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different applications (i.e. by widening usage) and in different countries the company has achieved a market share of 15-20 per cent in its key products.
Some of UPL's important products in the global market and their market shares are impressive - Aciflurofen (100 per cent),Acephate (23 per cent), Oryazalin (24 per cent) and Napropamide (67 per cent). In 2005, UPL made three strategic acquisitions.
It acquired CEQUISA (Spanish Agrochem Company with 400 registrations world-wide), SWAL
Corporation Limited (oldest agrochemical player in India) and REPOSO (Argentine company with more than 30 registrations in Argentina).
UPL has sucessfully transformed itself froma domestic insecticide player to a global generic agrochemicals player.
Background
UPL Limited (UPL), incorporated in 1969 as a domestic insecticide company, has successfully established itself as a global agrochemical player. It has reduced its dependence on the ageing
organophosphates-based insecticides and increased the range of pyrethroid based insecticides and has made a foray into the fast growing herbicides segment.Today it is one of the largest agrochemical companies in the domestic market and the world's sixth largest generic agrochemical player and the largest producer of Aluminium Phosphide and Napropamide.
Through acquisitions, strategic alliances and
subsidiaries, UPL has built a global network spanning 86 countries. It has also assiduously built its
distribution network, which has helped the company grow substantially in the international market.
Availability of a large product basket is a key success factor in the generics market. UPL has about 15-20 registrations to its name, with 12 registrations in USA and 9 in Europe, the two most important markets. By registering the same products for
UNITED
PHOSPHORUS LIMITED
Company Products Established Founder Distribution Production plants United Agrochemicals 1969 Lalit Sharma India, Americas, India, UK
Phosphorus & Associates, Europe, Middle East,
D. Shekhawat Asia Pacific, Africa 1994
1996 1996 1999 1999 2000 2000 2002 2002 2003 2003 2004 2005 2006
Acquired MTM Agrochem, UK Acquired Agrodan a/s Denmark
Acquired ‘Devrinol’ from Zeneca for USA Acephate registration in USA
ALP fumigation patent in USA
Acquired ‘Devrinol’ from Zeneca for Japan Permethrin registration in USA
Cypermethrin registration in USA Acquired Midland Fumigants in Europe Acquired Oryzalin a herbicide from DOW Acquired Aciflurofen a herbicide from BASF 2 new registrations in Europe;
Acquired Agrahe Inc., USA
Acquired Cequisa, Spain and Shaw Wallace Agrochem, India
Acquired Advanta (seed business), The Netherlands
.Source: Research reports, IMaCS Research
UPL's history of acquisitions and registrations
177 UPL has also focused on reducing its dependence
on insecticides (particularly organophosphates), which has can be traced to UPL's foundations in phosphorous chemistry and the nature of the Indian agrochemical market.The recent acquisitions have helped UPL in increasing the share of
herbicides in its turnover sharply since the year 2002.
Financial Analysis
With the globalisation of the operations, the company witnessed a 42.1 per cent CAGR in its gross sales between 1999 and 2005, with gross sales reaching US$ 253 million in 2005. It has witnessed 101 per cent CAGR in its exports between 1999 and 2005, with exports reaching US$ 136 million in 2005. Close to 55 per cent of the turnover is from exports.The company, which was loss making till 2002, was able to achieve a turnaround in the year 2004 due to better
realisations, mainly from exports. Gross margins on UPL's approach of forward and backward
integration helped in reliable supply of raw materials for multi-site manufacturing through an extensive downstream range of products and services. UPL pioneered 'backward integration' in agrochemicals and is one of the world's few companies to manufacture complex organo-
phosphorus compounds starting from the basic raw material. It has eight manufacturing plants (seven in India and one in UK) all of which are ISO
compliant.
The promoters hold around 33 per cent of the equity and the foreign institutional investor holding is around 20 per cent. Non-resident Indians and overseas corporate bodies hold close to 12 per cent of the equity capital. Indian financial
institutions hold about hold 20 per cent of the equity.The Indian public holds around 12 per cent shares of the company and corporate entities hold about 3 per cent shares.
