FY 2012-13, marked with a deficient monsoon, steep increase in critical input costs and an economic slowdown, was a year of mixed performance for the Murugappa Group. While the Engineering and Agri-businesses businesses had their share of challenges, the Financial Services businesses consolidated their position and grew their businesses aggressively and profitably. But the Engineering and Agri-businesses saw opportunity to acquire new businesses / enhance capacities and seized the opportunities that came their way. In a rather difficult year and environment, the Group invested 850 crores in acquisitions, as under:
New acquisitions
1. TII acquired 70.12% stake (including the Open offer) in Shanthi Gears Ltd, a listed company and a leading manufacturer of a wide range of power transmission products at an overall outlay of 464 Crores.
2. Coromandel acquired 48.62% stake in Liberty Phosphate Ltd (LPL), a significant player in the Single Super Phosphates industry for 169 Crores. Coromandel has also acquired 100% equity shares of Liberty Urvarak Limited (LUL) (a 100% subsidiary of LPL) at an overall outlay of 78 Crore. Including open offer (26%) for LPL, the total cost of above transaction will be approx. 350 Crores.
3. CUMI acquired Thukela Refractories, Isithebe (erstwhile RHI Isithebe (Pty) Ltd), one of the largest Fused mineral manufacturing facilities in Africa at an overall outlay of 15 Crores.
4. Coromandel entered into a Share Purchase Agreement to acquire 8.13% stake in Andhra Pradesh Gas Power Corporation Ltd, to meet the additional power requirement for the fertiliser plants. This proposal will have an outlay of 75 Crores.
Consolidation
5. TII increased the stake in Financiere C10 S.A.S (Sedis) by 22.87%, and hence FC10 has become a wholly owned subsidiary of TII.
6. The Group also acquired 49% stake previously held by Cargill in Silk Road Sugar Pvt Ltd, subsequent to which the company has become a wholly owned subsidiary of EID Parry.
7. EID Parry completed the merger of two plants of the subsidiary Parrys Sugar Industries Limited (PSIL) at Sankili and Haliyal with itself.
The above acquisitions are part of the next engines of growth and will provide significant opportunities to the Group to scale up the respective operations.
Besides the above, the group companies continue to invest in all the facilities by appropriate Capex programmes both to expand their capacities and also to modernise the facilities. Significant capital expenditure initiated/incurred by the companies during the FY 2012-13 aggregate to 300 Crores, including the following:
1. Coromandel has invested and commissioned 3rd Complex fertiliser plant ("C" train) at Kakinada. The new plant is capable of manufacturing all grades of complex fertilisers and will strengthen the product portfolio of the Company in providing quality fertilisers to the farmers to enhance their productivity
2. Foskor Zirconia, a South African subsidiary invested in a tilt furnace for the manufacture of Zirconia bubbles
3. TII invested towards the large diameter tube project and has signed MoU with the Tamil Nadu government during November 2012. TII has acquired land and the project is in implementation stage.
In addition, a sum of around 600 crores was deployed under regular capital expenditure during the year. In all, the Group incurred a Capital Expenditure of 1750 Crores during FY2012-13, including acquisitions (FY 2011-12 1115 Crores).
Key highlights of FY 2012-13
Group performance
The Group recorded a turnover of 22466 crores during 2012-13, (as against FY 2011-12 turn-over of 22314 Crores). Earnings before Interest, taxes, depreciation and amortization (EBITDA) stood at 2507 Crores (FY 2011-12 2692 Crores) and Profit Before Tax (PBT) was 1751 Crores (FY 2011-12 1850 crores).
Company wise performance
The summary of the Gross Sales and EBIDTA are as follows:
Chola MS General Insurance continued their upward growth, outperforming the market.
Disappointing monsoons, slower GDP growth rate, uncertainty of sugar decontrol measures (since then been announced) and absence of NBS policy in Urea, coupled with a depressed demand in the Auto sector and increased power and fuel costs led to pressures in both the topline and bottomline in Agri and Engineering businesses.
The Engineering businesses retained leadership positions in their served segments despite cost pressures and an overall drop in demand in the end-user industries in Auto and manufacturing.
The two top brands in the Group increased their Market penetration - Chola ended the year with 518 branches (last year 375), and TI Cycles retail network with 968 outlets (last year 800).
