UPL promoters to sell out and exit the company

The ownership of UPL (formerly United Phosphorus Ltd) has always been a controversial issue with the Shroff family members continuously fighting among themselves. UPL has been in the news in the last few days and has been attracting a lot of buying interest on the back of expectations that the existing promoter may soon exit the company and a new set of promoters may come in to take charge.

UPL, the Indian agrochemical producer, has always been a highly prized and sought after company among acquirers. That is more considering the niche of agrochemicals that the company operates in. The company has been a big beneficiary of the global inorganic acquisitions that it made in the last few years. Hence, today UPL is attracting takeover interest from global competitors and also from a clutch of private equity funds.

UPL has already sought the help of investment bankers to find a good buyer for the promoter stake in the company. Currently, the investment bankers are evaluating interest from rivals in the crop protection industry as also some potential bids from the private equity players. Potential suitors could include companies like CF Industries Holdings or FMC Corp. In addition, some of the large P/E funds may also be keen to enhance their stake.

In terms of its business model, UPL offers a wide and comprehensive range of fertilizers and agricultural chemicals. These include herbicides, insecticides, pesticides and seed treatment solutions. The company also sells other related products that are used for stimulating plant growth, enhancing nutrition delivery to these crops and for storing crops and conserving water. In addition, it also offers a complete line of disease-resistant seed varieties. 

The big deal for the Shroff family will be that they will be able to monetize their stake and that will reducing the warring factions within the family. Any deal either from competition or from private equity funds could help UPL’s controlling Shroff family divide its fortune and pass on wealth to the next generation. Overall, the members of the Shroff family and related entities own close to 28% stake in UPL. 

UPL started its journey in 1969 as a manufacturer of red phosphorus used to strike matches. The company was founded by Rajju Shroff and is still overseen by him as chairman, despite already being an octogenarian. Currently, his elder son Jai Shroff is CEO of UPL while his younger son Vikram serves as a member of the company’s board. Most of the family members need urgent cash to maintain their lavish lifestyles.

It may be recollected that UPL had acquired Arysta Lifesciences Inc in the year 2018 for a consideration of $4.2 billion. Back then, this was the largest deal in generic agrochemicals. The acquisition of Arysta Lifesciences had given UPL a tremendous foothold in the Latin American markets, which is one of the fastest growing and most prolific markets for agrochemicals. The stock markets have received the news of sell-off quite positively.