Saturday, December 3, 2011

Indian Land Grabber -Ramakrishna Karuturi: Man behind Karuturi Global - world's largest producer of cut roses - The Economic Times

Ramakrishna Karuturi
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Three years ago when Sai Ramakrishna Karuturi set up shop in the Ethiopian capital of Addis Ababa, his company was already the world's largest producer of cut roses. But the founder and managing director ofKaruturi Global didn't want to do in Addis Ababa what he was doing in Kenya in the past seven years. The 45-year-old mechanical engineer wanted to move beyond the company's mainstay, floriculture.

With the government of Ethiopia leasing out land at low cost to hi-tech foreign agriculture companies, there was indeed an opportunity in commercial farming; Ethiopia plans to transfer 3.3 million ha of land to such investors for the next four years.

"We were looking at becoming one of the top five agro-commodities [rice, maize, etc] producers in the world and a significant player in the global food business," says Karuturi who has steered Karuturi Global, once confined to Bangalore alone, to an international entity.

He started the company in 1994, a few years after finishing his engineering degree from Bangalore University. But doing business isn't as easy as pie in Ethiopia, where land is increasingly becoming a sensitive subject, and experts are divided on the extent of risk Karuturi has taken in the East African nation. Price of Risk The company is skating on thin ice, argues Bharat Kulkarni, an East Africabased consultant who advises Indian corporates looking to do business in Africa.

Narendra Dokania, senior analyst of ICRA's rating services, too, has a word of caution for Karuturi: "Although Karuturi enjoys the first-mover advantage compared with other Indian companies because of its good track record in East Africa, it would have to deal with local issues related to land, labour and climate." Karuturi Global is the first Indian company to invest in commercial agriculture in Ethiopia. He adds, "Logistics could also prove to be a challenge given the poor road connectivity and significant distance of Gambela, where Karuturi's biggest land holding is located, from key markets and ports.

However, if river transportation, as planned by the company, becomes a success, most of the transportation concerns could be resolved," he says. Karuturi Global has a land bank of 311,700 ha of agricultural land - or eight times the size of Mumbai. Land was leased to the company by the government. Problems galore, warns Kulkarni. "Karuturi will have to bring in a lot of heavy equipment, a lot of which cannot be classified as farm equipment and hence will not be duty-free," he notes.

In fact, he is also sceptical about the "low cost" of land which is seen to work out to $10-15 per ha for the company, with no lease rental being charged for the first few years. "The actual expenses would be much more than that since the land has to be converted to farmlands, and that could be as high as $1,500 per ha." For someone who has fought off numerous business challenges, Karuturi is unperturbed.

"We have finalised deals with four big agro companies in India for joint ventures for different crops that we are looking at growing - rice, maize, oil palm and sugarcane," he says. The company has also tied up with a consortium of agro-entrepreneurs from Punjab who have now set up operations in Ethiopia as registered agri-consultants. Further, Karuturi is in talks with agri companies in Latin America for tie-ups.

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