Debt-ridden Shree Renuka Sugars (SRSL) on Thursday announced that Wilmar International (WIL), the world’s largest palm oil processor from Singapore, will invest up to Rs 1,200 crore through its wholly-owned subsidiary Wilmar Sugar Holdings (WSH), in a two-step transaction.
Under a joint venture agreement signed between the existing promoters, SRSL and Wilmar, India’s largest sugar refiner will be jointly controlled by the existing promoters and Wilmar, with both parties holding equal shareholding and board representation.
The first step of the deal involves an investment of up to Rs 517 crore by WSH in SRSL through preferential allotment of up to 257.5 million shares in fresh equity at Rs 20.08 per share. The company told the Bombay Stock Exchange that its board of directors, which met on Thursday, decided to allot up to 257.5 million shares to Wilmar on a preferential basis.
The company has called an extraordinary general meeting on March 21 in Belgaum, Karnataka to seek approval to the preferential issue.
After the preferential issue, the existing promoters and WSH would hold 27.5 per cent of SRSL’s expanded equity share capital. As per Sebi guidelines, there will also be an open offer by WSH and the existing promoters for up to 26 per cent of the expanded equity share capital of the company at Rs 21.89 a share.
On Thursday, the SRSL stock moved up 3.7 per cent in anticipation of the deal to close at Rs 22.50 on BSE. This means the deal happened at over 10 per cent discount to market price and even the open offer price announced is lower than Thursday’s closing price.
The stock had touched a 52-week high of Rs 29.50 and a 52-week low Rs 14.50 on February 20, 2013 and August 28, 2013, respectively. In 2014, the stock has risen 10 per cent, adding Rs 1,490 crore to market value.
“The second step of the deal would involve Wilmar and the existing promoters of SRSL jointly participating in a rights issue to raise up to Rs 725.40 crore of primary equity capital for SRSL,” the release said.
The existing promoters will continue to manage the company with Wilmar being actively involved in strategic decisions. The investment is subject to approval by the shareholders of SRSL and regulatory clearances in India and Brazil.
According to SRSL, the proceeds of the investment would be used to pay down existing debt in India. An industry official said SRSL wanted to reduce debt, and this deal would help it pare debt. According to data compiled by Bloomberg, SRSL had total debt of Rs 8,480 crore as of March 31, 2013, up from Rs 840 crore in 2008.
SRSL managing director Narendra Murkumbi said in a statement, “It is a path-breaking deal in the sugar business. Wilmar’s trading expertise and financial strength make it an ideal partner.”
SP Tulsian, an independent analyst, questioned the deal, calling it all ‘drama’. According to him, the company has Rs 15,000 crore worth of assets and it could have raised funds by monetising at least one of the assets, either in Brazil or in India. “There was no need for this urgency,” he said. “You are squeezing public shareholders from 62 per cent to 15 per cent through the deal,” he said.
In 2009, SRSL had acquired Distillery Valley Ivai for $240 million. In 2010, it bought a 59.4 per cent stake in Equipav (Renuka do Brasil) for $250 million.
Motilal Oswal Investment Advisors acted as the strategic and financial advisor to SRSL, while Crawford Bayley, AZB & Partners and Veirano e Advogados Associados, Brazil, acted as legal advisors. Standard Chartered Bank acted as financial adviser and will also manage the open offer.
Bloomberg said in a report that the deal would add to Wilmar’s sugar assets from Australia to New Zealand, Indonesia and Morocco. It is the largest cane miller in Australia. The SRSL investment will allow Wilmar to expand in India, the world’s biggest sugar consumer.
Last week, SRSL reported a net loss of Rs 19.39 crore for the third quarter ended December 31, mainly due to lower income. Its performance took a beating as income from operations fell to Rs 119.11 crore compared with Rs 184.67 crore in the year-ago period.
SRSL operates 11 sugar mills globally, with a total crushing capacity of 20.7 million tonnes per annum (MTPA) or 94,520 tonnes crushed per day (TCD). The company operates seven sugar mills in India with a total capacity of 7.1 MTPA, or 35,000 TCD, and two port-based sugar refineries with expected capacity of 1.7 MTPA.
