Singapore-listed Olam International Ltd, a supplier of agri and food commodities, is acquiring Hemarus Industries Ltd at an enterprise valuation of $73.8 million or Rs 340 crore. The deal involves a cash payment of $8 million and part assumption of debt of approximately $66 million upon completion for the Hyderabad-based firm.
The deal will give Olam, a part of the Kewalram Chanrai Group, a sugar milling facility with a capacity of 3,500 tonne crush per day (TCD) and a 20 MW co-generation facility. Olam will further invest $6.6 million or Rs 31 crore to enhance the sugar milling capacity to 5,000 TCD.
Hemarus’ recently commissioned sugar milling facility is located in the sugar-growing region of Kolhapur (Maharashtra), along with a 20 MW co-generation plant capable of handling coal feedstock. The company also has licence to build a sugar mill in Belgaum district, with a 20 MW co-generation facility.
Hemarus is a five-year-old firm co-founded by Jayaram Chigurupati and Siva Rama Prasad Jetty. Chigurupati is also the founder of Zenotech, another Hyderabad-based biotech firm which is now controlled by Daiichi Sankyo. Although he has lost the control of the company after a bitter corporate battle with the Japanese firm that gained significant indirect holding in Zenotech after it acquired Ranbaxy Labs, Chigurupati continues to own around 25 per cent in Zenotech.
Hemarus is expected to contribute revenues of $90-$100 million, with an expected return on equity of 32 per cent, a statement by Olam said.
“This acquisition is another step forward in our plans to build a configuration of sugar milling assets in large sugar-producing countries which have a comparative cost advantage. In this regard, we had made our first investment in India, which is the world’s second largest sugar producer and the world’s largest sugar consumer when we acquired Giridharilal Sugar and Allied Industries in Madhya Pradesh in November 2008,” said Devashish Chaubey, Olam’s president for the sugar business.
“This acquisition strengthens our position in the Indian sugar industry and is in line with our stated strategic objective of building an annual sugarcane crush capacity between 2-2.5 million tonne over the course of the next five years,” said Sanjay Sacheti, Olam’s regional head for India and SAARC countries.
Olam International is a global integrated supply chain manager and processor of agricultural products and food ingredients, sourcing 20 products and supplying them to more than 11,600 customers across the globe. The company has a direct presence in 65 countries.
In another recent deal, NSL Sugars Ltd acquired Jay Mahesh Sugar Industries Ltd for an enterprise value of Rs 231 crore or $51.4 million.