UNITED

PHOSPHORUS

UPL has sucessfully transformed itself froma
domestic insecticide player to a global generic
agrochemicals player.
Background
UPL Limited (UPL), incorporated in 1969 as a
domestic insecticide company, has successfully
established itself as a global agrochemical player. It
has reduced its dependence on the ageing
organophosphates-based insecticides and increased
the range of pyrethroid based insecticides and has
made a foray into the fast growing herbicides
segment.Today it is one of the largest agrochemical
companies in the domestic market and the world's
sixth largest generic agrochemical player and the
largest producer of Aluminium Phosphide and
Napropamide.
Through acquisitions, strategic alliances and
subsidiaries, UPL has built a global network spanning
86 countries. It has also assiduously built its
distribution network, which has helped the company
grow substantially in the international market.
Availability of a large product basket is a key success
factor in the generics market. UPL has about 15-20
registrations to its name, with 12 registrations in
USA and 9 in Europe, the two most important
markets. By registering the same products for
UPL's history of acquisitions and registrations
1994 Acquired MTM Agrochem, UK
1996 Acquired Agrodan a/s Denmark
1996 Acquired ‘Devrinol’ from Zeneca for USA
1999 Acephate registration in USA
1999 ALP fumigation patent in USA
2000 Acquired ‘Devrinol’ from Zeneca for Japan
2000 Permethrin registration in USA
2002 Cypermethrin registration in USA
2002 Acquired Midland Fumigants in Europe
2003 Acquired Oryzalin a herbicide from DOW
2003 Acquired Aciflurofen a herbicide from BASF
2004 2 new registrations in Europe;
Acquired Agrahe Inc., USA
2005 Acquired Cequisa, Spain and Shaw Wallace
Agrochem, India
2006 Acquired Advanta (seed business),
The Netherlands
.Source: Research reports, IMaCS Research
different applications (i.e. by widening usage) and in
different countries the company has achieved a
market share of 15-20 per cent in its key products.
Some of UPL's important products in the global
market and their market shares are impressive -
Aciflurofen (100 per cent),Acephate (23 per cent),
Oryazalin (24 per cent) and Napropamide (67 per
cent). In 2005, UPL made three strategic acquisitions.
It acquired CEQUISA (Spanish Agrochem Company
with 400 registrations world-wide), SWAL
Corporation Limited (oldest agrochemical player in
India) and REPOSO (Argentine company with more
than 30 registrations in Argentina).

Company Products Established Founder Distribution Production plants

United Agrochemicals 1969 Lalit Sharma India, Americas, India, UK

Phosphorus & Associates, Europe, Middle East,
D. Shekhawat Asia Pacific, Africa
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 UPL's approach of forward and backward
integration helped in reliable supply of raw
materials for multi-site manufacturing through an
extensive downstream range of products and
services. UPL pioneered 'backward integration' in
agrochemicals and is one of the world's few
companies to manufacture complex organo-
phosphorus compounds starting from the basic raw
material. It has eight manufacturing plants (seven in
India and one in UK) all of which are ISO
compliant.