Products and Brands
UPL is the largest producer in India of crop protection products with a wide range of products that include fumigants, fungicides, insecticides, rodenticides and herbicides and has established a broad product line that caters to the crop protection needs of a plant during all stages of growth. UPL offers 'total crop protection' with a comprehensive product range and a sales support operation in every continent.
Its strong product portfolio includes proprietary brands like Surflan, SAAF, Ultra Blazer, Storm, Devrinol, Quickphos, Starthene and Sterameal. In the global agrochemicals business, generic players require a large portfolio of products and the lengthy registration process poses a major barrier to entry. UPL is well positioned on this front as it has diligently built its product portfolio over the last decade.
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majors.With improving cashflows and the recent capital raising (US$ 70 million through the Foreign Currency Convertible Bonds [FCCB]) the company is looking for more acquisitions.
UPL continued its strategy of acquisitions coupled with new registrations with good effect to ensure a large basket of product offering. UPL's strategy is to initially focus on products with a market of less than US$ 50 million enabling it to increase its portfolio.The global agrochemical market is characterised by stagnating markets and stricter regulatory requirements. It is therefore essential for agrochemical players to have a strong R&D base. UPL has four development centres in India and UK and has been successful in developing new process technology and new formulations.With over 50 per cent of the revenues from exports and a significant manufacturing and research presence overseas, UPL clearly established itself as a strong Indian player in the highly competitive global agrochemicals market dominated by giants such as Dow Chemicals, Syngenta, Bayer, BASF and DuPont.
UPL's global presence is backed by its subsidiaries across 20 countries outside India in Argentina, Australia, Bangladesh, Brazil, Canada, China, Denmark, Hong Kong, Indonesia, Japan, Korea, Mexico, New Zealand, Russia, South Africa,Taiwan, USA, UK,Vietnam and Zambia. It also has
representative offices in France, Germany, Sri Lanka and Vietnam. Its key international markets are USA, exports are of the order of 75 per cent, which is
significantly higher than the 30 per cent margins in the domestic market. UPL shifted some of its production from its UK plant to India that also helped reduce cost. The domestic demand in the year 2005 has been extremely good due to good rainfall throughout the country.
The return on capital employed has increased over the years due to a debt repayment, which will also help in bring down the interest cost by more than 50 per cent over the next two years.The debt- equity ratio has reduced from 1.1 in the year 1999 to 0.84 in the year 2005, and is expected to reduce further to 0.40 over the next two years, which will provide UPL significant financial flexibility to raise resources.
UPL's contribution in making 'Made in India” global
UPL started its international operations by acquiring smaller products and increasing product registrations in newer markets.The company started exports in early 1990s, which were primarily to the Middle East and East Asia initially.
Through acquisitions (of MTM, Agrodan and Midland Fumigants) in the second half of 1990s, the company has established a strong foothold in Europe and USA. UPL has undergone a ten year gestation process in the industry; it currently has 15-20 registrations in the US and EU markets and strong relationships with most global distribution
179 fumigants, fungicides and rodenticides. UP-Japan is
pursuing an aggressive growth strategy with plans to introduce new products every year.
Factors fuelling UPL's global initiatives
UPL's growth in the global markets has been driven by various factors:
• Strong R&D set up: UPL operates four development centres in India and UK and has access to Agrodan's (Danish company acquired by UPL in 1997) formulation development facility in Denmark. In addition, the company has direct access to the Jai Research Foundation (JRF) established by the promoters of UPL, which operates independently. JRF specialises in providing research data for agrochemical
registration requirements and has achieved Good Laboratory Practices (GLP) status.The company devotes much of its research effort to developing new process technology for manufacturing Europe, Australia and Japan.The mission of UPL's
US subsidiary is to become the premier supplier of post-patent technologies for the agricultural and speciality products industries throughout the United States and Canada. It offers a strong portfolio of agronomic tools such as post-patent metribuzin, cypermethrin, bifenthrin and acephate products, and sugar beet herbicides, as well as proprietary branded products including Surflan, Devrinol, Storm and Ultra Blazer herbicides. Its most recent acquisition is Ag Value, a major
marketer of post-patent products, located in Visalia, California.
