Chennai, 10 May 2012 : The Murugappa Group recorded an all-time high turnover of  22314 crores during 2011-12, a growth of 31% over FY 2010-11 turnover of 17051 Crores, with most of the key businesses reporting their best ever performance. Earnings before Interest, taxes, depreciation and amortization (EBITDA) grew by 20% at 2692 Crores (FY 2010-11 2247 Crores) and Profit Before Tax (PBT) went up by 21% to 1850 Crores without considering extra-ordinary incomes (FY 2010-11 1527 Crores). The market capitalization of the Group, at the end of the Financial Year stood at 20000 Crores, a growth of 5% over the previous year (against a Sensex drop of 10% for the same period). The Group incurred a capital expenditure of 632 Crores during FY2011-12, excluding acquisitions (FY 2010-11 410 Crores).

During the year the Group acquired a majority stake in Sabero Organics, a listed company and significant player in crop protection business, complementing the portfolio of crop protection products under Coromandel. With this acquisition Coromandel has become a Top 5 player in the segment. The Group divested its stake in the e-publishing company Laserwords.

Key highlights of FY 2011-12

The summary of the Gross Sales and Profitability is as follows :

Group Companies

Gross Sales
(Crores)

Growth over Last Year

EBITDA
(Crores)

Growth over Last Year

Coromandel International Ltd

9879

30%

1132

Tube Investments of India Ltd

3866

17%

411

14%

Carborundum Universal Ltd

2057

23%

402

29%

EID Parry (India) Ltd

2635

51%

300

107%

Cholamandalam Investment & Finance Company Ltd

1784

46%

270

103%

Chola MS General Insurance Company Ltd

1347

39%

67

48%

Other Businesses

745

37%

110

-7%

Total

22314

31%

2692

20%

Strong growth across sectors

With subdued economic reforms and continuing policy uncertainties, the GDP growth for India ranged at 7% and is expected to remain in this band for some time. FY 2011-12 saw macroeconomic worries ranging from poor economic growth, a fluctuating rupee and increase in interest rates, inflation, fiscal deficit and current account deficit. Corporate investments slowed down in pace and business sentiment was subdued for most of the year.

Against this backdrop, all the key businesses of the Murugappa Group reported satisfactory and significant performance in 2011-12. FY 2011-12 was a period of enhanced productivity and capacity utilization, increased market penetration and customer focus.

The number of customer touch points increased across all businesses. The successful format for farmer connect in AP, Coromandel’s Mana Gromor centre was launched in Karnataka under the name Namma Gromor centre. The Financial Services businesses added 157 branches, and the TI Cycles branch network increased to over 800.

Capital expenditure to the tune of 632 crores was made in FY 2011-12 towards normal organic business expansion and capacity increase.

Poised well for FY 2012-13 and beyond

The Group plans to deploy over 1000 crores towards capital expenditure for the FY 2012-13, a part of which will be towards completion of projects initiated in the previous year. The capacity expansion projects in Tamil Nadu and Punjab are expected to commence in 2012-13 after land acquisition process is completed.

The expansion in Coromandel Kakinada is proceeding as per schedule and is slated for commissioning in 2012-13. This will add 1 million tonnes to the existing 3 million tonnes.

The acquisition of Sabero Organics will provide access to potential market opportunities in Latin America, and Sedis will help gain access to the US market. Increased focus in the business sectors like retail insurance, inclusion of new product lines in Stainless Steel tubes and focus in funding Used Commercial Vehicles and tractors will further open up avenues for growth.

The Group continues to look for opportunities in the Merger & Acquisitions space to drive synergistic inorganic growth.

As a result of all this, the Group is well geared and positioned to achieve the vision of 35000 crores turnover by 2013-14, at a growth rate of 28% CAGR.

Sectoral Highlights – FY 2011-12

Key highlights in each sector are presented below :

Agri-businesses

The agribusinesses leveraged the upturn in the Agricultural GDP backed by a good monsoon and showed overall improvement in performance.

Coromandel International 

Coromandel recorded higher all round performance in its 50th year of operations.

Coromandel posted robust growth of 30% in consolidated sales and it has been one more year of good performance for the Company, despite input cost pressures aggravated by the depreciating rupee. The Company reported a much improved performance in all business segments. This has been achieved under challenging business environment of volatile raw material prices and depreciating rupee.