Sectoral Highlights - FY 2012-13
Key highlights in each sector are presented below:
Agri Businesses
Coromandel International
For the year ended March 2013 Coromandel achieved a sales turnover of 9103 crore (previous year 9879 crore), lower by 8% over the previous year. The delayed monsoon during Kharif and deficit monsoon during Rabi in the key addressable markets, along with significant disparity in price between Urea & Phosphatic fertilisers affected the demand for Phosphatic fertilisers. Despite adverse market conditions, Coromandel maintained its market share on an All-India basis, with an increase in Andhra Pradesh. Coromandel commissioned its third complex train (C-train) in Kakinada which is capable of manufacturing all grades of complex fertilisers to meet the farmer requirements. Post commissioning of the C train, the capacity of Coromandel has gone up from 3.20 million MTs to around 4.00 million MTs.
Plant Protection Chemicals
The segment recorded good growth during the year despite unfavourable weather conditions. The integration of Sabero Organics Gujarat Ltd is progressing as per plan, and Sabero has recorded 8 crores profits against a loss of 64 Crores in FY 2011-12. The integration efforts will continue in FY 2013-14 as well.
The Specialty Nutrients Division and the Organic Fertilisers Division continued to grow in volume, and recorded good growth in FY 2012-13. The businesses are focusing on new product launches in FY 2013-14 in order to address the market requirements.
The Company’s retail centers (Mana Gromor Centers – MGC in Andhra Pradesh and Namma Gromor Centres – NGC in Karnataka) continue to expand the retail footprint, and currently operates 640 stores.
EID Parry (India)
EID Parry registered a turnover of 1965 crores on a standalone basis.
Sugar Division
During the year, the division crushed 77 LMT (8% increase over FY 2011-12) across its 9 sugar factories (including those of its subsidiaries). Overall yield witnessed significant drop due to poor monsoon. Power and water availability in Tamil Nadu impacted the crop and led to lower recovery levels. Lower cane availability in Karnataka led to crushing levels remaining at last year’s levels.
Bio-products
The depressed demand levels in the overseas markets and disappointing monsoons led to turnover remaining at the last year’s levels.
Nutraceuticals
Parry Nutraceuticals continued to retain its market leadership position in organic Spirulina, with a healthy growth.
Silkroad Sugars, a subsidiary of EID Parry, is in the process of commissioning its coal-based boiler, and is expected to commence operations during FY 2014-15.
EID Parry was chosen one among the six companies and was conferred the Best Managed Board award under the Aon Hewitt Best Managed Boards award.
Engineering Businesses
Tube Investments of India
Tube Investments of India Ltd. (TII) registered a turnover of 3390 Crores on standalone basis for the year. Due to slowdown in customer industries mainly automobiles, company witnessed pressure on margins.
Tube Products of India (TPI), a leading supplier of precision tubes for the auto industry, witnessed a drop in demand for tubes and cold rolled strips due to slowdown in motorcycle and commercial vehicle segments. However the Tubular Component segment grew by 6% due to continued focus on value addition initiative. The margins were affected due to increase in power & fuel cost and time lag in passing on the entire cost increase to the customers.
TI Cycles (TICI) maintained its market share and All India Number 2 position with over 4 million cycles in the year. It continued the expansion of retail network and the total number of outlets stands at 968. TI Cycles organized around 3300 events all over India to promote cycling, continuing its core strategy of ‘selling cycling and not just cycles’. The margins continued to be under pressure due to product mix and inability to pass on the cost increases fully to the market due to competitive environment.
TI Metal Forming (TIMF), the market leader in car door frames, witnessed a drop of demand mainly due to de-growth of passenger car segment. There was also a delay in tender process for Railway wagons apart from severe price pressure due to competition. This resulted in lower volumes and price realisation thereby affecting the margins of the division.
TIDC India (TIDC) maintained volumes in the Chains segment, despite adverse market conditions. The sales of chain kits to the replacement market registered a growth of 30% and Fine Blanking division registered a healthy growth of 33% through a wider product portfolio for the passenger car and motorcycle markets.
Carborundum Universal
Carborundum Universal Ltd (CUMI) achieved consolidated net sales of 1942 Crs for the year. Profitability of all businesses was under pressure. However, CUMI managed its working capital well and repaid loans to improve consolidated debt equity.
Abrasives
The industrial slowdown attributed to the muted growth trends in India and Russia had an adverse impact on the order books. Profitability margins were strained on the backdrop of rise in input costs and rupee depreciation.
Electro Minerals
The net sales registered a drop of 8%, arising from the drop in volumes in the Silicon Carbide business in India and Russia. The South African business also witnessed a volume drop.
