Cargill raises India bet, to invest $240 million
Animal nutrition, health oils, cocoa products & building silos new growth areas for firm
Cargill, world’s leading multinational trading firm sees Asia as the most important growth engine over the next five years. Investments in the region are expected to grow by 16-20 per cent during the period. The company is focusing on growth in India and has decided to invest $240 million in the next four years. In fact, the investments have already started.
Cargill’s India revenue is ~80 billion and has 3,500 employees. Cargill has identified animal nutrition, health oils, cocoa products, building silos as growth areas. Siraj A Chaudhry, Chairman, Cargill India Private Limited, said, “We are looking at this space and going forward we will decide if the opportunity lies in doing something on our own or looking at partners.”
Cargill has a big international business of cocoa products. It makes and sells cocoa bean powder, butter and other cocoa products. Similar business opportunities exist in India too. Siraj said that for chocolate products, apart from chocolate manufacturers and ice cream makers, company is also targeting bakeries
and confectionery makers as they are also big purchasers, but mostly not in an organised way.
In India, Cargill procures 1 million tonnes of commodities, including corn, wheat and oil, annually. However, procuring cocoa from international market has been a challenge now as its prices are rising sharply globally.
Cargill, in January 2018, acquired Fish Feed Mill in Vijayawada and upgraded it by investing $10 million, and set up a manufacturing plant in Kurkumbh, near Pune, at a cost of $18 million, to establish itself as a significant player.
It is setting up its first corn silo at Davengere, Karnataka, for $15 million, which is expected to be completed by September-October 2018. However, a large chunk of $240 million is yet to be invested. Chaudhry said that “most of growth in India will be organic, but the company is not averse to inorganic growth. However, that depends upon good assets being available at a reasonable valuation.”
“Going forward, we are also looking at setting up a green field operation to expand our premix, nutrition and aquafeed businesses as well as make significant investments to grow our animal feed business operations over the next year or two,” said Chaudhry.
Edible oil is the largest business for Cargill in India. On currency and edible oil price risk, Chaudhry said, “we actively use hedging mechanism. For currency risk, hedging ratio depends upon our assessment; for commodity price risk, we hedge on commodity derivatives exchanges and international exchanges like Boursa Malaysia.”
In this space over the next few months, we will be launching health oils and wheat derivative products like suji and dalia to cater to consumer demand for healthier and nutritious products.
Of late, the company is working on adopting recyclable plastic for its product packaging. It uses plastic for packaging, but then several state governments are banning plastic use.