Crop protection company UPL Ltd. has reportedly stated that it is considering the purchase of the Telangana-based Kaveri Seeds Co. Ltd. As per sources familiar with the anticipated deal, the development comes on the heels of UPL’s decision to strengthen its seed portfolio.
Currently, the firm is one of the frontrunners in the global crop protection sector. According to credible sources, the acquisition of Kaveri Seeds will help the firm to enhance its GMO seed portfolio at a reasonable valuation, which cannot be ascertained as the discussion is still in its initial stage.
Recently, UPL proclaimed the acquisition of Arysta LifeScience Inc., the U.S-based crop solution provider, for $4.2 billion in the month of July. The firm confirmed that the Abu Dhabi Investment Authority and TPG have backed the acquisition by $1.2 billion equity infusion.
Kaveri Seeds had once taken the industry by storm with its cotton hybrid seed, which contained the Bollgard II gene, claims Forbes. However, in the last one year, the company has lost 10% to a closing price of Rs. 593.15 and its market value slumped down by Rs. 435.74 crore, as per trusted sources.
With a downfall in real estate and the government’s hike in cotton seed prices, the firm is now motivated to diversify its seeds portfolio, which would be backed by UPL’s expertise. As Kaveri Seeds is a debt-free firm, it will be a revenue generating proposition for UPL, stated sources.
Kaveri seed’s new portfolio would include maize, hybrid rice, chilies, pearl millet, tomatoes and more. The company also has cotton market share of 15.5% and maize market share of 10.3%. On the other hand, UPL has been trying to enhance its seeds business, constituting 10% of its overall crop solutions products. The firm has already fabricated a robust distribution network and this acquisition would potentially boost its distribution network within India, claim experts.