Ceramics
The ceramics segment recorded a 9% increase in sales on a consolidated basis. Both the high alumina ceramics business and the super refractories businesses registered growth. The operations in Australia registered higher growth.
Financial Services
Cholamandalam Investment and Finance Co
Cholamandalam Investment (CIFCL) has recorded growth rates better than the industry by leveraging its broad-based product offerings and a deeper penetration of the existing customer base. The company disbursed a total of 12118 Crores, of which Vehicle Finance was around 81 % and Home Equity was 18%. The Profit Before Tax stood at 451 crores (registering a growth of 55% over FY 2011-12). The company launched its Home Loan and Corporate Finance Loan products during the year. The Company expanded its presence to 518 branches as on 31st March 2013 compared to 375 as on 31st March 2012. The additional branches are in Tier III and Tier IV locations across India. The company raised equity capital l aggregating to 300 crores during the year.
Cholamandalam MS General Insurance
Chola MS recorded a strong growth of 20% in topline and 82% in Operating Profit. The performance increased both in depth and width, with new product offerings and distribution channels leading to higher volumes in the retail segment and improved synergies in the cross-sell business with CIFCL.
During the year the promoters infused additional capital of 50 crores through a rights issue for growth and expansion plans. The company continued its outreach to the social sector through the Rashtriya Swasthya Bima Yojana (RSBY) scheme run by the Ministry of Labour & Employment, Government of India, in five different states (Gujarat, Maharashtra, West Bengal, Bihar and Jharkhand) and was awarded the Best Insurer Award for overall performance for the 3rd time in a row.
Other Businesses
Parry Agro Industries Limited maintained its sales volumes at 170 Lac Kgs, despite the industry wide drop in tea production due to adverse weather in North & South India. The Rubber business - New Ambadi Enterprises maintained its revenues at FY 11-12 levels despite a 10% drop in natural rubber average sale prices for the company.
Coromandel Engineering Company Ltd. (CECL), the Property Development and Civil Construction business of the group, registered a topline growth of 27% over FY 2011-12. However, due to increased costs the profitability in civil construction segment was under pressure, especially for the projects that were continuing from last year. In the property development area, the company has four projects under development in Coimbatore & Chennai.
Parry Enterprise India Ltd (PEIL) witnessed a top line drop of 12%, mainly due to lower performance of flexible packaging business. The Polynet division expanded its capacity in the knitted line. General Marketing division witnessed a subdued performance due to prevailing surplus situation in dairy products industry.
Ambadi Enterprises Ltd maintained its total revenues at FY 11-12 levels. However the bottom line was impacted due to slow recovery in overseas markets. The company has launched machine made carpets in North India to grow in the domestic market.
People paradigm
All the key roles have in place leaders with appropriate background, experience and capability. The Group continued to invest in its Leadership Development Programme, with a balanced approach to external and internal leaders. Towards this end, the Group strengthened its efforts to develop a cadre of leaders ground up. The Murugappa Career Development Plan launched last year gained momentum and was implemented in phases across the businesses.
Corporate Social Responsibility
As part of the Group’s ongoing corporate social responsibility initiatives, 0.5% of the Profit After Taxes (PAT) was contributed in the FY 2012-13 to the AMM Foundation (AMMF) and Shri AMM Murugappa Chettiar Research Centre (MCRC).
In addition to the above, during the year the Group companies also stepped up development initiatives primarily catering to the communities around the plant locations, in the area of education and health. EID Parry conducted several healthcare-oriented camps and educational activities at and around the towns where the sugar plants are located. CUMI conducted activities in the areas of health & hygiene, education, formation of self help groups and local community development. Coromandel International worked on the areas of girl child education, sports, education, healthcare and providing support during natural calamity. Chola MS took up the causes of education and aid to the needy. CIFCL also worked in the area of road safety education.
The Hospitals run by the AMM foundation have reached out to over 7.50 lakh people through its out-patient services and 15,000 patients through its in-patient facilities.
The educational institutions (schools and the polytechnic) run by AMM Foundation cater to the educational needs of 10,500 students of which 6000 belong to the marginalized group.
Through the A.M.M Murugappa Chettiar Centenary Scholarship, the Foundation has given scholarships to 503 most deserving poor students to pursue their education, including 92 in professional colleges, in 2012-13. The scholarship has covered the geographical location of Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Maharashtra and Assam.
