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The aromatic basmati rice is the attracting increasing investor interest, mainly from West Asia.
The Abu Dhabi-based Al Dahra International Investment LLC is set to invest about Rs 112 crore in Kohinoor Foods Ltd (KFL) through equity shares allotted on a preferential basis.
This will lead to Al Dahra getting a 20 per cent stake in KFL. This deal also provides for the Abu Dhabi firm to acquire another 4.99 per cent in the next six months, after completion of investments on a fully diluted basis.
In a reaction to this development, Kohinoor Foods scrips hit the upper circuit on the Bombay Stock Exchange on Monday to touch Rs 46.05 a share. The board of Kohinoor Foods on Friday decided to issue about 70,48,306 equity shares on a preferential basis to Al Dahra at a consideration of Rs 160 a share.
The Abu Dabhi firm is a subsidiary of Al Dahra Holding LLC , which has invested in food production in various countries such as the US and Spain.
The holding company is into agricultural production and is responsible for compliance with the United Arab Emirates’ food security programme.
Its investment in various countries is to ensure “continuous and smooth flow” of food to the UAE and other Arab countries through trans-national food programmes.
Al Dahra Holding deals with production and distribution of products such as wheat, rice, potatoes, corn, olives, dates and grapes.
The Abu Dhabi firm’s investment in Kohinoor Foods is the second such instance of a West Asian firm investing in an Indian rice company. Recently, Hassad Foods, part of the Qatar Investment Authority, the Sovereign Wealth Fund of Qatar, announced the acquisition of a majority stake in the Delhi-based Bush Foods Overseas Pvt Ltd, a basmati rice and ready-to-eat products maker, for an undisclosed sum.
This trend assumes significance as West Asia is the biggest market for basmati rice and India has a major market share in the region, where it competes with neighbour Pakistan.
Analysts said the overseas interest in Indian companies will continue to rise, as such deals ensure assured supplies. Recently, Herba Foods, a subsidiary of Spanish-firm Ebro Foods, said it would acquire 100 per cent stake in Taraori Rice Mills, owned by Olam Agro India.
As part of the deal, Kohinoor Foods has also decided to enter a joint venture with Al Dahra to develop and manage a facility that would convert brown rice to white.
The proposed rice facility in Abu Dhabi would have a capacity of 60,000 tonnes a year and scalable up to one lakh tonnes with a storage facility of 30,000 tonnes.
Kohinoor expects to get a 20 per cent stake in the proposed joint venture for providing supervision and guidance to the new entity.
Officials said Kohinoor will not have to invest any cash in the proposed venture.
Also, the venture would procure a minimum of 25,000 tonnes of basmati rice from Kohinoor, which will be the exclusive supplier from India.
On formation of new joint venture with Al Dahra, the Kohinoor board has decided to dissociate from its existing venture in Dubai, the Rich Rice Raisers Factory LLC and sell its holdings in the same.
For fiscal ending March 2013, Kohinoor reported a net profit of Rs 9.75 crore on revenue of Rs 1,087 crore.
As on March 21, 2013, Kohinoor had a debt of Rs 802 crore.
vishwanath.kulkarni@thehindu.co.in
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