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MA Trends in the Edible Oils Industry
CORPORATE FINANCE

• 26 September 2009

ADVISORY
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Contents
1
Merger Acquisition Trends
2
Edible Oils Industry
3
MA Trends in the Edible Oils Industry
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Merger Acquisition TrendsLarger economic
themes that have driven MA activity
MA activity is broadly driven by larger economic
themes as companies reconfigure their strategic
initiatives to match macro events and adjust to
externalities that change the dynamics of their
value chain or competitive landscape.

• Theme
• Need to achieve economies of scale, both from a
  geographical and product offerings perspective
• Need for diversification gave rise to
  acquisitions in areas outside of acquirers
  direct focus
• Rise of conglomerates for which acquiring
  disparate businesses was a stated growth strategy

• Theme
• Proposition of achieving dominance and focusing
  on core competencies
• Technology revolution gave business enterprises
  the ability to disaggregate their traditional
  value chains and enhance the efficiency of their
  operations

• Theme
• Wave of globalization
• Traditional decision of buy-versus-build got
  skewed towards inorganic initiatives due to the
  pace of change
• Enhanced liquidity and credit products lowered
  the cost of capital of business enterprises

• Theme
• Slow down as the credit markets stalled and the
  bearish sentiment percolated into the broader
  business environment
• Longer deal cycles due to mismatch in valuation
  expectations between buyers and sellers
• Greater level of due diligence after Satyam

Post World War II
Eighties and Nineties
Early 2000s
Financial Crisis (2007 onwards)
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Merger Acquisition Trends Near term outlook
for India
Consolidation
Re-balancing of business portfolios
Inbound acquisitions

• Consolidation as sectors such as Pharmaceuticals
  face regulatory barriers, pricing and IP
  challenges.
• Strategic consolidation within sectors such as
  IT-ITES and Telecom, wherein larger players will
  seek inorganic growth.
• Consolidation for smaller players, impacted by
  the downturn to survive.

• Spurt of corporate restructurings, as companies
  align themselves to new market realities.
• Hive-off non-core businesses to raise capital or
  focus on core products.
• Asset rationalization by both cash-strapped firms
  and companies with sound balance sheets.

• Valuations have scaled down on account of the
  financial crisis, providing an opportunity for
  inbound activity.
• Cautious approach towards outbound investments.

Investors and companies are being conservative -
there is a change in sentiment with focus
shifting from aggressive growth intent in 2007 to
consolidation and re-balancing of business
portfolios.
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Contents
1
Merger Acquisition Trends
2
Edible Oils Industry
3
MA Trends in the Edible Oils Industry
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Edible Oils IndustryPer capita annual
consumption of edible oil in India has grown
significantly in the last decade, but remains
lower than several countries
But remains low compared to other countries,
even BRIC countries
Indias per capita consumption of edible oil has
grown at CAGR 6 over the last nine years
Forecast
CAGR 00-09 6
Average 18.9
Source FAPRI 2009, Business Standard
Source National Sample Survey, Government of
India, Business Standard Note National Sample
Survey Organisation conducts socio-economic
surveys at frequent intervals
Strong correlation of consumption/ capita to GDP
Indias per capita income growing rapidly
Source www.Nationmaster.com
KPMG Analysis Data pertains to 2003, drawn from
KPMG archives
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Edible Oils IndustryMix of oils is changing,
driven by marginal increase in production of
traditional oils and growing imports
Domestic production of select oils has remained
largely stagnant over the last 10 years
India is a net importing country for edible oil,
with approximately 45 of total edible oil supply
being imported
CAGR 1
The below mentioned five oils together account
for 75-80 of total edible oil supply in India
Imports of edible oils have been growing, with
palm oil accounting for a substantial share
CAGR 02-08 8
Note Year refers to oil year November to October
Figures are in million tonnes Figures for
2008-09 include imports for the period November
2008 to March 2009 Source Solvent Extractors
Association,
Groundnut and Mustard are the key traditional,
domestically produced oils with negligible
imports. Over the last decade, the share of
groundnut has fallen substantially, however
mustard continues to remain largely stable
Note Year refers to oil year November to
October Source Solvent Extractors Association,
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Edible Oils IndustrySupply of imported oils has
grown faster than domestic production in India
Supply of refined oils in India is a mix of
domestically produced oils and imported oils
CAGR 02-08 9
2008-09 estimates indicate import of edible oils
from November 2008 to March 2009
Historical trend indicates that supply of all the
key oils has fallen over the last 10 years with
the exception of palm that has grown at CAGR 7
over the same period
Note Year refers to oil year November to October
Source Solvent Extractors Association
Domestic production of refined oil appears to be
decreasing whereas imports of palm and soybean
has been increasing
Production of refined oils from domestic seed
crop has been stagnant
However imports of refinery feedstock have risen
CAGR 02-08 1
CAGR 02-08 8
Note Year refers to oil year November to
October Source Solvent Extractors Association
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Contents
1
Merger Acquisition Trends
2
Edible Oils Industry
3
MA Trends in the Edible Oils Industry
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MA Trends in the Edible Oils Industry