The company has a strong presence in Europe as well. Apart from having offices and distribution network, the majority of UK products are formulated at its plant in UK.The plant is capable of producing a wide range of sophisticated formulations both for its own needs and as a toll formulator for many other multinational
companies
UPL Australia was incorporated in 1994 and has obtained several registrations for the Group's products. Its initial focus was on the niche grain storage and horticulture market, though in the recent years UPL Australia is expanding its activities in cotton and other broad acre crops. UPL
Australia expects to launch three products each year in different crop segments and is also working on obtaining agency agreements from other multinational companies into Australia. Besides the domestic Australian market, UPL Australia also markets its products in New Zealand and Papua New Guinea and is expecting to expand into specific markets in the Asia Pacific region. Its aim is to rank among the top five Crop Protection and Specialty Chemicals supplier in the region.
Headquartered in Tokyo, UP-Japan is a joint venture of UPL Ltd, India with Mitsui & Co in Japan. UP- Japan markets speciality crop protection products.
Its products include herbicides, insecticides, grain
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constitutes the most lucrative segment of the US$
28 billion agrochemicals space.The products are highly profitable and their share is increasing in an otherwise stagnant market. By 2007, off-patent / generics are expected to account for 70 per cent of the total market. UPL has raised around US$
140 million in the month of December 2005 through FCCBs, the proceeds of which will be used mainly for expansion, modernisation and
acquisitions.
UPL pioneered 'backward integration' in the agrochemical space and is one of the world's few companies to manufacture complex Organo- phosphorus compounds starting from the basic raw material, rock phosphate ore. UPL is now planning to extend this strategy to other products, the most recent being an integrated caustic chlorine plant using the latest membrane technology, creating basic building blocks for agrochemical and Specialty chemicals. According to Bhupen Dubey,Vice
President - Sales & Marketing (Formulations), “The company expects the financial year 2005-06 to end with a record performance in terms of enhanced market presence in the formulation space with a big lead in its industry ranking”.
agrochemical. UPL has excellent track record in this area, which enables it to manufacture off- patent/ generic products with the lowest cost.
The development of new formulations is another priority, with the company having a strong portfolio of greater than 100 products.
• Strong product pipeline: UPL has a large product basket in the generics market and a strong history of registrations in USA and Europe, the two most important markets. Having a large product portfolio has helped UPL in building strong relationships with global distribution companies which is critical in the highly competitive global agrochemical business.
• Ability to acquire brands and make new registrations: Over the years, UPL has acquired various products and companies in developed markets in order to expand its presence in these countries. UPL is likely to continue its policy of acquisitions and expand its market reach.
• Diversification into newer products and
segments: In the last few years, UPL has reduced its dependence on its ageing insecticide range based on organophosphates.The company has increased its range of pyrethroid based insecticides along with increased focus on the herbicides segment where it had weak presence.The acquisition of two new products in 2003 from global majors has helped UPL expand its presence in the herbicides market- particularly the Specialty crops segment.
UPL has also recently started focusing on more profitable and fast growing non-crop segment.
Future plans
Consumption of agrochemicals in India is very low and a huge growth potential exists.The Specialty chemicals and chlor-alkali businesses of UPL are expected to do well on account of growing demand from down stream industries. Off-patent / generic products, the mainstay of UPL's portfolio,
Globalisation at a glance
• Subsidiaries in 20 countries outside India, including the large markets of US, Europe, Australia and Japan, and the growing markets of Latin America
• Representative offices in France, Germany, Sri Lanka and Vietnam
• Manufacturing plants in UK and Argentina
• Development centre in UK
• Strong history of growth in global markets through acquisitions
• Exports constitute nearly 55 per cent of sales
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