NARENDRA MURKUMBI – an emerging tycoon

BriefInformation:

Mr. Narendra Madhusudan Murkumbi is a promoter of Murkumbi Bioagro Pvt. Ltd.  Mr. Murkumbi is the Co-founder of Shree Renuka Sugars Limited and serves as its Managing Director.He serves as the Chief Executive Officer of Renuka Commodities DMCC. He has rich experience in small-scale industry, the agriculture sector and the rural economy. He serves as Chairman of the Board at KBK Chem-Engineering Pvt. Ltd. He serves as the Vice Chairman of Shree Renuka Sugars Limited . He serves as a Director of National Commodity And Derivatives Exchange Limited,Shree Renuka Sugars Limited, Murkumbi Bioagro Pvt. Ltd.,Murkumbi Industries Private Limited, Renuka Commodities DMCC, KBK Chem Engineering Pvt Ltd., J. P. Mukherji & Associates Private Limited and Shree Renuka Infraprojects Limited.

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 .

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.

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.

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. “SRS now buys over Rs 2 crore worth of cane every day from 50,000 farmers,” he says, proud of his contribution.

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 Business world dated Sep 2 2006

                                                                        Gathered by-

                                                                        Mandar S. Bilolikar

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