The company, which is set to buy UP-based Anamika Sugar Mills Pvt. for approximately Rs 200 crore, is diversifying geographically.

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"If you look at Renuka's asset base, we are largely concentrated in the states of Karnataka and Maharashtra. So we had to de-risk our business geographically, and that is the reason we went to UP," said Atul Chaturvedi, executive chairman of Shree Renuka Sugar.

 

The company found it logistically difficult to transport sugar as it was only present in western and southern India, he said. "Sending Madhur (its retail brand) from western and southern India was a logistical nightmare, so it made more sense for us to be present in the most populous part of the country," Chaturvedi said.

 

Increasing Capacity

The company has a cane crushing capacity of close to 6.2 to 6.3 million tonnes in Maharashtra and Karnataka. With the acquisition, the company will have a capacity of more than 7 million tonnes, he said.

 

"Going forward, we will look at making ethanol in UP in the future. As a company, we have focused on ethanol in the long term," said Chaturvedi.

 

Domestic Prices

International sugar prices are elevated; domestic sugar prices will remain firm but will not mirror world sugar prices.

 

"My take is that Indian sugar values will remain relatively firm but cannot go through the roof. The delta between international and domestic sugar values as of today could be more than Rs 20 a kilo. With exports not likely to happen, the sugar values should remain more or less at the same level."

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The company's management expects the sugar industry to perform well.

 

"My take is that the sugar sector should do well in years to come, as ethanol play has become a big game changer because it ensures that sugar produced during crushing season need not be carried fully for the off season, and that should be helping the cash flow of the sugar sector. The interest burden also gets reduced," said Chaturvedi.