“About 60 per cent of Indian soil lacks zinc,” says Dr. Rahul Mirchandani, executive director of Aries Agro Ltd. (Aries). With such nutrients becoming invaluable for efficient production of crops, Aries continues to be at the forefront by providing plant nutrients with its customised products and formulations for different kinds of crops. The Mumbai-based company was founded in 1969 by Mirchandani’s parents, Dr. T. B. Mirchandani and Bala Mirchandani and was initially focused on animal nutrients. According to him, the company took a turn towards real growth when it diversified into plant nutrients and micronutrients in 1975. Currently, Dr. Jimmy Mirchandani, chairman and managing director and Rahul are at the helm of affairs.
Today, Aries has in its portfolio a total of 86 brands sold through 90,000 retail outlets spread across various states covering 107 crops. Its leading brands are Agromin and Chelamin, which constitute about 55 per cent of its revenues. While the company was growing well (for the fiscal year ended March 2007, it had a total income of Rs. 74.05 crore as against Rs. 59.36 crore in the corresponding previous fiscal), it needed funds to expand its manufacturing capacity and take up mobile marketing. And hence, it tapped the capital market. Aries made its initial public offer in January 2008 and raised Rs. 58.5 crore. For the last seven years, it has been registering an average turnover growth of 27 per cent year-on-year. For the nine months ended December 2011, its net sales grew by 30 per cent to Rs. 177.79 crore from Rs. 136.24 crore the previous year. The net profit has also gone up for the same period to Rs. 16.80 crore from Rs. 7.67 crore in the last fiscal. The growth in numbers for this period has been buoyed by the performance of its Sulphur Bentonite manufacturing facility at UAE that became functional in 2010.
Through the company’s on-the-field presence to interact directly with its farmers, Aries’ products are sold in almost two lakh villages. With very minimal advertising, the company maintains that its farmers are its brand ambassadors and targets all its activities to build this ecosystem.
Aries Agro Ltd.
Founders: Dr. T. B. Mirchandani and Bala Mirchandani
Target: Rs. 250 crore in turnover for FY 2013
Aries works in tandem with farmers to help them understand its products and their usage. “We service every kind of farmer, including the backyard ones,” says Mirchandani. By offering demonstrations and soil testing to determine the nutrient deficiency, Aries also trains government officers at the local level about the technology to help the farmers in the village. It is this dissemination of knowledge that Mirchandani finds among the company’s hardest challenges. “Even after 42 years, we cover only one-sixth of India. It takes a lot of time to get through to the farmers’ network. Every village takes one and half years to breakthrough,” he reveals. A part of the proceeds from the public issue were used to implement Krishi Vigyan Vahan – its 100 mobile vans that cover six villages per day to offer farmer advisory services and soil testing besides showcasing the products.
In collaboration with Confederation of Indian Industry’s (CII) Young Indians, Aries has set up the Young Indian Farmers’ Network that is in its fifth year running. By choosing progressive farmers in the age group of 25 – 40, the network reaches out to about 11,000 farmers to inculcate best agricultural practices and document them. These farmers also receive regular SMSes about crop advisory. Aries has tied up with universities as a part of this training process as well. This February, it signed a memorandum of understanding with Institute of Technology and Management (ITM) Trust to launch a specialised ITM-Aries Agro PGDM Programme in agribusiness management. The first batch will begin on ITM’s Warangal and Mumbai campuses from June onwards.
Made for India
Aries partners with global entities to develop its products with the research and development undertaken by these companies and as Mirchandani says, they are specifically ‘Made for India’ brands. It has one such research facility in Mumbai, where customised nutrient formulations required for crops are redone every year due to changes in soil conditions. It works with 50 universities and research institutes to also undertake fieldwork. The company sources its raw materials from suppliers located in South America, China, Japan, Middle East, Jordan, Belgium and South Africa. As of fiscal 2011, 26 out of its 85 brands are ‘Made for India’ products sourced from overseas suppliers. “While availability of raw materials has not been a problem, the fluctuating dollar and the cost of these minerals and oil does affect the spends on them,” says Mirchandani. Its expenditure on raw materials for year-to-date (YTD) ending December 2011 has gone up marginally.
