In line with its strategy to focus on core businesses and to rationalise existing brand portfolios, FMCG major Hindustan Lever Ltd has decided to exit from oils and fats business in India and Nepal.
The oils and fats business would be transferred to the US-based Bunge Ltd, an agri-business and food company, for about Rs 90 crore (Rs 900 million), following a signing of a memorandum of understanding and in principle approval of HLL board in Mumbai on Friday.
HLL sources said manufacturing of more than seven-decade old 'Dalda' brand, its extensions, and other oil and fats products, which accounted for revenues of around Rs 388 crore (Rs 3.88 billion) last year, would be stopped. However, the company would continue to distribute the products through a distribution arrangement with Bunge, for a fee.
Value-added processed foods would continue to remain the key focus area for HLL's growth and it would seek to build and grow its portfolio of products and categories in this market with power brands such as Knorr, Kissan and Annapurna, an HLL press release said.
The edible oils and fats business comprises manufacturing and marketing of vanaspati, refined oils and bakery fats.
The proposed transfer of business to Bunge would include the manufacturing facility at Trichy, Tamil Nadu, together with about 300 employees with continuity of service and full protection to existing terms and conditions, the release said.
HLL said dealings with stockists would remain unaffected by the proposed transaction.
The company would soon seek shareholders' approval through a postal ballot for the disposal of its edible oils and fats business and definitive agreements are expected to be signed by August after the receipt of various approvals, it added.
The $14 billion Bunge operates in the farm-to-consumer food chain with worldwide distribution capabilities. The company, with locations in 29 countries, is the world's leading oilseed processing company, the largest producer and supplier of fertilisers to the farmers in South America and leading seller of bottled vegetable oils to consumers.
HSBC Securities and Capital Markets (India) Pvt Ltd advised HLL on the divestment of its edible oils and fats business, it said.
