Polycab India Limited, a leading Indian manufacturer of wires and cables in a letter to stock exchanges informed that it had signed an agreement with Trafigura Pte Ltd, Singapore (Trafigura) to acquire 50% stake in Ryker Base Pvt. Ltd. (Ryker).
Backdrop of the Ryker Acquisition
Trafigura Group Pte. Ltd. is a Singapore based multinational commodity trading company. In 2016 Polycab India and Trafigura entered into a 50:50 JV to incorporate Ryker Base Pvt. Ltd. Ryker manufactures copper wire rods with an annual capacity of 225,000 MT.
This was an expansion attempt by Polycab India for backward integration of its cable manufacturing operations, Copper being the highest value metal in cable manufacturing.
Trafigura being one of the biggest traders in commodities sector including oil and gas and base metals has incurred significant losses recently due to economic slowdown and then the Covid-19 pandemic. This has apparently led to Trafigura’s strategic exit from value-added Copper manufacturing business in India.
Presented with this unique opportunity, Polycab bought the remaining 50% shares to take over Ryker as a wholly owned subsidiary of Polycab India Ltd.
Polycab – Trafigura Deal for Ryker Base
According to information submitted to the exchanges this deal will cost Polycab tentatively around Rs. 30 Crore (US $ 4 Million).
Ryker, had Rs. 197 Cr. in external commercial borrowing as of 31st March 2020. This debt was taken earlier for setup of the copper rod manufacturing plant at Halol, Gujarat. This would now be consolidated in Polycab India Ltd.
Polycab will now have complete control over operation of this plant after completion of the deal. Polycab has also estimated that half of the annual production of Ryker’s Halol plant will be utilized for Polycab’s own operations, while rest will be supplied via tolling or partnership options.
Speaking on the occasion Mr. Inder T. Jaisinghani, Chairman & Managing Director of Polycab India said, “Enhanced control on our manufacturing operations will generate operational efficiencies and help us deliver better quality products to our consumers”.
About Polycab India Pvt. Ltd.: Polycab is among the major manufacturers of wire and cables in India. The company has 24 manufacturing facilities, around 3,000 dealers and presence at over 1,00,000 retail outlets across India. It registered a turnover of 7,910.55 Crore In FY-19.
About Trafigura Pte Ltd.: Trafigura is a multinational commodity trading company founded in 1993 that trades in base metals and energy headquartered in Singapore. It has around 4,300 employees worldwide. The overall revenue of the company for the year 2019 was $171.5 billion