The promoters hold around 33 per cent of the

equity and the foreign institutional investor holding
is around 20 per cent. Non-resident Indians and
overseas corporate bodies hold close to 12 per
cent of the equity capital. Indian financial
institutions hold about hold 20 per cent of the
equity.The Indian public holds around 12 per cent
shares of the company and corporate entities hold
about 3 per cent shares.
Products and Brands
UPL is the largest producer in India of crop
protection products with a wide range of products
that include fumigants, fungicides, insecticides,
rodenticides and herbicides and has established a
broad product line that caters to the crop
protection needs of a plant during all stages of
growth. UPL offers 'total crop protection' with a
comprehensive product range and a sales support
operation in every continent.
Its strong product portfolio includes proprietary
brands like Surflan, SAAF, Ultra Blazer, Storm,
Devrinol, Quickphos, Starthene and Sterameal. In
the global agrochemicals business, generic players
require a large portfolio of products and the
lengthy registration process poses a major barrier
to entry. UPL is well positioned on this front as it
has diligently built its product portfolio over the
last decade.
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UPL has also focused on reducing its dependence
on insecticides (particularly organophosphates),
which has can be traced to UPL's foundations in
phosphorous chemistry and the nature of the
Indian agrochemical market.The recent acquisitions
have helped UPL in increasing the share of
herbicides in its turnover sharply since the year
2002.
Financial Analysis
With the globalisation of the operations, the
company witnessed a 42.1 per cent CAGR in its
gross sales between 1999 and 2005, with gross
sales reaching US$ 253 million in 2005. It has
witnessed 101 per cent CAGR in its exports
between 1999 and 2005, with exports reaching
US$ 136 million in 2005. Close to 55 per cent of
the turnover is from exports.The company, which
was loss making till 2002, was able to achieve a
turnaround in the year 2004 due to better
realisations, mainly from exports. Gross margins on
exports are of the order of 75 per cent, which is
significantly higher than the 30 per cent margins in
the domestic market. UPL shifted some of its
production from its UK plant to India that also
helped reduce cost. The domestic demand in the
year 2005 has been extremely good due to good
rainfall throughout the country.
The return on capital employed has increased over
the years due to a debt repayment, which will also
help in bring down the interest cost by more than
50 per cent over the next two years.The debt-
equity ratio has reduced from 1.1 in the year 1999
to 0.84 in the year 2005, and is expected to reduce
further to 0.40 over the next two years, which will
provide UPL significant financial flexibility to raise
resources.
UPL's contribution in making 'Made in
India” global
UPL started its international operations by
acquiring smaller products and increasing product
registrations in newer markets.The company
started exports in early 1990s, which were
primarily to the Middle East and East Asia initially.
Through acquisitions (of MTM, Agrodan and
Midland Fumigants) in the second half of 1990s, the
company has established a strong foothold in
Europe and USA. UPL has undergone a ten year
gestation process in the industry; it currently has
15-20 registrations in the US and EU markets and
strong relationships with most global distribution
majors.With improving cashflows and the recent
capital raising (US$ 70 million through the Foreign
Currency Convertible Bonds [FCCB]) the company
is looking for more acquisitions.
UPL continued its strategy of acquisitions coupled
with new registrations with good effect to ensure a
large basket of product offering. UPL's strategy is
to initially focus on products with a market of less
than US$ 50 million enabling it to increase its
portfolio.The global agrochemical market is
characterised by stagnating markets and stricter
regulatory requirements. It is therefore essential
for agrochemical players to have a strong R&D
base. UPL has four development centres in India
and UK and has been successful in developing new
process technology and new formulations.With
over 50 per cent of the revenues from exports and
a significant manufacturing and research presence
overseas, UPL clearly established itself as a strong
Indian player in the highly competitive global
agrochemicals market dominated by giants such as
Dow Chemicals, Syngenta, Bayer, BASF and DuPont.
UPL's global presence is backed by its subsidiaries
across 20 countries outside India in Argentina,
Australia, Bangladesh, Brazil, Canada, China,
Denmark, Hong Kong, Indonesia, Japan, Korea,
Mexico, New Zealand, Russia, South Africa,Taiwan,
USA, UK,Vietnam and Zambia. It also has
representative offices in France, Germany, Sri Lanka
and Vietnam. Its key international markets are USA,
Europe, Australia and Japan.The mission of UPL's
US subsidiary is to become the premier supplier of
post-patent technologies for the agricultural and
speciality products industries throughout the
United States and Canada. It offers a strong
portfolio of agronomic tools such as post-patent
metribuzin, cypermethrin, bifenthrin and acephate
products, and sugar beet herbicides, as well as
proprietary branded products including Surflan,
Devrinol, Storm and Ultra Blazer herbicides. Its
most recent acquisition is Ag Value, a major
marketer of post-patent products, located in Visalia,
California.
The company has a strong presence in Europe as
well. Apart from having offices and distribution
network, the majority of UK products are
formulated at its plant in UK.The plant is capable
of producing a wide range of sophisticated
formulations both for its own needs and as a toll
formulator for many other multinational
companies
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 UPL Australia was incorporated in 1994 and has
obtained several registrations for the Group's
products. Its initial focus was on the niche grain
storage and horticulture market, though in the
recent years UPL Australia is expanding its activities
in cotton and other broad acre crops. UPL
Australia expects to launch three products each
year in different crop segments and is also working
on obtaining agency agreements from other
multinational companies into Australia. Besides the
domestic Australian market, UPL Australia also
markets its products in New Zealand and Papua
New Guinea and is expecting to expand into
specific markets in the Asia Pacific region. Its aim is
to rank among the top five Crop Protection and
Specialty Chemicals supplier in the region.
Headquartered in Tokyo, UP-Japan is a joint venture
of UPL Ltd, India with Mitsui & Co in Japan. UP-
Japan markets speciality crop protection products.
Its products include herbicides, insecticides, grain
fumigants, fungicides and rodenticides. UP-Japan is
pursuing an aggressive growth strategy with plans
to introduce new products every year.
agrochemical. UPL has excellent track record in
this area, which enables it to manufacture off-
patent/ generic products with the lowest cost.
The development of new formulations is another
priority, with the company having a strong
portfolio of greater than 100 products.
• Strong product pipeline: UPL has a large
product basket in the generics market and a
strong history of registrations in USA and
Europe, the two most important markets. Having
a large product portfolio has helped UPL in
building strong relationships with global
distribution companies which is critical in the
highly competitive global agrochemical business.
• Ability to acquire brands and make new
registrations: Over the years, UPL has acquired
various products and companies in developed
markets in order to expand its presence in these
countries. UPL is likely to continue its policy of
acquisitions and expand its market reach.

