Ruchi Soya-Adani Wilmar JV in limbo

Ruchi Soya fails to get NOC from lenders; firm now eyes Patanjali-like deals to use idle capacity

While it may have tied up recently with Patanjali for physical refining and packaging of edible oils, Indore-based Ruchi Soya Industries' other joint venture with Adani Wilmar may not see the light of the day. Signed in May 2016 for introducing retail products jointly, the Adani-Ruchi Soya JV has been held in abeyance and may not fructify, say industry sources.

According to sources close to the deal, Ruchi Soya's rising debt may have prompted its lenders to deny it an no objection certificate (NOC) for the JV with Adani. While Adani Wilmar declined to comment, queries sent to Ruchi Soya did not elicit any response.

However, sources say that Ruchi Soya's lenders including State Bank of India, IDBI and IDFC did not back the deal due to its outstanding dues. So the company is now looking to engage its idle capacities through similar deals such as the one with Patanjali.

"After Ruchi Soya failed to get NOC from banks, both Adani Wilmar and Ruchi Soya have stop discussions on the JV. The deal is now on hold and may not see any fruitful result," the sources said.

Adani Wlmar and Ruchi Soya had signed an agreement to form JV in May 2016. It was proposed that Adani and Wilmar will, through Adani Wilmar, jointly hold an equity stake of 66.66 per cent in the joint venture company, and Ruchi Soya will hold 33.34 per cent. A non-binding term sheet had been signed in this regard.

In July 2016, bankers had filed petition in Mumbai High Court against Ruchi Soya. The court had asked the company to get NOC from all the 22 banks prior to move brands like Nutrela Oils and Soya Foods to any third party. However, the court has on February 15, dismissed the winding up petition against the Ruchi Soya filed by IDFC Bank.

What's more, analysts are also not hopeful with Ruchi Soya and Patanjali deal as they believe it will not bring much relief to the former in reducing its debt. Rating agencies like CARE even rated Ruchi Soya 'D' recently based on its current financial standing. The downgrade was on account of recent delays in servicing of debt obligations on account of stress on its liquidity on the back of huge loss posted in FY16 and subdued operating performance in H1FY17.

According to the CARE Ratings analyst, "The company is in financial stress. Doing refining and packaging for third parties may not make much change. It will take some time to recover."

Ruchi Soya Industries' net loss widened to Rs 216.82 crore for the third quarter ended December 31 from Rs 79.09 crore in the year-ago period, mainly on account of poor sales. The firm's total income from operations declined to Rs 5,031.98 crore during the quarter under review as against Rs 8,079.93 crore in the same period a year ago.