Karuturi to be auctioned over toxic debts, workers fate unknown

Employees of the Karuturi flower farm in Naivasha spraying the flowers before the company was put under receivership. PHOTO | FILE | NATION MEDIA GROUP

What you need to know:

  • Fate of more than 3,000 workers in the balance.

  • Karuturi Limited went under in February 2014 after it faced cashflow problems and was placed in receivership.
  • At the height of its troubles, unpaid workers went on strike for weeks on end crippling its operations.

Kenya’s biggest flower firm is set to go under the auctioneers’ hammer.

The Naivasha-based flower exporter is to be sold after its Indian owners failed to defend a winding up petition filed at the High Court by creditors, leaving the fate of more than 3,000 workers in the balance.

Karuturi Limited, owned by an Indian multinational going under the same, went under in February 2014 after it faced cashflow problems and was placed in receivership. The receiver/managers later offered to put the firm on sale saying the business model was unsustainable. The Bangalore, India-based multinational had opposed a winding-up petition brought by the receiver managers.

However, this changed last week when its lawyers filed a no-objection motion leaving the High Court Judge Justice Charles Kariuki with no option but to order the company to be sold.

“It is hereby ordered that there being no objection to the petition (winding up) herein, the same be and is hereby allowed as prayed,” Justice Kariuki noted in a ruling delivered on Wednesday. The winding up petition was filed by Allpacks Limited.

The landmark move is expected to pave the way for the sale of Kenya’s largest flower company in what may compound the woes of an estimated 3,000 workers.


Karuturi’s troubles peaked in late 2012, when the Kenya Revenue Authority started the process which would later determine that the multinational used transfer mispricing to avoid paying the government nearly Sh2.1 billion at today’s exchange rate ($20 million) in corporate income tax.

But this was only a tip of the iceberg, for its troubles and slow and painful decline.

The flower company had in earlier years been unable to adequately pay its Kenyan workers and creditors and had in the recent past been at loggerheads with the Kenya Plantation and Agricultural Workers Union.

At the height of its troubles, unpaid workers went on strike for weeks on end crippling its operations.

The Karuturi Hospital in Naivasha also suffered power cuts, and free schooling for the flower farmworkers’ children at Karuturi School came to an end.

In early 2014, CFC Stanbic placed the flower firm under receivership after it failed to service a Sh340 million loan.

The bank took over the firm’s operations and said it would sell off the land Karuturi sits on — which had been given as security.

However, the flower firm’s management has protested the move, saying the land, valued at Sh8.2 billion, is worth much more than the loan amount.

Receiver managers from The Business Advisory Group were appointed after Karuturi failed to meet its monthly wage bill and fell behind on payments to creditors.

Mr Kieran Day and Mr Ian Small, the receiver managers, had earlier hinted at possible sale of the farm to other investors and in January this year they invited bidders for expression of interest in acquiring the business and assets and set a deadline of February 28.

“The receiver and manager offers for sale the business and assets as a going concern, of Karuturi Ltd (in receivership) together with the land registered under the ownership of Rhea Holdings Ltd/ Surya Holdings Ltd/ Yeshoda Investments Ltd used for flower farming in Naivasha, Kenya,” they said then.


“A detailed sales information memorandum regarding the business and assets will be made available to interested parties on terms approved by receiver and manager. Any parties interested in obtaining further information should provide expression of interest to the receiver,” said the notice.

Flower production volumes in Kenya faced a major setback after the Karuturi Farm was placed under receivership.

On September 2014, another of its parent flower trading subsidiary in the Netherlands was declared bankrupt.

During its heyday the company with similar offshoots in India and Kenya was described as one of the largest rose-growing farms in the world, with an optimum capacity of a million stems a day.

Karuturi then boasted of 126 hectares of flowers under greenhouses and a further eight hectares of open air rose cultivation comprising more than 20 popular rose varieties.

It had also newly installed greenhouses with upgraded facilities at the time it went under.

The firm also prided itself in having significant recognition in key European export markets and comprehensive contracts of sale in 2015 with customers in the main market segments.

Karuturi produced 580 million roses per year from its operations in Kenya, Ethiopia and India with estimates showing that one out of nine roses bought in Europe came from the Karuturi farm.

Its parent firm, the Indian multinational made its name in the global cut flower industry and would later launch an ambitious expansion bid across Africa.

The company, for instance, once acquired more than 300,000 hectares in Ethiopia to produce food for foreign markets.


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