EID Parry – an agriculture titan disguised as a sugar business

Hi Hardik,

Thanks for your comment. If you look at my base case valuation above, just the coromandel stake cash on the balance sheet is equal to the current share price. Hence you are getting the sugar business virtually for free. I think it is a low margin and commoditised business . They are just in the first stages of diversification into FMCG, so we will only see the results in 3-4 years. The ethanol business will help them reduce cyclicality, but i don’t expect it ever to reach a non commoditised margin level or ROCE. I see them earning only 3-5% margins on the standalone business. The only positive is that management seems to have realised this and is looking to deploy earnings in higher return ventures.

So, essentially my bet is based on their Coromandel stake, look through earnings and ability to reinvest earnings in high return ventures. Will monitor growth in FMCG and branded sugar in the next few quarters to see if they are able to pivot successfully.