The promoters of the Delhi-based agriculture and home pesticide maker Insecticides India (IIL) are looking to sell a part of their stake in the R520-crore company, two people with direct knowledge of the development said.
?At the moment, our strategy is to have a strategic investor who can enhance our product portfolio, help us in research and development (R&D) and bring clients for contract manufacturing,? Rajesh Aggarwal, managing director, IIL, told FE in a telephonic interview on Thursday. ?We have mandated investment bank Rothschild to scout for a partner.?
Asked specifically whether the promoters will sell their full 74% stake, Aggarwal said, ?Can?t say at this point of time. It depends on the offer.?
The Aggarwal family owns 74.69% stake, foreign institutional investors own 5.82% and others, including public, own 19.39% stake.
Aggarwal, a third-generation entrepreneur, has been trying to raise around R100 crore by selling a smaller stake to private equity funds. ?Some PE funds had shown interest in the company, but did not offer us the right value,? Aggarwal said. ?So we decided to shelve the plan.?
The company had lined up R125 crore to augment capacity and launch new products. Last year, IIL signed a technical collaboration with global giant American Vanguard Corporation to make and market its Thimet pesticide brand in both India and Nepal. The company also owns a home pesticide brand Lethal.
The R8,000-crore pesticide market is dominated by multinational companies like Bayer, BASF, Dupont and Indian players Tata Chemicals, Coromandel Fertilisers and United Phosphorous.
?The focus of the Indian pesticide market has shifted from production to marketing,? said KA Ramakrishnan, director at Avalon Consulting. ?So, there is cut throat competition to reach the dealers and, hence, smaller companies lose clout with dealers.?
Aggarwal is betting their future on three counts. One, its thrust on R&D with a facility coming up in Rajasthan, two, enhancing its product portfolio by developing products in-house and through collaborations and, three, to become a contract manufacturer for large companies.
The biggest advantages with multinational and large Indian companies is that their molecules are under patent and have a wider network, said Ramakrishnan. ?Indian companies need to shift from being generic players selling same products to niche ones to gain market share. The fight for market share deepened with Indian fertiliser companies distributing pesticides through their wider network.?
IIL shares rose marginally by 0.09% to close at R410 on the BSE on Thursday.