Kewalram Chanrai Group-promoted and Singapore-based supplier of agri and food commodities Olam International Ltd has acquired the bulk spices and private label assets and businesses of Vallabhdas Kanji Ltd (VKL) for $18 million in its second deal in India in as many months.
The acquired assets include VKL’s spice processing facility in Cochin, a pepper grinding factory in Vietnam and its sales and distribution operations in North America. The company processes and offers a range of value-added, processed spices and blends in various forms, customised for industrial customers. It also offers retail packs for spices, spice blends and seasonings to customers across the USA and Europe.
Greg Estep, Olam’s president and global head for spices & vegetable ingredients, said the acquisition would bring midstream and downstream processing assets in two important spice origins, namely, India and Vietnam. “This offers us a unique opportunity to accelerate our entry into new, attractive product segments, namely, chilli and turmeric, as well as into the private label segment of the value chain,” he said.
“These operations complement our own pepper production in Vietnam, as well as capsicum production and sales & marketing activities in the USA. They are an essential building block to become a player in the chilli segment, with the largest spread in origination, processing and blending. We also expect these operations to bring in additional revenue and cost synergies for Olam as we combine our sourcing, processing and distribution capabilities under one network for adjacent products and geographies,” he added.
Kochi-based VKL is one of the largest Asian processors of spice and spice ingredients. It is backed by Ascent Capital (formerly UTI Ventures) that invested $6 million five years ago to pick an undisclosed minority stake. Three years ago, Argonaut Private Equity also invested $7.5 million for an undisclosed minority stake. Incidentally, the firm was reportedly looking to go public in 2008, a year when stock market valuations crashed, virtually ruling out many proposed public issues.
VKL is the flagship company of Kanji Moorarji Group that also includes Kancor Flavours and Extracts Ltd and Autohangar (India) Pvt Ltd. Besides the assets being sold, the company has exposure in areas like flavours and fragrances after acquiring Mumbai-based Beeta Chemicals in October 2006, as well as the spice-gifting business under the brand of Bombay Tiffin.
Olam had, in late August, acquired Hyderabad-based Hemarus Industries Ltd at an enterprise valuation of $73.8 million in a deal involving a cash payment of $8 million and part assumption of debt of approximately $66 million upon completion. Hemarus is a five-year-old firm, co-founded by Jayaram Chigurupati and Siva Rama Prasad Jetty. Chigurupati is also the founder of Zenotech, another Hyderabad-based biotech firm which is now controlled by Daiichi Sankyo.
That deal gave Olam a sugar milling facility with a capacity of 3,500 tonne crush per day (TCD) and a 20 MW co-generation facility. Olam will further invest $6.6 million or Rs 31 crore to enhance the sugar milling capacity to 5,000 TCD. Hemarus is expected to contribute revenues of $90 million-$100 million, with an expected return on equity of 32 per cent, a statement by Olam has said.
Diversified Kewalram Chanrai Group has exposure in businesses such as textiles, supply chain management, farming, automobiles distribution and real estate, among others, starting with operations spread across the African continent, South-East Asia, India, China, Latin America and the Far East, among others. The group started Olam in 1989 and it now figures as an associate firm. Olam is listed on the Singapore Stock Exchange.
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