EID Parry (India) Limited

A pioneering company in many ways, EID Parry (India) has successfully forayed into various segments, including branded staples, biofuels and nutraceuticals, thus putting more wind in its sails. And even though it has faced some challenges in recent times, the financials bode well enough to attract investors [EasyDNNnews:PaidContentStart]

EID Parry (India) Limited is an Indian public company headquartered in Chennai, Tamil Nadu. Founded in 1788, it is one of the leading sugar producers in India. The company is engaged in the manufacture and marketing of sugar and bio-products. EID Parry (India) Limited is a subsidiary of the Murugappa Group, one of India’s leading business conglomerates. The company has a rich history, making it the oldest surviving mercantile name in Chennai. It has several firsts to its credit, including the first sugar plant in India, established in Nellikuppam in 1842. It was also the first private sector company in India to perform research and development. In 1906, EID Parry pioneered the manufacturing of fertilisers in the Indian subcontinent.

Subsidiaries
EID Parry has several subsidiaries that contribute to its diverse business operations. These include:
• Parrys Sugar Industries Limited
• Coromandel International Limited
• Parry Chemicals Limited n US Nutraceuticals LLC
• Parry Phytoremedies Private Limited
• Parrys Investments Limited
• Parry Infrastructure Co. (P) Limited
• Parrys Sugar Limited
• Coromandel Brasil Limitada
• CFL Mauritius Limited
• Sabero Organics Gujarat Limited n Parry Agrochem Exports Limited
• Alagawadi Bireshwar Sugars Private Limited
• Parry Sugars Refinery India Private Limited, formerly known as Silk Road Sugar Private Limited.

Business Segments
EID Parry is a diversified company operating in the following business segments:
1. Sugar: This segment is the cornerstone of EID Parry’s business, representing 66 per cent of the company’s revenue in FY24. It involves the production and sale of various types of sugar, including plantation white sugar, refined sugar and pharmaceutical-grade sugar. EID Parry also focuses on value-added sugar products like brown sugar, low GI sugar and jaggery. The company sells its sugar products to a wide range of customers, including commodity markets, large institutions and retail consumers.
2. Biofuels: Representing 28 per cent of the company’s revenue in FY24, EID Parry is a significant player in the Indian ethanol and biofuel market. The company is actively expanding its distillery capacities to meet the growing demand for ethanol, driven by government initiatives promoting biofuel blending.
3. Nutraceuticals: Although it represented a mere 1-2 per cent of the company’s revenue in FY24, EID Parry operates in the nutraceuticals sector, specialising in the production and sale of microalgae-based products, such as spirulina and chlorella. The company’s nutraceuticals business primarily caters to the export markets, with a strong presence in the US and Europe.
4. Co-Generation of Power: EID Parry is also involved in the co-generation of power, utilising bagasse from its sugar mills. Representing 4 per cent of the company’s revenue in FY24, the power generated is used to meet the company’s captive energy needs and is also sold to the state electricity grid and private energy players.

Financial Performance
FY24
EID Parry (India) Limited faced a challenging FY24, with declines in both revenue and profitability compared to the previous fiscal year. The company’s total income dropped by approximately 15.8 per cent, from ₹35,283.02 crore in FY23 to ₹29,716.92 crore in FY24, while its consolidated profit after tax (PAT) decreased to ₹1,617.57 crore from ₹1,827.74 crore. EID Parry’s financial performance in FY24 underscores the broader challenges faced by the sugar industry, including high volatility in global raw sugar prices and evolving government policies. Despite these headwinds, EID Parry’s operational focus and financial resilience provide a solid foundation for future growth.

Q2FY25
In Q2FY25, EID Parry (India) Limited reported a modest 2.99 per cent increase in net sales to ₹9,330.35 crore, but its profit after tax plummeted by 32 per cent, from ₹450 crore to ₹306 crore. The sugar segment switched from profit to a ₹38 crore loss due to lower cane volume and recovery, higher costs and reduced sales. Farm inputs saw profit drop to ₹959 crore from ₹1,078 crore, while the nutraceuticals division incurred a ₹5 crore loss, down from a ₹24 crore profit.

Growth Triggers
1. Ethanol Production: EID Parry has been actively expanding its ethanol production capacity. As of March 2024, its total capacity was 417 KLPD with further expansions underway to increase it to 582 KLPD by the end of FY25.
2. Branded Staples: EID Parry has forayed into the branded staples market with the launch of its Parry’s brand, offering rice, dals and millets.
3. Value-Added Sweeteners: EID Parry is focusing on expanding its portfolio of value-added sweeteners, including low GI sugar, brown sugar and jaggery powder.
4. Sugarcane Production: EID Parry is actively engaged in improving sugarcane yield and recovery rates through various initiatives, including soil health and fertility programmes, regenerative agriculture practices and the protray seedling plantation method.
5. Strategic Partnerships: EID Parry is actively seeking strategic partnerships to further strengthen its market position and expand into new areas. The company is exploring partnerships in the refinery and nutraceuticals segments to enhance its capabilities and product offerings.

Valuation
The company’s significant investment in Coromandel International Limited (CIL), exceeding ₹24,000 crore, yields consistent dividends and plays a crucial role in enhancing its revenue and profitability. With a dividend pay-out ratio of 7.89 per cent, the firm demonstrates solid returns to shareholders. CIL’s financial metrics include a return on equity (ROE) of 13.5 per cent and a return on capital employed (ROCE) of 20.3 per cent, indicating efficient capital utilisation. Currently trading at a price-to-earnings (PE) ratio of 23.5 and a price | earnings growth (PEG) ratio of 0.57, the stock appears attractively valued relative to its growth prospects. Additionally, an EV | EBITDA ratio of 6.10 suggests that the market may be undervaluing its earnings potential, making it a compelling consideration for investors.

Conclusion
EID Parry (India) Limited presents a compelling investment opportunity in the Indian sugar and bioproducts market. Despite facing recent headwinds in the sugar industry, the company’s strong foundation, diversified business segments and strategic initiatives position it for future growth. EID Parry’s focus on ethanol production, expansion into branded staples, and value-added sweeteners, coupled with its commitment to sustainable sugarcane production and strategic partnerships, are key growth drivers. The company’s attractive valuation, with a low PEG ratio and EV | EBITDA, further strengthens the investment case. Additionally, EID Parry’s significant investment in Coromandel International Limited provides consistent dividends and contributes to its overall financial performance. Hence, we recommend BUY.

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