Bajaj Hindusthan close to buying Balrampur Chini: report

By Pallavi S & Madhav A Chanchani (VCCircle.com)

A report suggests that the promoters of Balrampur Chini could sell their stake for Rs 1,700-2,000 crore.

Bajaj Hindusthan, India’s number one sugar producer, is reportedly inches away from acquiring the promoters’ stake in Kolkata-based Balrampur Chini Mills, the second largest in the pecking order.

Moneycontrol has reported that the promoters of Balrampur Chini could sell their stake for Rs 1,700-2,000 crore and the deal is in final stages of negotiation. Promoters hold nearly a 37% stake in Balrampur Chini, which has a market capitalisation of around Rs 3,850 crore. Others like US-based BUNGE, Singapore-based Olam International and Tata & Lyle are also said to be in the race for the pie.

When contacted by VCCircle, a Bajaj Hindusthan spokesperson declined to comment. The acquisition of promoters’ stake will trigger an open offer for another 20% stake in the firm.

If indeed, a deal between the two takes place, it would create a sugar behemoth completely changing the landscape of the industry.

The possible deal will create clearly the largest sugar maker in the country with Bajaj Hindusthan overtaking close rival Shree Renuka Sugar in terms of both revenues and profits. Currently four sugar makers are close competitors-- Shree Renuka, Bajaj Hindusthan, Triveni Engineering and Balrampur Chini. Out of these, Triveni derives a large part of revenues outside sugar from steam turbines unit and as a result there are essentially three key players in the sugar business.

Last year both Bajaj and Shree Renuka had similar consolidated revenues of around Rs 2,100 crore and sales from sugar business at around Rs 1,800 crore. With a possible acquisition of Balrampur Chini, Bajaj's revenues is likely to shoot up over 70% on an annualised basis. Sugar business of the combined would be 50% more than the number two Shree Renuka. Bajaj had clocked losses last financial year as it had spent a lot of money to expand capacity which is likely to add to revenues and bottomline in the next upward cycle in the sugar industry.

Moreover, the recent changes in sugar pricing policy would also bring parity between sugar producers in the north and south and make the combined entity in north more powerful in profit generation than Shree Renuka which has been reaping the advantage of better margins in South.