Investors with a three- to five-year investment horizon can consider investment in the stock of Chennai-based conglomerate EID Parry. In our bl.portfolio edition dated October 30, 2022 we had recommended that investors buy the stock when it was trading at ₹590. Post 80 per cent returns since then, our analysis indicates the risk reward remains favourable even at current levels for investors with a long term perspective. The company has diverse interest across sugar, nutraceuticals, bio pesticides through the parent entity. In addition to this, through its subsidiary Coromandel International (wherein EID Parry holds 56 per cent stake), it has interests in fertilisers, crop protection chemicals.
In the medium-to-long term, EID’s consolidated performance will be driven by strong performance in the fertilizer business, on the back of expansion initiatives, better product mix in the crop protection segment (Coromandel International) and higher contribution from premium products in the sugar segment. Besides the robust future growth prospects, we believe that the current valuation of the stock does not fully factor in the business’ potential.
At the current market price of ₹1,066.95, EID Parry’s market capitalisation at ₹18,970 crore is at a whopping 53 per cent discount to the value of its stake in Coromandel International, which as of Friday was worth ₹40,272 crore (Coromandel International market-cap at ₹71,710 crore). This is much steeper than the typical holding company discount of about 35-40 per cent.
We have valued the standalone base business at 1x its FY25 book value, which works out to ₹143 per share. For the 56 per cent investment that EID holds in Coromandel International, we have discounted the current investment conservatively by 40 per cent. The per share value of Coromandel stake held by EID works out to ₹1,359 per share. Net debt on books is negligible.
Based on the above numbers, SOTP value per share for EID works out to ₹1,502 apiece, indicating a 41 per cent potential upside in the medium term. This is after taking into consideration our view that the value markets have currently assigned for Coromandel International is reasonable.
Coromandel’s business is expected to sustain good growth, driven by expansion initiatives and recent acquisition of NACL Industries’ business, which will augur well for EID Parry.
Good prospects
We believe EID Parry to be a good value idea for long-term investors for four reasons.
First, the core sugar business took a beating in FY25, due to weak cane recovery in Tamil Nadu, which fell to 8.1 per cent compared with 8.5 per cent in FY24. Further, higher cane costs proved to be a double whammy for the company. For instance, the cane FRP (fair and remunerative price) was higher at ₹3,400 per tonne of cane, versus ₹3,150 a tonne in FY24, implying an 8 per cent increase. In contrast, the realisation in the retail and institutional segment rose by a modest 5 per cent and 2 per cent respectively, impacting the margins.
However, the sugar segment performance is expected to recover going forward on the back of a few initiatives — focus on premium sweeteners such as brown sugar, jaggery and low GI sugar can negate the impact of higher cane costs.
Second, the fast moving consumer goods business, which was launched in FY24 with products such as pulses, millets etc., is seeing good traction and is expected to sustain healthy growth. This will help margin improvement as the company leverages the brand value with newer products and brand extensions. Further, higher diversion for ethanol blending, wherein the realisation has seen consistent improvement over the last few years, will not only help domestic prices, but also aid distillery segment’s revenues and margins.
Third, the fertilizer business (Coromandel International) has witnessed healthy growth over the last few years, aided by better product mix, production efficiencies, higher production and sales. Going forward, the company is expected to sustain healthy growth momentum over the next two-three years. Capacity de-bottlenecking at Kakinada with an incremental capacity of 0.75 million tonnes, which is expected to come on-stream in FY27, along with sulphuric acid and phosphoric acid capacity enhancement of 2,000 TPD (tonnes per day) and 650 TPD respectively undertaken in FY24, will aid growth over the medium term.
Four, the company’s crop protection business will also contribute to the overall growth by way of new launches organically. This will be furthered by the acquisition of the business of NACL Industries (about 53 per cent equity stake for ₹820 crore), which has a good product portfolio of over 50 products across categories — fungicides, herbicides, insecticides, plant growth regulators etc. will add strength to the group’s crop protection business.
EID Parry’s revenue grew 7.5 per cent to ₹31,609 crore in FY25, largely helped by good growth in Coromandel International, whose revenue and operating profit grew 10 per cent in FY25. Net profit for the company grew 10 per cent to ₹1,773 crore in FY25, compared with the previous year.
Key concerns
In FY25, the company was constrained in terms of volume for ethanol diversion. This led to a lower contribution from the profitable refining business. While higher target for ethanol blending can support margin improvement, any restrictions on diversion can risk earnings.
The realisation for cogeneration power, which had seen healthy growth in FY21-23, has been under pressure over the last two years. In FY25, the average realisation per unit of power fell to ₹4.19 per unit, as compared to ₹4.73 per unit in FY24 and ₹5.26 per unit in FY23.
While we believe that the demand-supply dynamics are in favour of power producers, the ability to monetise power being produced will be a monitorable.
Published on June 28, 2025
