The Hindu Business Line : Ruchi Soya may halt oil sales in loose form

RUCHI Soya Industries Ltd, the biggest manufacturer of soya products in the country, plans to sell wholly in the packaged form in the next five years, according to Ms Amrita Shahra, Head (Business Development).

Typically when soyabean is crushed, 18 per cent of the yield is oil, the balance being predominantly soya meal. At Ruchi, the oil is refined and sold, while the bulk of the meal — 3-4 lakh tonnes of it — is exported. A portion of the meal is value-added for the domestic market and retailed under the company's brands, best known of which is Nutrella.

"Moderate'' volumes of edible oils from Ruchi's plants continue to be sold in bulk, to other players who may brand it for their sales. Further, rural customers prefer to buy the oil in loose form, given price advantages. Overall, this loose to packaged-oil ratio for the market is 65:35 and the company's produce shadows the divide.

Ruchi intends to fully convert its oil sales to packaged form, because the packaged segment has been growing at 25-30 per cent while the bulk sales category is stagnant, Ms Shahra said. This would turn its product portfolio, barring bulk export of soya meal, into wholly packaged form.

The Rs 3,553 crore-company has a crushing capacity of approximately 4,000 tonnes per day, with current capacity utilisation of 60 per cent. As is industry convention, Ruchi's plants maintain year-round activity crushing a variety of inputs, including soyabean, mustard, rapeseed, groundnut and sunflower seed. Its capacity is ahead of industry compatriots here, domestic capacities being small and fragmented. However, quality concerns prevent this scenario from being an acquisition zone for the likes of Ruchi.

Mr Dinesh Shahra, Managing Director, said, theoretically there is merit in a port-based sunflower oil plant, for nothing but the fact that it helps cost-effective import of crude oil for subsequent refining.

In contrast, there is sizeable duty on import of sunflower seeds for crushing and the prevailing freight rates are also high. Sunflower oil is imported as well as bought domestically.

Ruchi has not formally studied the cost of a port-based plant versatile enough for sunflower oil, soya oil and palmolein. But its merit remains, nevertheless. For the second quarter of FY05, the company has reported a small drop in profit. Ms Shahra said the second half would be better given both lower soyabean prices and higher capacity utilisation at Ruchi's plants. There are no plans to tap the equity market, the company currently enjoying good ability to leverage with the additional benefit of cost of funds ruling low.

According to her, the promoters would be buying shares every year under the creeping acquisition route. Alongside Ruchi's transition to being fully packaged, Nutrella (soya foods and edible oils) is being positioned as the company's brand in health foods. Sister brands, Soyyum (soyabean oil) and Ruchi Gold (palmolein oil, sunflower oil and mustard oil), will take on competition in the value-for-money segment.

The company said it has a 65-70 per cent share in the domestic market for soya foods.

While in edible oils, Ruchi sells sunflower and mustard oil in addition to its core soyabean oil, in the foods business, its growth is projected to be soyabean-based, progressing from direct soya offerings to additives, where the host for soya additive can be a non-soya item such as atta.

"New products can be soya milk, soya snacks, atta fortified with soya and so on. There are many options," Ms Shahra said.