Singapore-headquartered agri-commodity giant Wilmar International is picking 27.5 per cent stake in the first leg of a larger deal in Shree Renuka Sugars for Rs 517 crore ($83 million), which would help India’s largest sugar company to cut debt on its books piled up as part of its global expansion.
Wilmar is subscribing to up to 257.5 million shares at a price of Rs 20.08 apiece aggregating to Rs 517 crore through a wholly owned arm Wilmar Sugar Holdings Pte. Ltd., on a preferential basis. This would give it 27.5 per cent stake in the company and make it a co-promoter. The allotment will dilute the stake held by existing promoters led by Narendra Murkumbi from 38.3 per cent to 27.5 per cent.
The co-promoters have made an open offer to buy 26 per cent of the diluted share capital. The open offer is at a price of Rs 21.89 a share, which could cost up to Rs 532 crore, if fully subscribed.
In addition, the company will come up with a rights issue worth Rs 725.4 crore, where the co-promoters will equally pick the unsubscribed portion of the issue.
Shree Renuka Sugars’ scrip was down 6.4 per cent in mid-day trades on the BSE quoting at Rs 21.05 a share in a strong Mumbai market on Friday.
Post conclusion of the deal, Wilmar and Murkumbi family will hold equal stake in Shree Renuka Sugars along with board representation.
The existing promoters will continue with the management of the company with Wilmar being actively involved in strategic decisions. The investment is subject to approval of its shareholders, anti-trust clearances in India and Brazil and other statutory clearances.
The fresh funding worth around Rs 1,240 crore ($200 million) will help Shree Renuka Sugars reduce its mounting debt, which was pegged at Rs 8,478.86 crore as on March 31, 2013. The firm piled debt after it bought two large assets in Brazil.
It bought Distillery Valley Ivai SA (now Renuka Vale do Ivai) for $240 million in 2009 and 59.4 per cent stake in Equipav SA (Renuka do Brasil) for $250 million in the following year.
Shree Renuka Sugars is a global sugar producer/refiner with a strategic portfolio of sugar assets across India, including port-based refining assets, sugar mills in productive cane growing regions and diversified revenue streams from ethanol and electricity co-generation. Additionally in Brazil, it has well located sugar, ethanol, cogeneration, port and logistics assets.
The company operates 11 mills globally with a total crushing capacity of 20.7 million tonnes per annum and two port-based sugar refineries with sugar production capacity of 1.7 million tonnes per year. Shree Renuka Sugars has high level of integration in its mills with total cogeneration capacity of 584 MW and ethanol production capacity of 4,160 kilolitres per day.
Narendra Murkumbi, vice chairman and managing director of Shree Renuka Sugars, said, “This is a path-breaking move in the sugar business which would create a very strong partnership in some of the key global markets for sugar. Wilmar’s leadership position in the edible oil business globally and its strong reach in several countries across the world would be synergistic with our large footprint in India and Brazil, the two largest sugar producers in the world. Wilmar’s trading expertise, strong financial strength and history of entrepreneurial growth make it an ideal partner.”
Kuok Khoon Hong, chairman and CEO of Wilmar, said, “India is a very important market for Wilmar. Besides the benefit for our sugar business, this venture will complement the development of our edible oils and other businesses in India.”
Wilmar International Limited, founded in 1991, is today Asia’s leading agribusiness group and is ranked amongst the largest listed companies by market capitalisation on the Singapore Exchange and has a market capitalisation of around $17 billion and revenues of $44.1 billion, with profit of $1.3 billion in FY 2013.
Its business activities include oil palm cultivation, oilseeds crushing, edible oils refining, sugar milling and refining, specialty fats, biodiesel and fertilisers manufacturing and grains processing. The group is backed by a multinational workforce of about 93,000 people.
Wilmar’s sugar investments include assets in Australia, New Zealand and Indonesia with 17 million MT cane crushing capacity and 1.9 million MT refining capacity. It also has a 27.5 per cent interest in Cosumar in Morocco with refining capacity of 1 million MT.
Wilmar is also Australia’s largest cane milling company. With an annual milling capacity of about 17 million MT, Wilmar produces about 2 million MT of raw sugar. Wilmar’s sugar refining business operates five refineries across Australia, New Zealand and Indonesia, with a combined annual production capacity of almost 2 million MT of sugar per year.
In Indonesia, Wilmar is one of the largest players in the sugar industry with two refineries having combined capacity of 1.1 million tons of sugar per year.
Motilal Oswal Investment Advisors acted as the strategic and financial advisor to Shree Renuka Sugars, Crawford Bayley & Co., AZB & Partners and Veirano e Advogados Associados, Brazil acted as legal advisors. Standard Chartered Bank acted as financial advisor and would be the manager to the open offer.
(Edited by Joby Puthuparampil Johnson)
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