UPL's Overseas Subsidiary Sells Entire Stake in Brazil JV

UPL (formerly known as United Phosphorus) announced that its overseas subsidiary has entered into an agreement with an Italian company Sipcam S.p.A, to sell its entire stake of 50% in Brazilian agrochemical company Sipcam UPL Brasil S.A. The entire process of the deal will be completed after fulfilment of certain conditions and approvals. After divestment (sale of stake), the gross consideration amount of the transaction will be approximately Rs. 351 crore.

The company wishes to utilise the available money to explore new opportunities and meet growing business requirements. Further, it will help UPL to have a more focused approach on Brazil agrochemical market which is one of the largest agrochemical markets in the world through its subsidiary UPL do Brasil Industria e Comerciode Insumos Agropecuarios S.A.

Post this deal of selling its entire stake of 50% in Brazil Joint Venture, UPL is left with one company in Brazil, namely UPL do Brasil Industria e Comerciode Insumos Agropecuarios S.A, wherein UPI has recently increased its stake to 73%. Latin America (where Brazil is a major market) is an important market for UPL which contributes approximately 37% of the total revenue of the company and has recorded 18.35% growth on yearly basis in Q3FY14.

The company has performed well during Q3FY14 on account of growth in sales volume as well as price and favourable exchange impact. During the said quarter, the company recorded 15% of yearly growth in topline to reach Rs. 2647 crore and 26% growth y-o-y in bottomline to reach Rs. 209 crore as against Rs. 166 crore in the corresponding quarter of previous year.

After announcement of the deal, the shares of UPL moved higher by 2.63%. At the Current Market Price (CMP) of Rs. 189.30, the stock is trading 9.65 times of its trailing 12-month earning.