The expansion at the Kakinada plant to scale up fertilizer capacity to 4 million tonnes (Current capacity 3 million tonnes) by 2012-13 is progressing as per schedule and is expected to be completed by July 2012.

The company has a plan for setting up a greenfield facility Single Super Phosphate plant in Punjab in the light of escalating prices of phosphatic fertilizers.

The Plant Protection Chemicals Division (Pesticides)sales grew by 5% during the current year. During the year, the company acquired majority stake in Sabero Organics. With this acquisition, Coromandel will be among the top five players in the country in the Crop Protection market. The acquisition will strengthen the product portfolio and also will enable leverage of technical competence among the two companies. As a combined business, Coromandel will have a range of over 16 technical grade pesticides. Apart from technical competencies, it will also provide access to new markets.

The Specialty Nutrients Division (SND) recorded a sales growth of 40% during the year. The organic fertilizer volume increased by 50% to touch 180000 tonnes and has plans to increase it further for better yield. Coromandel SQM (India) Pvt Ltd. commissioned its Water Soluble Fertiliser plant in 2011-12. This will help in aggressive growth in the Water Soluble Fertiliser segment going ahead.

The Company’s retail centers (Mana Gromor Centers – MGC) expanded its presence in Andhra Pradesh, and entered into Karnataka, taking the total count to over 600 stores. It thus continues to improve its performance by being a total solution provider to the farming community.

The Company plans to issue unsecured redeemable non convertible bonus debenture of 15 each for every equity share, subject to approvals.

EID Parry (India)

EID Parry and its subsidiaries recorded a growth of 51% in turnover and 107% in EBITDA. During the year, Sadashiva Sugars Ltd. and Valensa International became wholly owned subsidiaries of EID Parry.

Sugar Division

The sugar division leveraged the higher availability of cane and increased crushing to about 300 days this year from the average of 180 days in the previous years in Tamil Nadu. The consolidated sugarcane crushing, including Karnataka and Andhra Pradesh, increased by 69% at 71 lakh MT (FY 2010-11 42 Lakh MT).

EID Parry, together with its subsidiaries has 9 sugar factories having a capacity to crush 32500 tonnes of cane per day, generate 146 MW of power ad 4 distilleries having a capacity of 230KL per day.

Merger of 2 PSIL units

EID Parry announced the merger of two plants of the subsidiary Parrys Sugar Industries Limited (PSIL) at Sankili and Haliyal with itself, w.e.f. 1st April 2012 subject to statutory and regulatory approvals. This merger will help the company secure funds at lower cost to operate these units. The third unit at Ramdurg will continue to operate under PSIL.

Silk Road Refinery, a JV with Cargill, at Kakinada is in the process of moving into a coal fired model after having received statutory approvals. The plant is expected to resume its commercial operations in 2014-15.

Bio-products

Bio-products Division registered a sales growth of 37% for the year 2011-12.

Nutraceuticals

Parry Nutraceuticals introduced new product ranges in the OTC segment, and retained its market leadership position in organic Spirulina

Engineering businesses

Tube Investments and Carborundum Universal (CUMI) performed better than the industry in top- line and bottom-line leveraging capacity utilization, operational efficiencies, higher market reach and stronger customer relationships.

Tube Investments of India Ltd.

Even as the auto industry growth slowed down, Tube Investments showed tremendous overall growth across the auto components businesses. This has been achieved mostly by focusing on operational efficiencies and partly through recovery of input costs.

Tube Investments of India Ltd. (TII) registered a growth of 14% in EBITDA and 17% in turnover over the previous year despite the slowdown in the major customer industry namely the Auto sector.

Tube Products of India (TPI), a leading supplier of precision tubes for the auto industry, recorded a domestic volume growth of 15% in Tubes and 7% in Cold Rolled Steel Strips for the year. TPI witnessed a healthy growth of 22% in turnover and 16% in profitability despite the slow growth in the Auto industry. This was achieved due to stronger customer relations. The SBU forayed into the Stainless Steel tubes segment and commenced commercial production.

