Edible oil majors Adani Wilmar and Ruchi Soya on Wednesday announced joining hands to combine their respective procurement, marketing, distribution and sales businesses aiming to increase efficiency and rationalise costs for the companies.

Adani Wilmar will hold a majority stake of 66.66 per cent in the joint venture company. A non-binding term sheet has been signed between the two companies. The joint venture will have the rights to originate, market and distribute commodities such as oil seeds and vegetable oils, soya foods, oleochemicals, biodiesel, grains and castor oil derivates. Manufacturing these agri products would be done jointly by both the companies.

Speaking to BusinessLine , Atul Chaturvedi, CEO of Adani Wilmar, said: “With this joint venture, there will be a merger in distribution channels and employees although the physical assets of the both of the companies will remain separate. The size of the company should be in excess of ₹40,000 crore. The businesses of the both the companies should complement each other.”

Benefit for consumers

The integrated platform of the JV is expected to benefit farmers for efficient handling of produce and sales realisation. Besides, the scale of the operations will ensure lower distribution costs, which will benefit consumers in terms of prices across categories like edible oils and commodities like rice.

“There will be improvements in cost optimisation processes and marketing once we get the regulatory clearance,” added Chaturvedi.

In a statement, Gautam Adani, Chairman of Adani Group, said: “The proposed partnership between Ruchi Soya and Adani Wilmar will have a positive impact on the overall agricultural landscape.”

Adani Wilmar is a 50:50 joint venture between Gujarat-based Adani Group and Singapore-based agribusiness group Wilmar International. “The joint venture will be well positioned to leverage its strong base in edible oils and capture a good share in demand to become a leading FMCG company,” said Kuok Khoon Hong, Chairman and CEO of Wilmar.

Commenting on the development, Dinesh Shahra, MD of Ruchi Soya, said: “This joint venture will not only enable us to continue with our core manufacturing operations via toll processing arrangements, but also to capture the synergistic value by working closely together and learning from each other’s experience to make things more lean and efficient.”

The planned integration of activities is aimed to help both companies realise savings in terms of origination efficiency across distribution, handling and sales.

Mumbai-based Ruchi Soya is a listed company in the business of edible oil refining and manufacturing of soya foods. However, securities and commodities market regulator SEBI temporarily restrained the company recently from accessing the securities market as it had formed a cartel to execute trade trades in the castor seeds future market.

The proposed integration of the downstream businesses of two companies is expected to serve as a catalyst for further expansion of both companies’ product portfolios, and to allow the JV to reach and address the consumer need, preferences and aspirations.

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