• Acquired HLLs India and Nepal edible oil and
  fats business in 2003
• The deal included a production facility and 7
  brands (Dalda, Masterline, Gold Seal, Silver
  Seal, Marvo, Biskin and Lily)
• Rationale Established platform to enter the
  Indian market

Bunge
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ConAgra

• CAG-Tech (Mauritius) Ltd, a JV between ConAgra
  Inc (USA) and Tiger Oats Ltd (South Africa),
  acquired ITC Agro Tech from ITC Ltd. in 1997
• Rationale An established platform to enter the
  Indian market

India Entry Strategy
Kuok

• Acquired KTV Oil Mills for USD 18.35 mn
• Rationale Provides the Singapore based group a
  platform to establish its presence in the Indian
  edible oils market.

• Acquired a refinery in Rajasthan in 2006 and in
  Haldia port for USD 25 mn in 2008
• Rationale Add refining capacity. Haldia
  acquisition complemented the eastern market and
  provides access and logistical efficiencies for
  the north east markets.

KS Oils
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• Acquired acquired Mac Oil Palm Ltd. including the
  palm oil processing facility, which operates on
  fruit procured from a command area of around
  5,000 hectares.
• Rationale Capacity expansion along with backward
  integration

Ruchi Soya
Capacity Expansion
SawariaAgro Oils

• Acquired two solvent extraction plants in 2004
• Rationale Capacity expansion

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MA Trends in the Edible Oils Industry
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• Agro Tech acquired the Rath brand from Siel
  Ltd.
• Rationale To provide a stronger foothold in the
  vanaspati market and to consolidate Agro Techs
  market position in the Indian edible oil industry

Agro Tech
Branded Business Expansion
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• A joint venture between Indias Adani Group and
  Singapores Wilmar Group, set up in 1999
• Rationale Entry into the Indian edible oil
  business. Wilmar had experience in the edible
  oil industry and Adani understood the Indian
  landscape

Adani - Wilmar
Joint Ventures

• Acquired over 20,000 hectares of palm plantation
  land in Indonesia and Malaysia
• RD tie-up with the National University of
  Singapore - commitment towards sustainable and
  green development
• Rationale Aim to become a global fully
  integrated edible oil company with capabilities
  across the entire value chain - from edible oils
  to owning plantations

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KS Oils
International Expansion
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Future MA Trends in the Edible Oils Industry

• The high growth and lucrative edible oil market
  is attractive to many international players
• Larger players are looking to eat into the
  unorganized market, to be achieved by
  consolidation

• Edible oil players to expand their branded
  business
• Create a level playing field vs. the unorganized
  market by acquiring small scale operations

MNC entry / Consolidation
Larger Branded Oil Play

• Large players are looking to acquire plantations
  and facilities abroad as a base to export to the
  Indian market

• Acquire / set up facilities near ports to reduce
  costs considering the growing proportion of
  imported edible oil in India

Overseas Plantations
Refineries near ports
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Thank you
Abizer Diwanji Executive Director KPMG Corporate
Finance Contact Details Phone [phone]
5301 Email adiwanji_at_kpmg.com Website
www.in.kpmg.com