Bengaulru-based Rajesh Exports has acquired Valcambi SA, the world’s largest gold refiner of Switzerland. Rajesh Mehta, the chairman of Rajesh Exports, in an interview with FE’s Banikinkar Pattanayak, says the acquisition will help the company source raw material from Valcambi and the synergy between the two companies will help the Indian bullion and jewellery manufacturing space, Excerpts:
What is the exact nature of this acquisition?
We have fully acquired the European Gold Refineries (EGR), which holds a 100% stake in Valcambi. Our total investment in this acquisition is $400 million. Rajesh Exports, through its wholly-owned subsidiary in Singapore, has fully acquired EGR in an all cash deal.
Considering that Valcambi’s average annual revenue over the past three years has been in excess of $38 billion, isn’t the deal size of $400 million too small?
It isn’t a question of the deal size being too small. The owners of Valcambi, NYSE-listed Newmont Mining Corporation and a group of Swiss investors, wanted to concentrate on their core business, that’s mining. And they wanted to sell one of their most-prized assets, Valcambi, to someone who enjoys good reputation in the industry and who will take the company forward. They trusted us, and that’s why it’s not just about the deal size, it’s about carrying a legacy forward.
How are you funding this acquisition?
This acquisition is funded mostly through our internal accruals and a tiny part has been funded by Credit Suisse (Zurich) through a long-term debt.
What was the idea behind this acquisition?
Rajesh Exports is primarily a forward-integrated player. Currently, we have a small refinery and we manufacture gold jewellery in large scale. Valcambi is a backward-integrated player. They have contracts with miners who supply them gold dore for refining and producing gold out of it. With the acquisition, Rajesh Exports will help Valcambi in forward integration and Valcambi can help us in backward integration. So the synergy between these two companies will be of immense value. Rajesh Exports can complement them in their efforts and they can supply raw gold to Rajesh Exports. In fact, the amount of gold that Valcambi refines every year ( an annual average of 945 tonnes over the last three years against Indian consumption of 843 tonnes in 2014) can take care of the entire demand of India.