Its multi nutrient product, Agromin is considered as an entry-level product for farmers since it contains all necessary nutrients such as zinc, iron, copper, manganese etc. “It is customised for each type of soil or crop. Hence, we have multiple formulas – for instance, there are 11 different formulas in Tamil Nadu and farmers can choose from these depending on their need,” he adds. Its other flagship product is Chelamin (chelated zinc – an organo-metallic, chemically inert complex) that due to its chelated form does not harm the soil or the water. “A farmer gets six times the benefit to cost of the product,” adds Mirchandani. This benefit accrues from saving in application cost per unit of land area (25 kilograms of an inorganic sulphate can be replaced by 500 grams of an Aries chelated mineral source), a yield increase of a minimum of 20 per cent to 25 per cent as a result of more efficient fertilisation and savings in labour costs (as the product can be sprayed along with other agrochemicals) and reduction in plant protection chemicals (as balanced nutrition improves crop resistance to pests and diseases).
Aries has six manufacturing facilities in India and two overseas. The IPO proceeds were also used to setup facilities in Ahmedabad, Lucknow and Hyderabad and as a result its Indian production capacity has gone up to 80,000 tonnes from 30,000 tonnes after its IPO. Aries now has a total capacity of 1,50,000 tonnes, including 70,000 tonnes overseas. “This would be sufficient for now and we are planning to fully utilise this production capacity within the next two to three years,” he adds. The capacity utilisation of the Indian units in fiscal 2011 was 47 per cent while the international capacity utilisation was at 51 per cent. Its consolidated operating profit for the nine months ended December 2011 increased by 142 per cent to Rs. 45.31 crore from the previous year.
Mirchandani believes its efforts in innovation and customisation keeps Aries ahead of its competitors. “We lay emphasis on our products and expect it to ‘shock and awe’, like our water soluble packaging for our flagship brands of fertilisers. We sell our products like FMCG ones – packaged well and on the shelves for the farmers to choose. We have always been clear about being a premium value brand,” he says. Since Aries sells its products on credit, the rising interest cost and the logistics of getting them to the field have been challenges the company hopes to overcome by working with financial institutions and further strengthening its distribution network.
But payments and delays from farmers have its share of problems. Since Aries does not sell directly to farmers, hence it does not collect payments from them. It sells through its registered distributors and dealers, who all hold security deposits with Aries and are subject to a dealership agreement. “We do experience delays in the poor season for receivables, but we often provide attractive cash discounts and payment-linked trade schemes to collect money faster.”
According to Mirchandani, the plant nutrient industry would be approximately Rs. 1200 crore to Rs. 1500 crore in size and growing. Though agribusiness is by nature cyclical, he believes they can partially insulate themselves by widening Aries’ reach to varied climatic areas. Prices also play a major role in determining how much a farmer is willing to invest. “This cyclicality of commodity/agricultural output prices is also a factor that we look at. Since we deal with over 100 crops, we need to realign focus on crops that are realising better prices and select geographies strategically.”
With crop conditions changing dynamically, the kind of crops that are grown now is different from those that were cultivated even seven years ago. “There is lesser focus on cereals and more on horticulture, oil seeds, spices, vegetables and cash crops. With every new crop, we customise our formulations and hence, introduce a new product variant,” says Mirchandani, about the factors contributing to Aries’ growth. Also, more young farmers being trained and exposed to the improvements in agriculture, and a growing awareness among them about the need for micronutrients and balanced fertilisation has helped its cause. “We have run health campaigns on the need for balanced crop nutrition and the fact that 30 per cent of farmers use hybrid seeds is also a good trend,” he adds.
Aries’ focus in the coming year would be to grow both its international and domestic businesses. While Andhra Pradesh, Maharashtra and West Bengal are the regions contributing most to its revenue, the company has stepped into newer markets like Kashmir, Manipur and Kerala. It is also setting up a strong distributors’ network in other countries like Sri Lanka, Pakistan, Bangladesh and Australia. Supplies to these markets have begun in the past two years through Aries’ overseas subsidiaries. It will also be focusing on more products for specialised crops such as cardamom, saffron and apple. “Two years ago, we did not have much of an international focus. But with these efforts, our consolidated numbers for the first three quarters of the current financial year have shown a significant impact from overseas operations on both our top line and bottom line numbers. We hope our global business will generate one-thirds of our revenues two years from now,” he says.
Aries will be closing FY 2012 with a turnover of Rs. 210 crore – Rs. 220 crore that saw it launch 14 new products (eight plant nutrients), two natural/organic products and four plant protection chemicals. For FY 2013, Aries is looking to launch at least two more plant nutrient products and target Rs. 250 crore from both the domestic and international markets. “With increasingly erratic weather trends, I would rather under commit and over perform,” concludes Mirchandani.
- Focus on cash crops, horticulture and oil seed vegetables
- Enter newer states like Kashmir, Manipur and Kerala
- Set up a strong distributor’s network in countries like Sri Lanka, Pakistan, Bangladesh and Australia
- Bring out newer products for crops such as cardamom and apple