Coromandel International
BSE SENSEX
24,486
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, (INR m)
Free float (%)
S&P CNX
7,436
CRIN IN
291.3
47.9 / 0.7
302/151
-8/-17/-28
61
37.9
25 January 2016
Q3FY16 Results Update | Sector: Fertilizers
CMP: INR164
TP: INR260 (+58%)
Buy
Results below estimates; monsoon-led rebound expected in FY17
Financials & Valuation (INR b)
Y/E Mar
2016E 2017E 2018E
113.6 130.6 145.3
Net Sales
8.1
10.5
12.4
EBITDA
3.8
5.8
7.5
PAT
12.9
20.0
25.7
EPS (INR)
-7.0
54.9
28.4
Gr. (%)
81.9
93.5 110.7
BV/Sh (INR)
16.4
22.8
25.1
RoE (%)
17.9
25.2
30.8
RoCE (%)
12.8
8.3
6.4
P/E (x)
2.0
1.8
1.5
P/BV (x)
Estimate change
TP change
Rating change
-10%
8%
Results below estimates, impacted by erratic rainfall:
Coromandel’s overall
revenue de-grew 7% YoY to INR27.5b (est. of INR32 b) in 3QFY16 v/s INR29.6b
in 3QFY15 on account of erratic rainfall. Rabi crop sowing was down 4% YTD
(December 28, 2015) to 520 lakh hectares, while reservoirs were down to 49%
v/s 62% in 3QFY15. Management highlighted that weak monsoon in
addressable markets and rupee depreciation impacted sales and margins.
Addressable markets impacted by rainfall were Maharashtra, eastern Madhya
Pradesh, Gujarat, Karnataka, Telangana and Andhra Pradesh. EBITDA de-grew
27% YoY to INR1.6b (est. of INR2.5b). EBITDA margins declined 160bp—from
7.6% in 3QFY15 to 6% (est. of 8%) in 3QFY16. Subsidy:Non-subsidy revenue mix
stood at 82:18 (same as 3QFY15) while EBITDA mix was 55:45 (63:37 during
3QFY15) in 3QFY16. Consequently, PAT de-grew from INR1,235m in 3QFY15 to
INR644m (est. of INR1,323m) in 3QFY16, marking a 48% YoY de-growth.
3QFY16 witnesses significant volume de-growth:
Phosphatic fertilizer volumes
were down 3% YoY while complex fertilizers were down 9% YoY. DAP volumes
were up 3% YoY due to higher consumption in northern India while Urea was
up 9% YoY. Overall production of complex and DAP fertilizers was down to
0.6m tonnes from 0.7m tonnes in 3QFY15; sales against the same were at
0.53m tonnes v/s 0.58m tonnes in 3QFY15. All-India market share for CRIN
during the quarter stood at 13.9%, down from 15.5% in 3QFY15. However,
management highlighted that despite challenging environment, CRIN managed
to gain market share in home markets of Telangana and Andhra Pradesh
where the market share increased from 61% to 68%.
Sabero reports stellar performance:
Sabero reported strong EBITDA margin
expansion (from 12% to 16%), driven by higher sales of Macozeb molecule,
rupee depreciation leading to improvement in export realizations and decline
in costs due to lower gas prices. However, the growth was offset by muted
performance in the domestic formulation business.
Valuation and view:
On the back of normal monsoon forecasts, we expect
higher capacity utilization (expected to increase from 70% to 79% over FY15-
18). We believe CRIN has significant operating and financial levers ahead. We
expect 9% revenue CAGR and 23% PAT CAGR over FY15-18. Maintain
Buy
with
a TP of INR260, 10x FY18E EPS (rolled over to FY18).
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 3982 5426
Chintan Modi
(Chintan.Modi@MotilalOswal.com); +912239825422/Kaustubh
Kale
(Kaustubh.Kale@MotilalOswal.com); +912230102498
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Coromandel International
Results below estimates
Coromandel’s overall revenue de-grew 7% YoY to INR27.5b (est. INR32b) in
3QFY16 v/s INR29.6b in 3QFY15 on account of erratic rainfall.
Rabi crop sowing was down 4% YTD as on 28 December 2015 to 520 lakh
hectares, while reservoirs were down to 49% as against 62% in 3QFY15.
Management highlighted that weak monsoon in addressable markets and rupee
depreciation impacted sales and margins.
Addressable markets impacted by the rainfall were Maharashtra, eastern
Madhya Pradesh, Gujarat, Karnataka, Telangana and Andhra Pradesh.
