India gets a sweet Brazilian deal

An Indian company has entered into a sweet sugar and ethanol deal in Brazil.

Shree Renuka Sugars, one of the largest producers in the country, has acquired Brazil’s Vale Do Ivaí SA Açúcar e Álcool (VDI) for $240 million (€161.3 million).

The acquisition of VDI includes two sugar and ethanol production facilities in the southern Brazilian state of Parana, with a combined cane crushing capacity of 3.1 million tonnes a year. VDI holds strategic stakes in several logistics assets, including terminals for storage and loading of sugar and ethanol at the port of Paranagua.

The company also operates eight sugar mills, five owned and three leased, with a cumulative daily crushing capacity of 35,000 tonnes.

The acquisition includes 18,000 hectares of cultivable land under VDI, through which the company meets the larger part of its sugarcane requirements. The land is on long-term lease and used to cultivate cane with an average yield of 95 tonnes a hectare, with recovery of 13%. In India, the yield of around 60-65 tonnes per hectare, and the recovery at a maximum of 11.5%, are lower.

SRSL will pay $82 million now and the balance over eight years. It plans to finance the acquisition by leveraging the $105 million it raised through a qualified institutional placement (QIP) of shares in July. The proceeds would be used on refinery and cogeneration plans.

VDI has a third production facility in state of the Minas Gerais, which will be spun off to its current shareholders as a consideration for the acquisition.

Through this acquisition, SRSL is planning to feed raw sugar demand at its refineries in Gujarat and Haldia, where huge capacity expansion work is under progress.

'To meet our objective to focus on sugar refinery, we imported about 0.7 million tonnes of raw sugar last sugar year (October-September) and plan to import about 1.3 million tonnes next year. Going forward, our refinery will require two million tonnes of imported raw sugar to meet the enhanced refinery capacity of 9,000 tonnes per day by 2011,' said Gautam Watve, SRSL’s head for strategy and planning.