Of Highs, Lows And Ambitions

Secunderabad-based Coromandel International, a fertiliser and crop-solutions company from the Murugappa Group, has seen its sales grow at an average 52 per cent over the past five years, helping it reach the spot of No. 3 in the super heavyweights category of BW's listing of India's Fastest Growing Companies. The company's revenues for FY2009-10 were Rs 6,442.5 crore.

The company broadly operates under four segments — phosphatic fertilisers, specialty nutrients (including organic fertilisers), crop protection (insecticides, fungicides and herbicides), and rural retail (both for farm and lifestyle products). While fertilisers contribute the most to the top line, in terms of profits, the pesticide and speciality nutrient businesses contribute the most.

"We are very bullish on the sector because India is a growing market and the food basket is also undergoing a change," says managing director Kapil Mehan. "That would call for improved farm technologies and farming practices." For instance, the company is recycling city waste as well as waste from sugar mills back into the soil after accelerated composting.

Starting with just two in 2007, Coromandel now has more than 425 stores, mostly in Andhra Pradesh, and some in Karnataka. This year, it plans to add another 200 outlets in Andhra Pradesh, and 75 in Karnataka. Retail gives the company an exclusive distribution channel and branding opportunity.

In 2008-09, the company's revenues jumped about 150 per cent to Rs 9,592 crore. In 2007, it bought out Iffco's 25 per cent holding in the Godavari Fertilisers & Chemicals, followed by an open offer, taking its stake to almost 75 per cent. Last fiscal, though, its sales fell 33 per cent and net profits, 6 per cent, because of a steep fall in the prices of fertiliser raw materials and traded fertilisers. And in 2010-11, its fourth quarter revenues and profits dipped 15-20 per cent because of political unrest in Tunisia from where it imports raw materials. However, growth is positive for the full fiscal.

"Managing volatile commodity prices is going to be a challenge," says Sageraj Bariya of Angel Brokerage. "Expansion in its retail arm looks like a tricky task too, especially because there are geographical differences in the market," he adds. However, the biggest challenge is to ensure adequate supply of raw materials. Another problem could be forex volatility. "This has a major effect on our business because we import most of our raw materials for fertilisers," says Mehan. To regain the growth momentum, Coromandel is open to further acquisitions.

(This story was published in Businessworld Issue Dated 23-05-2011)