UPL Ltd plans to spin off and list its crop protection business as an independent entity, as part of a strategy to create the world's second-largest agrochemical firm. The Mumbai-headquartered company announced on Friday a three-step restructuring plan to consolidate its domestic and international pesticide units into a single global entity.
This restructuring was undertaken in 2022 when the country’s largest agro-chemicals firm brought in private equity giants into three of its businesses.
Under the three-step process, UPL Ltd will first merge its India crop protection subsidiary, UPL Sustainable Agri Solutions, with its parent. This will be followed by the domestic crop protection business being demerged and transferred into a new entity, UPL Global Sustainable Agri Solutions Ltd. Finally, UPL Ltd will merge its foreign crop protection business, housed under UPL Corp., into this new entity, UPL Global Sustainable Agri Solutions.
The businesses under UPL Global Sustainable Agri Solutions reported revenue of ₹9,721 crore in October-December, accounting for about 80% of parent UPL Ltd’s total revenue of ₹12,269 crore. UPL Ltd, in a statement to the exchanges, claimed that UPL Global would be the world’s second-largest listed pure-play crop protection firm. Syngenta Crop Protection, the Swiss giant, with $13 billion in revenue, is the largest.
To put it simply: UPL’s new independent entity will be much bigger than the parent.
“By unifying our India and international crop protection businesses under UPL Global, we are creating a future-ready platform with the focus, agility and innovation needed to lead in a rapidly evolving market,” said Jai Shroff, chairman and Group CEO of UPL Ltd. “This move sharpens strategic focus, aligns stakeholder interests and positions both UPL Ltd and UPL Global for disciplined, value-accretive growth in the years ahead.”
As part of this demerger, every UPL Ltd shareholder gets 1 share of UPL Global. UPL Ltd’s promoters, the Shroff Family, will own 71.56% in UPL Global and have agreed to an 18-month lock-in on their shares post-listing.
Debt reduction
In 2022, UPL Ltd carved out four businesses as subsidiaries: domestic crop protection, international crop protection, global seeds, and manufacturing and speciality chemicals. The listed company, UPL Ltd, has a speciality chemical business, Superform Chemistries Limited, while its Indian crop protection business is housed under UPL Sustainable Agri Solutions and counts TPG, Abu Dhabi Investment Authority, and Brookfield as investors. International Crop Protection or UPL Corp counts TPG and Abu Dhabi Investment Authority as investors, while the seeds business under Advanta Enterprises Ltd counts KKR as its investor.
UPL Ltd did this exercise to trim down its debt, which totalled $3.8 billion at the end of September 2022. UPL Ltd’s debt stood at $2.6 billion at the end of December.
UPL Ltd’s consolidated revenue totalled ₹12,269 crore in October-December. UPL Corp. was the largest subsidiary, with revenue of ₹9,163 crore, followed by Superform Chemistries Ltd, with ₹2,668 crore. Advanta’s revenue totalled ₹1,574 crore, and Sustainable Agri Solutions did ₹558 crore in revenue. Last month, Advanta Enterprises, which houses the seeds business, filed a Draft Red Herring Prospectus as it looks to go public.
UPL Ltd shares ended nearly 2% down on Friday, giving the company a market cap of ₹63,355 crore, even as the Sensex ended 0.4% higher at 82,814.7 points. The transaction was announced after market hours.