|
KS Oils has acquired an edible oil refinery in Haldia for Rs 125-150 crore. This will be the company's first refinery in east India. The company plans to expand their crushing and refining capacity by 3.5 to 4 times in the next two years.
Sanjay Agarwal, MD, KS Oils, said the acquired refinery has a capacity of 500 MT per day. "This acquisition would increase the company's overall refining capacity to 1,800 MT per day. This is a part of our near to market strategy for east India. It will save us transportation and logistic costs. With the acquisition of this refinery, we will be able to provide all types of edible oil to our customers." He informed CNBC-TV18 that the company had raised capital for the acquisition via debt of Rs 80 crore at 11.5%.
Here is a verbatim transcript of the exclusive interview with Sanjay Agarwal on CNBC-TV18.
Q: What exactly is the cost of this plant and how are you putting together the money. Do you already have it? Are you taking a loan?
A: We bought a port based refinery in east India in Haldia port for approximately Rs 125 crore. It has a 500 metric tonne per day capacity refinery and a vanaspati unit and it will help us in servicing the eastern market. This is a part of our near to market strategy for east India. The refined oil product will serve customers across north east Orissa, Bihar, Jharkhand. It will save us transportation and logistic costs tremendously and with the acquisition of this refinery we will be able to provide all types of edible oil to our customers.
Q: How did you raise the money?
A: It's through internal accruals and the debt that we have raised for this.
Q: How much debt have you raised and at what cost?
A: We have raised Rs 80 crore of debt at a cost of 11.5%.
Q: What does this do to your capacity currently for refining and even your seed crushing capacity? I believe a lot was going to come on stream by the second half of next year. So what are the capacity targets and are they on stream currently?
A: The new refinery capacity is 500 metric tonne per day and for all of my existing plant the capacity is 1,300 metric tonne per day so all together our capacity would be 1,800 metric tonne for the refinery. The existing capacity for mustard oil crushing is 4,800 metric tonne per day. We had to increase that capacity in second half and that we did.
Q: A word on one of your strategies: report suggests that you as a company in general hedge about 50% of your raw material cost while edible oil had an upward trend that would have definitely benefited your company in terms of inventory gains with edible oil having come off a bit and with crude oil also selling off a bit. How do you expect this scenario to pan out? What is your hedging strategy going forward and how will this affect your inventory going forward? Do you sense that going forward you may even report a bit in terms of losses in terms of inventory?
A: When there is a decrement trend in the price, at that time we make 70% hedging of our inventory and we also reduce our inventory level. In the normal circumstances we carry the inventory of 70 metric tonne days but when the prices are on downward trend we carry the inventory of 45 metric tonne days only and there 70% is through hedging. We are looking at market trend where soybean prices are already downward, but mustard has upper trend so we have a good inventory of 50-60 metric tonne in mustard.
Q: Your plan was to expand your crushing and refining capacity by 3.5 to 4 times in the next two years and I think the amount of money set aside for capex were Rs 650 crore. Is all your expansion on schedule? Is the money in place?
A: Yes all are in schedule; we have commenced with three of our plants. The capacity is in place and the money was already raised for that so we have enough funded for all the plants and our all plans are implemented.
|
