This will the largest investment in agri and food space thus far. The Morena, Madhya Pradesh-based edible oil company KS Oils is raising Rs 450 crore ($90 million) from a clutch of private equity funds  and promoters. PE investors New Silk Route and the existing backers like Citi Venture Capital International (CVCI) and Baring Private Equity Asia are investing Rs 233 crore. The rest of the amount will be invested by promoters, who will subscribe to warrants in this round, and through a GDR issue.

According to its filing to BSE, New Silk Route is is investing Rs 135 crore in the company through subscription of equity shares. CVCI and Baring Asia, who are the existing investors, are subscribing to convertible warrants, investing Rs 49 crore each. NSR will be issued equity shares at Rs 48.35, while Baring Asia and CVCI will convert the warrants at a price of Rs 56.50.

KS Oils was trading at Rs 53.50 at 11.10 AM today, up by more than 2%. The stock has touched a high of Rs 57 today. The funds will be used for intertnational expansion by the firm. It plans to build greenfield palm plantations and acquire mature plantations in South-East Asia.

The promoters (the Gargs) are also being issued warrants worth Rs 157 crore in the company. The India listed company will also raise Rs 60 crore through a GDR issue. The company owns mustard oil brands such as Kalash, Double Sher and KS Gold.

New Silk Route’s stake post transaction would be around 7%. This is the first investment in agri and food space, and also first PIPE by New Silk Route. Biggies like Blackstone and Morgan Stanley Private Equity have already opened their account in food and agri sector. Blackstone invested reportedly about $80 million for less than 25% stake in India largest hybrid seeds company Nuziveedu Seeds Ltd (NSL Group) in December last year. Around the same time, Morgan Stanley Private Equity Asia, invested Rs. 182 crore (38.5 million) for a significant minority stake in Biotor Industries Ltd, a fertilizer company.

New Silk Route was founded in 2006, and has over $1.4 billion under management with a focus on the Indian subcontinent and the Middle East. Its founders and leadership team include Rajat Gupta (former McKinsey worldwide chief), Parag Saxena (prominent VC), Victor Menezes (former vice chairman of Citigroup Inc),  and Dr. A. Hafeez Shaikh (a former Pakistani minister and chairman of NSR Dubai).

CVC and Baring currently hold 12% and 6%, respectively, in KS Oils. The promoters hold a stake of around 38% and post dilution, their holding will fall to 36%.

KS Oils plans to invest money in expanding its Haldia refinery and palm plantations in Indonesia. It would invest Rs 75 crore in Haldia refinery and invest the remaining in Indonesia, the report further added. Last year, KS Oils had acquired a port-based refinery in Haldia Port for Rs 125 crore.

PricewaterhouseCoopers Pvt Ltd was the financial advisor to KS Oils on the deal.

The Rs 3,144 crore KS Oils is a leading edible oil company with 7% market share in the mustard oil segment and a 25% share in the branded mustard oil segment. India still imports edible oils - about 5-6 million tonnes every year.

In November 2006, KS Oils had raised Rs 90 crore from CVCI through its arm Citigroup Venture Capital International Growth Partnership Mauritius Ltd. In August 2007, Baring Private Equity Asia picked up 8.86 per cent stake in the company for Rs 90 crore ($22 milion).

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