The billionaire Rai family is among the eight high-profile investors eyeing a lease deal for the Sh15 billion assets of ailing Mumias Sugar Company, the miller’s receiver-manager has disclosed.
The disclosure of Rai’s bid underlines months of the heated behind-the-scenes fight for the control of the once top miller by wealthy investors including steel tycoon Narendra Raval who has since withdrawn from the race.
Mr Raval, who was planning to inject Sh5 billion to modernise the miller on winning the bid, cited political interests after western Kenya politicians questioned the process.
The Devki Group chairman said he made the decision to protect his business name and reputation from being muddied in politics. Only Mr Raval had publicly declared his bid for Mumias.
“I have withdrawn my interest to invest in Mumias through a leasing plan because of the political interests that have emerged. I have officially informed KCB of my withdrawal,” Mr Raval told Business Daily in an interview last week.
Others in the shortlist of investors eyeing Mumias are the Kisumu-based Kibos Sugar, Catalysis Group, Russia, Kruman Associates of France, Premier JV (India), Third Gate Capital Management and Godavari Enterprises of India.
The Rai group made a bid for Mumias through its Ugandan subsidiary Sarrai Group, which among other installations, owns a sugar and plywood business in Uganda and Malawi. The company also operates the Nyanza-based Rai Cement.
A successful bid by the Rai family would see it further firm its grip on the Kenyan sugar market where it already owns three millers - West Kenya, Sukari Industries, and Olepito Sugar.
As at June 2020, data by the Sugar Directorate showed the three firms owned by the Rai family controlled 45 percent of the total sales of the commodity in the country, a rise from the 41 percent market share they held in the corresponding period of 2019.
The Rai family is also among 29 investors that had last year submitted bids for lease deals for the five State-owned sugar factories — Chemelil, Sony, Nzoia, Miwani and Muhoroni as part of reforms aimed at reviving the ailing sector. Two of the millers are in receivership.
The list of bidders for the five State millers includes West Kenya and Sukari Industries linked to tycoon Jaswant Rai.
Others are China CAMC Engineering Company Limited, Shenzhen Start Instruments, Mheta Group, Kibos Sugar, Butali Sugar Mills, Mini Bakeries and Kuguru Food Complex.
Mumias receiver-manager PVR Rao last week told Parliament that the lease process had not been completed, raising hopes for other bidders even after Mr Raval withdrew.
Mumias, which used to be Kenya’s leading producer at more than 250,000 tonnes a year, was beset by poor management, heavy debts, and years of mounting losses, prompting its closure.
The miller was in September 2019 placed under receivership by KCB Group #ticker:KCB to protect its assets and maintain its operations.
KCB has been barred from auctioning the plant to secure assets used as security for other loans, prompting it to turn to the lease option.
Under the leasing deal, the successful firm will run the plant on behalf of KCB after it defaulted on loans amounting to Sh545 million owed to the lender, which successfully pushed the process through the courts.
Mumias Sugar owes Proparco Sh1.84 billion secured using the electricity generation plant, Ecobank Sh1.77 billion on the ethanol plant, and Sh2.83 billion owed to the Treasury.
Other banks that it owes more than Sh3 billion include KCB Group, NCBA #ticker:NCBA, and Stanbic Bank #ticker:SBIC.