The domestic edible oil industry is looking to acquire palm plantations in Malaysia/Indonesia since prices of such plantations have crashed by 50-60 per cent in the past 5-6 months following a fall in palm oil prices.
Last year, K S Oils became the first Indian company to acquire a palm plantation in Indonesia. While prices of plantations were at a record high last year, valuations have now become cheaper and more Indian players are exploring similar acquisitions to integrate their operations.
According to industry experts, average cost of such plantations is now ruling at Rs 9,000-10,000 a hectare as against Rs 15,000 during the first quarter of the year.
“Interest to acquire palm plantation is high since price has crashed by about 60 per cent. We are exploring opportunities to acquire a plantation in Indonesia or Malaysia from where we can import crude palm oil and refine it at a port-based refinery. The company plans to invest up to Rs 100 crore in such acquisition”, said Anil Agarwal, director, Sanwaria Agro Oils.
It makes sense for Indian companies to acquire plantation since the country meets nearly 50 per cent of its edible oil consumption demand through imports from countries like Malaysia, Indonesia and Brazil and is often subject to international price fluctuations.
“Ruchi is very keen to acquire a yielding or mature palm plantation at current lower valuation. This is a great opportunity for us to integrate palm oil operation”, said Dinesh Shahra, managing director, Ruchi Soya Industries Ltd, the largest palm oil refiner in the country.
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As a part of its strategy to create an integrated raw material supply chain, Morena-based K S Oils had acquired 50,000 acres of palm plantation in Indonesia last year. The company plans to invest Rs 230 crore over a three-year period to develop the plantation and supply crude palm oil to its refineries in India.
In order to safeguard themselves against the price fluctuations in raw material, a number of domestic edible oil companies have joined hands to form a consortium led by the Solvent Extractors Association for corporate farming of oilseeds in Latin America.
The consortium will invest in farming of oilseeds in Latin America through a special purpose vehicle. The companies would captively use the produce from such plantations.