Corporate File

How ‘shopoholic’ UPL adds muscle with takeovers

Vishwanath Kulkarni | Updated on: Jun 18, 2022

Homegrown agrochem MNC UPL believes in collaborations to drive growth and revenue

In recent weeks, the market was abuzz that UPL Ltd, the home-grown agrochemicals multinational, could become a likely takeover target for US companies like FMC Corp and CF Industries. However, UPL was quick to dismiss the reports, stating “promoters — the Shroff family — are completely aligned and committed to the company’s future growth.”

“We are a beautiful company and people have many aspirations when they see beautiful things,” says Jai Shroff, Global CEO, UPL, the second-generation promoter. Established in 1969, UPL has done over 40 acquisitions in the past 25 years, expanding its presence to over 138 countries.

“UPL is a shopoholic company and we like to shop,” says Shroff , adding that it is currently in talks with 70 different start-ups for testing technologies and in discussions with another 50 firms for collaboration.

After acquiring Arysta LifeScience from Platform Specialty Products Corporation for $4.2 billion in 2019, UPL has kept up with its shopoholic image, with the latest being the buyout of OptiCHOS, a bio-solutions product platform, from the Norwegian University of Life Sciences.

The Arysta deal catapulted UPL to the fifth slot among the top ten global agrochem firms with annual revenue exceeding $5.2 billion. A large player in the post-patent crop-protection market, UPL has a robust portfolio consisting of biologicals, seeds, traditional crop protection solutions, bio solutions, pre- and post-harvest solutions, soil and water technologies, with more than 14,000 registrations. In fact, the company doubled its share in the global crop protection market over the past five years to around 8 per cent in FY 2022 from 4 per cent in FY 17. The company expects to increase it further to 9-11 per cent by FY27.

Robust growth

For FY22, UPL registered a 19 per cent revenue growth at ₹46,240 crore and 26 per cent profit growth at ₹3,626 crore. The robust growth was driven by strong demand for herbicides and insecticides in Latin America, North America and India, among other markets. In the current year, UPL is eyeing over 10 per cent revenue growth, which it believes will be driven by factors such as strong commodity prices and the higher cost and reduced availability of fertilisers favouring the use of bio-solutions, a key focus area for the company.

“The integration of Arysta is complete and the company has reorganised itself to focus on growth,” says Shroff, adding that UPL has got better ability to price the products. With significant investments in manufacturing, marketing and distribution, UPL is probably the most backward integrated player in the industry worldwide.

The company has diversified its raw material sourcing strategy by reducing dependence on China, while increasing from other geographies, including India, where it has an expanding supplier base of over 15 major companies like Deepak Fertilisers, Aarti Industries and Laxmi Organics, which are being encouraged to expand their capacities. Sourcing of raw materials from China has reduced from 37 per cent in FY17 to 31 per cent in FY22. At the same time sourcing from India has improved from 34 per cent to 38 per cent and rest of the world from 29 per cent to 31 per cent during this period.

UPL has been gaining market share in the past 10 years and expects to grow at thrice the industry average. It expects to sustain the trend of doubling revenue every five years.

"UPL has consistently gained market share through a combination of low-cost manufacturing and portfolio expansion, and gaining scale through inorganic play. With food inflation rising on account of geopolitical tensions and supply disruption, we expect demand for crop protection products to remain robust," says Anil R, Sr. Research analyst at Geojit Financial Services.

Collaborate to grow

UPL, which strongly believes in collaboration to drive growth, has entered into a string of partnerships through its OpenAg platform to expand its product portfolio and geographical footprint, besides setting up a new global business unit, Natural Plant Protection, that comprises both natural and biologically derived inputs to tap the fast-growing bio-solutions business. In fact, the company is the largest player in the bio solutions space. UPL saw encouraging volume-led growth in its differentiated and sustainable (D&S) solutions portfolio, which grew 19 per cent during FY 22.

“We believe UPL’s strategy to expand its D&S solutions and focus on increasing penetration in the high-growth crops segments and markets is expected to drive sustainable growth and margin expansion,” said analysts Rohit Nagaraj and Ayush Chaturvedi of Emkay Global in a note.

Notable partnerships include the likes of the one with Chr Hansen, a bio-product company in Denmark; with FMC Corp for manufacture and supply of chloratraniliprole (CTPR), an insecticide in India; with Mitsui Chemicals Agro Inc (Meiji) of Japan for introducing Flyupyrimin, an insecticide, in the Indian market, among others.

Through OpenAg, UPL is focused on accelerating progress for the food system and building a network that’s reimagining sustainability. At the same time the company has been trying something new — assuring an outcome to the farmers for using the company’s services or solutions. “We are transforming the industry from a ‘selling products business’ to an outcomes business,” says Shroff.

Such outcome-based offerings to farmers are being implemented through its agri-technology platform, Nurture.Farm, and by selling crop specific solutions under the ProNutiva package. UPL’s ProNutiva integrates bio-solutions with conventional crop protection products to reduce the use of inputs, while enabling better crop growth and climate resilience. Through ProNutiva, UPL is assuring increase in yields and better prices for growers of crops such as groundnut and sugarcane among others. The area serviced with ProNutiva package of solutions has increased to 1.7 million acres in FY22 from 0.1 m acre in FY20. Besides helping increase farmers income by an average of 15 per cent, ProNutiva has pushed up yields by 35-40 per cent in crops like groundnut in Gujarat.

Fetching better prices

“Farmers have signed up in over 4,500 villages where they use our platform from the beginning to the end. Farmers are not just buying for the sake of buying products, but want to get better quality produce and fetch better prices. The concept is working well and over the next five to six years, it will have a huge impact,” Shroff adds.

UPL’s ProNutiva has generated a lot of interest not only among the farmers but also among the food companies. “A lot of food companies are partnering with us because they want traceability,” Shroff adds.

With focus on expanding bio-solutions and sustainability high on agenda, the CEO of the world’s fifth largest agrochemical firm believes farmers should be rewarded for following sustainable practices. Last year, he announced a gigaton challenge to reduce atmospheric carbon dioxide equivalent 1 gigaton by 2040, leveraging sustainable methods. The Gigaton Challenge will create a new carbon credit to incentivise and support farmers for adopting sustainable and regenerative practices.

“If adoption of electric vehicles can be incentivised, why not reward the farmers,” asks Shroff while stating that Nurture.Farm platform it is exactly doing that. Nurture, which has been instrumental in preventing the stubble burning in north India, has also been able to generate and forward sell about 20,000 agri-related carbon credits from its dry seeded rice project for methane reduction. Nurture, which has taken up widespread spraying IARI’s Pusa bio-decomposer on paddy straw in about 4.2 lakh acres, has not only prevented air pollution, but also helped increase the carbon content in soil while maintaining soil health. The UPL investee company is targetting to help Indian farmers generate one million carbon credits by 2023.

Interestingly, UPL completed a ₹1,100 crore share buyback programme recently. Besides, the buyback, the promoters have also been increasing their stakes in the company through open market purchases. The promoters' stake has increased to 28.4 per cent at the end of March, 2022 from 27.9 per cent in September 2021. It remains to be seen whether there’s any correlation between the company’s buyback, the promoters increasing their shareholding and the reports of the company being a take-over target.

Published on June 19, 2022
  1. Comments will be moderated by The Hindu editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.

You May Also Like

Recommended for you