— PHOTO: BIJOY GHOSH

MIXED FORTUNE: A. Vellayan (left), Vice-Chairman and Director-Strategy, Murugappa Corporate Board, and N. Srinivasan, Director, Finance, addressing a press conference in Chennai on Tuesday.

CHENNAI: The Murugappa Group is the latest to join the $2-billion revenue club. The group has reported a turnover of Rs. 8,446 crore for 2006-07, up by 15 per cent over the previous year. The profit before tax at Rs. 649 crore has grown by 10 per cent. A. Vellayan, Vice-Chairman and Director (Strategy), said though the group had breached the $2 billion revenue-mark, he "is not satisfied with the topline growth of 15 per cent." Going by the profit before tax yardstick, however, "the performance was reasonable," he added. Addressing a press conference here on Tuesday, he termed 2006-07 as a `year of mixed fortune' for the group." Ideally, the group should have grown more than double the GDP growth (gross domestic product), he felt.

Rising interest rates

According to him, the unsatisfactory growth in topline was caused by a couple of factors. In the case of fertilizer, New Delhi was neither increasing the MRP (maximum retail price) nor disbursing the subsidy in time. With interest rates going up, this was having its own impact on the group. Mr. Vellayan said the group had an outstanding subsidy claim for Rs. 500-600 crore from the Centre. The director wanted the fertilizer subsidy to be revisited to include micronutrients in the scheme. The current subsidy scheme depended heavily on cheaper urea. In this context, he said the subsidy scheme should take into account soil-specific fertilizer after due process of testing. He also informed presspersons that it had become increasingly unremunerative to produce sugar in Tamil Nadu. In this context, he said that, "most sugar units in the State are selling below cost."

The Vice-Chairman called for fresh policy thinking on the part of the State Government, which allowed export of molasses, blending of ethanol with petrol and grant of export subsidy. Maharashtra, Karnataka and Andhra Pradesh governments had adopted proactive policies on the sugar front, he said.

Answering a range of questions, Mr. Vellayan said the group had drawn up a Rs. 1,000-crore capital expenditure programme for the current year. Last year, the group's capex was Rs. 480 crore. Out of the Rs. 1,000-crore capex plan this year, the investment by EID Parry would be around Rs. 350 crore, Carborundum Universal Rs. 150 crore, Tube Investments Rs. 300 crore, Coromandel Fertilisers Rs. 100 crore and Godavari Fertilisers Rs. 100 crore. The financial services business would spend around Rs. 100 crore. The group's investment in Uttaranchal would be around Rs. 150 crore.

Mr. Vellayan said the group would meet 50 per cent of the fund needs from internal resources. The balance would be funded through debt, which would be a combination of rupee loan and cheaper ECB (external commercial borrowing).

On the sugar business, the Vice-Chairman said the group was confident that branded sugar would contribute around a quarter the group's sugar business three years hence. Currently, it contributed just about five per cent of the revenue.

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