Cable and wire manufacturer Polycab India Ltd, which owned 50% stake in Ryker Base Pvt. Ltd, will acquire the remaining 50% from Trafigura Pte Ltd in what appears to be a premature end to its affiliation with its Singapore-based joint venture (JV) partner.
Polycab will pay Rs 30 crore ($4 million at current exchange rates) to Trafigura as it looks to exit value-add manufacturing businesses in India as part of its global strategic decision, Polycab informed the stock exchanges on Monday.
The deal, subject to fulfillment of certain other conditions by both parties, will convert Ryker into a wholly-owned subsidiary of Polycab.
Ryker had availed Rs 197 crore in external commercial borrowings (ECB) for capital expenditure. This will be consolidated into Polycab’s balance sheet post the deal.
“This strategic buyout reflects Polycab’s unwavering focus on strengthening its core. Enhanced control of our manufacturing operations will generate operational efficiencies and help us deliver better quality products to our consumers,” Inder T. Jaisinghani, chairman and MD at Polycab, said.
Polycab, which is backed by World Bank’s private investment arm International Finance Corporation (IFC) and went public in April last year, had formed a JV with Trafigura in December 2016 to manufacture, sell and distribute copper rods and related products.
This agreement signed three-and-a-half years ago had a five-year lock-in period from the date of commencement of production at the copper rod plant. Ryker has a total annual capacity to manufacture 225,000 tonnes of copper rods. It commenced its commercial production in fiscal 2020.
An email query sent to Polycab, seeking more information and clarity on terms of its JV with Trafigura did not yield a response till the time of publishing this report.
Copper is an important element of Polycab’s business and is used extensively in wires, cables and most of FMEG products.
The company will utilise nearly half of Ryker’s capacity for its internal requirement over the medium-term, the balance volume will be utilised through various tolling or partnership opportunities, as per the Polycab statement.
Currently, India is a net importer of refined copper and value-added copper products due to the huge supply gap. Ryker is well placed to service this demand, the statement added.
Shares of Polycab declined 4.35% on the BSE on Monday to end at Rs 692.25 apiece.
Incorporated in January 1996, Polycab manufactures electrical wires, cables and fast-moving electrical goods (FMEG) under the ‘Polycab’ brand name.