US companies want big bite of Indian food processors  ( September '1,2004, ET)

American food companies are on the prowl to gobble up chunks of Indian agro-processing companies. Bunge, the world’s largest oilseed processor, which bought Hindustan Lever’s Dalda vanaspati last year, is in talks with Ruchi Soya, the country’s top cooking oil company and maker of Nutrela soya chunks, for buying out its processing plants.

If Bunge is successful, the deal could be worth Rs 750 crore, making it the largest acquisition ever in the Indian edible oils sector. That’s not all. Two other global giants — USA’s Archer Daniel Midlands and Hong Kong’s Noble Grains — are also in talks with Indian oilseed processors for buying out capacities that would put them on the fast track.

US transnational ADM is scouting for acquisitions through its Indian arm, Tinna Oils, in oilseed crushing plants located in the hinterland. The company already has two processing plants in Maharashtra and Karnataka. It is now seeking to acquire plants in the North, especially in Punjab and Rajasthan, so that it can process oilseeds near the growing areas and retail them locally as well.

This will enable ADM to profit from the different growing seasons and crop cycles in the country. However, as of now, it has no plans to set up a port-based refinery.

If it were to acquire Ruchi’s plants, Bunge Agribusiness India would be catapulted into the top league of domestic players, with a large capacity in this rapidly-growing sector. It’s already a significant exporter of crude soya oil to India.

For the Rs 2,500-crore Ruchi, which has been grappling with a high debt burden, selling its plants to Bunge will reduce liabilities and allow the company to consolidate its widely-diversified activities in the sector. Ruchi has refineries in Mangalore, Chennai, Indore and Kandla, with a new one coming up at Patalganga.

However, Dinesh Shahra, managing director of Ruchi Soya, said there was no deal with Bunge in the offing. Officials in Bunge India were also unable to comment as the multinational is handling all acquisition negotiations directly out of its regional headoffice in Singapore and through its New York headquarters. But sources close to the M&A activity say the due diligence by DSP Merrill Lynch is almost complete and the two companies are nearing a discussion on price.

Keen to get a fresh infusion of capital, Ruchi has already applied to the International Finance Corporation, the commercial arm of the World Bank, for a loan to finance its new refinery at Patalganga and an oilseed crushing plant at Nagpur. In ’03-04, Ruchi invested close to Rs 488 crore to generate a turnover of Rs 3,586 crore.

However, as a result of a Rs 23.3-crore interest payout, the company’s total profit after tax was only Rs 39 crore.

The Dalda buyout has already given Bunge ownership over HLL’s three production plants in Trichy, Bundi and Pithampur, and also an R&D facility in Bangalore. Last year, it acquired Prestige Foods, including an oilseed processing unit with an integrated vegetable oil refinery and packaging facility.

Bunge is an integrated global agribusiness and food company operating in the farm-to-consumer food chain with worldwide distribution capabilities. It is the world’s leading oilseed processing company, the largest producer and supplier of fertilisers to farmers in South America and the leading seller of bottled vegetable oils globally.