“I would say this is a one-off transaction and cannot say this marks a revival of M&As in India,” said Deepak Kaushik, vice-president of capital markets group at SBI Capital Markets.
Under a joint venture agreement signed between the existing promoters, SRSL and Wilmar, India’s largest sugar refiner will be jointly controlled by the existing promoters and Wilmar, with both parties holding equal shareholding and board representation.
The first step of the deal involves an investment of up to Rs 517 crore by WSH in SRSL through preferential allotment of up to 257.5 million shares in fresh equity at Rs 20.08 per share. The company told the Bombay Stock Exchange that its board of directors, which met on Thursday, decided to allot up to 257.5 million shares to Wilmar on a preferential basis.
The company has called an extraordinary general meeting on March 21 in Belgaum, Karnataka to seek approval to the preferential issue.
After the preferential issue, the existing promoters and WSH would hold 27.5 per cent of SRSL’s expanded equity share capital. As per Sebi guidelines, there will also be an open offer by WSH and the existing promoters for up to 26 per cent of the expanded equity share capital of the company at Rs 21.89 a share.
On Thursday, the SRSL stock moved up 3.7 per cent in anticipation of the deal to close at Rs 22.50 on BSE. This means the deal happened at over 10 per cent discount to market price and even the open offer price announced is lower than Thursday’s closing price.
The stock had touched a 52-week high of Rs 29.50 and a 52-week low Rs 14.50 on February 20, 2013 and August 28, 2013, respectively. In 2014, the stock has risen 10 per cent, adding Rs 1,490 crore to market value.
“The second step of the deal would involve Wilmar and the existing promoters of SRSL jointly participating in a rights issue to raise up to Rs 725.40 crore of primary equity capital for SRSL,” the release said.
The existing promoters will continue to manage the company with Wilmar being actively involved in strategic decisions. The investment is subject to approval by the shareholders of SRSL and regulatory clearances in India and Brazil.
According to SRSL, the proceeds of the investment would be used to pay down existing debt in India. An industry official said SRSL wanted to reduce debt, and this deal would help it pare debt. According to data compiled by Bloomberg, SRSL had total debt of Rs 8,480 crore as of March 31, 2013, up from Rs 840 crore in 2008.
SRSL managing director Narendra Murkumbi said in a statement, “It is a path-breaking deal in the sugar business. Wilmar’s trading expertise and financial strength make it an ideal partner.”
SP Tulsian, an independent analyst, questioned the deal, calling it all ‘drama’. According to him, the company has Rs 15,000 crore worth of assets and it could have raised funds by monetising at least one of the assets, either in Brazil or in India. “There was no need for this urgency,” he said. “You are squeezing public shareholders from 62 per cent to 15 per cent through the deal,” he said.
In 2009, SRSL had acquired Distillery Valley Ivai for $240 million. In 2010, it bought a 59.4 per cent stake in Equipav (Renuka do Brasil) for $250 million.
Motilal Oswal Investment Advisors acted as the strategic and financial advisor to SRSL, while Crawford Bayley, AZB & Partners and Veirano e Advogados Associados, Brazil, acted as legal advisors. Standard Chartered Bank acted as financial adviser and will also manage the open offer.
Bloomberg said in a report that the deal would add to Wilmar’s sugar assets from Australia to New Zealand, Indonesia and Morocco. It is the largest cane miller in Australia. The SRSL investment will allow Wilmar to expand in India, the world’s biggest sugar consumer.
Last week, SRSL reported a net loss of Rs 19.39 crore for the third quarter ended December 31, mainly due to lower income. Its performance took a beating as income from operations fell to Rs 119.11 crore compared with Rs 184.67 crore in the year-ago period.
SRSL operates 11 sugar mills globally, with a total crushing capacity of 20.7 million tonnes per annum (MTPA) or 94,520 tonnes crushed per day (TCD). The company operates seven sugar mills in India with a total capacity of 7.1 MTPA, or 35,000 TCD, and two port-based sugar refineries with expected capacity of 1.7 MTPA.
“I would say this is a one-off transaction and cannot say this marks a revival of M&As in India,” said Deepak Kaushik, vice-president of capital markets group at SBI Capital Markets.