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Singapore’s Wilmar hiking stake in debt-laden top sugar producer Shree Renuka

Singapore-based agribusiness giant Wilmar International Ltd will invest Rs 783.96 crore ($120 million) in Shree Renuka Sugars Ltd as part of a plan that also involves the company restructuring its massive debt.

The capital infusion via compulsorily convertible preference shares will increase Wilmar’s stake in one of India’s top sugar producers to 38% from 27.2%, the Singapore company said in a regulatory filing. It added that it will also provide a corporate guarantee of about $415 million to the Mumbai-based sugar producer’s lenders.

Shree Renuka has been struggling with debt ever since its ill-fated foray into Brazil seven years ago with the acquisition of two companies. The acquisitions were hailed as a pioneering move at the time. But weather-related problems in Brazil, a global sugar glut and interest costs on the massive debt the company took on for the twin acquisitions changed its fortunes for the worse.

In a bid to cut its debt, Shree Renuka sold a 27.5% stake to Wilmar for Rs 517 crore in 2014. Wilmar and the company’s founding Murkumbi family subsequently made an open offer to public shareholders, but met with little success.

The fresh capital infusion will make Wilmar the biggest shareholder in Shree Renuka. However, the Murkumbi family’s stake will halve to 13% from 27.5%, according to VCCircle estimates.

In a separate stock-exchange filing, Shree Renuka said it will use the funds to pay off debt and meet working capital expenses. The company had consolidated debt of about Rs 6,000 crore as of March 2017. It reported revenue of Rs 7,864 crore and a loss of Rs 123 crore for the financial year ended March 2017.

Shree Renuka said its board also decided to restructure the company’s debt. This will involve issuing equity shares worth Rs 835 crore, redeemable preference shares worth Rs 935 crore, optionally convertible preference shares worth Rs 450 crore and non-convertible debentures worth 585 crore to 10 lenders.

The lenders are IDBI Bank, ICICI Bank, Life Insurance Corporation of India, Standard Chartered Bank, Yes Bank, Kotak Mahindra Bank, State Bank of India, Export Import Bank of India, RBL Bank and Axis Bank.

If redeemable preference shares and/or optionally convertible preference shares are converted into equity, Wilmar's stake will be lower than the 38% estimated earlier.

The sugar producer said it also plans to issue global depositary receipts worth Rs 800 crore.

The company will seek shareholders’ nod to the proposals in a meeting scheduled for 24 August. The proposals are also subject to approvals from the Reserve Bank of India and the Competition Commission of India.

Shree Renuka was advised by IMAP India, Crawford Bayley & Co and Khaitan & Co. Wilmar was advised by Edelweiss Financial Services and Trilegal. IDBI Capital Markets was adviser to the banks.

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