Ruchi Soya to sell 51% to Devonshire for Rs 4,000 cr

PE firm will take total control in specific edible oil brands and their distribution

Global private equity (PE) player Devonshire Capital will acquire up to 51 per cent in branded edible oil major Ruchi Soya Industries (RSIL), and 100 per cent in specific brands and their distribution, the latter to be made a specific company to be spun off.
 
Devonshire will invest Rs 4,000 crore to acquire the majority share in the company, including a fresh equity issue in a phased manner. The board of RSIL in a meeting on Thursday approved the proposed equity sale and restructuring. RSIL proposes to issue fresh shares to Devonshire Capital, an Asia-based PE firm which invests primarily in consumer-oriented companies.
 
RSIL is a loss-making company. Its consolidated debt rose from Rs 4,200 crore in 2014-15 to around Rs 6,000 crore for the financial year ended March 2017. On the other hand, its market capitalisation stood at Rs 988 crore on November 2. RSIL aims to utilise the Rs 4,000-crore from Devonshire Capital primarily to reduce debt.
 
“The binding term sheet details Devonshire Capital taking 51 per cent equity stake in RSIL according to the Securities and Exchange Board of India (Sebi) guidelines post approval from the creditors and other statutory/regulatory approvals. It also covers restructuring of RSIL’s certain branded packaged oils distribution business being spun out and to be 100 per cent acquired by the investor for a gross consideration amount of Rs 4,000 crore to be paid to RSIL in various tranches. The amount would be substantially utilised for payment to all lenders over the period of time as described in the scheme of arrangement,” the company said in a statement.
 
The RSIL board also approved the filing of a petition under Section 230 of the Companies Act (discussion with lenders and exploring options to reduce debt) at the National Company Law Tribunal (NCLT) to enter into a scheme of arrangement subject to applicable approvals.

“This strategic investment by Devonshire will enhance the value of our business and provide an effective solution to resolve our outstanding issues with banks, financial institutions and operational creditors. We are optimistic on early completion of the restructuring, exercise after all necessary approvals of the lenders and legal formalities,” said Dinesh Shahra, managing director and chief executive officer, RSIL.
 
RSIL’s share price on the BSE hit a 52-week high of Rs 33.75 on Thursday, following news of the capital infusion, before closing at Rs 29.60, a rise of 4.6 per cent over Wednesday.
 
The company board had on September 6 approved a corporate restructuring exercise, which would allow RSIL to consider options such as subsidiarisation or demerger of its business units into separate entities. The company is into edible oil refining and brands, palm plantations, oilseed crushing, foods and renewable energy. The term sheet is subject to RSIL obtaining approval from its lenders and all other applicable statutory/regulatory consents.
 
For 2016-17, RSIL’s total sales from operations were Rs 18,527 crore, compared to Rs 27,692 crore for 2015-16, due to lower capacity utilisation of manufacturing units and rebalancing of the trading portfolio. The company posted a net loss of Rs 1,257 crore for FY17, against a loss of Rs 1,062 crore in the previous year.