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Rajesh Exports acquires European gold refiner Valcambi for $400 million

Livemint:  July 28, 2015

Mumbai: Bengaluru-based gold and diamond jewellery maker and exporter Rajesh Exports Ltd has acquired Switzerland-based precious metals refiner Valcambi SA in an all-cash deal for $400 million (approximately Rs.2,540 crore), the company said in a statement to the BSE on Monday.

The acquisition was made through Rajesh Exports’ Singapore subsidiary, which acquired European Gold Refineries Holding SA, the firm that holds a 100% stake in Valcambi.

“Since the last 53 years, Valcambi has been a consistently profit-making and dividend-paying company. For the last three years, on average per year, Valcambi generated revenues in excess of $38 billion and earnings before interest, tax, depreciation and amortization (Ebitda) of $33 million by refining and selling 945 tonnes of gold and 325 tonnes of silver per year,” the company said, adding that Valcambi is a zero-debt company with considerable cash surplus.

Valcambi refinery is accredited by the London Bullion Market Association and Valcambi gold bars are accepted across all official commodity exchanges in the world, including the Chicago commodities exchange, the New York Commodities Exchange, the Tokyo Commodities Exchange, the Shanghai Gold Commodities Exchange, the Dubai Multi Commodities Exchange and the Multi Commodities Exchange, India.

Valcambi has an installed capacity to refine 1,600 tonnes of gold per annum and an additional capacity to refine 400 tonnes of other precious metals.

“The coming-together of REL (Rajesh Exports) and Valcambi will expand the global gold business and will prove very productive for the future plans of the REL group. This acquisition will add significantly to the revenues and profitability of the REL group in the coming years,” said Rajesh Mehta, chairman of Rajesh Exports.

The chief reason behind the acquisition was to ensure that the company keeps growing like it has previously, he said. “We felt that to grow further, we need to increase our global footprint and also our backward integration,” Mehta added.

Grant Thornton Llp assisted Rajesh Exports in the due diligence process and broking firm Credit Suisse AG is part-financing the acquisition through long-term debt.

“The acquisition has been part-financed by Credit Suisse, to the tune of 30-35%, while the rest has been raised from internal accruals of the company,” said Mehta, adding that the company has been conserving cash for the last couple of years.

Going ahead, the firm is looking at setting up a refinery in India, under Valcambi, in the next one or two years, he said.

According to analysts, gold prices are expected to fall due to weak domestic demand and several international factors such as an expected interest hike in the US, and this may result in demand pick-up in India.

“Of late, a lot of factors have been driving down gold prices. The first being the unwinding of the safe haven bet. The positive developments on the Greece front and the Iran nuclear deal have provided some stability to global markets. These have hurt the allure of gold as a safe asset. Also, an expected increase in interest rate by the US Fed (Federal Reserve) will also hurt gold prices,” said Sugandha Sachdeva, assitant vice-president and in-charge, metals, energy and currency research. at Religare Commodities Ltd.

“Overall, demand is quite subdued, but as prices fall, we may see demand pick up, especially with the upcoming wedding and Diwali seasons,” she added.

Shares of Rajesh Exports closed at Rs.540.10, up 2.09% on the BSE on Monday, while the benchmark Sensex closed at 27,561.38 points, down by 1.96%.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.