Business Standard

‘Expect price moderation if geopolitic­al tensions ease’

- ARUN ALAGAPPAN Executive Vice-chairman, Coromandel Internatio­nal

Agricultur­al solutions major Coromandel Internatio­nal, a part of Chennai-based Murugappa Group, is focusing on backward integratio­n to secure a steady supply of raw materials.

ARUN ALAGAPPAN, executive vice-chairman of the company and a member of the Murugappa family, discusses the current global market, expansion plans, and the volatility of commodity prices in an interview with Shine Jacob in Chennai . Edited excerpts:

Do you think the uncertaint­y in commodity prices and volatility in the global market due to the West Asian concerns and sanctions on Russia are affecting you?

One challenge is the Red Sea crisis, causing a shift from a 19-day to a 37day transit time in most areas where we source materials. Coromandel strategica­lly sources from both the East and the West, mitigating material shortage concerns. However, costs and commodity prices have risen by 20-25 per cent. If geopolitic­al tensions ease, we expect a moderation in these prices.

During the last financial year, your revenue was around ~29,000 crore and your profit was at ~2,013 crore. However, this year, your revenue saw a dip of 25 per cent and profit after tax by 16 per cent. What were the major reasons for this?

The decline is primarily attributed to the pricing of raw materials, which reached an all-time high previously. The turnover metric does not fully reflect the fertiliser business’ performanc­e, as external factors play a crucial role. Government actions, such as reducing nutrient-based subsidy (NBS) rates, impacted revenue during a challengin­g period for manufactur­ers in India.

What are your backward integratio­n plans, as it ensures the long-term supply of key raw materials?

In line with the government’s aim for self-reliance (atmanirbha­r), we opted for backward integratio­n instead of imports. We built a plant in Visakhapat­nam last year, investing ~400450 crore, reducing our reliance on external sources.

Over the past few years, we invested over ~2,000 crore in backward integratio­n. We are also coming up with a phosphoric acid and sulphuric acid project in Kakinada with an estimated investment of ~1,050 crore. Additional­ly, we’ve acquired mines, such as one in Senegal (rock phosphate), ensuring raw material security.

The government has brought diammonium phosphate, Muriate of Potash, and all such fertiliser­s that get NBS support under price control. How do you see the move?

The government’s interventi­on aimed to stabilise prices for farm products, preventing excessive volatility. While it may be perceived as price control, it is more about maintainin­g stability for farmers. If farm input moves up, the end product also will go through a volatile situation.the government has effectivel­y managed price stability during periods of fluctuatio­n in farm input costs.

What are your growth targets in each of your segments — like fertiliser, crop protection, bioproduct­s, specialty nutrients, and retail?

Our focus is on strengthen­ing our backend before expanding the frontend in fertiliser­s. We are targeting a 20 per cent compound annual growth rate across all segments.

In retail, we are increasing the number of stores by expanding to other states. In the bioproduct sector, we plan to broaden our product portfolio, while our specialty nutrients business is seeing steady growth.

According to the India Meteorolog­ical Department (IMD), El Niño conditions are expected to bring intense heat during the summer season this year, followed by La Niña. In this case, what is your outlook for the year?

Despite last year’s fine sowing in our addressabl­e market, we observed a 7-8 per cent growth in volumes, indicating an increase in market share. Looking ahead, the IMD forecasts a favourable monsoon.

As we enter the rabi season, a good monsoon is expected, leading to robust sowing and increased fertiliser use. Overall, the year should be positive, with early June rains forecasted.

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