The Murugappa Group, a Rs8,400 crore conglomerate, said it will invest Rs1,000 crore in the current year, aiming to boost its market share and increase its production capacity for the five main areas of business it has identified—fertilizers, sugar, tubes, abrasives and financial services.
“We are taking a long-term view of the five business that we want to focus on. We are not looking at short-term returns”, said A. Vellayan, vice-chairman of Murugappa Group. The investments, he said, would be half funded through debt, mostly suppliers credit and external commercial borrowings.
At present, the group has 29 registered companies, with fertilizers and engineering products constituting around 70% of turnover. Fertilizers alone contribute 46% of the group’s turnover, which grew by 15% last year to Rs8,446 crore. However, profits from selling fertilizers contributed only around 30% of profit before tax, according to data supplied by the company.
The combined net worth of the group, which is the value of all assets including cash, minus the total liabilities, is Rs2,800 crore, which will enable the group to take on the additional expansion.
The group, through EID Parry, which makes sugar, is focusing on sale of branded sugar, institutional sales and sales to pharmaceutical companies. It will spend the bulk of an allotted Rs350 crore in ramping up sugar production and will set up a sugar refinery for export-quality sugar.
N. Srinivasan, director (finance) of Murugappa Group, said easy availability of gas with more projects coming on-stream, would improve profitability at the fertilizer units. The group will spend about Rs200 crore to improve manufacturing and to enhance its current distribution network for fertilizers.
The group has two companies that manufacture fertilizers, Coromandel Fertilizers Ltd (CFL) and Godavari Fertilizers and Chemicals Ltd (GFCL), where it recently acquired additional 25% stake; it also has two separate brand names and product lines.
“We will consider merger of the two companies in the future. As of now, we are not looking into this aspect”, said Srinivasan.
The company will also pump in about Rs320 crore into its steel-tubes venture which includes a tube making unit in China.
As for the remaining business which includes bicycles and chains for two-wheelers, the Murugappa Group is looking at increasing returns through acquisitions, and the Murugappa corporate board is exploring the same, said senior group officials.