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Business diversification

In the second quarter of 2012-13, Sudar made a momentous decision to expand their business from the garment manufacturing activity to the manufacture of pharma-chemicals and agrochemicals.

The Company acquired the assets comprising of land & building and plant & machineries of Benzo Petro International Limited (manufacturing petrochemicals) for a consolidated cost of Rs 26 crore. Following the consolidation, the Company's equity capital increased to Rs. 150 crore.

This expansion decision was the result of the Company's need to accelerate growth, diversify revenues and de-risk the Company from the labour-intensive business sector of garment to technology intensive pharma intermediaries and agro-chemical business sector

These are some of the well-grounded reasons behind the Company's conscious expansion initiative:

  •  The Company engaged in the pharma-chemical and agrochemical businesses they were in need of financial investments while they possessed rich intellectual capital (the management teams of both companies were retained)
  •  The units of the acquired companies are proximate. The factory premises of Benzo Petro International Limited is based in a small village located in the government-notified industrial zone, just 20 kms. away fromVadodara.
  •  The Company's garments business is labour-intensive. The expansion into pharma and agro- chemical business will extend the Company to businesses that are asset-based with a quicker capacity that can be scaled
  •  There is no gestation period for the commencement of manufacturing operations since all necessary requisite licenses and permits are already in place; making it possible to capitalise on existing and emerging opportunities speedily
  •  There are a number of factors influencing success in the pharma and agrochemical spaces within the management's control
  •  There is a growing international intellectually-driven wage arbitrage opportunity in the manufacture of pharma and agrochemical business
  •  The business of pharma and agrochemical are expected to be boosted in lieu of a weakening rupee
  •  The business of pharma and agrochemical provide room for extensive synergic product addition; the number of grades that can be added is significant, generating revenues in a sustainable way
  •  The acquisitions are value-accretive. They can generate a revenue increase that will be faster than can be derived out of garments. The businesses will cross over the breakeven during 2012-13 and can potentially generate a consolidated topline in excess of Rs 450crorewithout significant investments (in addition to the garments business)