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Murugappa Group’s Three Key Focus Areas

Here’s the outlook for the conglomerate, Murugappa Group’s, key businesses.



Workers sprays weed killer on plants at a soya bean farm in Dewas (Photographer: Prashanth Vishwanathan/Bloomberg)
Workers sprays weed killer on plants at a soya bean farm in Dewas (Photographer: Prashanth Vishwanathan/Bloomberg)

There hasn’t been a sizable pick-up in investments as most companies will first exhaust capacity lying idle. But the Murugappa Group has started work on increasing output of its fertiliser business.

That’s what A Vellayan, head of Rs 30,000-crore cycle-maker-to-gold-lending conglomerate told BloombergQuint in an interview. Fertiliser companies typically start thinking of expanding capacities when utilisation reaches about 85 percent, he said. Coromandel International, the group’s fertiliser company, is now operating at a higher utilisation rate and the government wants to make the country self-sufficient in phosphatic fertilisers.

The direct-benefit transfer will also help. The first few months brought out some teething problems for Coromandel but things are now looking better, Vellayan said. The group expects to gain from its last-mile connectivity and the DBT framework, which involves companies being pushed to set up retail centres and help farmers with crop and weather insurance.

Improvement In NBFC Business

Vellayan said better-managed non-bank lenders will continue to do well. The group’s Cholamandalam Investment and Finance is bringing down bad loans and its ratings have improved. Rising interest costs will not be a problem as Cholamandalam targets areas where nationalised banks are not taking risks to earn higher spreads.

Insurance Opportunity

He is optimistic about the insurance business. An increase in penetration will give insurers an opportunity to grow at an annualised rate of 25 percent in the next few years. The Murugappa Group will concentrate on making profits at the underwriting level, because companies can’t bank on investment income as interest rates rise. The group, which houses the insurance business under TI Financial Holdings Ltd., is looking to expand the portfolio. Vellayan ruled out hiving off the insurance business into a separately listed entity, saying the company is happy with the current holding structure.