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Tuesday, May 19, 2009

KS Oils set to raise Rs 450 cr from PE cos, promoters

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NEW DELHI/MUMBAI: Edible oil firm KS Oils is raising Rs 450 crore from a clutch of investors, including New Silk Route, Citigroup Venture Capital (CVC) and Baring Private Equity Partners, as well as promoters, through the issue of equity shares and convertible warrants.

A person close to the fund-raising programme said that New Silk Route will invest around Rs 135 crore through subscription of preferential equity shares, while existing investors such as CVC and Baring will pump in Rs 49 crore each through subscription of convertible warrants. The promoters will put in around 157 crore through subscription of convertible warrants. The company will also raise Rs 60 crore through a GDR issue.

The same person said an announcement was likely to be made as early as Tuesday. It would be the first investment by a PE firm in an Indian company, post the general election results, a reinstatement of the fact that funds are looking at India. Monday saw the stock market hit the upper circuit by noon on increased investment by foreign institutional investors.

He said that New Silk Route's stake would be around 8% after the preferential issue of equity shares. When contacted, a spokesperson of KS Oils declined to comment. The KS Oils stock gained 11% to close at Rs 52.20 on the BSE on Monday.

New Silk Route is a leading Asia-centric growth capital firm founded in 2006 with over $1.4 billion under management. It is focused on the Indian subcontinent as well as other rapidly growing economies in Asia and the Middle East. The private equity fund was floated by ex-DSP Merrill Lynch MD Amit Chandra and former McKinsey global chief Rajat Gupta. CVC and Baring hold 12% and 6%, respectively, in KS Oils. The promoters hold a stake of around 38% and post the equity and warrants issues, their holding will decline to 36%. KS Oils, which owns mustard oil brands such as Kalash, Double Sher and KS Gold, is expected to utilise the money for expansion of its Haldia refinery and palm plantations in Indonesia.

It would spend Rs 75 crore at the Haldia refinery and invest the remaining in Indonesia. Last year, the company had acquired a port-based refinery in Haldia Port for Rs 125 crore. The acquisition was aimed at catering to consumers in eastern India better.

KS Oils claims to enjoy a 7% market share in the mustard oil segment and a 25% share in the branded mustard oil segment. India is one of the world's largest consumer of edible oils, importing 5 - 6 million tonnes every year.

The Rs 3144-crore KS Oils produces mustard oil, soybean oil and palm oil and has a strong presence in the mustard oil market in India. It controls a market share of 7% in the overall mustard oil segment, with a 25% market leadership in branded mustard oil. The company has 5 manufacturing plants, marketing offices and plantations in India, Malaysia, Indonesia and Singapore.

The company recently reported a 53.8% increase in net sales to Rs 3,143 crore for the financial year ended March 31, 2009. Net profit for the year grew by 44.6% to Rs 174.5 crore.