Excel Crop Care - Turn Around - Sumitomo Acquisition


(ashishverma) #1

Excel Crop Care

From Rs 150 in 2011 to 4200 in 2018

Hidden Gem !

12 reasons you should think about it

2800% growth in 7 years !

Why it is a hidden gem :

  1. Agrochemicals market in India is growing at > 10% annum and * it would gain speed* due to following reasons :

a) Manual labor shift to other high paying attractive sectors ( mfrg, construction etc ). Less availability of manual labor means more dependence on chemicals

b ) Farmers kids getting educated. Farming won’t be core business for next generation kids , it would be a side business. They would like to outsource farm management to consultants, technologies. Hence higher chances of chemical usage as manual involvement would go down.

c) Farmers are aging very fast in the world , India has a higher younger population . In next 10 years , there would be less farmers in the world , so chances of higher exports from India . Higher export means higher margins so high chances of spending on high value chemicals .

  1. Excel is involved in generics and speciality chemicals .
    After acquisition by Sumitomo, Excel Crop has now access to speciality chemicals . Generics help to grow it business in existing markets whereas speciality chemicals would make it capable of competing in emerging opportunities.

  2. Sumitomo Chemicals track record in India
    the company’s agrochemical business grew from 30 crores to 900 crore in 7 years .It is the fastest growing company in India in agrochemical sector. If it transfers its marketing know-how to Excel Crop Care , the growth of this company can be much higher .

  3. Distribution channel of Sumitomo Chemicals

Check last year results of Excel Crop Care .

Sumitomo chemicals in India has a bigger and dynamic distribution channel than Excel Crop . If Excel Crop Products can be sold by Sumitomo in India , the growth for Excel Crop Care would be much higher . In last year , Excel Crop sold 114 crores material to Sumitomo in India . That is 10% biz and 10% growth for Excel Crop . And that was the first year . If this continues , Excel Crop would keep getting growth from Sumitomo Chemical .

  1. Old to new management

Excel Crop was managed by local Indian promoter who were not keen on too fast growth . UPL and other companies took advantage of a growing market whereas promoters at Excel Crop were happy with the status quo .
Sumitomo Chemical might change that management style and may bring fresh blood and fresh thinking in the organisation.

  1. Chances of de-listing or demerger

That would give other opportunity of value re-creation .

  1. Export opportunities

Bharat Rasayan, UPL all have grown many fold in last 10 years by becoming a global exporter whereas Excel was sleeping . Now after acquisition by Sumitomo Chemicals , chances of it becoming a global supplier as very visible as Sumitomo has footholds in every country .

8.Supplier to Sumitomo Chemicals

Most of the Japanese companies are changing their production base from Japan to China or India . There are high chances that Sumitomo may shift their production to India .Excel Crop Care would benefit from that .

  1. Less Cap-ex requirement

Excel Crop spends huge money on r & d . That may not be required as new molecules would come from parent company . Growth with reduced cap-ex would help it to realise better margins

  1. Good corporate governance

Being a MNC , we can expect a good corporate governance from new management.

  1. Focused Approach

Whereas other MNCs are focusing on too many parts of the agriculture market , Excel Crop is focused on chemicals . As many MNCs are shifting their r & d money towards seed research , this leaves a big vacant space for Sumitomo & Excel to be a strong , solo player for innovating future
molecules.

  1. Herbicide resistant crops

In near future, India may give permission to herbicide resistant crops . Monsanto could not get permission due to certain image issues but now it has been merged with Bayer . Chances of Bayer getting permission are higher. Excel Crop is 2nd largest player in producing that specific herbicide. If herbicide resistant crops in India come , it would be big lottery for Excel Crop investors.
Check the last quarter results


(RadheyShyam Aggarwal) #13

Agree with you. Synergy would play a bigger role than short term disruption from integration,


(ashishverma) #14

Did some research on current management of Excel Crop Care .

Came to understand that current MD, Chetan Shah is an ex-owner of a small company named NuChemi . He was in-charge of that company for 25 years and company grew from 30 crores to 50 crores and later on he sold that company to Sumitomo.

Wondering about the dynamism of the said person. During same period ,other contemporary promoter companies (PI Ind, Dhanuka, UPL, Excel ) grew from 50 crores to 1000 crores while Nuchemi was lingering.He got the business in heredity but could not grow it like other Indian companies and sold it off .

2nd person in leadership is Ninad Gupte , Joint MD . He was MD of Excel Crop before acquisition. During his time ,company business went down drastically .

Before joining Excel , he was MD of a American company Cheminova . During his period , company lost huge business and he had to change the job .

So it is difficult to see whether current management is able to grow business.

