Simbhaoli Sugar raises $ 33 mn

The Simbhaoli Sugar Mills Ltd has issued US$ 33 million (Rs 145 crore) of foreign currency convertible bonds (FCCBs) as part funding for its Rs 400 crore expansion.

The FCCBs will have a maturity of five years and one day and will be convertible into Simbhaoli shares at an initial conversion price of Rs 170 a share, said Gurmit S Mann, chairman and managing director of the company.

To be listed on the Singapore Stock Exchange, the FCCBs are zero coupons with an annual yield-to-maturity of 6.5 per cent per annum.

The company is amid a Rs 400 crore expansion plan to increase its sugar capacity to 19,500 tonnes cane crushed per day (tcd) from current 13,000 tcd, surplus power generation capacity to 36 megawatt per hour (mwh) from current 7 mwh and distillery capacity to 210 kilo litres per day (klpd) from current 90 klpd.

Of the Rs 400 crore, Rs 170 crore will be towards expansion in sugar capacity, Rs 130 crore in power and Rs 100 crore in distillery, said Sanjay Tapriya, director (finance) and company secretary.

Simbhaoli has already initiated expansion process with an investment of Rs 70 crore and the process is slated for completion by March 2007.

Raising Rs 145 crore, the FCCBs will be part-financing this expansion. For expansion in ethanol production and power generation, the company has sought a loan of Rs 55 crore at 4 per cent under the union government's Sugar Development Fund.

Out of the remaining, Rs 135 crore will come from internal accurals and Rs 65 as debt from banks, Tapriya added.

Simbhaoli has strategised to shift its focus from commodity market to become a retail and institutional player in the sugar market, said Mann.

"In the current global scenario, sugar sector's upcycle is set to be longer than usual. Further, in the market scenario when indirect sugar consumption is rising faster than the direct one, it is better to become a retail and institutional player," Mann added.

Also, the company plans to generate better revenues from non-sugar segment such as distillery, surplus power generation, bio manure among others.

"By 2007-08 (October-September), 55 per cent of Simbhaoli's turnover will be from sugar business and remaining 45 per cent from non-sugar," said Tapriya.

In 2005-06, sugar segment is estimated to command 61 per cent share in its turnover and 39 per cent by non-sugar. In 2004-05, sugar business had 65 per cent share in its turnover and 35 per cent by non-sugar.