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Murugappa to launch a housing finance subsidiary

The southern industrial conglomerate, Murugappa Group, recorded a 12 per cent growth in turn over and EBITDA through 2018-19, with revenues at Rs 36,893 crore and EBITDA of Rs 5190 crore. The conglomerate has been engaged in financial services including insurance, fertilizers, sugar, bicycles, auto parts, and abrasives. This diversified range of businesses provides for sustained growth despite ups and downs in the sectors engaged in. Major landmarks included the plan of Cholamandalam Investments to launch a housing finance subsidiary, a new steel tube plant at Rajpura and enhancing phosphoric acid capacity at Vizag by a million tonnes.

Chairman of the group, M M Murugappan, spends considerable time at the IIT-Madras Research Park, lending his expertise as a mentor. The group has been actively interacting with several academic institutions, including the IITs to expand its R&D efforts. Murugappan referred to applying for 44 patents. A significant initiative is to set up an IIT Monash Academy as a collaborative effort of Coromandel International, IIT-Bombay and Monash University, Australia to focus on agricultural research.

Cholamandalam Investments (28 per cent growth on sales), Coromandel International (19 per cent), Tube Investments (15 per cent) and Carborundum Universal (14 per cent) have recorded impressive results.

Sugar industry in the state has been through trying times. The drought conditions have been contributing to a steep fall in availability of sugarcane resulting in the company closing down its Puducherry unit and two units in Tamil Nadu. There is thus a steep decline in net sales of EID Parry India Ltd by 28 per cent to Rs 3283 crore. Large domestic sugar production in the last sugar season compared to the previous season also depressed sugar prices. Unlike most other sugar companies in Tamil Nadu, his company has no issue on payment to cane farmers, said Murugappan.

The group has been expanding its operations in other states as also abroad in Russia, Tunisia, etc. An attractive characteristic of the group is its impressive growth through acquisitions, notably EID Parry and Coromandel Fertilizers. In the same breath, the promoters have not been sentimental in phasing out or hiving off businesses not offering scope for significant growth or profits. Remember, the group selling off its iconic building TIAM house in Chennai, Parrys confectionary and sanitaryware businesses? The cyclic nature of the sugar business, the controls and the not very conducive experience in Tamil Nadu may make the sugar business a candidate for such disinvestment.

In the same breath, the group may also look at opportunities for expansion in some of its core areas of business.

Cigna switches to Manipal group.

The healthcare insurance sector is witnessing growth and intense activity. The global leader in healthcare insurance, Cigna Global Healthcare Services of USA, has now joined hands with the southern leader Manipal group. The latter is reported to have acquired the 31.5 per cent stake held by the TTK Group for Rs 500 crore. It already has a 19.5 per cent stake.

Cigna is a global healthcare service company and had revenues of $ 49 billion for 2018 and serves around 95 million customers across the globe. In the US, Cigna has merged with Express Scripts Holding Company, the last major standalone pharmacy benefit manager with revenues in excess of $ 100 billion.

The Manipal Group had its humble beginnings as the back office of Syndicate Bank in 1941. With the long term vision for sustained growth, it is in the business of facilitating secure transactions and marketing, branding and communication to key industry verticals – banking, telecom, education, publishing, consumer goods and retail, financial services, aviation and transport … Its production facilities are spread over Manipal, Chennai, Mumbai and Delhi.

Star Health Insurance pioneered medical health insurance in India. The well-known leader in general insurance, V Jagannathan, pioneered health insurance and built it in a short time to a profitable and high growth company in the sector. The healthcare sector has Apollo Munich (being acquired by HDFC), Religare and Max Bupa as other leading standalone healthcare players.

The health insurance sector has been a high growth business. With increasing costs of healthcare and with the middle-class meeting an estimated 75 per cent costs on hospitalisation on its own, there is increasing awareness on the imperative for healthcare. The Ayushman Bharat health scheme of the Central government and the innovative state-funded insurance schemes of Tamil Nadu along with the efforts of the pioneer, Star Health, have been spreading the importance of health care insurance. The Manipal-Cigna health insurance can be expected to further widen this interest.

Piramal sells stake in STFC

For a couple of months now, Ajay Piramal’s selling off his investments in the Shriram Group has been in the news. From 2013 Piramal is estimated to have invested around Rs 4500 crore in the holding company, Shriram Capital, the leader in truck finance, Shriram Transport Finance Company (STFC) and the finance arm, Shriram City Union Finance. He has since been heading the Shriram Group as chairman.
The disinvestment has begun with Piramal Enterprises selling the entire shareholding of in STFC to HDFC Mutual Fund, SBI Mutual Fund and others. The realisation is estimated at around Rs 2300 crore. The disinvestment in the other two Shriram Group companies is expected to follow.
Piramal, along with Shriram Group’s founder-promoter, R Thyagarajan, attempted to merge STFC with the IDFC Bank. But this did not fructify. It appears Piramal’s focus is on high-value investments rather than dealing with several lakhs of truck operators. He has come close to Reliance Industries by his son marrying Mukesh Ambani’s daughter. There could be more extensive opportunities for him for more profitable, big-ticket investments.

Welcome foray in gas distribution by a Philippines company

For three decades IE has been demanding the south getting natural gas distribution in the south as in the northern and western states. The opening up of natural gas distribution to private players, including multinationals, augurs well for a rapid expansion of piped gas supply to domestic consumers and also for city gas distribution outlets. The commissioning of LNG gas terminals at Kochi and Chennai has ensured large scale imports of compressed natural gas (CNG). The recent rounds of auction for city gas distribution concessions have attracted several concessionaries. This includes the Atlantic, Gulf and Pacific Company (AG&P) of Manila.

AG&P is a gas logistics company rapidly expanding across the globe. It is one of two foreign companies to conclude agreements to deliver natural gas directly to residential, commercial, industrial and transport sectors in four southern states and Rajasthan. The company has secured 25-year exclusive rights to lay natural gas pipelines to residential users, supply to commercial establishments and setting-up CNG stations for cars, buses and trucks.

AG&P has won the licences to supply natural gas to 12 geographical areas in the four southern states covering 28 districts. These include Kancheepuram and
Ramanathapuram districts in Tamil Nadu.

The entry of the private sector and MNCs would impart the needed dynamism to lay the pipelines and make natural gas reach several lakh customers in quick time.

I have had occasion to visit the Philippines recently and was impressed by the quality of infrastructure in this Asian country in the far east with hundreds of islands and a population of around 10 million. Americans had colonised the Philippines and their influence is widely felt. Manila is the headquarters of the Asian Development Bank and the International Rice Research Institute. Literacy levels are high. Surprisingly, India doesn’t have much of a trade or investment relations with this ASEAN country. The advent of AG&P should herald speedy two-way trade relations.

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