The slump in the market is yet to abate the thirst for buyout plans of private equity (PE) players. In the latest development, PE players such as Blackstone, Carlyle and Kotak are learnt to be in a race to acquire Mumbai-based chemical company Gharda Chemicals Ltd. GCL, the Rs 700 crore agrochemicals major, was in the news following its negotiations with Tata Chemicals for a possible buy-out by the latter two years back.
According to experts, there is accelerated growth in the Indian agriculture industry, which grew by 4.5% in 2007-08 from 3.8% in 2006-07. The pesticide industry has seen a growth estimated at 10% during the year 2007-08. Foodgrains output is at a record 227 million tonne (mt). A PE executive, close to the development, confirmed the talks. When contacted, Keki Gharda, chairman and managing director refused to comment. Shankar Narayanan, MD, Carlyle India did not respond to calls either.
GCL has clocked sales of Rs 722 crore for the year 2007-08, including exports worth Rs 390 crore. GCL, started in 1964, has a wide product basket including insecticides, pesticides and veterinary drugs. It exports 60% of its sales, and has operating companies in the US, Canada, Argentina and Brazil.
Top PE executives opine that the deal could be valued at 5-10 times the company’s Ebidta margin.
In 2006, Tata Chemicals had been in talks to buy out GCL, with plans of merging it into Tata group?s Rallis India, which has similar business. Rallis India, which earns major revenues from sales of pesticides like GCL, had posted net sales of Rs 692 crore with a profit after tax of Rs 125 crore for the year ended March 31. It has posted an Ebidta margin of Rs 170 crore for the year 2007-08. Earlier, global chemicals giant Dupont had offered to buy the company, which was opposed by Gharda?s relatives.
Last year, Godrej Industries had sued GCL in the Bombay High Court, following Keki Gharda?s refusal to transfer 7% shares bought by Godrej from a Gharda family member to Godrej?s name. Gharda and his wife hold 60% in the company, while relatives and a few employees hold 33%. Last year, in an interview, Gharda had said, ?As and when I sell my shares, which I do intend to sell, because I do not have any capable successors, I will invest in Gharda Advance Technologies. I have an excellent idea for this company.?