Rallais India is a TATA group enterprise and the company is in four lines of businesses.
In the Domestic Agri business the company manufactures pesticides, seeds and fertilizers. The key strength in the domestic sector lies the strong distribution network, which is spread, across 80% of the country’s districts.
The Institutional business is involved in providing technical and bulk of various molecules to companies. Well known customers include Bayer, Syngenta and DuPont.
The company also exports insecticides, fungicides and herbicides and International business is the third LOB the company is in.
The fourth LOB is Contract services where the company partners with various other companies for contract manufacturing and contract research.
Financial Turnaround
The company reported a net profit of 33.50 crores for fiscal 2004-05, which is up from 25.55 last fiscal. However the profit last year included a figure of 78.47 crore from sale of asset and to that extent the company was in the red if not for this exceptional item.
The turnaround has been made possible because of a number of factors. This includes divesting from non-core businesses like pharma, gelatine and knowledge services. The proceeds from such divesture has been used to reduce debt which has been brought down from Rs.353 crore in fiscal 03 to Rs. 138 crore this fiscal. Apart from this operational restructuring and streamlining has also been done to bring down costs. For instance efforts were made to reduce corporate and manufacturing overheads and sales and distribution costs. The vendor network has also been rationalized bringing down the number of dealers to less than one fifth of what they were. Reducing inventories and strengthening collections mechanisms have also reduced the working capital requirements.
Road Ahead
The company has entered into marketing tie ups with big names like DuPont, Bayer, Syngenta and Dow to sell patented and generic products of these companies through its distribution network. This benefits the company in two ways. It increases the line of products that it sells and leverages its strong distribution network.
The export revenue grew by 25% as a result of entering new markets with marketing alliances with global majors. As the relationships with the international companies are new and the products have just been introduced as time progresses the growth in export revenue is likely to considerable.
The company is looking for tie ups with various companies for contract manufacturing and already has an alliance with a Danish company.
Stock Valuation
The stock currently trades at 280 levels up from the mere 60 it was last year and trades at around 12 times trailing multiple.