EBITDA de-grew 27% YoY to INR1.6b (est. INR2.5b). EBITDA margins declined
160bp—from 7.6% in 3QFY15 to 6% (est. 8%) in 3QFY16.
The margins were positively benefitted due to increase in Sabero margins which
show a 50% increase from 12% to 18%, without which the margin decline would
have been higher.
Subsidy:Non-subsidy revenue mix stood at 82:18 (same as 3QFY15) while
EBITDA mix stood at 55:45 (63:37 during 3QFY15) during the quarter. The
EBITDA mix was relatively higher of non-subsidy (as compared to revenues) due
to under absorption of fixed overheads, increased share of manufactured DAP in
fertilizers piece.
Consequently, PAT de-grew from INR1,235m in 3QFY15 to INR644m (est.
INR1,323m) in 3QFY16, marking a de-growth of 48% YoY.
All India market share for CRIN during the quarter stood at 13.9%, down from
15.5% in 3QFY15. However, management highlighted that despite challenging
environment, CRIN managed to gain market share in home markets of
Telangana and Andhra Pradesh where the market share increased from 61% to
68%.
Quarter characterized by low volumes and softness in raw material prices
Overall production of complex and DAP fertilizers was down to 0.61m tonnes
from 0.67m tonnes in 3QFY15. Sales against the same were at 0.53m tonnes v/s
0.58m tonnes in 3QFY15.
In case of imported DAP, volumes were flat at 0.06m tonnes. SSP saw volumes
of 0.14m tonnes this quarter.
Phosphate fertilizer volumes were down 3% YoY while complex fertilizers were
down 9% YoY. DAP volumes were up 3% YoY due to higher consumption in
Northern India while Urea was up 9% YoY. Consumption during this quarter is
driven more by North India – where DAP is generally higher than complex.
Overall basis, volumes were down by 22% at industry level, while Karnataka saw
decline of 21% and Telangana and AP saw a decline of 12%.
On the prices front, the DAP price was down from ~USD450 to USD400, urea
prices were close to historical low of USD200 while ammonia was sub-USD400
as well.
25 January 2016
2

Coromandel International
Exhibit 1: Revenues de-grew 7%
Revenue (INRm)
32,154
18,977
34,660
27,562
21,840
20%
14%
5%
-1%
18,807
8%
7%
Growth YoY (%)
37%
29,621
29,976 21,812
16%
3%
35,644
27,555
2%
-7%
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16
Source: MOSL, Company
Exhibit 2: EBITDA margins declined 160bp
EBITDA (INRm)
8.9%
5.8%
8.0% 8.2%
10.0%
6.5%
7.6%
5.3%
4.2%
EBITDA Margins (%)
8.8%
6.0%
Exhibit 3: PAT de-grew 48%
PAT (INRm)
5.0%
3.4% 3.7%
1.1%
1.7%
5.2%
4.1%
2.3%
PAT Margin (%)
4.9%
2.9%
1,092 2,850 2,192 1,792 1,220 3,467 2,252 1,597 924 3,137 1,653
214
0.7%
1,601 942 808 326 1,799 1,207 687 145 1,735 804
Source: MOSL, Company
Source: MOSL, Company
Subsidy receivables
Subsidy outstanding as at December 2015 stood at INR15.8b as against INR14b
in September 2015. Included in above is 10% retention subsidy of INR8.5b which
is pending to be cleared since last 3 years.
Exhibit 4: Capacity utilization to improve
Capacity (m MT)
76%
58%
65%
70%
Capacity Utilization (%)
72%
79%
63%
3.3
2012
3.2
2013
3.6
2014
3.6
2015
3.9
2016E
3.9
2017E
3.9
2018E
Source: Company, MOSL
Other highlights from conference call
Management highlighted that the new plan of subsidy on organic manure of
INR1500/ton that will be provided by government can be a major positive in
terms of reducing overall costs and driving volume expansion, however the
25 January 2016
3

Coromandel International
details of the exact scheme are yet to be notified. Management also expects the
recently announced crop insurance scheme to impact positively.
Management highlighted that net debt to equity as at end of 3QFY16 was 0.06x
as against 0.17x at end of 3QFY15.
We value CRIN at 10x FY18E EPS (rolled over to FY18), which we believe is justified
considering:
Valuation and view
Significant operating and financial levers over next two years
CRIN has significant operating and financial levers ahead over the next two years.
