Shree Renuka Sugar Ltd to buy Brazilian Firms

Mumbai, Feb. 21: Shree Renuka Sugars Ltd has swooped on Brazil for the second time in just three months to pick up Equipav S.A. Açúcar e Álcool for $329 million, or Rs 1,530 crore, and become the third largest producer in the world.



In November, Shree Renuka, which will also be No. 1 in the country after the Equipav deal, had brought Vale Do Ivai for Rs 1,100 crore.


Equipav is one of the largest sugar and ethanol companies in Brazil. It has two mills with integrated co-generation facilities in Sao Paulo. They have a combined cane crushing capacity of 10.5 million tonnes per annum (mtpa), or 4,400 tonnes crushed per day (tcd).


Shree Renuka’s buy will be the biggest overseas acquisition by an Indian sugar firm.


The company will fund the deal through internal accruals and money raised earlier via a qualified institutional placement issue.


Equipav also has a co-generation capacity of 203 mega watt (mw). The plan is to expand the combined capacity of the mills and power production to 12mtpa (56,600 tcd) and 295mw, respectively.


Equipav’s requirement of cane comes from around 1,15,000 hectares of land, of which nearly two-thirds are cultivated by the company.


Shree Renuka said the mills had an easy access to the main ports of Santos and Paranagua.


The Indian firm will acquire not less than 50.79 per cent, and the remaining stake in the venture will be held by the Equipav group.


Equipav had a net debt of approximately $822 million, (Rs 3,821 crore) as of December 2009.


Shree Renuka said its investment would be used to fund capital expenditure for expansion, repay debt and increase working capital.


According to the company, the deal is subject to approval of a debt restructuring package by the lenders and certain other conditions customary to such transactions.


Though it did not provide any further details, the company said the deal was likely to be closed in 40 days.

Banco Itau BBA, Brazil and Motilal Oswal Investment Advisors were the strategic and financial advisers to Shree Renuka.


Brazil is the largest producer and exporter of sugar in the world, and India is the largest consumer. The acquisition comes at a time sugar prices are ruling firm both in the international and domestic markets.


According to an analyst, the acquisition is a huge positive for Shree Renuka as it can now secure raw material at a time of supply deficit in sugar.


The company said the buyout would bolster its presence in the central and southern region of Brazil and enhance its competitiveness and size, globally.


Vale acquisition


Shree Renuka’s Vale acquisition included two sugar and ethanol manufacturing facilities in the Brazilian state of Parana, with a combined cane crushing capacity of 3.1mtpa.


Besides, it got stakes in logistic assets, including terminals for storage and loading of sugar and ethanol at the Paranagua port.


On the second acquisition, Narendra Murkumbi, managing director of Shree Renuka, said, “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.”

The buyout will also help the company meet its raw material requirements.

Source : The Telegraph