Shree Renuka Sugars, India's biggest refiner has announced that it has acquired Brazilian company Equipav SA Acucar e Alcool for Rs 1,530 crore.

Equipav is the seventh-largest sugar maker in the world's largest sweetener producing country with a capacity 10.5 million tonne a year. The company has two plants in Sao Paolo.

Shree Renuka, based in Belguam, Karnataka has made the acquisition in a bid to improve access to supply of raw material as the supply of sugar in the country has declined leading to higher prices.

The Managing Director of Shree Renuka Narendra Murukumbi has said that the banks will assist the company in restructuring the Brazilian company's debts.

He also said that after the acquisition "the total cane crushing capacity is expected to go up to 70,000 tonne crush per day." The company has paid less than replacement value and indicates that it not looking for more acquisitions at the moment.

India is the world's largest consumer of sugar and will import around 7 million tonne this year as poor monsoon has affected the cane production. Between October 1, 2009, and September 30, 2010 the country produced 15.5 million tonne of sugar and the demand was at 23 million tonne.

In November, Shree Renuka acquired another company in Brazil, Vale Do Ivai Acucar E Alcool which produces sugar and ethanol, for $240 million. The company said it acquired 50.8% stake with provisions to acquire further stake later from the promoter.

The deal is to be funded by funds raised by the company from selling shares to institutional investors and convertible warrants to promoters as well as internal accruals, informed Mr. Gautam Watve, head of strategy and planning.

The company raised Rs 500 crore through a qualified institutional placement in July last year and the promoters contributed Rs 185 crore through conversion of warrants.

The Brazilian firm will use the capital to scale up its capacity, reduce debt and meet working capital requirements. The company plans to raise capacity by 14% to 12 million tonnes a year. This along with the other possession of the company, Vale would make Shree Renuka among the top five sugar makers in Brazil.

Vale had a debt of Rs 3,821 crore as on December 31, 2009 which will be negotiated with the lenders.

Shree Renuka processed about 0.65 million tonne of raw sugar between October 2008 and September 2009, and plans to refine 1.2 million tonne in 2009-10. It is also involved in the field of ethanol, or ethyl alcohol, from molasses.

The promoters of Eqipav are involved in sectors like highway concessions, bus terminals, water and sewage plants, electricity generation, mortar production, waste management and maintenance of green areas decided to sell their stake in the sugar company in 2009.

Banco Itau BBA, Brazil, and Motilal Oswal Investment Advisors acted as the strategic and financial advisors to Shree Renuka. Veirano e Advogados Associados, Brazil, and Crawford Bayley & Co acted as legal advisors.

The shares of Shree Reunka Sugars declined 4% to close at Rs 180 on Friday. The company is valued more than Rs 5,650 crore at current market prices.