Fertilizer capacity utilization currently stands at just 70% which we expect to be
ramped up to 79% by FY18. Further, CRIN is largely focused on organic growth thus
envisaging limited capex over the next two years (largely maintenance capex
amounting to INR1b annually). Improving asset utilization, stable fertilizer and non-
fertilizer margins, and improving working capital situation will generate significant
free cash over the next two years. This will result in net debt to equity declining
from 0.7x in FY15 to 0.1x in FY17. Similarly, we expect RoCEs and RoEs for the
company expanding from 18.7% / 18% to 30.8% and 25.1% respectively over FY15-
18.
Profitability mix to improve in favor of non-subsidy business
The subsidy business accounted for ~64% of CRIN’s EBITDA in FY15. EBITDA margin
is ~6% in the subsidy business as against ~15% in the non-subsidy business. By FY18,
we expect the EBITDA contribution of non-subsidy business increase from 36% to
42%. The shift in EBITDA mix in favor of the more lucrative non-subsidy business
would enhance the return on capital for the company.
Exhibit 5: Price to earnings (one year forward)
30
25
20
15
10
8.9
5
0
16.5
11.2
9.4
1.0
0.0
P/E (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
Exhibit 6: Price to book (one year forward)
5.0
4.0
3.1
3.0
2.0
1.9
2.5
1.9
P/B (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
Source: MOSL, Company
Source: MOSL, Company
We value the stock at 10x FY18E EPS (rolled over to FY18) and arrive at a target price
of INR260 – 58% upside. Maintain
Buy
rating.
25 January 2016
4

Coromandel International
Story in charts: Best play in fertilizers
Exhibit 7: India has lowest fertilizer penetration
Country-wise Fertiliser Consumption (Kgs/ha)
333
275
166
2.4
1.0
India
Brazil
Pakistan
Japan
China
2007
2.1
1.0
2008
5.9
5.5
Exhibit 8: NPK ratio skewed at 7.7:3:1 v/s ideal of 4.2:2:1
N
P
K
6.9
4.6
1.6
1.0
2009
4.3
2.0
1.0
2010
4.3
3.1
2.0
1.0
2011
1.0
2012
3.0
7.7
128
133
1.0
2013
Source: MOSL, Company
Source: MOSL, Company
Exhibit 9: Revenue growth set to accelerate
Capacity (m MT)
76%
58%
70%
Capacity Utilization (%)
72%
79%
Exhibit 10: Dependence on subsidy is declining every year
Farmgate price as a percentage of total realization
Subsidy as a percentage of total realization
37%
65%
63%
40%
48%
63%
65%
63%
3.3
2012
3.2
2013
3.6
2014
3.6
2015
3.9
2016E
3.9
2017E
3.9
2018E
Pre NBS
60%
FY11
52%
FY12
37%
FY13
35%
FY14
Source: MOSL, Company
Source: MOSL, Company
Exhibit 11: Non-subsidy business contribution to rise to 42%
Phosphatic Fertilisers
30%
30%
36%
36%
Non-subsidy business
35%
Exhibit 12: RoE set to improve to 25% in FY18E
RoE (%)
22.8
18.8
18.0
25.1
40%
42%
16.3
16.4
70%
70%
64%
64%
65%
60%
58%
FY12
FY13
FY14
FY15E
FY16E
FY17E
FY18E
2013
2014
2015
2016E
2017E
2018E
Source: MOSL, Company
Source: MOSL, Company
25 January 2016
5

Coromandel International
Exhibit 13: Key assumptions (INR m)
Revenue mix
Phosphatic Fertilizers
Non-subsidy business
EBITDA mix
Phosphatic Fertilizers
Non-subsidy business
Revenues (INR m)
Phosphatic Fertilizers
Non-subsidy business
Total
EBITDA Margins (%)
Phosphatic Fertilizers
Non-subsidy business
FY12
90%
10%
FY12
70%
30%
FY12
89,114
9,902
99,016
FY12
8%
32%
11%
FY13
90%
10%
FY13
70%
30%
FY13
81,303
9,034
90,337
FY13
7%
26%
9%
FY14
80%
20%
FY14
64%
36%
FY14
80,426
20,106
100,532
FY14
6%
14%
8%
FY15
82%
18%
FY15
64%
36%
FY15
92,713
20,352
113,064
FY15
6%
15%
8%
FY16E
80%
20%
FY16
61%
39%
FY16
97,254
23,763
121,017
FY16
6%
14%
8%
FY17E
80%
20%
FY17
61%
39%
FY17
113,924
28,090
142,014
FY17
6%
17%
9%
FY18E
79%
21%
FY18
58%
42%
FY18
114,295
31,044
145,339
FY18
6%
17%
9%
25 January 2016
6

Coromandel International
Financials and Valuations
Consolidated - Income Statement
Y/E Mar (INR m)
Total Income from Operations
Change (%)
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Expense/(Income)
PBT after EO Exp.
