Cofco in race for Shree Renuka mill in Brazil

Chinese company Cofco Agri is among the three bidders to help India’s Shree Renuka Sugars pare debt in Brazil by selling one of its two mills in the Latin American country. The other two are Interface Brasil and Companhia Minerira de Acucar e Alcool (CMAA).

These three companies have submitted their interest in participating in the auction before the last day on August 9. The auction will be held on September 4. In two earlier attempts, first in 2016 and later in January 2017, no companies showed their interest in buying the sugar mill.

Sources said that China’s Cofco has aggressively positioned itself in taking control of the other sugar mill of Shree Renuka called Revati, as it already has presence in that region of Brazil.

Shree Renuka Sugars, India’s largest refiner, has a subsidiary called Renuka do Brasil in Brazil with a total crushing capacity of 10.5 million tonnes per year and is under judicial reorganisation there.

Cofco Agri is a subsidiary of Chinese State Food Company Cofco and it has a capacity to crush 15 million tonnes of sugarcane per season. Since its plants are located near Renuka’s Revati mill, the company has emerged as a frontrunner for taking over the control.

The Chinese company had earlier also showed interest in buying Renuka’s Madhu mill, but backed out citing lack of adequate sugarcane in the area, where the plant is located.

The other company CMAA, which has also registered to participate in the auction, last year acquired a mill of commodity trading form, Archer Daniels Midland (ADM) and its total crushing capacity now stands at 5 million tonnes per season.  The third major Interface Brasil has been scouting for a partner before the auction date so that it can get the Revati mill, sources said.

It has plans to increase sugarcane production in the area where this plant is located, to achieve 100 per cent crushing in the 6-million tonnes capacity plant in next four years, the sources add.

The total debt of the Renuka in Brazil is about Rial 2.2 billion (or Rs 4,412.74 crore), but it has got a discount and now will have to repay Rial 700 million (around Rs 1,400 crore) to settle the debt after a prolonged legal process, sources said.

By selling one unit, the Brazilian company will become debt-free, the sources added. Renuka had invested about Rs 1,900 crore in 2010 buying two loss-making plants there.

Shree Renuka Sugars could not be contacted as its office was closed on Sunday.

The Brazilian subsidiary — Shree Renuka do Brasil Participações Ltda (SRDBPL) together with all of its subsidiaries had filed for protection under judicial recovery in court in São Paulo in September 2015.

The court had approved the re-organisation plan of the company’s subsidiary Renuka Vale do Ivai S/A in July 2016 following which its debt declined by Rs 168 crore. The court also granted substantial reduction in interest rates as well, after it received approval to repay debt between 9 years and 15 years.