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Value pricing to customised specialty — what Deepak Fertiliser expects from demerger plan

business | Dec 16, 2022 12:57 PM IST

Value pricing to customised specialty — what Deepak Fertiliser expects from demerger plan

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Deepak Fertilisers and Petrochemicals Corporation has decided on a corporate restructuring plan under which it will demerge its mining chemicals and fertilisers businesses

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Deepak Fertilisers and Petrochemicals Corporation has decided on a corporate restructuring plan under which it will demerge its mining chemicals and fertilisers businesses, according to an exchange filing on Thursday. Investors on Dalal Street seem to have welcomed the move as the stock of industrial chemicals and fertilisers manufacturer gained almost six percent in Friday’s session.
The board of Smartchem Technologies (STL), a wholly-owned subsidiary of DFPCL, approved the corporate restructuring plan aimed at unlocking the growth potential of each of the businesses, the company said in a statement.
As part of the restructuring, Deepak Fertilisers’ TAN business (mining chemicals) will be demerged from STL to Deepak Mining Services, a wholly-owned subsidairy of Deepak Fertilisers and Petrochemicals Corporation. Meanwhile, Mahadhan Farm Technologies (MFTPL), a wholly-owned subsidiary of STL has been merged with STL.
Sailesh C. Mehta, Chairman and Managing Director of Deepak Fertilisers said the transformation strategy has been executed with the following fundamental drivers: a) focus on customised specialty in place of commodity b) move from volume focus to value/premium end-user focus c) shift from competition pricing to value pricing.
“The proposed corporate restructuring shall considerably help create strong independent business platforms within the larger DFPCL brand umbrella, hence enhancing stakeholders' value over time,” he said.
Deepak Fertilisers has a four-point rationale — focused leadership, consumer-focused orientation strategy, unlocking the true potential, and economies of scale — behind the TAN business demerger, the company said.
“Over the last five years, the focus of both TAN and CNB business (Crop Nutrition business) has evolved from commodity to specialty, with an increased emphasis on solutions. Both independent entities to have individual growth plans, focused leaderships, and strategies to maximise its growth prospects,” it said.
There will also be no product, seasonality, markets, branding, or value proposition overlap between the businesses and it is of the view that consumer-focused orientation strategy will likely get impacted if the CNB and TAN work culture remains intermingled. The demerger shall enable sector specific strategic and financial investments in respective businesses.
Moreover, the demerger shall strengthen customer service, distribution network and overall economies of scale for all the business verticals, the firm said.
Meanwhile, with the Mahadhan Farm Technologies and STL merger, the company wants to simplify its corporate structure by reducing multiple entities carrying on similar businesses as well as associated overhead and administrative costs.
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