Renuka-Wilmar, one of India’s leading sugar makers, is in advanced stages of negotiations with Olam International, controlled by Singapore’s Temasek Holdings, for the sale of the latter’s sugar plant in Maharashtra.
The acquisition is likely to cost Renuka-Wilmar around Rs 350-400 crore.
For Olam, it is a strategic decision to exit its non-core business verticals like sugar business. The two companies have been in talks for a while now. Olam had already announced its plans to quit non-core businesses last year.
Olam International is a global united supply chain manager and processor of agricultural products and food ingredients. In fact, in 2019, it had declared that it would gradually exit from its sugar, fertilisers, rubber, and wood products businesses within a span of six years.
Olam has two sugar mills in India with a capacity to crush 1 million tonnes per annum. The plant under negotiation is located in Kohlapur and has a crushing capacity of more than 6000 tonnes per day. Olam bought this plant in 2011 from Hemarus Industries for about $74 million together with a cash payment of $8 million and an assumption of around $66 million debt.
The buy-out for Renuka-Wilmar would be a winner, as it would boost the sugar crushing capacity from the current 37000 tonnes to 43000 tonnes per day. After Wilmar took over the controlling shareholding, Renuka-Wilmar has been cleaning up their balance sheet and boosting capacity.
Renukas’ is one of the first mills in the country to be fully forward integrated into distillery (using molasses, a by-product of sugar) and co-generation (based on bagasse) operations, as per rating agency ICRA.
Meantime, with sight set on becoming one of the top three integrated sugar and ethanol companies in the world, Shree Renuka Sugars Limited (SRSL) has just announced its plans to infuse Rs 450 crore to expand its ethanol capacity.
At present SRSL’s distillery capacity stands at 720-kilo litre per day spreads across three locations in Karnataka. However, considering the huge untapped demand for ethanol given the recent policy initiatives of the government of India on ethanol blending, the company’s board of directors have approved capacity expansion for ethanol production to 1,400-kilo litre per day.