Shree Renuka Sugars would raise another Rs 725 crore from the proposed rights issue in which both existing promoters and Wilmar would participate. The total Rs 1,242 crore raised would be utilised to cut the debt.
The Board approved allotment of up to 25.75 crore fresh shares at Rs 20.08 each for Rs 517.04 crore to Wilmar Sugar Holdings (WSH), a wholly-owned arm of Wilmar International, on preferential basis, the company said in a filing to the BSE.
"After issue of fresh shares, Wilmar will have 27.5 per cent stake in Renuka Sugars, while promoters stake will also come down to 27.5 per cent," Shree Renuka Sugars Vice-Chairman and Managing Director Narendra Murkumbi told PTI.
As on December 31, promoters held 38.36 per cent stake in the company.
Murkumbi said the total equity infusion in the company would be Rs 1,242 crore (USD 200 million).
"Our current domestic debt stands at Rs 3,700 crore and after this fund raising the debt will come down to Rs 2,460 crore," he said, adding that the debt equity ration would fall below 1:1 ratio.
Asked about the investment to be made by Wilmar, he said it would be difficult to give exact number as there would be open offer and rights issue after the preferential allotment.
In a statement, Shree Renuka Sugars said it has entered into an agreement with WSH to facilitate the "investment of about USD 200 million" in the primary capital of the company.
Shree Renuka Sugars said the deal would be done in two steps. First, WSH would invest up to Rs 517 crore in the company through a preferential allotment of fresh equity. This would trigger an open offer by WSH and the existing promoters for up to 26 per cent of the expanded share capital at Rs 21.89 per share.
"The second step would involve Wilmar and the existing promoters jointly participating in a rights issue to raise upto a further Rs 725.4 crore of primary equity capital for Shree Renuka Sugars," the statement said.
Under a joint venture agreement signed between existing promoters, WSH and the company, Shree Renuka Sugars would be jointly controlled by the existing promoters and Wilmar with both companies holding equal stakes and board representation.
The existing promoters would continue with the management of company, while Wilmar would be "actively involved in strategic decisions".
Shree Renuka Sugars operates 11 sugar mills in India and Brazil with a total crushing capacity of 20.7 million tonne per annum and two port-based refineries with sugar production capacity of 1.7 million tonnes per year.
Wilmar's business activities include oil palm cultivation, oilseeds crushing, edible oils refining, sugar milling and refining, specialty fats, oleochemicals, biodiesel and fertilisers manufacturing and grains processing.
It has a market cap of about USD 17 billion and revenues of USD 44.1 billion, with profit of USD 1.3 billion in FY2013.
The investment is subject to approval of shareholders, anti-trust clearances in India and Brazil and other statutory clearances as may be deemed necessary.
"As a strategic shareholder, WSH's shareholding in Renuka Sugars and the capital infusion will strengthen the company's financial and business position and also provide a further platform for growth. Wilmar's global reach and strong presence in key sugar producing countries is complementary to Shree Renuka’s business," the statement said.
Commenting on the deal, Murkumbi said: "This is a path- breaking move in the sugar business which would create a very strong partnership in some of the key global markets for sugar. Wilmar's leadership position in the edible oil business globally and its strong reach in several countries across the world would be synergistic with our large footprint in India and Brazil."
Wilmar Chairman and CEO Kuok Khoon Hong said: "India is a very important market for Wilmar. Besides the benefit for our sugar business, this venture will complement the development of our edible oils and other businesses in India."