Bengaluru-based Rajesh Exports Ltd (REL), India’s largest bullion and jewellery house by revenue, has acquired Valcambi, the world’s largest precious metals refinery, in an all-cash deal of $400 million (Rs 2,600 crore).
While the Switzerland-headquartered Valcambi’s erstwhile promoter and its banking partner, Credit Suisse, agreed to part-finance the acquisition, providing 30-35 per cent of the cost, the rest will be funded through internal accruals.
On Monday, the REL stock jumped to a 52-week high of Rs 549.95, before profit-booking dragged it down. It closed at Rs 540.10 on the BSE, a rise of 2.09 per cent compared to its previous close. The stock has risen fivefold in the past year.
“There is complete synergy for both sides. While REL will strengthen its backward integration, Valcambi will enter into forward integration. Through this acquisition, REL will get gold from Valcambi cheaper than other jewellery players in India,” said REL Chairman Rajesh Mehta.
Valcambi has an installed refining capacity of 1,600 tonnes of gold and another 400 tonnes of other precious metals, including silver and platinum. The Swiss refinery produces an average of 945 tonnes of gold, equivalent to India’s annual consumption, and 325 tonnes of silver a year. It accounts for 10-15 per cent of the Indian market.
Valcambi produces gold and silver accredited with the London Bullion Market Association (LBMA) and accepted worldwide. Its customers include nearly all central banks. For 2014, the Swiss refinery reported revenue of $38 billion (Rs 2,36,500 crore) and earnings before interest, tax, depreciation and amortisation of $33 million (Rs 205 crore). The zero-debt company paid about $10-million dividend to its shareholders.
Due-diligence for the deal with REL was carried out by consultancy firm Grant Thornton. REL acquired 100 per cent stake in Valcambi from US-based Newmont Mining Corporation, one of the world’s largest gold and copper mining companies, as well as a group of Swiss investors. Newmont Mining has signed a five-year gold doré supply contract with Valcambi, with a provision of extending the period.
“Valcambi shareholders were looking for a buyer for quite some time. We were also looking to deploy our cash at a safe place, which could generate a fair amount of business interest and help us grow. So, both of us came together and the transaction was concluded. As of now, we are a zero-debt company. But this acquisition would generate some debt on REL through its subsidiary, which we plan to retire in four years,” said Mehta.
The acquisition of Valcambi was carried out through REL’s subsidiary REL Singapore PTE Ltd, which set up a European arm Global Gold Refinery for the purpose.
For 2014-15, REL, which retails gold and diamond jewellery through 85 showrooms, recorded revenue of Rs 50,463 crore and a net profit of Rs 655 crore.
The company plans to convert its refinery in Rudrapur, Uttarakhand, into a subsidiary of Valcambi, after modernising the plant and machinery at the unit. To cater to the Asian market in general and the Indian market in particular, REL plans to produce LBMA-accredited gold and silver from Indian facilities in one-two years.