REL to be global player in bullion: Rajesh Mehta

Interview with Chairman, Rajesh Exports Limited

Jewellery firm Rajesh Exports Limited (REL) has acquired 100 per cent stake in the world’s largest bullion refinery Valcambi for $400 million. Chairman Rajesh Mehta tells Rajesh Bhayani the firm is looking to become a fully-integrated global player. Excerpts:

How has the deal been financed?

We have net worth cash of around Rs 3,000 crore, from which Rs 1,800 crore will be used for the Valcambi acquisition, along with funding from Credit Suisse. Valcambi also has cash of $190 million. So the deal on net basis is beneficial to REL. With this deal, India now has a major story to tell the world about the gold business. This is the first such deal by any Indian company. Valcambi’s refining capacity is equivalent to India’s annual consumption of gold.

How do you plan to restructure the existing business after acquiring the refinery?

We’ll make our Indian gold refinery a subsidiary of Valcambi and make it an LBMA (London Bullion Market Association)-approved refinery. Gold for the Indian market will be directly imported in unrefined-ore form for refining in our refinery in India. Valcambi has been acquired by our Singapore subsidiary and all future global acquisitions will also be under that company.

Will financial benefits be reflected in REL’s balance sheet from FY16?

Part of the benefits will accrue from the current financial year itself. With the profitability of Indian and international companies rising once both operations achieve synergy, it will have a handsome impact on REL’s balance sheet. REL is set to become a major global integrated player in bullion.

Going forward, this will have a multiplier impact on the profitability of the company. Expansion in retail business is also under consideration. At present, we have 85 stores.

How will falling gold prices affect the outlook for gold refining?

Refining is less vulnerable to prices as the business is running on refining margin. With the prices of refined gold falling further, the demand will only improve. Valcambi’s business model is to fully hedge the price of the gold it acquires for refining and, hence, the business model is foolproof.