Pan Gulf to locate Dh100 million rice facility in Jebel Ali

Dubai-based Pan Gulf Foods and Industries will set up and operate a Dh100 million rice processing and warehousing facility in Jebel Ali free zone this year.

Jebel Ali will host one of the largest rice processing and warehousing facilities in the Arabian Gulf by the end of the year as securing the supply chain for grains becomes a priority for local companies.

The Dubai-based Pan Gulf Foods and Industries, a joint venture between a Saudi company, a private equity investor, and an Indian basmati rice processor, will own and operate the Dh100 million facility in the Dubai free zone. Besides warehousing it will also process, polish and package basmati rice.

This year, it expects to start processing between 50,000 tonnes and 75,000 tonnes of basmati rice a year. The total capacity is 100,000 tonnes.

Pan Gulf is 51 per cent owned by Balbir Singh Uppal, the chairman and managing director of Lakshmi Energy and Foods (Leaf) based in Chandigarh, India.

Prince Mishal bin Abdullah bin Turki Al Saud of Saudi Arabia, the chairman of Zad Investment Company and the food distributor Anaam International Holdings, and the private equity investor Venu Raman Kumar, the chairman of Aeries group, hold the remaining 49 per cent.

The trio also own Dubai-based Innovo Specialty Foods, which would market and distribute the processed grains in Middle East and Africa. Almost 80 per cent would be sold to supermarket chains and wholesellers.

“Our project will enhance food security of the region,” said Prince Mishal. “Besides Dubai is a global centre, and it will help us go extremely competitive in terms of pricing.”

Mr Uppal’s company buys basmati rice from 300,000 farmers in Punjab, considered the grain bowl of India. Leaf, listed on the National Stock Exchange (NSE), processes the grains before exporting them. Its top export markets include Saudi Arabia, Iraq and Iran. Leaf would export semi-processed grains to Jebel Ali. His company exports 50,000 tonnes of grain each year, of that half comes to the Gulf.

“We plan to expand to the United States and Europe,” Mr Uppal said.

Leaf shares closed at 26.30 rupees yesterday, up 5.62 per cent from Friday’s close. That is down from its 52-week high of 48.50 rupees reached on June 20 last year.

It reported a net profit of 114.2 million rupees in the quarter ending December against a net loss of 242.4m rupees during the same period in 2012.

The UAE’s ports, such as Jebel Ali and Abu Dhabi’s Khalifa Port, are increasingly handling goods that get exported to other parts of the world.

“It is cheaper and quicker for importers to offload at Dubai port and ship into say Saudi Arabia by road,” said Nicholas Lodge, the managing partner at Clarity, a consultancy that advises on investments in agricultural industries.

“Rail will further enhance this, [and] projects like Etihad Rail are significant factors to watch in the coming years.”

The UAE is also increasing its storage and handling capacity.

Earlier this month, the Abu Dhabi-based Al Dahra Agriculture announced it would invest US$150 million in a factory to process basmati rice at Kizad, the Khalifa Industrial Zone Abu Dhabi. Expected to be ready in 16 months, it is expected to handle 100,000 tonnes a year. It is in partnership with Kohinoor Foods, a rice processor in India.

The Fujairah Strategic Grain Terminal, which was expected to open in 2012, would store 275,000 tonnes of wheat and rice.

The Arabian Gulf’s growing population is also boosting Pan Gulf’s business confidence.

By 2020, Gulf population is expected to touch 50 million.

“In the next year, we expect to capture 10 per cent of the Gulf market of basmati rice,” Prince Mishal said.

The region a major importer of global grain supplies, and consumption is only expected to rise.

Every year, 4 million tonnes of rice is sold in the Gulf, including Iraq and Iran, and of that Saudi Arabia consumes 1.5 million tonnes, according to Mr Kumar. Of that the UAE consumes half a million tonnes.

While the UAE accounts for 20 per cent of the total food consumption in the region, it has the highest per capital food consumption, according to a report from Alpen Capital in May.

This is attributed to the UAE’s tourist flow, which is the highest in the region, and relatively lower income disparity.

“With rising population and affluence levels, we forecast food consumption in the UAE to grow at a [compound annual growth rate] of 4.2 per cent during 2012 to 2017,” the report said.

It estimates that the UAE would import $5.5 billion worth of food in 2015, up from $3.8 billion in 2011.

“With plans to maintain and even increase domestic production in areas such as poultry, eggs, dairy and meat, each will result in further pressure and demand for feed stock, typically often grain based,” Mr Lodge said. “This is the case also with other areas predicted to play an important role such as aquaculture.”

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