Chhabrias to exit agrichem business

Shaw Wallace & Company (SWC) has put its agrichemicals business arm, SWAL Corporation (formerly Shaw Wallace Agrichemicals), up for sale.

This follows the company's announcement that it would sell its liquor business to the Vijay Mallya-controlled UB Group. The Manu Chhabria family-controlled Jumbo Group, promoters of SWC, has also divested its 70 per cent stake in Hindustan Dorr-Oliver to IVRCL Infrastructure & Projects.

The spokesperson for SWC told Business Standard, "In terms of overall strategy of the company, divestment of the agriculture business is contemplated as it is a part of the non-core businesses of the company."

Besides its core business of alcoholic beverages, SWC has a presence in traditional businesses with subsidiaries like SWAL Corporation and Narmada Gelatines.

Sources close to the development said a merchant banker had been appointed to advise the company on the sale.

The Rs 75 crore SWAL Corporation has three brands, namely Starthene, MIIT and Sterameal. The company has turned around in 2003-04 with a net profit of Rs 1.61 crore after incurring losses for several years.

The plans of the company for the current year include adding new molecules in the fungicide segment for paddy and introducing a herbicide for wheat in the Haryana and Punjab markets.

Industry sources said although SWAL Corporation commanded a small share of the domestic agrichemicals market, its strength lay in its lower cost of operations. Production of agrichemicals in the country is around 70,000 tonnes per annum. The domestic market is estimated at about Rs 3,000 crore and exports Rs 1,500 crore.

"The turnaround in SWC's agrichemicals business was possible due to improved resource productivity and cost reduction. Resource productivity was improved through a combination of measures, including portfolio rationalisation, rightsizing field manpower and improving operating efficiency. Rightsizing of field manpower and high motivational levels have seen sales per employee going up from Rs 65 lakh to Rs 100 lakh. Rationalisation of the brand portfolio has led to elimination of low-margin products," the sources added.

Encouraging policy initiatives taken by the government are expected to fuel investment and growth in the farm sector, thereby increasing pesticide consumption. Agriculture contributes 25 per cent to the GDP and the agrichemicals sector is poised to show a healthy growth of 6 -8 per cent per annum.