Shree Renuka Sugars to raise $350 million through its Brazilian arm

India’s largest sugar manufacturer Shree Renuka SugarsBSE -5.50 % is looking to raise around $250-350 million (Rs 1,350-1,925 crore) through a bond sale through its Brazilian subsidiary, Renuka Do Brasil S/A, or RDB, three people with knowledge of the development said. These bonds will carry a guarantee from the listed Indian parent, these people said.

“The company will soon seek approval from the board,” one of the three people said. “The company targets raising around $250 million with an upside (green shoe option) of another $100 million.” The plan to raise money through bond sale comes after the company tried selling stake in two of its Brazilian subsidiares last year to raise around $250 million.

Last year, the company failed to raise money from Brazilian sugar manufacturer ETH Bioenergia owned by three partners, PE fund Ashmore, Brazilian Brandes Bank and Brazilian conglomerate Odebrecht, by selling stake in the Brazilian company. The talks fell off on valuation mismatches.

Credit Suisse’s Brazil is said to be advising the company on the bond sale. “The term sheet of the bond offering is in the drafting stage and finer details of the bond, like its coupon and tenure will be known only later,” another person said. Shree Renuka Sugars managing director Narendra Murukumbi did not respond to the emailed questionnaire that ET sent.

Shree Renuka Sugars purchased controlling stake in Equipav SA Acucar e Alcool (Now renamed as Renuka Do Brasil) for Rs 1,530 crore in 2010 and later hiked its stake to 60%. The original owners of the company continue to hold the remaining stake in the company. It owns another subsidiary in Brazil called Renuka Vale do Ivai S/A (VDI). Revenues of the Brazilian company have been witnessing a dip on back of a lower sugar cane production as drought hit Brazil.

Share price of Shree Renuka Sugars closed 0.21% down at Rs 23.65 a share on theBombay Stock Exchange on Tuesday.

According to an April 17 report by ICICI Direct, Shree Renuka Sugar’s Brazilian operations (mainly Renuka do Brasil) are still suffering despite production levels having improved significantly. “We continue to believe that woes of the Brazilian operations are far from over. Simultaneously, consolidated debt levels for the company remain a big concern,” the report authored by Sanjay Manyal and Parineeta Poddar said.

Sugar production for the Brazilian subsidiary improved, led by higher sugarcane cultivation and increased diversion (63% compared with 56%) towards sugar. RDB posted a loss of Rs 75 crore and a cash profit of Rs 31.2 crore. VDI posted a profit of Rs 14.1 crore and a cash profit of Rs 61.3 crore.

“Though volume for the Brazilian subsidiary has increased, it has still not become profitable due to a decline in realisations and high interest cost. We believe the company needs to deleverage its balance sheet to increase its cash profit and avail the benefit of higher production levels,” the report added.

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