The manufacturing requirements of the joint venture company are proposed to be fulfilled by Adani Wilmar and Ruchi Soya. It is proposed that Adani and Wilmar will, through Adani Wilmar, jointly hold an equity stake of 66.66% in the joint venture company, and Ruchi Soya will hold 33.34%. A non-binding term sheet has been signed in this regard.
Adani Wilmar is a joint venture between the Adani Group and Wilmar International. Currently Adani Wilmar owns refineries in 17 locations across India, has eight crushing units and 18 toll packing units. Cumulatively, this translates to a refining capacity of over 10,400 tonnes per day, seed crushing capacity of 7,400 tonnes per day and packaging capacity of 9,000 tonnes per day. The company also said it has the largest distribution network among all branded edible oil players in India, with more than 93 stock points, 3,500 distributors and 10% retail penetration which spans across approximately 1 million outlets all over India.
Ruchi Soya is a manufacturer and India’s largest marketer of healthier edible oils, soya food, premium table spread, vanaspati and bakery fats. It is also the highest exporter of soya meal, lecithin and other food ingredients from India. Ruchi soya has access with exclusive oil procurement rights to over two lakh hectares of land in India with a potential of oil palm cultivation.
This proposed new integrated platform is expected to have significant value for both the Indian farmer, in terms of efficient handling of produce and sales realization, as well as for the Indian consumer, who will stand to gain from an increased range of high quality finished products through distribution networks that will be optimized to provide the highest standards of quality and handling, at the lowest cost possible.
The proposed transaction is subject to due diligence, definitive binding documentation, applicable regulatory and other approvals and certain other terms and conditions. Further announcements will be made at an appropriate stage.
The joint venture company will have the exclusive right to originate market and distribute finished products from the following manufacturing businesses of Adani Wilmar and Ruchi Soya in India:
• Oil seeds and vegetable oils, oil seeds crushing/extractions/refining, derivatives and by-products
• Soya foods, by-products and all other food products
• Castor oil and derivatives.
“The proposed partnership between Adani Wilmar and Ruchi will have a positive impact on the overall agricultural landscape of India,” said Gautam Adani, chairman of Adani Group. “Our current partnership with Wilmar has been successful due to a solid combination of Wilmar’s strategic outlook and experience in the international food business, coupled with our domestic operational expertise. We look forward to take the next leap forward with the Ruchi family through this new joint venture.”
“We are very bullish on Indian demand for high quality food products due to population and economic growth,” said Kuok Khoon Hong, chairman and chief executive officer of Wilmar. “The joint venture will be well-positioned to leverage on its strong base in edible oils and capture a good share of this demand to become one of India’s leading FMCG companies.”
The joint venture was conceived looking at India’s complex agricultural environment, where declining farm productivity has come in the face of rising consumption patterns amongst India’s growing population. This mismatch can be partially eased by optimizing and improving the supply chain networks of Adani Wilmar and Ruchi Soy, both companies said.
“Our company is truly honored to be able to partner with such reputable conglomerates, and together we feel we will be able to leverage on each other’s strengths to truly make a difference to the agricultural backdrop of the country,” said Dinesh Shahra, managing director of Ruchi Soya. “This joint venture will not only enable us to continue with our core manufacturing operations via toll processing arrangements, but also to capture the synergistic value by working closely together and learning from each other’s experience to make things more lean and efficient.”
The planned integration of activities will help both companies realize savings in terms of origination efficiencies across distribution, handling and sales.
Lastly, the proposed integration of Adani Wilmar’s and Ruchi Soya’s downstream businesses will serve as a catalyst for the further expansion of both parties’ product portfolios and allow the joint venture to reach and address the consumer tastes, preferences and aspirations of India’s 1.3 billion consumers.