Current Tax
Deferred Tax
Tax Rate (%)
Less: Mionrity Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
2011
76,393
18.4
10,556
13.8
621
9,935
889
811
9,857
0
9,857
2,961
-40
29.6
0
6,937
6,937
48.3
9.1
2012
99,016
29.6
10,544
10.6
597
9,947
1,261
780
9,467
-355
9,111
2,906
-140
30.4
-43
6,388
6,635
-4.3
6.7
2013
90,337
-8.8
7,679
8.5
711
6,968
2,102
701
5,567
0
5,567
106
1,125
22.1
17
4,320
4,320
-34.9
4.8
2014
100,532
11.3
8,052
8.0
961
7,092
2,403
608
5,297
-126
5,171
1,545
-24
29.4
84
3,565
3,654
-15.4
3.6
2015
113,064
12.5
8,535
7.5
1,046
7,489
2,096
566
5,959
-39
5,920
1,879
23
32.1
0
4,018
4,045
10.7
3.6
2016E
113,628
0.5
8,068
7.1
1,010
7,058
2,119
675
5,613
250
5,863
1,935
0
33.0
0
3,928
3,761
-7.0
3.3
2017E
130,572
14.9
10,458
8.0
1,053
9,405
1,488
775
8,693
0
8,693
2,869
0
33.0
0
5,824
5,824
54.9
4.5
(INR Million)
2018E
145,339
11.3
12,354
8.5
1,096
11,258
963
863
11,158
0
11,158
3,682
0
33.0
0
7,476
7,476
28.4
5.1
Consolidated - Balance Sheet
Y/E Mar (INR m)
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred Liabilities
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Deferred Tax assets
Appl. of Funds
2011
282
19,286
19,567
0
910
15,623
36,100
13,529
5,515
8,015
0
3,027
1,706
42,544
15,139
2,024
9,605
15,777
19,287
15,184
2,782
1,321
23,258
95
36,100
2012
283
23,721
24,003
158
1,104
29,434
54,699
16,193
6,704
9,489
3,470
5,267
1,495
59,930
19,218
9,579
9,847
21,286
25,381
21,163
2,716
1,502
34,549
429
54,699
2013
283
21,683
21,966
1,063
2,326
29,458
54,812
21,269
7,397
13,872
4,691
4,201
1,599
59,758
14,775
18,201
5,346
21,436
29,757
24,014
3,751
1,992
30,001
449
54,812
2014
283
22,526
22,810
254
2,358
18,429
43,850
22,070
8,212
13,858
3,483
744
3,416
54,544
17,529
14,835
4,722
17,459
32,663
27,081
3,655
1,927
21,881
468
43,850
2015
291
21,729
22,020
0
2,204
22,878
47,102
22,981
9,189
13,793
3
465
3,522
65,834
22,592
14,464
3,176
25,602
36,843
30,880
4,736
1,228
28,991
328
47,102
2016E
291
23,560
23,851
0
2,204
17,878
43,933
23,981
10,198
13,783
3
0
3,522
63,354
22,116
16,767
2,680
21,792
37,057
30,609
4,131
2,317
26,297
328
43,933
2017E
291
26,937
27,228
0
2,204
11,878
41,310
24,981
11,251
13,730
3
0
3,522
66,358
23,105
19,267
2,522
21,464
42,631
35,173
4,747
2,711
23,727
328
41,310
(INR Million)
2018E
291
31,966
32,258
0
2,204
7,378
41,839
25,981
12,347
13,635
3
0
3,522
71,551
25,718
21,446
495
23,891
47,199
39,151
5,284
2,764
24,352
328
41,839
25 January 2016
7

Coromandel International
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Working Capital Turnover (Days)
Leverage Ratio (x)
Current Ratio
Debt/Equity
2011
24.6
26.8
69.4
7.0
33.1
2012
23.5
25.6
84.9
7.0
36.0
2013
15.3
17.8
77.6
4.5
34.7
2014
12.9
16.3
80.6
4.5
42.0
12.8
10.1
2.0
0.6
7.6
2.8
47.7
40.1
30.4
2.1
72.3
10
73
65
2.2
0.8
2011
9,857
621
204
-2,949
665
8,398
-443
7,956
-1,907
0
-60
901
-1,067
60
-4,110
-870
-1,969
-6,889
1
9,605
9,605
30.5
24.2
1.8
70.8
35
78
91
2.4
1.2
2012
9,111
597
728
-2,760
-7,370
306
648
954
-2,361
6,049
-3,668
-1,731
-7,760
37
10,618
-1,310
-2,296
7,048
242
9,605
9,847
18.8
14.6
1.6
59.7
72
97
100
2.0
1.3
2013
5,567
711
1,521
-1,207
2,546
9,139
702
9,841
-2,585
-1,407
-2,282
-187
-5,054
26
-5,626
-2,014
-1,674
-9,288
-4,501
9,847
5,346
16.3
16.6
2.3
63.6
53
98
62
1.7
0.8
2014
5,171
961
1,858
