The fertilizer company recently made a big-bang announcement. Coromandel International is a leading agriculture solutions provider in India, with a large market share in the field of fertilisers, pesticides and specialty nutrients.
The company is a leader in phosphatic fertiliser and super phosphate, with a 17.9% market share and a capex of ₹2.8 billion in 2022 and ₹9 bn for 2023 and 2024. Despite heavy capex, it plans to remain debt-free. Along with a big capex plan, it also launched nine new products in 2022.
The company has also given decent financial performance during the past five years. In the last five years, the company’s revenue has grown at a compound annual growth rate (CAGR) of 11.6%, driven by volumes due to its strong retail presence with over 750 outlets.
The net profit has seen a 17.1% growth on a CAGR basis due to the captive production of phosphoric acid, a key input, and established relationships with the suppliers.
During the quarter ended 31 December 2022, the company reported total sales of ₹83,492 million (m), which is a sharp rise of 64% on a YoY basis. During the same period, its profit went up by 41%.
Apart from earning well, the company has also rewarded its shareholders generously. It paid a dividend of 1,200% amounting to ₹12 per share for the year ended March 2022.
The company also declared an interim dividend of ₹6 on 2 February 2023. Over the last 5 years, it has paid an average dividend of ₹9.
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Coromandel International share performance
After recognizing the opportunity in agri-tech, the company is also adopting new technologies. The company invested in a drone-based startup to launch the first of a kind ‘drone-as-a-service’. All these reflect the company’s efforts to become the largest player in the fertilizer industry. The efforts are also reflected in its share price chart. In the past five years, its share price went up by 63.7%.
On 22 March 2023, the company announced that its board of directors have approved the plan to expand their operations in crop protection chemicals and foray into the contract development & manufacturing organisation (CDMO) business. The board further approved to diversify into new growth areas namely specialty and industrial chemicals. Along with establishing a larger market share in its existing business, the company will also leverage its deep technical capabilities and best-in-class infrastructure to enter into new business avenues. According to the announcement, the company plans to invest ₹10 billion (bn) over the next two years in the above businesses and leverage the macro tailwinds in the specialty chemical sector to build a business of scale.
Coromandel International Capabilities and performance
Its entry into the CDMO business can help leveraging its expertise in handling complex chemistries at a commercial scale and strong development capabilities across various chemistries. The rising need for better medicines has resulted in the increasing willingness of pharma companies to outsource drug development to CDMOs. In the near future, Indian CDMOs will look to offer end-to-end product development, scale-up and regulatory approval solutions and create compelling new products at rapid velocity. From ideation to high-volume manufacturing – all elements of the new product’s research and development will be taken up by the CDMOs who get into marketing alliances with strong branded generic companies.
The company’s current capabilities in crop protection chemicals offer a strong starting position and flexibility for play in specialty and industrial chemicals.
Future of Coromandel International
With global supply chain diversification trends and strong policy push by the government, these businesses offer significant growth prospects. Covid-19 was a blessing in disguise for the Indian specialty chemical sector. China commands a 20% market share in the US$ 800 bn (about ₹658.8 bn) global specialty chemical industry. But due to strict lockdown restrictions in China, the world turned to India. India is the sixth largest chemical producer. Low production cost, cheap labour and a proven track record of producing world-quality products made India an attractive investment. Apart from this, India’s proximity to the Middle East, the world’s largest source of petrochemicals stockpile, enables it to benefit from economies of scale.
Coromandel International share price performance
In 2023 so far, Coromandel shares are down 2%. In the past one year, Coromandel International is up 10.8%. Coromandel International has a 52-week high of ₹1,094.4 touched on 1 September 2022 and a 52-week low of ₹779.8 touched on 28 March 2022.