Polycab India (PIL) on 2 May 2020 said that it has signed an agreement with Trafigura, Singapore, to acquire 50% stake in Ryker Base thereby terminating the existing joint venture.
The company had entered into a 50:50 JV with Trafigura in 2016 to incorporate Ryker with an aim to strengthen backward integration of its operations and improve quality of its key input i.e., copper.
Post Trafigura's global strategic decision to exit from value-add manufacturing businesses in India where it is a JV partner, PIL decided to acquire balance 50% stake in Ryker from Trafigura making Ryker a wholly owned subsidiary of PIL. The purchase consideration is likely to be around $4 Million (Rs 300 million).
Ryker is involved in manufacturing of copper wire rods with a total annual capacity of 225,000 MT and commenced its commercial production in FY20.
Copper is an important element of Polycab's business and is used extensively in wires, cables as well as most of fast moving electrical goods (FMEG) products. The transaction will further allow PIL to have complete control of Ryker's manufacturing operations. Currently, India is a net importer of refined copper and value-added copper products due to the huge supply gap. Ryker is well placed to service this demand.
Inder T. Jaisinghani, chairman & managing director of Polycab said, "This strategic buyout reflects Polycab's unwavering focus on strengthening its core while readying the business for its future. Enhanced control on our manufacturing operations will generate operational efficiencies and help us deliver better quality products to our consumers. I am confident that this deal will fortify Polycab's market position in the Electricals space and create great value for all its stakeholders.
Shares of Polycab India fell 4.24% to Rs 693 due to weak market sentiment. It has traded in the range of Rs 690.30 and Rs 711.45 so far during the day.
Polycab India manufactures and sells various types of cables, wires, electric fans, LED lighting and luminaires, switches and switchgears, solar products, pumps and conduits and accessories. Polycab caters to various public and private institutions across a diverse set of industries, as well as retail customers through its B2C business.
The company's consolidated net profit rose 13.16% to Rs 218.78 crore on a 23.83% jump in net sales to Rs 2,507.31 crore in Q3 December 2019 over Q3 December 2018.
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