TI Cycles (TICI) continued the trend-setting performance in retail and product innovation, recording a volume growth of 8% and turnover growth of 15% over the previous year. The margins were under pressure mainly due to volatile exchange rates and inability to pass on the cost increases fully to the market due to competitive environment. Both the company’s brands BSA and Hercules, have been awarded the ‘Consumer Superbrand’ status by SuperBrands India for the year 2011-2012. The award-winning “Hercules BSA Cycles stores” format of stores to provide the urban retail buying experience in smaller towns. This has scaled up to over 200 of these stores in just over a year’s time, taking the total number of stores to over 800. The company launched the first of its kind Track & Trail cycling cafe, ‘Coffee and Cycles’ in Bengaluru. As part of its core strategy of ‘selling cycling and not just cycles’, TI Cycles organized around 5500 events pan-India to promote cycling.

E-scooters, a leading player in South India, maintained its steady presence in the market.

TI Metal Forming (TIMF), the market leader in car door frames, witnessed a drop of 9% in volumes mainly due to lower growth of the passenger cars segment. The sales for the railway segment product remained steady mainly due to delay in release of orders to the wagon builders from Railways.

TIDC India (TIDC), a leading chain manufacturer, witnessed a domestic volume growth of 14% in automotive chain and 11% in Industrial Chain. Export of industrial chains registered a growth of 40% mainly due to higher sale to the European market and better off-take from OEMs in the US. The Company is focused on providing superior quality and technology products to become a leading global player in Industrial and Engineering Class Chain segment by leveraging from the SEDIS acquisition.

CUMI

CUMI recorded stellar performance in 2011-12 with turnover growing by 23% and EBITDA by 29%, with all divisions recording good growth. Overseas subsidiaries recorded strong growth in sales, particularly the entities in Russia, South Africa and Australia.

Abrasives

Sales of the abrasives business on a consolidated basis registered an increase of 20% on a full year basis. Off-take from user industries in India and Russia continued to be encouraging.

Electro Minerals

The second largest business segment viz. Electro Minerals recorded an increase of 22% in sales Growth in sales despite the slowdown in the European markets. This was made possible by the robust performance of the Russian and Indian operations.

Ceramics

The ceramics segment recorded a robust 31% increase in sales on a consolidated basis. Both the high alumina ceramics business and the super refractories businesses performed well during the year. The operations in Australia registered higher growth.

With a view to rationalize the holding structure, the company transferred its holdings in CUMI Abrasives and Ceramics Company Limited, China, to its wholly owned subsidiary in Cyprus.

Financial services

Both Cholamandalam Investment & Finance and Cholamandalam MS General Insurance in the financial services group recorded their best ever performance in 2011-12.

Cholamandalam Investment and Finance

Cholamandalam Investment (CIFCL) recorded better-than-industry growth rate with its customer focused market approach – both in terms of increased product portfolio and better reach in Tier 2 and 3 centres.

Disbursements in Vehicle Finance assets grew 63% compared to the last year and Home Equity loans grew 24% compared to the last year. The Company disbursed 7306 Crores in Vehicle Finance assets (as against 4496 Crores in 2010-11) and 1528 Crores in Home Equity loans (as against 1235 Crores in 2010– 11). The disbursement in the newly launched Gold Loan business was 54 Crores during the year. Aggregate disbursements of the Company for the year ended 31st March 2012, was 8889 Crores as against 5731 Crores in 2010 – 11 registering a growth of 55%. Overall, total assets under management grew by 40% from 10445 Crores to 14643 Crores.

The Company’s branch network grew to 375 adding more Tier III and Tier IV locations across India.

The Company raised Tier II capital of 583 Crores during the year in the form of perpetual debt instruments and subordinated debt. Three private equity firms invested in equity share capital aggregating to 212 Crores.

Cholamandalam MS General Insurance

Cholamandalam MS recorded its best ever performance in its 10th year of operations with growth of 39% in turnover and 48% in EBITDA.

The Company forged ahead with its focus on the retail segment both in terms of new products and new customer reach initiatives offline and online. This approach has borne remarkable results. Subsequent to the January 2012, Insurance Regulatory and Development Authority (IRDA) directive on ultimate loss ratio with regard to Motor Pool to the General Insurance Industry, the Company has provided 66 Crores for the year covering the losses up to March 2012. During the year, the promoters infused additional capital of 50 crores through a rights issue for growth and expansion plans.

The Company has won the Financial Insights Innovation Award for innovation in mobile enablement at the Asia Insurance Congress and also “Best In time Claims Settlement Award for RSBY Claims” from Government of India.

