K S Oils, one of India’s leading integrated edible oil company and the leader in the Packaged Mustard Oils business today announced the acquisition of 20,000 hectares (50,000 acres) of Palm plantation in Indonesia. With an investment of Rs. 230 crores spread over the next 3 years, the company is ensuring backward integration to secure raw material supplies and avoid global price volatility. This will help the company in reducing raw material costs significantly and also signals the company’s strategic intent of being a global player.

K S Oils has acquired a single palm plantation over a vast area spread across 50,000 acres of green land in Indonesia. The company has set up operations and the plantation will be developed over next 3 years. The investments in the plantation will ensure that agricultural best practices and environment friendly methods are used in the cultivation; while the focus will be on scientific methods of plantation to increase productivity and yield, due care will be taken to enrich the surrounding eco-system.

Commenting on the acquisition, Ramesh Chand Garg, Chairman, K S Oils said, “Indonesian palm plantations are among the most efficient and productive plantations across the world and hence our decision to invest; with spiraling commodity and raw material prices, owning raw material source is the right strategy to derisk in the long term. We thank our Private Equity partners for providing strategic inputs and deep insights which helped us clinch the deal. This is another important step in our global ambitions.”

With current investments in the project pegged at Rs.230 crores over a three year period, the plantation will yield 80,000 Mt annually. This will substantially bring down the raw material costs for K S Oils which is currently importing palm oil to refine and sell along with its main product of mustard oil in Northern and Eastern India. The investment has been routed through the company’s wholly owned subsidiary in Singapore. Interestingly, the plantation yield of 80,000 Mt. represents 2.5% of India’s current palm oil imports, which today stands at 3.6 million tonnes annually.

Incidentally, K S Oils is the first Indian company which has invested in palm plantations in Indonesia. The palm oil will be transported to the various manufacturing plants of the company in India. The company through this move is shaping its strategy of an integrated agri player through backward and forward integration in the entire value chain.

Sourced From: Beehive Priority Consultants

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