Tata group to hike stake in Rallis India to over 50%

In recent months, Tata Chemicals had consolidated its stake in Rallis India by buying out stakes held by other Tata group companies like Tata Tea. Its stake in the company now is about 45% but it plans to increase it further beyond the 50% mark. Rallis India has announced a preferential allotment in which Tata Chemicals will buy 9.8 lakh shares in Rallis, spending about Rs 80-85 crore, the final figure depending on the price at which the shares are issued. The total group stake in Rallis India after the preferential allotment will be 50.2%.

Since the increase in the promoter’s stake will be less than 5% it will not trigger an open offer, under Sebi’s takeover regulations. Rallis has said it will use the funds for its ongoing expansion plans at Dahej, Gujarat. The company is a large producer of agri inputs like agrochemicals, speciality fertilisers and seeds. In 2008-09, its consolidated sales was up 23.7% to Rs 837 crore, while its profit before tax and exceptional items increased by 82% to Rs 119.5 crore.

The company has been stepping up its international operations to drive growth, and in 2008-09, exports grew by 79% to Rs 288 crore. It has said that innovation and focus on new products are its key strategies; new products introduced in the past four years contributed to around 30% of turnover. The Dahej project is being set up in phases, with Rs 150 crore being invested in the first phase, for a 50,000 mt/kl per year, with estimated revenues of Rs 500 crore from the plant in a three year period. The plant is expected start production in June 2010.

Poor monsoons are a cause for concern for agrochemical companies. If there is a decline in acreage in crops being targeted by these companies, they are likely to see pressure on demand. It will be a few quarters before any impact will be visible. The Rallis share was trading at Rs 910 yesterday, down by 2.45% and is up by 12.5% from its level a year ago.

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