Shree Renuka looks to rework Equipav deal

BANGALORE: Shree Renuka Sugars (SRS) is renegotiating the price of its proposed Rs 1,530-crore acquisition of Brazilian sugar and ethanol maker Equipav amidst differences over the amount of debt on the company’s books.

People close to the development said that SRS is seeking a significant reduction in the $700-million debt on Equipav’s books.

“Yes, discussions are underway to renegotiate the terms of this transaction. Talks are at an advanced stage and we would not be able to share more details at this point of time. The discussions are likely to end over the next four to five days,” a senior SRS official told ET. He refused to add further details.

It is learnt that if the terms are not acceptable, the SRS management may choose to call off the transaction with Brazil’s seventh largest sugar refiner.

In February this year, SRS had announced its intention to acquire a 51% stake in Equipav for $321 million. It had also decided to assume debt of nearly $700 million.

Analysts say that SRS had no option but to renegotiate given the steep fall in global sugar prices.
The August white sugar futures traded in London, for instance, had gone past $685-per tonne mark in February but is currently trading at about $475.9 per tonne on the back of news that global sugar production (notably in India & Brazil) will rise.

SRS, which is India’s largest sugar refiner, paid $240 million to acquire another Brazilian sugar company, VDI. This provided the company with a cane crushing capacity of 3 million tonne.

The Murkumbi family, which owns SRS, built its fortunes in the sugar sector through a strategy of production and trading of the commodity. It built its sugar crushing capacity by leasing financially weak sugar co-operatives notably in Maharashtra and Karnataka.

It also set up a sugar refinery at Haldia in West Bengal. SRS shares slipped 0.18% to Rs 54.25 even as the Sensex lost 159 points.