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Monday, Jan 21, 2002

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Striving to Excel in Indian and foreign fields

Latha Venkatraman

`Excel has not looked at capital expenditure as the major way to grow. We have been able to employ versatile and more productive utilisation of assets. It is quite easy to get into a situation where you spend, borrow and then get saddled with a huge debt burden.'

Mr Ashwin C. Shroff, MD, Excel Industries Ltd

MUMBAI, Jan. 20

EXCEL Industries Ltd is looking at a 25 per cent growth in each of its businesses - agrochemicals, chemicals & environment and bio-tech. In the midst of a demerger process, the company expects synergies with its strategic investor Nufarm to propel growth in agrochemicals.

As for chemicals, the company is diversifying into newer products. Environment and bio-tech will be the new growth areas for Excel, says Mr Ashwin C. Shroff, Managing Director, in an interview. Excerpts :

What is the rationale behind spinning off your agrochem division into a separate entity and inducting a strategic investor ?

Nufarm which is coming in as a strategic investor and Excel have complementary strengths that synergise to create a bigger and better business. The spinning of the agrochem division is to facilitate the alliance. We had gone into a number of businesses but we realised that we cannot run these businesses like this so we split them into separate divisions, with each division having reasonable amount of autonomy to pursue its own goals and strategies.

Agribusiness division, which is mainly into agrochemicals, is being spun off. Nufarm, an Australian company, will come in as a minority shareholder. The demerger process will be completed in 5-6 months.

What is it that Nufarm will bring to the table that you are looking for?

Nufarm is an old customer of Excel. Although it is based in Australia, it has international operations in 12-13 countries. Nufarm specialises in weedicide. It is quite good at combinations. Excel has a range of products in the insecticide segment.

The alliance will bring Excel's insecticide portfolio and Nufarm's weedicide portfolio to the table. The combined range will be quite large. Excel's strengths lie in developing products and at registration management. Nufarm holds 2,000 registrations worldwide. Though our experience has been confined mainly to India, we would be able to market a number of products in a larger geographical area.

Is there such a large weedicide market that justifies your entry into that area?

You have to look at both the Indian market as well as the international market. This alliance would provide a boost to our exports. About 20-25 per cent of our revenues come from overseas sales. What Nufarm would like to do is to source from India a number of products. Nufarm would also like to enter the Indian market with its products. It will be a two-way movement. Its products will move into India and our products will move out of India.

Weedicide has a growing market. We will be able to capitalise on that growth. We will also be able to participate in the weedicide market globally. Besides, with the help of the overseas reach of Nufarm, we would be able to access the South East Asian region, which is an insecticide market.

<109,95>What are your plans for the chemicals and bio-tech divisions?

<109>They remain part of the original company - Excel Industries Ltd. In chemicals, we are diversifying into other areas such as polymer additives, mining chemicals and speciality chemicals. We plan to grow at 25 per cent annually.

The same is the case with the environment and bio-tech division. We hope to encash opportunities provided by the Supreme Court judgement to establish Municipal Solid Waste disposal plants in all large cities. We are targeting 25 per cent growth in both the divisions. As for agrochemicals, the synergy with Nufarm will propel growth.

What are your capital expenditure plans for 2002-03?

Excel has not looked at capex as the major way to grow. We have been able to employ versatile and more productive utilisation of assets.

It is quite easy to get into a situation where you spend, borrow and then get saddled with a huge debt burden.

In a higly competitive era, it is risky to get saddled with lower sales and fixed costs. We have been quite conservative with our financing.

We use our resources in a versatile manner, spending on an average Rs 20 crore on projects such as debottlenecking, projects in chemicals division, developing new market segments and new products.

There is criticism that you are too dependent on Endosulfan. How do you tackle this situation?

We are acutely aware of our dependence on Endosulfan. That is why in the last 6-7 years from a very high dependence of over 60-65 per cent, we have come to a level of less than 40 per cent. While Endosulfan has continued to grow, other products have grown at a faster rate.

We are no more dependent on Endosulfan. But it is like a flagship product, versatile for cotton, sugarcane, tea vegetables and horticulture. Very interestingly, this product fits beautifully into the concept of Integrated Pest Management. It targets pests but spares the beneficial insects like the pollinators.

How is the company expected to fare in the current fiscal considering the fairly satisfactory monsoon rains?

Monsoon rains were quite satisfactory as compared to last year. By and large, the industry has enjoyed good growth. Topline growth has been good and correspondingly bottomline growth will be good. This year, we are reasonably on target aiming to achieve 18-20 per cent sales growth.

No doubt, monsoon has helped, but we have employed several strategies to drive growth. For instance, our product portfolio has grown. We have undertaken cost management measures.

Besides, we are driving our exports up and have targeted to touch Rs 100 crore this year. We are looking at new markets, both in chemicals and agrochemicals.

Could you elaborate on the cost management measures employed by the company?

We have started a VRS for our Mumbai operations, which is expected to result in a substantial reduction in costs. Our fixed costs as well as variable costs have been reduced. We have brought down interest costs to a reasonable level.

We restructured our finance by converting a part of our loan to FCNR. We have a working capital limit of Rs 100 crore. As we have not resorted to aggressive borrowing, our gearing is just above one per cent. We have made a breakthrough in one of our intermediates and therefore will be saving substantially this year.

Working capital requirements for agro-chemicals business rose considerably as the industry became competitive. However, in the last couple of years the industry has been going through a rationalisation process.

The restructured industry is getting to be in a better shape. Hopefully, we should be able to manage working capital in such a manner that it is not detrimental to the companies.

What measures have the company taken in the area of Integrated Pest Management?

Excel has a strong nationwide programme with field staff, technical experts and demonstration farms. We have gone from IPM to ICM and are now looking at water management through the use of drip irrigation. We are also promoting responsible use of pesticide as we are long-term players.

How would you rate yourself vis-a-vis foreign players?

Excel has tried to understand the farming needs. We are also a vertically integrated company. Integrated production gives us a cost advantage and reliability because we are in intermediates. We are a reliable, quality producer with a good dealer network, and a good field force. These factors put us quite at par with any other foreign company.

What is the promoter's stake in the company? Is it at a comfortable position?

Promoters hold 32 per cent. Well, 100 per cent would be ideal but then you cease to be a public listed company. We will look for opportunities to improve.

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