 "Sailesh Mehta")
His firm has just made an unsolicited bid for acquiring control of Mangalore Chemicals & Fertilizers (MCF) but Deepak Fertilisers and Petrochemicals Corporation Chairman Sailesh C Mehta, 53, insists he wants the issue to be sorted out smoothly.
“I hope there would be some amicable settlement,” Mehta said in his first public comments after Deepak Fertilisers, which owns 25.3 per cent in MCF, made an open offer last week for a further 26 per cent stake in the company. The offer, if it succeeds, will help Mehta seize majority control of MCF. The offer pits him directly against Vijay Mallya, who owns 21.99 per cent in MCF, and Kolkata-based industrialist Saroj Poddar whose company, Zuari Fertilisers and Chemicals, bought a 16.43 per cent stake in MCF in early 2013.
People who know Mehta well say this is typical of the soft-spoken industry baron who always downplays his aggressive business instincts. Ask Mehta about his strategy in the backdrop of reports that Mallya and Poddar might come together to thwart any hostile takeover bid, and the answer is a cryptic: “We will take it as it comes.”
According to analysts, behind Mehta’s cool demeanour lies a steely resolve to acquire MCF. That’s because MCF is a good strategic fit in terms of providing complimentary territory and products. Deepak Fertilisers has a strong foothold in Maharashtra and Gujarat and MCF will help it get the market in Karnataka. Also, it will add urea to Deepak’s product portfolio, which is largely focused on nitro phosphate fertilisers.
But no one denies the battle would be tough. Poddar is a good friend of debt-ridden Mallya who has pledged nearly half his holding in MCF. When Poddar bought the stake in MCF, he was seen playing the role of a white-knight to keep raiders away. Later, he had also agreed to sell the stake back to Mallya or get into a joint venture or take the full management control. However, he never planned a hostile bid. The immediate aim of the Mallya-Poddar duo is to raise their combined holding in the UB Group firm from around 38.5 per cent.
What makes the battle fierce is that there is only about 36 per cent of floating stock in the market, making Mehta’s chances of buying a full 26 per cent from the open offer bleak. Also, Mehta’s offer price of Rs 61.75 a share is below MCF’s closing price of Rs 69.80 on Wednesday. Analysts tracking the company believe Mehta is most likely to revise the price. “A 10-15 per cent increase in offer price would not be an issue in this battle as MCF has valuable land,” says an analyst who did not wish to be identified.
A second-generation entrepreneur, with a management degree from Texas, Mehta is seen by his peers as hungry for growth. He took over as managing director in 2002 and became the chairman in October 2012 after his father, C K Mehta, decided to devote more time to social work.
He is credited for moving the company up in the value chain. The company that is largely focused on farm solutions, mining chemicals and industrial chemicals recorded a 28 per cent compounded annual growth in the last five years to generate a revenue of Rs 2,606 crore in 2012-13. Net profit of the company for the year stood at Rs 147 crore.
A leading maker of industrial chemical technical ammonium nitrate (TAN), which is used in mining for explosion, it is moving towards more value-added services such as mining consultancy. “There is a huge power deficiency in India and therefore, there lies an opportunity for growth in the coal mining sector, which is one of our major endusers,” says Mehta.
Similarly, he is credited for growing the industrial product segment of the company as he found opportunity in pharma for products such as isopropyl alcohol as increasing awareness for health care is driving growth for medicines.
Even in the agri business, he is moving beyond selling bulk fertilisers by expanding into the nutrient management. The growing demand for exports and domestic retail has raised the consumer expectation of quality of fruits and vegetables and this is what he wants to encash with the nutrition management products.
Currently, these three divisions contribute almost equally to the top line and bottom line. “Each of these businesses is targeting to grow significantly and would continue to compete within themselves to maintain their share,” says Mehta.
