At Rs 1,530 crore, it’s the largest deal by a domestic sugar producer
Shree Renuka Sugars, among the country’s largest sugar producers, has signed an agreement with Brazilian conglomerate Grupo Equipav to buy a controlling 50.79 per cent in Equipav S A ACUCAR e ALCOOL (Equipav) for Rs 1,530 crore or $329 million.
The deal is the largest by a domestic sugar producer and puts the company among the world’s top three sugar players from its current position among the top ten.
Equipav is among Brazil’s largest sugar and ethanol manufacturers and its acquisition will enable the Indian company to source more than 50 per cent of its annual requirement of raw sugar annually. Brazil is the world’s largest producer and exporter of sugar and India is the largest consumer.
“This investment brings us closer to building a global sugar and ethanol business combining the most cost-efficient and scalable production areas in the world along with a leading presence in the largest ethanol and sugar markets of the world,” said Narendra Murkumbi, managing director.
Mumbai-headquartered Shree Renuka, which is promoted by the Murkumbi family and owns mills in Karnataka and Maharashtra, has a current cane-crushing capacity of 35,000 tonnes a day, which it is expanding to 45,000 tonnes.
Equipav owns two large modern sugar/ethanol mills with integrated co-generation facilities in Sao Paulo in south east Brazil with a cane crushing capacity of 44,400 tonnes a day, which it is expanding to 56,600 tonnes a day. Its power plant generates 203 Mw, which will be expanded to 295 Mw.
“After the acquisition, Renuka’s cane crushing capacity will go up to 1,15,000 tonnes a day,” said Shree Renuka Sugars Chairperson Vidya Murkumbi.
The deal is subject to the approval of an acceptable debt restructuring package by Equipav’s lenders.
Equipav currently has a debt of Rs 3,821 crore or $822 million.
Shree Renuka will use Rs 500 crore raised through qualified institutional buyers last June to finance this acquisition. The company's promoters will contribute Rs 185 crore (via warrants that will be converted into equity this week). The remaining Rs 845 crore will be raised from internal accruals, said K K Kumbhat, chief financial officer.
"The company has surplus liquidity and we won't need to raise any further finance for this deal," said Kumbhat. He added that the company is open to raising its stake in Equipav.
Out of the $329 million, one-third will be used to pay debt. Another third will be used for working capital and rest will be spent on Equipav's expansion.
The deal, which is expected to be finalised by the end of March, is the second overseas acquisition by Renuka Sugars in four months. It acquired Vale Do Ivai in November last year.
Banco Itau BBA, Brazil and Motilal Oswal Investment Advisors were the strategic and financial advisors to Shree Renuka.
On the Bombay Stock Exchange, the company's stock on Friday closed at Rs 179.90, down 2.31 per cent.
| SWEET DEAL # The deal puts Shree Renuka among the top three global sugar players # Will enable the Indian company to source more than 50% of its annual requirement of raw sugar # This is the second overseas acquisition by Renuka Sugars in four months; it bought Brazil’s Vale Do Ivai in November last year # Buy to be funded through Rs 500 crore raised via QIBs last June. Promoters will contribute Rs 185 crore; Rs 845 crore from internal accruals # Out of the $329 million, one-third will be used to pay debt, another third as working capital and the rest for Equipav’s expansion # Renuka is open to raising its stake in Equipav |
