Tata Chemicals plans to expand in rural market
The Economic Times— May 31, 2007

Tata Chemicals is extending its already large business portfolio. The Mumbai-based company, which is one of the country's largest makers of inorganic chemicals and fertilisers, on Wednesday said it plans to use its large rural network to buy farm fresh fruits and vegetables from farmers and supply to large retail centres through a recently-developed logistics venture.

While the investment and the headcount for Tata Chemicals' rural initiative will be small - about Rs30 crore in the initial period and 200 agronomists - the company is betting big on this venture.

"We are rolling out two distribution centres this year in Ludhiana and Kolkata and will hopefully ramp it up to 20 in three years," said Tata Chemicals' MD Homi Khusrokhan. The company will buy farm produce through its 800-outlet strong Tata Kisan Sansar and distribute it via the JV company Total Produce, formed in February with Ireland's Total Produce. Till now, Tata Kisan Sansar used to provide weather information, fertiliser usage details and other information to farmers. Tata Chemicals plans to tap into this established network with farmers to push the new farm initiative.

"It is a franchise-based model where our investment will be low and has been formed to effectively improve the supply chain for farmers," said chemicals business COO R Mukundan. "We will use TKS to source farmers' produce and take it to retail customers," he added.

TKS, which has a turnover of Rs400 crore, is currently operational in the north Indian states of Uttar Pradesh, Haryana and Punjab. The move is in line with a similar initiative launched on a larger scale by consumer goods major ITC through e-choupal. Rising rural incomes and growing competition in urban markets are prompting more corporates to look at developing rural retail networks.

Tata Chemicals on Wednesday said its net profit for Q4FY07grew 47 per cent to Rs94.4 crore due to increased sales of salt, soda ash and urea. Its revenue in the same period rose 6.6 per cent to Rs803 crore. For the full fiscal, the company's net profit totaled Rs444 crore, a rise of 25 per cent, while revenue grew 13 per cent to Rs3,990 crore. On a consolidated basis, the company's net profits were up 18 per cent to Rs508 crore and sales increased by 44 per cent to Rs5,809 crore. Shares of Tata Chemicals rose 0.2 per cent to Rs256.60 on the BSE on Wednesday, while the Sensex fell 0.6 per cent.