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Ruchi Soya Industries Ltd.*

CASE STUDY, FINANCIAL MANAGEMENT
ET Cases - GSMC, 13 Pages

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Ruchi Soya Industries Ltd.

 

“Our growth is just an outcome of our concern; a concern that drives us to create innovative products using advanced technology and apply sound logistics for being there on demand.”

– Dinesh Sahara, Managing Director, Ruchi Soya Industries Ltd.


“At Ruchi Soya, we have always dreamed big” stated Managing Director, Dinesh Sahara, at the 20th Annual General Meeting (AGM) of RSIL1. He clearly understood the demand for edible oil in India and lack of enough production to meet the demand and that almost more than the half of the requirement was imported from outside India. Edible oil import comprises 63 % of the total Indian agricultural imports2 and this was the reason why this sector has huge growth opportunities. RSIL understood the supply-demand gap and was eager to tap this market by putting its best efforts in expansion and creation of quality products for the consumers. RSIL, when compared to other players in edible oil industry had continuously restructured its business and achieved success positioning it as No.1 in the industry.

Company Background

The Ruchi Group was founded by late Mr. Mahadeo Sahara in the year 1958 and further his four sons set up different businesses like commodity trading, farming, ginning and oil mining to expand their family business. Late Mr. Mahadeo Sahara realized the potential of soya crop in the early 1960s. Mr. Dinesh Sahara the youngest son was appointed as the Managing Director of RSIL Industries Ltd. (Annexure I). It is quite interesting that the Group named itself as ‘Ruchi’ which in Hindi means taste or interest especially in food.....................

 



1 20th Annual Report, 2005-06, Ruchi Soya Industries Ltd.
2 Ministry of Agriculture (GOI) and DGCI&S

Teaching Note Preview

Ruchi Soya Industries Ltd.

 

Synopsis

Indian edible oil production only cater less than 40% of the required demand and it imports almost more than 60 percent to meet the demand in the country. It  shows the kind of demand persists in India; still the per capita edible oil consumption is below the average per capita consumption of the world. The industry  experts are expecting that India’s per capita consumption will match the global average in the coming years. However, the huge gap in between the demand and  supply needs to be taken care and that gap is fulfilled through imports and Indian firms are exactly looking to capitalize this opportunity. Ruchi Soya is perhaps the  one in the edible oil industry has understood these phenomena clearly and has put its incessant effort to increase its scale of production and sales through mergers and acquisitions.

Ruchi group, the leading player in the edible oil industry started its journey in 1986. Ruchi Soya is the first and foremost maker and marketer of cooking oil and  soya food and at present it is the largest palm Plantations Company of India. Mr. Dinesh Sahara, who is currently the managing Director of the company has  been taking care of this company since its inception and has been shaping the company to reach new heights every time. In these years Ruchi has transferred itself from a mere commodity trader to a leading cooking oil and food processing unit with a proper branding of its products. It has a strong portfolio of brands that  include Nutrela Soya Foods, Ruchi Gold, Sunrich Sunflower oil, Ruchi Star, Ruchi Refined Oil and Mahakosh Refined Soya Bean oil. Ruchi’s Vanaspati, a  hydrogenated vegetable fat rules the rust. It has 22 manufacturing plants, 5642 non-exclusive distributors covering over 2,210 towns and over 725, 000 retail outlets as on FY 2013.

Ruchi Soya took a major restructuring decision in the year 2005 to consolidate the business of the other companies in their group. Six companies of Ruchi group were earlier engaged in the soya processing, edible oil &fat, food businesses and dairy products, while Ruchi Soya has been looking after edible oil processing and marketing. The merger of the group companies will be effective from April 1, 2005, subject to statutory and other clearances. With the effect from the appointed date, the business of MPGIL will be transferred to Ruchi Soya for Rs. 805.7 million by way of slump sale................................

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Abstract

This case study focuses on how merger and acquisition navigated Ruchi Soya Industries Ltd. (RSIL), RSIL in eliminating competition, tapping the opportunity in the  edible oil industry and emerging as the market leader. It focuses on the business performance analysis of RSIL’s amalgamation and its related issues. RSIL started in 1986 and primarily dealt with processing of oil-seeds, refining of crude oil and food products from soya. Its brand portfolio includes Nutrela, Ruchi Gold, Ruchi Star,  Sunrich and Mahakosh. These brands are well-rooted and have a strong market presence. It has 22 manufacturing plants, 5642 non-exclusive distributors covering over 2,210 towns and over 725, 000 retail outlets1 as on FY-2013.

RSIL’s consolidation with its sister concerns in the FY-2005 and its backward integration with Mac Oil Palm Ltd., and Pam Tech India Ltd., in the FY-2010 increased the company’s revenue from mere INR52 million in the FY-2004 to INR306 million2 in the FY-2012. Its net worth also increased from INR2720 million in the FY-2004 to  INR23660 million in the FY-20131, which was almost nine times more. Its continuous expansion strategy helped Ruchi to be included in the top 250 consumer  companies of the world3.

India has emerged as a leading edible oil consumer with a share of 12%4 of the world’s consumption. India’s domestic edible oil consumption has been growing steadily from 11 million MT in the FY-2005 to 18 million MT2 in the FY-2013 out of which India only produces 7 million MT and rest 11 million MT are imported to meet the demand. Looking into the present opportunities RSIL devised its business strategy which helped it to achieve a CAGR of 14%2 and accelerated its growth cycle.

    1  Annual report-2013 2  Corporate presentation-2013 3  7th annual Global Powers of Consumer Products 2014 by Deloitte 4  USDA FAS

* GSMC 2014, IIM Raipur

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