Then I wanted to check the reason for last year growth in Excel crop business !

I found 2 reasons .

  1. As per last year’s annual report of Excel Crop Care, related party sales to Sumitomo Chemicals is 114 crores. That means at least 10% growth of last year growth came from Sumitomo Chemicals selling Excel Products. Not much has changed in Excel Itself. Let’s hope that things change when Sumitomo Chemical management takes over Excel Crop Care management.

  2. Increase in export business is there but it is very small as compared to growth of Afro chemical business of PI , UPL, Meghmani , Sharda . So again , whatever growth is there , it is due to market opportunity, it is not due to management ability . And past record of Excel export business is also not good .


(RadheyShyam Aggarwal) #15

Got this news on WhatsApp group…was surprised by Chetan Shah name on block deal. He MD of Excel Crop.

It seems MD and an Independent director of Excel Crop (some Shroff) have bought 8% stake . Other 15% stake has been purchased by Ratnabli Investment. It is same Ratnabli who sold 24% share of Excel Crop to Sumitomo Chemical.

What is cooking ? Sumitomo Chemical comany planning to buy THIS company in India through Ratnabli. ?

Checked the history of Bhagiradha ,it is loss making company .Why Sumitomo Chemical or Ratnabli would like to buy it?
Is it a pump and dump story ?


(ashishverma) #16

https://www.moneycontrol.com/stocks/company_info/blockdeals_query.php?sc_id=BCI01&post_flg=1&myexchg=Both#BCI01

Thanks ,checked bulk deal on money control for Bhagiradha .Also read announcements

  1. Ratnabli ,Chetan Shah, Dipesh Shah bought the shares of this company on same day .
    2.CFO of company resigned.

Ratnabli -is famous market investor and operator. Buys illiquid stocks in bulk and sells later on a higher price (not exactly pump and dump but it is buying a potential take-over company and later selling to some big player ). This firm is same that had 24% shares in Excel Crop and later sold to Sumitomo Chemical. So a doubt whether Ratnabli is buying for Sumitomo may or not may not be correct. But a doubt is there.

Chetan Shah -MD of the company Excel Crop

Dipesh Shah -Ex promoter of Excel Crop who sold his shares to Sumitomo, he is still independent director of Excel crop.

A doubt definitely comes when 3 people who are and were involved with Excel Crop deal are involved . All 3 persons buying shares of Bhagiradha on same day is not a coincidence.

If sUMITOMO NOT BUYING bHAGIRADHA, then why MD and Executive Director are having partnership in a competing company. Total purchase is about 23% share, promoter has only 19%.CFO of Bhagiradha resigned after 23% shares bough by above 3 people.

Doubts are many. MD joining new company Bhagiradha? Sumitomo buying Bhagiradha with help its employees and Ratnabli ?

Why MD and other board members are working with a big investor like ratnabli. It is not good for company image.Hope things would be clear in next few days.


(RadheyShyam Aggarwal) #17

As per country head of Sumitomo Chemical,India , Pran Arora, the company is launching a new product . There is great buzz in the trade.

It is a herbicide. Herbicide market is growing very fast. As per company staff , this product goes in many crops. If this product becomes successful, Sumitomo chemical company will grow very fast.


(RadheyShyam Aggarwal) #18

Sumitomo Chemical has launched a farmer focused product website in India. It is a new product and it is first time that some company has launched a usable website for farmers.

Trade is very bullish about this product. As I belong to agrochemicals space, I find this digital approach a very big development. This would help the company to expand its reach multiple times at grower level.In this trade, creating awareness at farmer level is a big challenge. This shows the company is progressive and innovative.


(RadheyShyam Aggarwal) #19

max dainik bhaskar.pdf (264.9 KB)
Got some detail on new product.


(RadheyShyam Aggarwal) #20

PK

Today all North Indian papers have front pages have advertisement Sumitomo Chemical new product.Should be an important product , the company has never spent so much money on any product in past.


(RadheyShyam Aggarwal) #21

Q2 results are much below expectations . It seems that the company does not have any moat, unable to pass on all the increased RM costs to the customers . It’s also visible that the company is not able to take any volume growth as all the income growth is coming from price -increases.But price -increases are not in the same ratio of RM price increases ,hence the pressure on margins.Feel that Q3 ,Q4 would be more challenging for the company.


(RadheyShyam Aggarwal) #22

The company seems to have a long runway. How they manage the merger of 2 companies in India (local Indian generic company and a MNC ) would be the key to success or failure in India.Excel Crop although has a good distribution network but not doing so great (all growth of last one year has come due to cross-selling of Excel products by Sumitomo Chemical in its own channel)