Factors fuelling UPL's global initiatives

UPL's growth in the global markets has been driven

by various factors:

• Strong R&D set up: UPL operates four

development centres in India and UK and has
access to Agrodan's (Danish company acquired
by UPL in 1997) formulation development facility
in Denmark. In addition, the company has direct
access to the Jai Research Foundation (JRF)
established by the promoters of UPL, which
operates independently. JRF specialises in
providing research data for agrochemical
registration requirements and has achieved Good
Laboratory Practices (GLP) status.The company
devotes much of its research effort to developing
new process technology for manufacturing
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• Diversification into newer products and company expects the financial year 2005-06 to end
segments: In the last few years, UPL has reduced its with a record performance in terms of enhanced
dependence on its ageing insecticide range based market presence in the formulation space with a
on organophosphates.The company has increased big lead in its industry ranking”.
its range of pyrethroid based insecticides along
with increased focus on the herbicides segment
where it had weak presence.The acquisition of two
new products in 2003 from global majors has
helped UPL expand its presence in the herbicides
market- particularly the Specialty crops segment.
UPL has also recently started focusing on more
profitable and fast growing non-crop segment.

Future plans

Consumption of agrochemicals in India is very low

and a huge growth potential exists.The Specialty
chemicals and chlor-alkali businesses of UPL are
expected to do well on account of growing
demand from down stream industries. Off-patent /
generic products, the mainstay of UPL's portfolio,
constitutes the most lucrative segment of the US$
28 billion agrochemicals space.The products are
highly profitable and their share is increasing in an
otherwise stagnant market. By 2007, off-patent /
generics are expected to account for 70 per cent
of the total market. UPL has raised around US$
140 million in the month of December 2005
through FCCBs, the proceeds of which will be used
mainly for expansion, modernisation and
acquisitions. Globalisation at a glance
• Subsidiaries in 20 countries outside India, including
UPL pioneered 'backward integration' in the the large markets of US, Europe, Australia and
agrochemical space and is one of the world's few Japan, and the growing markets of Latin America
companies to manufacture complex Organo- • Representative offices in France, Germany, Sri
phosphorus compounds starting from the basic raw Lanka and Vietnam
material, rock phosphate ore. UPL is now planning • Manufacturing plants in UK and Argentina
to extend this strategy to other products, the most • Development centre in UK
recent being an integrated caustic chlorine plant • Strong history of growth in global markets through
using the latest membrane technology, creating acquisitions
basic building blocks for agrochemical and Specialty • Exports constitute nearly 55 per cent of sales
chemicals. According to Bhupen Dubey,Vice
President - Sales & Marketing (Formulations), “The www.uplonline.com
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