Murugappa Group eyes double-digit growth in FY20, plans Rs 1,300 cr capex

Group is going ahead with expansion despite challenges faced in its main businesses such as fertilizer, sugar, engineering and financial services

Despite uncertainities around its key businesses, the Murugappa Group has said it would invest around Rs 1,250-1,300 crore in 2019-20 as it hopes things would turn around and will look at double digit growth.

The Group posted 18 per cent growth in overall PAT to Rs 2,880 crore in 2018-19 and expect to sustain.

Murugappa Group's Executive Chairman M M Murugappan said that it was a good year for the Group despite the fact that some of the main businesses including fertilizer, sugar, engineering and financial services have faced challenges.

"India will continue to grow and I am quite optimistic. We are a long-term player and are preparing ourselves for the future," said Murugappan.

He said the auto slowdown would hopefully get over by second or third quarter. 

Murugappan also expects some stability post elections, which will boost the demand and compensate for the tepid show in the first half. 

The important is to ensure liquidity, which the RBI and government will address after election. once it is over, there would be demand pick up. 

"In NBFC there are issues, and government is taking adequate steps. We have taken a cautious approach," he said.

The proposed investments include Carborundum Universal's capacity expansion at Sriperumbudur, Tube Investments' new plants for tubes and capacity expansion in metal forming business, Coromandel  International's capacity expansion of its phosphoric acid unit at Vizag. The Group is also investing around Rs 200 crore in technologies for its financial service businesses.

On challenges, he said the main issue is uncertainty, but asserted that it also offers opportunity to improve.

The key challenge in its agriculture vertical (fertilizer, sugar) was in sugar, which posted a negative growth of 28 per cent to Rs 3,283 crore. However the PAT grew to Rs 79 crore in 2018-19 from Rs 28 crore, as the company sold its biomass business. EID's other businesses have also grown.

Sugar business was impacted due to depressed prices brought on by huge rise in domestic production over the previous year.

Murugappa Group's President & CFO said the price declined by Rs 6 a kg, which translated to a Rs 240 crore loss. 

Besides, the company needs to close one factory at Puducherry and stop production at two of its facilities in Tamil Nadu due to non-availability of cane.

On the engineering business, 70 per cent of whose revenue comes from auto industry, Murugappan expects that things would improve going forward.

Meanwhile Cholamandalam Investments announced plan to launch a housing finance subsidiary.

The Group reported 12 per cent growth in revenue to Rs 36,893 crore from Rs 33,079 crore. Group's profit rose to Rs 2,880 crore from Rs 2,432 crore, a year ago. Market capitalisation if the Group was Rs 66,000 crore as of March 31, 2019.