Fertiliser maker Coromandel sees a new model in farm equipment rentals

With hands to till hard to find and productivity a permanent challenge, the road ahead for the ryot and a food-deficient India, goes the consensus, is mechanisation.

That’s easier said than done because modern equipment involves big money — something the farmer just doesn’t have.

To Coromandel International, the predicament presents a great business opportunity: why not rent out farm equipment? The country’s second-largest phosphatic fertiliser maker from the Murugappa Group sees rentals as a strategy that will also derisk its business by increasing revenues from non-subsidy products and services, which currently is 28% of its Rs7,527-crore turnover.

A Vellayan, chairman of Coromandel, said the company will supply machinery to farmers and collect rentals and service charges. “We are charging about Rs4,500-5,000 per acre. It will take another two years for the model to stabilise and start contributing to the balance sheet,” said Kapil Mehan, the company’s managing director.

Farmers spend about Rs10,000 crore on labour every year to produce paddy, Vellayan said. “That’s the total revenue potential. We will see how much of that can be tapped through farm mechanisation,” he said.

The level of farm mechanisation in India currently stands at 7-8%.

Coromandel is keen on importing machinery and indigenising them for local conditions.

It also plans to offer services ranging from developing nurseries, pre-plantation preparation to transplantation. “We will not handle the harvesting part. All other activities of farming will be handled by us through the farm mechanisation programme. The focus currently is on paddy and sugarcane. We have already started a pilot project covering 8,000 acre.”

Scale-up is also on the cards and Coromandel hopes to handle about 20,000 acre next year and ramp it up 4-5 times in subsequent years. The aim is to generate half its revenues from non-subsidy products, Vellayan said.

Capacity is also being expanded from 3.2 million tonne to 4 million tonne with an outlay of Rs350-400 crore by mid-next fiscal.

The company is also setting up an 800-tonne single super phosphate plant in Punjab. The greenfield project is being taken up with an outlay of Rs116 crore. 

“Our capex for the next couple of years would be about Rs500 crore,” he said. For the first half of this fiscal, the company recorded Rs4,501 crore revenue and a net profit of Rs438 crore.
Coromandel is also offering its shareholders unsecured redeemable bonus debentures of Rs15 each for every one share held. The 4-year tenor debentures would result in an outgo of about Rs495 crore.