Bunge looks to sell off MP plant

NEW DELHI: There is a new round of consolidation in India’s cooking oil industry. Bunge, maker of Dalda vanaspati and refined oils, is learnt to be selling off its Pithampur plant after moves to turn it around came a cropper. Ruchi Soya and Khaitan Solvex are in the race to acquire the unit in a deal pegged at around Rs 17 crore.

Though Bunge is the world’s biggest crusher of oilseeds, it has not been able to profit from this segment of the business in India due to the poor location of its Madhya Pradesh plant. After efforts to turn it around failed, Bunge called for bids from interested buyers. The bids are expected to be opened on November 9. Once it cut its losses, Bunge plans to expand crushing capacities in India.

Meanwhile, there has been rapid hiring and acquiring of soyabean crushing plants. The Bhaskar group, ITC and Adani are swelling in size as they hire new capacities to take advantage of better margins in the new season. These three, along with Ruchi, are now the biggest players in India’s soya oil market.

At the same time, Reliance Industries is learnt to have put on hold its plans to contract oilseed crushing plants for its own veg oil brand. Among the new deals this season, the Bhaskar group has hired out its Maharshtra unit to ITC and Dewas unit to Adani. In turn, it is in talks to take over SM Dyechem’s Vidisha unit.

Bhaskar will run its own Shivpuri plant on its own account. ITC, with a total capacity of upwards of 2,500 tonne, has leased Khalsa’s Khandwa unit and Sam Industries’ Dewas plant. Adani has hired Raj Solvex’s large capacity in Ratlam. Cargill has leased Malwa Vanaspati’s unit, along with Agro Solvent’s unit in Gwalior.

It is also learnt to be in talks with Natraj Proteins for their Itarsi plant. KS Morena has leased SKG plant in Guna and also likely to hire its Bara unit as well. Khaitan Solvex is learnt to have acquired Tristar Soya’s Maksi plant for around Rs 9 crore.

For oilseed crushing plants, location of the plant for adequate supply of raw material is the critical factor for success. In the case of Bunge, for instance, it has been able to successfully operate its unit in Bundi, Rajasthan, because the plant can crush both soya and mustard seed at different times of the year. On the other hand, its Pithampur unit, acquired from Geepee Ceval, was finding it difficult to compete with only soya in its portfolio.

In July this year, Bunge decided to shut down the plant for eight months and operate it only between October to March when the soya crop is in. These operations were to be contracted to an outside company, with lower costs, under Bunge’s supervision. That way Bunge expected to drastically cut overheads and stem losses. But the strategy came a cropper when the operations could not be outsourced to a reliable partner, senior company officials said.

The MNC’s basic business model is to crush oilseeds competitively in Latin America and ship it to the main consumption markets of China and India. In India, Bunge continues to be the single largest importer of soya oil, selling to all the large players, including Adani and Ruchi Soya. Talks are on to also supply oil to Reliance Industries for retail sales.