The board of directors of The Ravalgaon Sugar Farm Limited, on the recommendation of the audit committee of the Company, approved the sale, transfer and assignment of the trademarks, recipes, all intellectual property rights, including all rights, interests, and protections associated therewith, relating to the Company's sugar boiled confectionery business to Reliance Consumer Products Limited ("RCPL"), for a consideration of Rs. 27,00,00,000/- (Rupees Twenty Seven Crore). A deed of assignment ("Deed") amongst the Company, promoters of the Company namely, Mr. Harshavardhan Bharat Doshi, Mr. Nihal Harshavardhan Doshi and Mrs. Lalan Ajay Kapadia, and RCPL has also been executed.
Rs. 27,00,00,000/- (Rupees Twenty Seven Crore) to be paid upon closing of the proposed transaction.
The Company has found it difficult in recent years to sustain its sugar boiled confectionery business. It has lost market share owing to a surge in competition from both the organized and unorganized players in this industry. At the same time, its profitability has been affected by the sustained increase in raw material, energy and labour prices, without the ability to effectively pass on the input price increases to its customers beyond the Re.1/- price point. As the age of the Company's factory, machinery and equipment has increased, the cost of production and related wastages have also increased. The financial position of the Company was exacerbated by the COVID-19 pandemic as schools and offices remained closed for physical attendance over a prolonged period, resulting in the reduction of movement of the Company's largest demographics of consumers. Being an impulse product, the absence of physical movement translated into weak demand for the Company's products.
The Deed imposes certain non-compete obligations on the Company, its affiliates and the specified promoters, restricting them from directly or indirectly manufacturing, sourcing, marketing, distributing or engaging in any business activity which deals with the products of the Company as well as sugar confectionery, jelly confectionery, fruit confectionery, etc. and all products using, under or associated with the Intellectual Property. However, the Company shall be able to continue to undertake contract manufacturing and packaging for third parties as well as RCPL.
Subject to closing having occurred under the Deed, the term of the said non-compete obligations is 6 years from the date of closing.