The Hindu Business Line : Murugappa joins billionaire club

THE Chennai-based Murugappa group on Tuesday said that its turnover has crossed the $1-billion mark in 2003-04. The turnover was about Rs 5,200 crore ($1.17 billion), a 25 per cent growth over the previous year's figure of about Rs 4,200 crore. The group estimates that profit before tax will grow by 40 per cent.

The higher turnover had been achieved despite problems such as a bad monsoon, issues on fertiliser subsidy, increasing steel prices and an appreciating rupee, Mr A. Vellayan, Director, Murugappa Corporate Board, which governs the group's businesses, told presspersons today.

This financial year too the group was quite optimistic about the prospects, although Mr Vellayan and Mr P. Datta, Director - Finance, Murugappa group, would not put a figure on the growth prospects. From a profitability point of view, all segments had done well, Mr Vellayan said.

The improved performance last year, he said, was due to greater focus by the top management. Apart from regular meetings of the corporate board itself, the corporate executive board consisting of operating executives of the companies met more frequently to take stock of market conditions.

Mr Vellayan said exports, which contributed five per cent to turnover now, were one area of concern for the group. It intended to push exports to 15 per cent of turnover within the next three years. "We are not satisfied with our level of exports."

The management had discussed strategies to grow exports. The US, Europe and South East Asia would be the focus markets for exports.

The strategies that could be adopted included getting manufacturers to "outsource from us," acquiring small brands to push sales abroad or selling through these brands, and enlarging the group's own marketing establishments abroad.

The group planned to invest about Rs 100 crore on major projects and another Rs 150-200 crore on modernisation this year. Most of the funds would come from internal accruals.

Mr Datta said the group had retired most of the high-cost long-term funds, and only Rs 50-60 crore of high cost funds remained in the books.

The Murugappa group's businesses are broadly classified into three segments - agri and allied business, manufacturing and services. The companies include EID Parry (India) Ltd, Carborundum Universal Ltd, Parry Agro Industries Ltd, Tube Investments of India Ltd and Cholamandalam Investment and Finance Co Ltd.

Mr Vellayan said the group expected value addition in its traditional businesses and it planned to expand in areas such as fertiliser and sugar. It would increase its sugarcane crushing capacity to 20,000 tonnes per day at four locations, from about 15,000 tonnes now.

It would also set up a sugar refinery of 30,000 tonnes capacity to manufacture refined sugar. Over the next few years, the group intended to divert 15-20 per cent of its sugar production towards branded sugar.

To a question, Mr Vellayan said the Murugappa group would continue to push individual brands rather than the Murugappa group brand. For, the individual brands such as Parryware in sanitaryware or BSA in cycles were better known in the market.

An internal survey had also shown that individual brands needed to be promoted. However, the group would push the Murugappa brand in the northern markets, as it sought to become a pan-India player. Promoting the Murugappa brand in the North would also help when it came to campus recruitment and among the investor community. The group now had a presence in 12 States.

Asked about the strategy vis-à-vis China, Mr Vellayan said the group imported raw materials for pesticides and fertilisers and also components for bicycles. It looked to grow its sales to China in steel tubes and chains. The group did not plan to set up manufacturing facilities in China.

On the other hand, a number of Indian two-wheeler companies had talked about plans to set up manufacturing facilities in South East Asia. If and when this happened, the Murugappa group would also look at putting up plants in these countries to supply to these manufacturers, he said

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