-1,112
6,683
13,560
1,051
14,611
-1,114
7,255
-962
282
-1,794
-44
-9,238
-2,649
-1,511
-13,442
-624
5,346
4,722
2015
13.9
17.5
75.6
4.5
39.2
11.9
9.4
2.2
0.6
7.8
2.7
-0.2
18.0
18.7
2.4
72.9
46
100
83
1.8
1.0
2015
5,920
1,046
1,605
-1,425
-7,456
-310
1,173
863
-921
13,497
-19
-827
-1,767
33
3,693
-2,159
-2,208
-642
-1,546
4,722
3,176
2016E
12.9
16.4
81.9
6.0
53.4
12.8
10.1
2.0
0.5
7.7
3.6
27.6
16.4
17.9
2.6
71.0
53
98
76
1.7
0.7
2016E
5,613
1,010
1,445
-1,935
2,198
8,331
250
8,581
-535
-59
0
675
140
0
-5,000
-2,119
-2,097
-9,217
-496
3,176
2,680
2017E
20.0
23.6
93.5
7.0
42.0
8.3
7.0
1.8
0.4
5.4
4.2
30.9
22.8
25.2
3.2
64.6
53
98
59
1.6
0.4
2017E
8,693
1,053
712
-2,869
2,412
10,002
0
10,002
-1,000
8,046
0
775
-225
0
-6,000
-1,488
-2,447
-9,935
-158
2,680
2,522
2018E
25.7
29.4
110.7
7.0
32.7
6.4
5.6
1.5
0.4
4.4
4.2
17.2
25.1
30.8
3.5
64.6
53
98
60
1.5
0.2
2018E
11,158
1,096
100
-3,682
-2,652
6,020
0
6,020
-1,000
9,002
0
863
-137
0
-4,500
-963
-2,447
-7,910
-2,027
2,522
495
Consolidated -Cash Flow Statement
Y/E Mar (INR m)
NP/(Loss) Before Tax and EO Items
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(inc)/dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
(INR Million)
25 January 2016
8

Coromandel International
Corporate profile
Coromandel International (CRIN) is the flagship
company of the Murugappa Group and is a
subsidiary of EID Parry (India) Limited (EIDP), which
holds 62.56% of its equity. CRIN has multi-locational
production facilities, and manufactures and markets
a wide range of phosphatic fertilizers, crop
protection products, specialty nutrients like sulphur
pastelles, water-soluble fertilizers, micronutrients,
and organic fertilizers. It exports its crop protection
products to countries across the globe. CRIN also
provides agricultural inputs/solutions and offers
lifestyle products through its rural retail centers,
branded
Mana Gromor Centers.
Fertilizer business
contributed 80% of revenue and 64% of EBITDA in
FY14, while the plant protection business
contributed 20% of revenue and 36% of EBITDA.
Company description
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Promoter
DII
FII
Others
Sep-15
62.1
7.7
5.5
24.8
Jun-15
62.1
7.4
6.7
23.8
Sep-14
63.2
5.6
6.7
24.6
Exhibit 3: Top holders
Holder Name
ICICI Prudential Life Insurance Company Ltd
Groupe Chimique Tunisien
Pinebridge Investments Gf Mauritius Limited
NA
NA
% Holding
4.9
1.7
1.6
0.0
0.0
Source: Capitaline
Note: FII Includes depository receipts
Source: Capitaline
Exhibit 4: Top management
Name
A Vellayan
V Ravichandran
Sameer Goel
P Varadarajan
Designation
Chairman
Vice Chairman
Managing Director
Company Secretary
Exhibit 5: Directors
Name
B V R Mohan Reddy
Prasad Chandran
Uday Chander Khanna
Name
M M Venkatachalam
Ranjana Kumar
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells
V Kalyanaraman
Type
Statutory
Cost Auditor
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
FY18
MOSL
forecast
12.9
20.0
25.7
Consensus
forecast
14.6
19.0
21.4
Variation
(%)
-11.6
5.3
20.1
Source: Bloomberg
Source: Capitaline
25 January 2016
9

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Coromandel International
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COROMANDEL INTERNATIONAL
No
No
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