Ruchi Group lines up $150 m for overseas expansion

Business Line | March 2011

By M.R. Subramani
Ruchi also cultivates soybean on 25,000 ha in Ethiopia. Photo :

Kakinada (AP) : In tune with Indian corporates looking abroad to source their raw material needs abroad, Indore-based Ruchi Group plans to grow oil palm in Cambodia. The group has signed a memorandum of understanding with Phnom Penh for this and, initially, oil palm will be cultivated in 20,000 hectares, a company official said.

“We are looking to expand our operations wherever possibilities exist to ensure supply of raw materials for our edible oil business. Towards this end, we have already acquired land in Ethiopia, while we are entering Cambodia,” said Mr N.K. Arora, Corporate Head (Palm Business) of Ruchi Soya Industries Ltd's Oil Palm Division. He was addressing a select group of journalists who were taken on a company sponsored trip to the division's corporate office at Peddapuran in East Godavari district.

Ruchi Group plans a total investment of $150 million in the next three years to expand globally, while in the country, it plans to spend Rs 80-100 crore for expansion.

Ethiopia plans

In Ethiopia, Ruchi has cultivated soyabean on a pilot basis and the result has been good. It plans commercial cultivation of soyabean on 25,000 hectares there. During the pilot project, the yield was two tonnes a hectare.

“The first harvest was handed over to the Ethiopian Prime Minister. We have sought additional land in the Gambella region in that African country to grow oil palm,” Mr Arora said. “There was even an invitation to take up a crushing plant in Madagascar,” he said.

Besides, the group grows oil palm in Indonesia's Medong area.

To raise capacity

Ruchi, which has a major share of the palmolein market in the country through Ruchi Gold, plans to increased its capacity to crush oil palm fresh fruit bunch (FFB) to 150 tonnes a hour from the current 61 tonnes. The company has three units, two in Andhra Pradesh and one in Karnataka. Next year, it plans to set up another mill in Karnataka, while expanding the capacity of the mill that is in the premises of its corporate office in Peddapuram, he said.

Operations of Ruchi's Oil Palm division spans Andhra Pradesh, Karnataka, Mizoram, Orissa, Tamil Nadu and Gujarat. Under the Technology Mission on Oilseeds, a company showing interest in oil palm is allocated a particular area by the State Government. A company that is allotted a particular district or mandal can produce FFB only within that area.

In Andhra Pradesh, FFB is procured at a cost fixed by the State Government. This is based on the average crude palm oil price in the global market. A firm procuring FFB pays 12 per cent of crude palm oil price and 33 per cent of price of the kernel nut in the bunch.

In Andhra Pradesh, the AP Oil Federation is the governing body and firms pay the price fixed by it to farmers.

Companies help farmers who take interest in growing oil palm by supplying them the seedlings.

Ruchi has 15 nurseries in which it currently has 3 lakh seedlings as stocks. While there are seven nurseries in Andhra Pradesh, there are two nurseries each in Tamil Nadu, Mizoram and Karnataka, while one each in Gujarat and Orissa. It plans to add two more nurseries in Orissa and one each in Gujarat and Mizoram this year.

Ruchi accounts for 28 per cent (34,000 hectares) under oil palm cultivation in the country and it plans to raise it to one lakh hectares in the next five years, Mr Arora said.

On Friday, shares of the Group's listed company, Ruchi Soya, closed 1.23 per cent lower at Rs 100.25 on the BSE.

Original source: Business Line

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