Ruchi Soya sells its subsidiary to Golden Agri

The company incurred losses three out of five years since existence due to unfavourable government policy

Edible oil major, Ruchi Soya Industries Ltd has divested its majority stake (50.001 per cent) in a Hyderabad-based subsidiary Gemini Edibles and Fats India (GEFI) to Singapore based Golden Agri International India Holding Pte Ltd at a total consideration of $17.88 million (Rs 109.92 crore).

GEFI incurred losses three out of five years since existence due to an unfavourable government policy which made edible oil business unviable in India. During the last financial year i.e. 2013-14, GEFI recorded a net loss of Rs 4 crore, though small yet significant for edible oil companies.

Operating as a subsidiary of the world's second largest palm oil plantation company Golden Agri-Resources Ltd (GAR), Golden Agri International Pte Ltd is engaged in the production of palm based edible oils and fats. With a market capitalization of $5.7 billion, GAR has 470,600 ha area under palm plantation in Indonesia. The company posted an operating profit of $31.86 million in the third quarter of 2014 as against $65.99 million in the corresponding quarter last year.

Gold Agri International bought 71 per cent stake in GEFI in all with 50.001 per cent from Ruchi Soya and 20 per cent from Pradeep Chowdhry, the current chief executive officer of the company. Chowdhry continued to hold around 19 per cent stake in the company of his total holding of 40 per cent before the said sale. Another Singapore based company holds 10 per cent stake in GEFI which will continue, said Chowdhry.

"GEFI had lots of forex exposure which due to depreciation in the rupee turned out as losses. That apart, the company invested immensely in brand building and other promotional activities. The most striking of the reasons for the sell off was the business un-viability," said Chowdhry.

He added that the edible oil industry had recommended the government to raise import duty on crude palm oil to make refining and fats business viable in India. Owing to a marginal 5 per cent difference in crude and refined oil, edible oil business suffered immensely.

GEFI, the producer of Freedom brand edible oil in addition to cheese and fats, has a long term debt of Rs 67 crore on its books in addition to around Rs 160 crore working capital loan.

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