Ruchi Soya Industries Ltd, India’s largest edible oil producer, said there was no threat of takeover by anybody as the promoters have substantial holding in the company.
Ruling out market rumour about Siva Group’s interest in Ruchi Soya (which is said to be inching up their stake in the company), Dinesh Shahra, MD of Ruchi Soya Industries told CNBC-TV18 that promoter stake in the company was over 50% post merger of associate company. The company had last year amalgamated Mac Oil Palm Ltd, an associate company, with itself to expand its presence in palm oil plantation in India. Shahra termed Siva Group’s stake acquisition in the company as “friendly interest”.
He also ruled out fund raising plans in near term saying all expansions will be funded by internal accruals.
Below is the edited transcript of Dinesh Shahra’s exclusive interview on CNBC-TV18. Also watch the video.
Q: One clarification because the market seems abuzz with rumours and talk that the Siva Group is inching up their stake. Is that happening? What is the plan?
A: Ours is a public company and investors are welcome to participate and invest. We welcome any investor who is interested in the company. However, edible oil is a growing industry. It is a USD 15 billion industry and we are in the business of palm and soya. They constitute almost 70% of India’s vegetable oil consumption and where we have almost 20% market share. We have nutrition business as well and we have brand called Nutrela, which is a brand leader in its segment.
Edible oil consumption is a low consumption in the country today. We have almost 12-13 kg per capita consumption whereas China is 18 kg and world per capita consumption is 22 kg. So India has good growth potential for its consumption. So this industry is a very promising industry.
Q: We understand that the promoter stake now in the company is 42% and the stake of Sivasankaran is now approaching 10%. You are comfortable with the promoter holding and do you see this additional stake acquisition as a friendly overture as an investment or do you have reason to be apprehensive?
A: We recently merged a group company involved in palm plantation. Post-merger of this company our stake is going to be over 50% so we are quite comfortable with our stake and this investment we will consider as a friendly investment.
Q: We believe that you are increasing your refining capacity by about 10%. Can you take us through the details—by when that will happen? What investment it entails?
A: Of late edible oil consumption has been growing and India’s edible oil production is stagnant for many years. So the entire consumption, the growth is coming in thepalm production and Ruchi being the largest palm oil refiner in the country—we have 2.1 million tonne capacity—we decided that we should expand by another million tonnes that will make us to 3.1 million tonne.
We have recently acquired 50% stake in a South Indian refinery where the capacity would be about 300,000 tonne. That will take us to almost 3.4 million tonne, which will make us the second or third largestpalm oil refiner in the world. Ruchi understands the pulse of Indian consumption. When we came to know that India’s shift will be towardspalm , almost 12-13 years back; in ’98 we launched Ruchi Gold brand. This Ruchi Gold brand is almost 55% market share in the country. We have decided to expand this business and we want to take a leadership position in the world business ofpalm.
Q: We believe all this expansion will require investment of close to Rs 100 crore. Will you need to raise cash in order to do that or are you sufficiently funded?
A: We have internal accruals and our debt equity is less than 0.6 so we have no intension to raise any capital.
Q: There is also talk that you are looking at backward integration and acquiring palm oil plantations to improve your margins. Can you take us through any plans there?
A: In our business the margins are very low; we are running between 1-2% profits after tax (PAT) level, which is very low against the peers in the global markets and the raw material pricing is the key for this business so we have decided to integrate our business to palm plantation and it’s a high capex business so we acquired some palm plantation of the group company and Palm Tech company from Malaysia, which has plantation in India. Altogether we will have a land bank of almost close to 170,000 hectare and out of which over 30,000 hectare we planted 11,000-12,000 yielding and we have three oil mills so we are intending to have 20,000 hectare per year in next ten years to complete this 200,000 hectares.
We intend to acquire some more plantation companies so altogether we are targeting 200,000 hectare of plantation in India which will be on completion, will look at to give over Rs 500 crore per year income when this is completed and this will also improve our PAT level margins because Indianpalm plantation is on EBIT of 35% where as the global palm plantation is at 70% but it needs low capex. The EBITDA is low and this will be a great advantage to the company.
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