Hyderabad: DuPont, the diversified US industrial group, is hoping to be a billion-dollar company by sales in India by the end of 2012, amid tough macroeconomic conditions and a weakened local currency.
“It is a challenging environment, but I think the fundamental growth drivers remain strong,” said Rajeev Vaidya, president (South Asia) at EI du Pont de Nemours and Co. (DuPont), “and so we continue to believe that long-term growth in South Asia and growth in India will be there”.
The 210-year-old company’s trading association with India dates back to 1802, when DuPont, an explosives maker to start with, imported its first shipment of raw materials for gunpowder from India.
Despite its long association and its trademarks Nylon, Teflon and Lycra becoming household names in India, the company took almost two centuries to establish a local wholly owned subsidiary, DuPont India, in 1994.
India is the ninth largest and one of the fastest growing markets for DuPont behind China, registering a compounded annual growth rate of 21% from 2008 to 2011.
In 2011, India contributed about 2.5%, or $900 million, (around Rs.4,970 crore today) to the company’s global sales of $38 billion. India sales for DuPont are largely driven by its seeds, crop protection chemicals and titanium dioxide (coating) businesses.
Vaidya, a 26-year veteran at DuPont who took over its South Asia operations a year ago, sees “opportunity” in India for the company to be around $5 billion. “We would be able to grow in India two to three times that of GDP (gross domestic product) growth rate,” he said.
India’s GDP growth has slowed considerably from around 9% in past years to 5.5% in the June quarter.
DuPont is larger than its global competitors in India, ahead of BASF India Ltd that had revenue of Rs.3,515.94 crore in the year to March, Bayer Cropscience Ltd (Rs.2,272.27 crore), Dow Chemicals Co. (Rs.1,404.61 crore in calendar 2011) and Monsanto India Ltd (Rs.373.77 crore).
But analysts say the sluggish global economy might present hurdles for the company in most markets. “DuPont is exposed to raw material cost inflation and currency headwinds, and is witnessing a decline in sales volumes across many segments,” US-based equity research firm Zacks Investment Research Inc. said in a report on 15 November.
DuPont expects its food business, which includes seeds and crop protection, to be its major growth contributor in India, followed by its automotive and coating segments.
“If you look at per hectare production rate in India, there is still a fraction of what they are even when compared to other Asian countries like Vietnam and Thailand, for example, for rice. There is a lot we can do to increase farm productivity in India and so we have a great business,” Vaidya said, adding that DuPont is working on hybrid variants of corn, rice, pulses, millets and oilseeds.
Research and development (R&D) is another key area for the company in India, on which it spends an average $2 billion a year globally.
In 2008, the company set up its first R&D centre outside the US in Hyderabad, called DuPont Knowledge Centre, which works on agriculture biotechnology, crop protection, industrial biotechnology such as biomaterials and biofuels, and advanced material applications in high-performance polymers.
“We continue to invest in technology in emerging regions. One driver is we want to be closer to our markets, the other driver is India has a wonderful talent base for doing global R&D,” Vaidya said.
To reach out to the growing automotive market in the country with its light-weight polymer applications, the company set up the DuPont India Innovation Centre in Pune in 2011. Vaidya said the company is also planning to set up a food application laboratory in India to work on efforts such as protein fortification of indigenous food.