Hyderabad: Fertilizer maker Coromandel International Ltd, a part of the Chennai-based Murugappa Group, will acquire a 73.22% stake in Sabero Organics Gujarat Ltd, gaining access to overseas markets that contribute more than half the revenue earned by the producer of crop protection chemicals.
Coromandel, based in Hyderabad’s twin city of Secunderabad, will spend Rs 284 crore to purchase 14.29 million shares, equivalent to a 42.22% stake, from the founders of Sabero and make an open public offer to buy an additional 31% of the company from shareholders. The decisions were announced after a Coromandel board meeting on Tuesday.
Coromandel is paying a 63.4% premium over Tuesday’s closing price of Sabero shares, which rose to a record of Rs 97.90 on the Bombay Stock Exchange on news of the deal. Coromandel shares gained 0.48% to Rs 316.75 on a day the benchmark Sensex index gained 1.5% to 18,503.28 points.
The purchase of Mumbai-headquartered Sabero will give Coromandel a company that makes a variety of fungicides, herbicides and insecticides.
Sabero, which claims to be among the lowest-cost producers of such chemicals, has offices and subsidiaries in Europe, Brazil, Argentina, the Philippines and Australia, according to the company’s website. Sabero has 250 product registrations in 50 countries.
“Our association with them will increase our sales in Latin America, Australia and parts of Europe,” A. Vellayan, executive director of the Rs 17,051 crore Murugappa Group, told business news channel ET Now.
Sabero Organics, which has factories at the Sarigam industrial estate near Vapi in Gujarat, had net sales of Rs 413 crore—Rs 220 crore coming from exports—in the fiscal that ended 31 March. Coromandel earned Rs 7,527 crore of revenue in the year.
Sabero has a utilization rate of 35-40% of production capacity, which Coromandel aims to increase.
Sabero has a licensed capacity to produce 95,000 tonnes and is building a project in a special economic zone at Dahej in Gujarat.
“We believe that with our network, marketing capabilities and export business, we will be able to ramp up the utilization faster,” Kapil Mehan, managing director, Coromandel, said at a news conference in Hyderabad.
Mehan said Coromandel had carried out its own evaluation, looked at Sabero’s potential, “complementarity and synergy” that the acquisition would bring before setting the price for the company. The combined entity would be among the top six fertilizer makers in India; on its own, Coromandel is No. 15, said S. Sankarasubramaniam, vice-president of finance at Coromandel.
Coromandel has been more focused on the domestic market and the acquisition will “give us access to overseas markets”, said Mehan.
One analyst said the price paid by Coromandel was justified, given the fact that the company will gain ready access to Sabero’s licences.
“They (Sabero) have marketing licences for 50-odd countries. That’s a big one,” said Satish Mishra, a Mumbai-based analyst at Pinc Research. “Getting a licence takes six months to one year for any company.”