Tuesday, July 3, 2007

"Narendra Markumbi" Proud Belgaumite

India is changing and farmers are part of this change, today we only read suicides stories of farmer, but here is something encouraging for framers the man behind them is Mr Narendra Markumbi , I have a fade glimpse of meeting him in Belgaum when I was studying at CMS institute and attended a call at Markumbi Bioagro camp office with Mr Sunil Uppin (Frontline Automation) for system repair somewhare in 1996.


The Fortune in The Farms

This is a rags-to-riches story with a twist. Narendra Murkumbi became a billionaire all right. But he also created wealth for thousands of cane farmers .
M. Anand & Nelson Vinod Moses

Shindogi, in the Belgaum district of Karnataka, is like any other Indian village. Most of the inhabitants are farmers. Here they grow sugarcane and their incomes rise and fall with crop prices. It is the last place one would expect people to track stock prices. But they do. Through the pages of Kannada daily Usha Kiran, they keep a close watch on the fortunes of Shree Renuka Sugars (SRS). After all, 9,900 farmers in the region own the stock and their combined shareholding is worth around Rs 350 crore. “When we see the share price, we are happy because this is more than we expected even in our dreams,” says Gurappa Sidappa Kanapanaure, one of the farmer investors.

The farmers had bought the stock at face value. A Rs 5,000 investment in the late 1990s was worth Rs 7.61 lakh on 31 March 2006. Each investor holds at least 500 shares, with some, like Raiappa Mallapa Shetty, holding as many as 2,500. His holding was worth Rs 3.8 lakh on 31 March 2006.

When SRS listed on the BSE in October 2005, one of the farmers rang the customary bell to kick off trading in the stock. On that day, the combined wealth of these farmers was Rs 129 crore. By April 2006, that number had grown to Rs 811 crore. That growth of wealth (the farmers had invested less than Rs 5 crore) is now very much a part of the Shindogi folklore.

The tale would not have been told, but for Narendra Murkumbi, the managing director of Shree Renuka Sugars. He was born in Belgaum, not too far from Shindogi. His father was a distributor for Tata Tea and Tata Chemicals. With him, Murkumbi travelled a lot. He saw the tea gardens of Assam and the wheat fields of Punjab. In 1994, when he graduated from IIM, Ahmedabad, he wanted to start his own agri-business. He dabbled in bio-pesticides, but soon his interest shifted to sugar.

Having lived in Belgaum for most of his life, Murkumbi was familiar with the business. But he did not have the Rs 100 crore needed to set up a mill. At that time, the Andhra Pradesh (AP) government was selling a sugar unit for Rs 55 crore. He wanted to buy it and bring it to Belgaum, which grew lots of high-yield cane. But he did not have the cash to do even that.

With great difficulty, he convinced IDBI to lend up to 60 per cent of that cost. He also got the Sugar Development Fund to contribute another 15 per cent of the project cost as equity. He then went about raising the remaining 25 per cent. But, after exhausting his options, he was still about Rs 5 crore short. He recalls: “Then, the stockmarket was indifferent to the sugar industry. So an IPO was ruled out.” That’s when he turned to the farmers.

Says Murkumbi: “They were used to a culture of investing because of the co-operative mills. Though our model was different, we figured it could work.” His mother, Vidya Murkumbi, chairperson of SRS, visited 80 villages to talk to the farmers. Her pitch was simple. There was oversupply of sugarcane in the district. Farmers were travelling 60-70 km to sell their produce in Raibaga. There were payment delays and defaults. By setting up a plant in Belgaum, SRS would step up cane offtake and make prompt payments. In return, each farmer would have to buy at least 500 SRS shares at Rs 10 each. Not everyone was convinced. Most invested only after they saw the mill coming up. In the end, 9,900 farmers bought the story and the stock — the latter, in many cases, with borrowed money. That was SRS’ defining moment.

Since then, Murkumbi has turned the company into a fully integrated sugar maker with power generation and refining capacities. It has also become a major merchant exporter of sugar and is setting up a 2,000 tonnes per day sugar refinery in Haldia — the largest in India — primarily for exports.

SRS’ growth (in the last three years, sales have grown from Rs 152.34 crore to Rs 673 crore, and net profit from Rs 2.36 crore to Rs 40.73 crore) has attracted investors. Foreign investors, like Carlson Fund, have bought 12 per cent of SRS and the company’s market cap is among the highest in the sector.

Now, the Murkumbis’ 46.87 per cent stake in SRS is worth about Rs 1,698 crore. But that hasn’t changed their lifestyle much. Vidya still lives in Belgaum, Narendra in rented quarters in Worli Seaface, Mumbai. He was trying to buy a flat in south Mumbai, but settled for one in Prabhadevi instead. “Prices are much too high,” he says. He is distinctly uncomfortable talking about his wealth. “I look at my stock prices every day, but I am not the kind who will sit with a spreadsheet trying to figure out my wealth,” he says. In fact, it took a lot of persuasion to get Murkumbi to meet for this story on billionaires. He relented on the condition that the interview would largely revolve around the wealth of the farmers, not his. “SRS now buys over Rs 2 crore worth of cane every day from 50,000 farmers,” he says, proud of his contribution.

That has changed Shindogi. Now, the crop is sugarcane all the way. Hardly anything else is grown any more. Take Raiappa Mallappa Kalti. In 2000, he used to ride a bicycle, grow maize on his 40 acres and make about Rs 1 lakh a year, which barely covered his farm and family expenses. After the SRS plant came up, he switched to sugarcane. He sells his crop to SRS and is paid within 15 days. Says Kalti: “I drive a Tata Indica now, have increased my holdings to 100 acres and make Rs 20 lakh-30 lakh an acre.”

To farmers in these parts, Vidya is “more than the mother who gave birth to us”. SRS has helped them with better seeds, fertilisers and loans at the initial stages. It has also bettered their farming methods and monitored cane quality. Says Shetty: “We were taken to training programmes in Coimbatore, where we learned how to increase the yield. Five years back, we used to get 30-40 tonnes per acre. Now we get 50-60 tonnes per acre, sometimes even 70.”

The farmers, however, have been careful with their new found wealth. No flashy cars or clothes for them. Most have used the money to increase their land holdings, build bigger houses, educate their children (even send them abroad) and buy better irrigation systems. They say that if they knew that the shares would be worth this much today, they would have bought more of them. Now they joke about what they could buy if they sell their stock. Says Shetty: “Four of us have cars, now we are thinking of buying an aeroplane.”

courtesy Businessworld dated Sep 2 2006

1 comment:

MBA Institute Ahmedabad said...

Too much info and infact great info.