The Board of Directors of Smartchem Technologies Limited (STL) at its meeting held approved a Corporate Restructuring Plan with the objective of unlocking growth potential of each of the businesses.
STL is a wholly owned subsidiary of Deepak Fertilisers and Petrochemicals Corporation Limited, one of India’s leading producers of industrial chemicals and fertilisers (DFPCL).
Commenting on this important development, Mr. Sailesh C. Mehta, Chairman & Managing Director said: “Over past few years, DFPCL group has significantly improved its operational performance, generated cash flows, and strengthened balance sheet whilst focusing on increasing investments in greenfield expansions. The proposed corporate restructuring shall considerably help create strong independent business platforms within the larger DFPCL brand umbrella, hence enhancing stakeholders’ value over time.
Earlier, DFPCL Group’s strategy was primarily focused on production, cost optimization, capacity utilisations and efficiency improvement. Following extensive deliberation to deliver an outward consumer focus, a specified ‘Transformation Strategy’ with the following fundamental drivers has been executed:
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
This radical shift in strategy was deemed necessary to significantly improve customer experience, enhance market share, and build a sustainable brand. In terms of growth trajectory and value creation, both TAN and Crop Nutrition business have attained a strategic size and relevance to deserve stand-alone corporate identities and focussed leadership. This transaction shall provide the required strategic flexibility to drive long-term growth and value creation for the end customers, employees and other stakeholders.”
Strategic Rationale
A. Demerger of TAN Business (Mining Chemicals) from STL to DMSPL:
a. Focused Leadership: Over the last five years, the focus of both TAN and CNB 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
b. Consumer-focused Orientation Strategy: There is no product, seasonality, markets, branding, or value proposition overlap between CNB and TAN businesses. Consumer-focused orientation strategy likely to get impacted if the CNB and TAN work culture remains intermingled
c. Demerger to Unlock the True Potential: Enable sector specific strategic and financial investments in respective businesses
d. Economies of Scale: Strengthening customer service, distribution network, overall economies of scale for all the business verticals
B. Amalgamation of MFTPL with STL:
a. Simplification of Corporate Structure: Reduction of multiple entities carrying on similar businesses simplifies the group corporate structure b. Economies of Scale: Strengthening customer service, distribution network, overall economies of scale for all the business verticals (including reduction of overhead / administrative costs).