SWEET SUCCESS

The fortune in farms-Narendra

Murkumbi

1) Dr. MIHIR GHARIA PRN-026 2) Dr. AMIT MURARKA PRN-027

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SUMMARY

“The Impossible is what you believe cannot be done. The limits are in
your own thinking”

Sweet success is a story of how a person with a small idea makes it

big not only for himself but also for the farmers who helped him grow big.

Narendra Murkumbi, IIM A PGP '94 is one of the 25 entrepreneurs

featured by Stay Hungry Stay Foolish in a cover story on IIMA’s alumnus
who made it big. Others in the list include Sanjeeev Bhikhchandani, R
Subramaniam, Rashesh Shah and many more.

In sugar, a sector dominated by old, established players,

Narendra Murkumbi, first-time entrepreneur with his mother Vidya
Murukumbi, experimented with an asset-light, capital-light business
model. They chose to buy old units rather than set up new ones. They
chose to lease out factories rather than invest in new facilities. Result:
with little capital, Shree Renuka Sugars became India’s eighth largest
sugar company. More importantly, it earns a 46 per cent return on capital
employed, the highest in the industry and almost double the industry
average of 20-25 per cent.

Murkumbi, when he graduated from IIM-Ahmedabad in 1994,

he knew he wanted to be in agri-business. After a brief experiment with
bio-pesticides, which he closed after deeming a Rs 50 crore company too
small, it was sugar that caught his fancy. 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. The stock
market was indifferent to the sugar industry. So an IPO was ruled out.
That’s when he turned to the farmers who were used to a culture of
investing because of the co-operative mills. His mother, Vidya Murkumbi,
chairperson of SRS, visited 80 villages to talk to the farmers. By setting up
a plant in Belgaum, SRS would step up cane off take 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. That’s how he raised the capital to run
the company.

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 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. Later, Murkumbi expanded the factory to
include a cogeneration unit. In 2002, when sugar prices crashed,
Murkumbi ventured into sugar trading in the overseas market.
Consequently, in a year when the industry was in the red, SRS made
profits.

To farmers in these parts 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.

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. They are happy because this is more than they would have
expected even in their dreams.

ADVICE TO LISTENERS AND BUDDING ENTREPRENEURS

Reading the story one can find that Narendra Murkumbi had to go through
a lot of difficulties and so here are the learning’s from his story-

Passion and desire to succeed

Narendra Murkumbi sold out his initial Bio-Pesticide business because he

found that he could not scale it up. And then took up the task of setting up
sugarcane factory.

Openness to Change- Risk Taking ability

If something is not working for them they simply change. The fact that
only bio-pesticide industry would not enable him to grow much he shifted
to the sugarcane industry.

Opportunistic

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He found that sugar is a large industry in Belgaum and it got decontrolled
in 1998 which he saw as an opportunity to enter the industry as a private
player.

Strong Belief in themselves-Rigidity

Successful entrepreneurs have a healthy opinion of them and often have a

strong and assertive personality. They are focused and determined to
achieve their goals and believe completely in their ability to achieve
them.

Search for New Ideas and Innovation

The cogeneration unit start-up was a great new idea which proved hugely
successful for the sugarcane industry.

Adaptability

When obstacles arise in business then adapting to suit the needs is a part
of business.

Socially responsible

Being socially responsible goes a long way into making business

successful as we can see from the farmer’s growth story in this case.

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