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Karuturi Global is going down

  • Karuturi Global is going down

    by Market insider

    Monday, 13 Oct. 2014

    Karuturi has seemingly lost control of its operations in Kenya, the Netherlands and Ethiopia, there is not much left for the company to hold onto, except some small operations in India - and a whole lot of debt.

    Karuturi Global Ltd, the Indian multinational that made its name in the global cut flower industry and recently acquired more than 300,000 ha in Ethiopia to produce food for foreign markets, is continuing its painful and massive decline. On 30 September 2014, its flower trading subsidiary in the Netherlands was declared bankrupt, while a Dutch industry source reports that one of its farms in Ethiopia has been sold to a company in Dubai.

    Four years ago, CEO Sai Ramakrishna Karuturi (pictured) boasted: 'Personally, I believe that in five years or in ten years' time I would like to be seen and compared with peers such as Cargill or the Archer Daniels of the world or the Bunges of the world, who are all well known, well reputed agricultural companies.' Now, with much of Karuturi's overseas operations shut down, seized by creditors or sold off, these ambitious plans appear all but dead.

    Karuturi produced roses in India, Kenya and Ethiopia and was planning to expand its nascent food production operations from Ethiopia to numerous other African states. But the company struggled to get its expansive farm operations in Ethiopia's Gambella region off the ground and its flower businesses got into trouble.

    The company's stock price plummeted from a high of US$38.15 in October 2010 to US$5.00 at the beginning of 2012 to around US$1.30 where it sits today.

    Meanwhile, the company was on the hook for millions of dollars in unpaid taxes and debts. In 2012, the Kenya Revenue Authority determined that Karuturi, which had once been producing close to a million roses a year at its Naivasha farm for an eager European market, failed to pay US$20 million worth of taxes due to transfer mispricing.

    In 2013, the company was taken to court in Kenya for failure to pay its creditors. Unpaid workers went on strike, the Karuturi Hospital suffered power cuts, and free schooling for the flower farmworkers' children at Karuturi School came to an end. The community around the farm in Naivasha continues to bear the economic and social costs of the Indian company's troubles.

    In early 2014, the Kenyan courts finally determined that Karuturi Ltd was bankrupt and put the flower farm in receivership, despite protests from Karuturi.

    Recently, Karuturi's Dutch affiliate, Karuturi BV, has been declared bankrupt by the court of Haarlem.

    The Dutch unit was responsible for receiving the flower shipments flown in daily from Karuturi's farms in Ethiopia and Kenya, and trading them through FloraHolland. The flower shipments apparently stopped in May of this year.
    Various sources say that Karuturi sold its Ethiopian Meadows Plc flower farm to a company in Dubai.

    Another of its Ethiopian flower farmers, Surya Blossoms Plc, was almost sold in June but remains in Karuturi's hands for now.

    What went wrong? It's hard to tell. But the change has been spectacular. In Kenya, the flower farm they took over went from peak productivity to financial hemorrhage in a matter of years. In Ethiopia, the hugely controversial land deals, presented as a way for Karuturi 'to make a significant contribution to alleviate the global and African food crisis,' didn't feed anyone. In Europe, the firm was once responsible for about 1 out of 10 roses that consumers took home. All of this has gone south.

    Source: Allafrica / pambazuka.net

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