Rallis, a turnaround case study
In addition to its leading position in crop nutrition, Tata Chemicals (TCL) also has a strong and growing crop protection business. More than 2.5 million farmers across India use the crop care solutions delivered by Rallis, a publicly traded Tata Chemicals' subsidiary.
The company's Indian roots stretch back more than 150 years when Greek traders, the Ralli brothers, began exporting jute, cotton and other agri commodities from offices in Calcutta (Kolkata) and Bombay (Mumbai). It has long had Tata Group investors and that stake was streamlined in 2010, with Tata Chemicals now holding 50 per cent equity.
V Shankar, chief executive and managing director, Rallis, has overseen a transformation programme since taking the reins in 2007. He joined Tata Chemicals from Hindustan Unilever as part of the Haldia acquisition.
After posting a Rs100 crore (US$20 million) loss in 2003, the company's market cap plunged to an all time low of around Rs30 crore (US$6 million). It has increased 100 fold since then through a strategy of rationalisation and focusing on its core business under the banner 'Rallis poised'. The Tata Management Training Centre now uses the turnaround as a case study.
From his office in Mumbai's historic business district at Nariman Point, Shankar explains the strategy, "There are three fundamentals driving our path to growth: strong processes, good infrastructure, both in factories and out in the fields, and highly engaged people. On the latter point, we have a score that sits in the top quartile of Gallup's global database."
"With those foundations we're looking at growth in a number of areas. We're balancing our portfolio by moving into adjacent businesses such as seeds and nutrients. We've built contract-manufacturing capacity and we're expanding our agri-services offering. We've also built an international business, with sales in around 40 countries outside India now accounting for about 30 per cent of our revenues. We've de-risked our portfolio while focusing on our core agribusiness activities. Along with a strong presence in the crop protection business, we now are building a robust base in seeds, plant growth nutrients, contract manufacturing and agri services."
The acquisition of Metahelix Life Sciences has given Rallis a firm presence in the seeds market in India, which is estimated to be worth around Rs11,160 crore (US$2 billion). Rallis employs around 3,000 people, including the extended workforce. It has manufacturing operations at four locations in Maharashtra and Gujarat.
Shankar sees innovation as central to Rallis' recent success: "Innovation in the spheres of process, business models, product and people." As an example of process innovation he cites Rallis Kisan Kutumba – a farmer engagement initiative launched five years ago: "We initially had contact with around 30,000 farmers. That's grown to 7,00,000 and we'll touch one million in the next two years. We work closely with those farmers. Their input and feedback allows us to refine our product offering. That's an expensive activity but the quality of interaction is beyond anything our competitors are able to achieve." A recent development has been to introduce a helpline that now allows Rallis to offer advice to farmers and help them respond to changing weather conditions, for example. A shining example of business model innovation is the More Pulses, or MoPu, programme, where Rallis engages with farmers to drive productivity of pulses. It then buys their harvest, which is retailed as the i-Shakti brand by the consumer products team of TCL.