Renuka Sugars buys 51 pct stake in Equipav

MUMBAI (Reuters) India's biggest sugar refiner Shree Renuka Sugars Ltd said it had signed a definitive agreement for a 51 percent stake in Brazil's Equipav SA Acucar e Alcool for $329 million.

The Brazilian firm, which holds the sugar and alcohol assets of Equipav Group, owns two large sugar mills with integrated co-generation facilities, in southeastern Brazil, Shree Renuka Sugars said in a statement on Sunday.

The sugar mills have a combined annual cane-crushing capacity of 10.5 million tonnes and a co-generation capacity of 203 megawatts (MW), it said.

The Indian firm will expand the co-generation capacity to 295 MW and cane-crushing capacity to 12 million tonnes annually with additional capital expenditure.

"We don't have any plan to raise money to fund this acquisition," said K. K. Kumbhat, chief financial officer at Shree Renuka.

The company has already raised 5 billion rupees ($176.9 million) through a placement of shares to institutions and another 1.85 billion rupees would be added on conversion of warrants in the future and remaining amount of 8.3 billion rupees would be from internal accruals, he said.

At the end of December 2009, Equipav had a total debt of $822 million, which would be restructured through Brazilian banks within the next 40 days, Kumbhat said.

This is Shree Renuka Sugar's second major acquisition in more than three months in Brazil, the world's biggest sugar producer. The company acquired sugar and ethanol producer Vale Do Ivai S.A. Acucar E Alcool for $82 million in November 2009.

"After the commencement of new refinery we need 1.75 million tonnes of raw sugar annually. After this and earlier acquisition we will secure nearly half of that quantity," said Gautam Watve, who heads the company's strategy and planning.

The acquisition will provide the company access to cheaper Brazilian raw sugar needed for its refineries based on the eastern and western coasts of India and will make it the biggest producer of sugar in India, it said.

Shree Renuka's shares have more than doubled in the past year due to higher domestic sugar prices, which helped the company to post a net profit of 2.6 billion rupees in the quarter ended in December, from just 0.11 billion rupees the previous ago.

Shares of the company ended 2.31 percent lower at 179.9 rupees in a weak Mumbai market on Friday.

The rally in global sugar prices has prompted sugar producers worldwide to acquire assets in Brazil, which many analysts believe are a good buy.

U.S. agribusiness giant Bunge Ltd. in December said it would buy Brazilian sugar and ethanol producer Moema for $452 million.

India, the world's biggest sugar consumer, has allowed duty-free imports of raws and whites as it is battling rising prices due to a deficit in domestic output.

In 2009/10, India is likely to produce 15.3 million tonnes, falling severely short of domestic consumption of about 23 million tonnes for a second straight year, a Reuters poll showed, driving global prices to multi year high.

(Reporting by Rajendra Jadhav; editing by Karen Foster)