Shree Renuka Sugars Ltd, India’s biggest refiner, plans to acquire rivals in Brazil to secure supplies, as a global deficit drives prices to the highest in more than 28 years.
The company plans to bid for Equipav SA Acucar e Alcool, the sugar and alcohol assets of Brazil’s Equipav Group, and is in exclusive talks with several other Brazilian producers for acquisitions, Managing Director Narendra Murkumbi said in an phone interview in Mumbai today.
Sugar, the best-performing commodity in the UBS Bloomberg CMCI Index, has almost doubled in the past year as production lagged behind demand in India and smaller-than-expected output in Brazil worsened a global deficit. Shree Renuka’s profit in the quarter ended June doubled after domestic prices surged to reflect global levels.
“Assets in Brazil will protect us from the supply swings in India,” he said. “Shortage or no shortage in India, we’ll be assured of supplies, which we can process and sell to other Asian nations.”
The acquisitions may help Shree Renuka secure half of its annual raw-sugar requirement of 2 million tonnes by 2011, Murkumbi said. India will remain the largest buyer with a deficit of 8 million tonnes in 2009-10, according to Czarnikow Group Ltd.
“More than any other Indian producer, Shree Renuka needs to secure supplies of raw sugar as it’s primarily a refiner,” Nirmal Shah, an analyst at Alchemy Share and Stock Brokers Pvt. said. “This will also protect it from the vagaries of weather in India, which often disrupts sugar cane production.”