Wilmar to buy 25% in Renuka Sugars

MUMBAI: Singapore-based agribusiness major Wilmar International is close to finalising an agreement to buy up to 25% stake in India’s largest sugar refiner Shree Renuka Sugars, said three persons with direct knowledge of the transaction.

The Murkumbi family promoted company will issue fresh shares to Wilmar, and the deal is likely to be finalised at a price between Rs 30 and Rs 33 per share, they said.

Renuka Sugars’ top executives, including vice chairman and managing director Narendra Murkumbi recently met the top management of Wilmar in Singapore to iron out the last-minute glitches, said one of the persons quoted above. “Both parties will shake hands very soon.

The deal is being finalised in such a way that the Murkumbi family will retain control of the company. It is more or less like the original Diageo-UB group deal,” the person added. Shree Renuka Sugars and Wilmar did not respond to ET queries on the subject.

Fresh issue of shares equivalent to 25% of Renuka’s capital at Rs 33 per share values the company at Rs 2,900 crore. The company’s shares fell around 3.95% to close at Rs 20.60 a share on Friday at the Bombay Stock Exchange.

Post the transaction, the Murkumbi family’s stake is expected to come down by 8% from 38.36%. The deal will help Renuka cut debt of Rs 8,477 crore arising out of expensive acquisitions in Brazil in 2010. Renuka reported a loss of Rs 374 crore in year ended March 31, 2013. Its standalone losses were Rs 184 crore in the first six months ended September 30, 2013.

“The induction of a foreign partner will provide financial and business strength to Shree Renuka to handle the volatilities of the commodity business. Secondly, it will give a comfort to bankers to restructure debts,” said a sugar sector analyst who does not want to be quoted.

If the transaction materialises, palm oil giant Wilmar, which is seeking to grow its sugar business, will get a major toehold in two main markets — India and Brazil.

Renuka tried to sell the units in Brazil, but dropped the idea after Wilmar showed interest in the company. Its mounting losses also made such a deal inevitable, industry experts said.