Karuturi trips up on $55 million FCCB redemption

Gets one year extension, hopeful of cash flows stabilising

Karuturi Global, a publicly-held flower exporter, has tripped up on paying back $55 million, which it had earlier raised through the FCCB route. The company has now restructured the bonds and has got Reserve Bank of India’s approval to pay back the bond holders after a year with an additional 7 per cent interest.

Sai Ramakrishna Karuturi, CMD, Karuturi, said they had to restructure the FCCB as there was no appetite for Indian paper in the global markets. “Over the next year, we must be generating enough cash flows from the agriculture foray in Ethiopia to pay back the bond holders and hopefully, we need not raise debt to pay them,” Karuturi said.

The company, which is embarking on an ambitious $300 million agriculture foray in Ethiopia by growing a range of cereal and plantation crops, suffered a severe setback during late 2011 due to heavy floods in the region and had to take a hit of $15 million as its first maize crop was hit severely. “Post that, we are now ready with a decent harvest here and even the prices are firming up admirably. We should be adding as much as $12 million to our bottomline during the third quarter of FY13,” Karuturi told Business Standard from his farm in Ethiopia.

The company has acquired 311,000 hectares of land on a lease-hold basis from the Ethiopian government in Baka and Gambella with an intention to cultivate short, medium and long gestation crops. In the first phase, the company intends to cultivate cereal crops (rice and maize) on 70,000 hectares and oil palm on 20,000 hectares. Even as the company is going through the pain of coming out of the devastating floods, it has been facing allegations of land grab.

The Human Rights Watch (HRW), a global independent organisation dedicated to defending and protecting human rights, had earlier raised a red flag for corporate houses from India expanding in Ethiopia. According to HRW, the Ethiopian government under its ‘villagisation’ programme is forcibly relocating approximately 70,000 indigenous people from the western Gambella region to new villages that lack adequate food, farmland, healthcare and educational facilities. State security forces have repeatedly threatened, assaulted and arbitrarily arrested villagers who resist the transfers, the report added. Karuturi on his part said the report was biased and does not reflect the truth on the ground. “We are empowering the locals with jobs and we are not into grabbing land. The report is totally baseless.”

Karuturi Global came into the agriculture business after establishing itself as one of the leading exporters of cut roses with operations spread across Ethiopia, Kenya and India. With an area of over 292 hectares under greenhouse cultivation, Karuturi annually produces around 555 million stems of cut roses, essentially for exports. Last fiscal, it reported a net profit of Rs 151 crore on a topline of Rs 573 crore.