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Jun, 06 2018

Lenders resort to Swiss challenge method to buy ruchi soya

Ruchi Soya is the largest edible oil seed extraction and refining company in India, with 3.72 million tonnes of oil seed extraction capacity across 10 locations and 3.30 MT refining capacity in 13 locations.

In order to finalise a buyer for the edible oils company, the lenders of Ruchi Soya are resorting to the Swiss challenge method. This is the first time that banks are using this method to find a resolution under the Insolvency and Bankruptcy Code (IBC). There are just two players left in the fray. Edible oils player Adani Wilmar is pitted against Baba Ramdev’s Patanjali in a contest which may see Godrej Agrovet joining forces with the latter.

Swiss challenge, a method that has been used in India by various states to award roads and housing projects, could become the final round to decide the winning bidder for Ruchi Soya.

Under the auction process, both candidates will submit their detailed resolution plan. As per the process finalised, Adani Wilmar will be given the first opportunity to raise its bid which will be followed by an option to Patanjali to revise its offer. Adani Wilmar will then be given the second opportunity to up its bid following which Patanjali will get the final chance to beat Adani Wilmar’s bid, sources said.

Banks last year dragged Ruchi Soya to the bankruptcy court to recover dues of around Rs. 12,000 crore.

Adani Wilmar and Patanjali have submitted their bids to the committee of creditors (CoC) in a meeting held on May 30 with Patanjali holding an edge with its bid of Rs. 4,150 crore plus a commitment to infuse about Rs. 1,800 crore of capital. Adani Wilmar has offered Rs. 3,250 crore.

The CoC in consultation with independent evaluator BDO, then decided to adopt the Swiss challenge to maximise the value for the asset, the sources said.

“Patanjali is expected to maintain its aggressive approach in the challenge and will have the advantage of having the last go. It’s evident from the fact that Baba Ramdev himself made the final presentation before the insolvency professionals,” said one of the sources.

An executive committee comprising representatives from IDBI Bank, State Bank of India, Standard Chartered and Corporation Bank are expected to conduct the Swiss challenge and conclude the process by mid-June, sources said. They expect the final bid to be around Rs. 5,200-5,300 crore.

While Patanjali’s appetite for growth and desire to be a market leader in edible oils have led it to bid for the company, Adani Wilmar’s position is significantly different. Adani Wilmar already has a sizeable market share in India and the addition of Ruchi Soya’s market share will put it in a position of holding 65% of the market that may raise a red flag for the Competition Commission, whose approval is mandatory for the acquisition to be completed.

Ruchi Soya is the largest edible oil seed extraction and refining company in India, with 3.72 million tonnes of oilseed extraction capacity across 10 locations and 3.30 MT refining capacity in 13 locations. It also has a 3.05 MT soya meal extraction capacity. The company is the largest player in the cooking oil and soya foods category in the country with iconic brands like Nutrela, Mahakosh, Sunrich, Ruchi Star and Ruchi Gold.

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