Devonshire Capital Acquires Majority of Ruchi Soya for US$601M

Private equity firm Devonshire Capital has agreed to acquire a 51 percent majority stake in edible oil producer Ruchi Soya for Rs 4,000 cr (US$601 million) which will be paid through a series of tranches. The deal includes the transfer of Ruchi Soya’s total branded oil distribution business and Ruchi Soya’s entire stake in its wholly-owned subsidiary Mrif Trading Pvt Ltd, which will be spun off into the edible oil business.

Ruchi Soya is one of the leading names in India’s cooking oil and soy foods categories with a turnover of US$3 billion. It’s also a fully integrated entity and is a pioneer in palm oil plantations in the country. Its brands include Nutrela, Mahakosh, Sunrich, Ruchi Gold, and Ruch Star, and it is a leading exporter of value-added soybean products including soy meal, textured soy protein, and soy lecithin.

The deal comes as a conclusion to a challenging period for Ruchi Soya, which has been struggling under a debt load of Rs 5,923 cr (US$890 million) as of September 30, according to the company’s latest annual report. As is expected, the company said that it will use the capital from the transaction to pay down its lenders comprised of 16 banks including State Bank of India, ICICI Bank, Axis Bank, and IDBI Bank among others, reports VC Circle.

Furthermore, two of the company’s international lenders - DBS Bank India and Standard Chartered Bank - filed independent insolvency cases against the company in September with the Mumbai bench of the National Company Law Tribunal (NCLT).

The Ruchi Soya Board of Directors has signed off on the deal, however, approval is still needed from Ruchi Soya’s creditors, the Securities and Exchange Board of India (SEBI), and the NCLT.

“This strategic investment by Devonshire will enhance the value of our business and provide an effective solution to resolve our outstanding issues with the banks, financial institutions, and operational creditors. We are optimistic on an early completion of this restructuring exercise after all necessary approvals of the lenders and legal formalities,” said Dinesh Shahra, managing director and CEO of Ruchi Soya.

A Deal with Potential

Founded in 1995, Devonshire Capital is a leading merchant bank organization focused on Asia with offices in Thailand, China, India, South Korea, and with team members in London, New York, and throughout the Asia Pacific region.

“The deal is subject to approvals, and so it’s not done yet,” Amarjeet Singh, country head, India, with Devonshire Capital, told Live Mint, adding, “We were set up to look at stressed assets in Southeast Asia and Greater Asia, this is going to be our first investment in India if it happens.”

Ruchi Soya’s total operational sales for 2016/17 were Rs 18,527 cr (US$2.8 billion) with a net loss of Rs 1,257 cr (US$189 million) compared to sales of Rs 27,692 cr (US$4.2 billion) and a net loss of rs 1,062 (US$160 million) the year before, due in large part to lower capacity utilization.

However, there is great potential for growth in the edible oil and soybean space in the Indian market.

Ruchi Hi-Rich Seeds of India - a joint venture of Ruchi Soya, Agrimax, DJ Hendrick International, and Agri-India Holdings - has developed non-GMO soybean seeds that show the potential to surpass yields of current varieties cultivated in the country by up to 50 percent.

Dinesh Shahra noted that just a 10 percent increase in yields could result in a significant effect on the economy of the country, which has a current population of 1.28 billion and is expected to surpass China to be the most populous in the world by 2050.

“It seems that India is on everyone’s radar these days, with some saying it will be the next China in terms of expected growth, and they want to be there in some way, shape, or form,” Michael Treytiak, who is overseeing fundraising efforts for the joint venture, told GAI News in July.

“Companies in Asia and Japan recognize India’s growth potential and are looking for opportunities to gain a foothold in the market,” added Treytiak.