Sugar firm plans expansion

Shree Renuka Sugars (SRS), India's largest ethanol producer, will invest nearly Rs 273 crore in various organic and inorganic projects, which include the expansion of existing capacities and the acquisition of backward integration projects.

The company has earmarked Rs 230 crore for organic projects and Rs 43 crore for inorganic ones.

To maintain leadership in the segment, the company is doubling its ethanol production capacity to 900 kl a day in two years from 450 kl now at its existing plant in Karnataka for an investment of Rs 105 crore.

With the demand for biofuel expected to increase, the company is planning to corner a major share of the market. Developing nations including India is likely to make ethanol blending of up to 5-10 per cent mandatory, according to industry experts.

The company has recently acquired a majority stake (about 51 per cent) in KBK Chem-Engineering, the Rs 84-crore Pune-based company engaged in providing turnkey solutions in the field of distilleries, ethanol plants and biofuels. SRS acquired the stake in the company, which generates about 50 per cent of its revenues from overseas projects, for a total consideration of Rs 37 crore.

"The major aim in acquiring KBK was to help SRS set up backward integration projects for distilleries," said Narendra Murkumbhi, MD.

The company is also planning to set up a facility that can convert ethanol into fuel grade ethanol for an investment of Rs 6 crore.

Additionally, the company has earmarked an investment of Rs 90 crore to set up a 25.5 mw cogeneration facility at Kawalga, Karnataka, and a Rs 35 crore upgradation of its refining facility to 100 tonnes a day in Karnataka.

To part finance the company's proposed expansions, it is planning to raise US$100 million through foreign currency convertible bonds (FCCB). Other financing strategies were also being worked out and would be finalised soon, Murkumbhi added.

The company is also evaluating the potential of setting up crushing facilities in low cost production countries in Africa.

SRS reported a modest 6.38 per cent increase in net profit at Rs 36.7 crore (including Rs 12.9 crore from unrealised forex gains) during the third quarter (April-June 2007) of the current sugar year (October- September) against Rs 34.5 crore for the corresponding period last year.

However, the company recorded a 19 per cent decline in turnover at Rs 277.2 crore during the period under consideration. The net profit during the first nine months of the sugar year also declined by 30 per cent to Rs 70.2 crore (on a turnover of Rs 719 crore) from Rs 100.8 crore (Rs 784.4 crore).

"There could be inconsistencIes in the performance due to the nature of the industry as sugar crushing does not continue throughout the year. But overall, the performance was better than most other players due to the new accounting system and a better product mix," said Murkumbhi.