Other Businesses

  • Parry Agro Industries Limited increased its sales volumes in Assam by 13% over the FY 2010-11. However, the lower sales volumes from South India due to unfavourable weather conditions restricted the overall volume growth to 1% over 2010-11. The prices still remain subdued. The company continues its focus on increasing sales volumes through its blending operations. The Rubber business grew by 45% over FY 2010-11.

  • Coromandel Engineering Company Ltd. (CEC), the Property Development and Civil Construction business of the group, registered a topline growth of 50% over 2010-11. However due to increase in construction material prices the profitability in civil construction segment was highly impacted. The company continues to focus on Orissa and Maharashtra in the coming years for growth in civil construction. In property development, the company has three projects under development in Coimbatore & Chennai. Overall, the outlook for the company is optimistic on the back of a healthy order book size. The company is expected to grow profitably in the coming years.

  • Parry Enterprise India Ltd (PEIL) witnessed top line growth across all its divisions. Its General Marketing division forayed into trading of dairy ingredient products in North India. It has plans to expand the capacity in packaged water division in the coming years. The Polynet division has expanded its capacity in the knitted line to cater to the growing demand for Agro shading nets and in the overseas markets. The Travel division of the company is focusing on enhancing the allied services to the customers. The Flexi Packaging division of the company is focusing on Laminates and added major customers during the year.

  • Ambadi Enterprises Ltd and its subsidiary Parry Murray, the high end furnishing and floor covering business with exports to European and American markets, grew by 20% over FY 2010-11 despite the slow recovery in overseas markets. The company has strengthened the design team to offer break-through products. It has plans to focus more on retail in the coming years. The company also entered the Guinness Book of World Records for having made the world’s largest apron.

People paradigm

People productivity and leadership continued to be key engines for driving growth at the Murugappa Group. During the year, an innovative Murugappa Career Development Plan was introduced and rolled out as a pilot in a few organizations. The Murugappa CDP will be implemented across the other organizations in the coming years. Business Coaching has been identified as a key enabler to facilitate better people productivity, and this has been adopted in a few organizations. The Group continues its focus on providing the employees an enriching career and different companies in the Group have won several industry commendations on the people practices, including the coveted CII HR Excellence awards. The Murugappa Management Development Centre continues to spearhead the development initiatives for employees through customized training programmes in partnership with world-class universities such as Harvard, Wharton, INSEAD, LBS, IMD and IIM etc., to hone the business and leadership acumen of employees.

Corporate Social Responsibility

  • As part of the Group’s ongoing corporate social responsibility initiatives, 0.5% of PAT was contributed in the FY 2011-12 to the AMM Foundation (AMMF) and Shri AMM Murugappa Chettiar Research Centre (MCRC).

  • In addition to the above, during the year the Group companies also stepped up development initiatives primarily catering to the communities around the plant locations, in the area of education and health. Coromandel International launched a Health Centre at Ennore-Chennai and a full-fledged hospital is currently being set up in Kakinada. CUMI has conducted numerous health camps in and around the factory units, benefiting villagers and the employees’ families. CUMI has also undertaken a project of providing biogas from domestic waste. Many companies have contributed to the cause of education, by means of scholarships, support to buy school uniforms, personality development sessions etc.

  • The Hospitals run by the AMM foundation has reached out to over 7.30 lakh people through its out-patient services and 14000 patients through its in-patient facilities.

  • The schools run by AMM Foundation cater to the educational needs of 9800 students of which 7400 belong to the marginalized group. Of the 846 students who appeared for Higher Secondary Public Exams 235 had scored above 1000 and 72 had scored above 1100. Of the 1306 students who had appeared for X Std public examination 203 had scored above 90%

  • Through the A.M.M Murugappa Chettiar Centenary Scholarship, the Foundation has given scholarships to 617 most deserving poor students to pursue their education, including 190 in professional colleges, in 2011-12. The scholarship has covered the geographical location of Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Maharashtra and Assam.

Safe Harbor

Some of the statements in this news release that are not historical facts are forward looking statements. These forward looking statements include financial and growth projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our businesses and the markets in which we operate. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward looking statements. These risks include, but are not limited to, the level of the market demand for the products, the highly competitive market for the types of the products that we offer, market condition that would cause customers to reduce their spending for the products, our ability to create, acquire and build new businesses and to grow existing businesses, our ability to attract and retain qualified personnel, currency fluctuations and market conditions in India and elsewhere around the world, and otherwise not specifically mentioned herein but those that are common to industry.