Indian Firm Jaiprakash Associates Unexpectedly Enters Vegetable Oil Processing Industry

8/7/2019 Indian Firm Jaiprakash Associates Unexpectedly Enters Vegetable Oil Processing Industry

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Indian Firm Jaiprakash Associates Unexpectedly Enters Vegetable Oil ProcessingIndustry

Economic Times (India) -- NEW DELHI -- July 22, 2009 -- Jaiprakash Associates, best known for its presence inthe construction and hydroelectric power sectors, plans to process and market edible oil under its own brand as

part of a surprise foray into the agribusiness segment. The Delhi-based group plans to invest Rs 80 crore initiallyin the venture that will process soya and mustard oil and produce oil cakes, all of which will be sold under its ownbrands.

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The company, which is targeting annual revenue of Rs 400 crore from the business by FY12, did not explain thesynergies between the edible oils business and its mainstay infrastructure businesses, merely disclosing that theoil processing plant will be set up in Rewa in Madhya P radesh where it has a strong presence in the power andcement sectors.

"The plan is to procure oil seed from the farms in 100-km radius of Rewa. We want to turn Rewa into the mostpotent force in soya farming and ensure that farmers get the best price," said Manoj Gaur, executive chairman of Jaiprakash Associates.

The growth prospects of the edible oil business in India have attracted interest from private equity and hedgefunds. Baring P rivate Equity P artners Asia had picked up an 8.86 percent stake in KS O ils for Rs 90 crore in2007. Citigroup Venture Capital International also owns a stake in KS O ils.

The group with interests in cement, construction, real estate, hotel and power sectors has its biggest cementplant in Rewa in Madhya P radesh and has also two more thermal power plants under construction in the state.The oil processing unit, which will have a capacity of 1 lakh tonnes per annum each for mustard and soya oil, willcommence production in November 2010.

The group's foray into edible oil will pit it against the likes of groups such as KS O ils, Adani Wilmar, Ruchi Soya,ITC, NDDB, Cargill and the Bhaskar Group. Its proposed brands -- whose names Mr Gaur declined to reveal --will compete with NDDB's Dhara, Adani's Fortune, Agro Tech's Sundrop, Cargill's NatureFresh and Bungee's

Dalda. MadhyaP

radesh, Rajasthan and Maharashtra are the major producers of edible oil, with MP

accountingfor almost half of total domestic soya produce. India consumes around 13 million tonnes of edible oil per annum,which includes 5.5 million tonnes of imported oil.

The rapid increase in demand for edible oil has prompted several players to expand processing capacity, leadingto difficulties in seed procurement during the off-season, which extends for up to six months a year for both soyaand mustard. The government allows import of edible oil, but not of oil seed.

So, during the off season, oil processing companies have to simultaneously contend with high seed prices andcheap oil imports. For local edible oil companies, there is an attractive export market for oil cakes -- a by-productof oil processing, which is used as cattle feed.

8/7/2019 Indian Firm Jaiprakash Associates Unexpectedly Enters Vegetable Oil Processing Industry

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Author: By Sanjeev Choudhary, The Economic Times, India

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