Vishwaraj Sugar eyes expansion, to bring IPO by March

Karnataka-based Vishwaraj Sugar Industries is planning to double its cane-crushing capacity to 11,000 tonne per day, which will make it the first mill to go for expansion after the Rangarajan panel suggested complete de-regulation of the sugar sector in October. The company plans to hit the capital market in late February or March to raise R374 crore to fund the expansion, according to its executive director Mukesh Kumar.

?The company will use the proceeds of the IPO for expansion, which includes doubling cane-crushing capacity from the current 5,500 TCD (tonne crushed per day),? Kumar said. The Securities and Exchange Board Of India, the capital market regulator, has already given its approval for the IPO, Kumar said.

The company also plans to almost treble its distillery capacity to 1,00,000 litres per day from the current 35,000 litres. This will help it double its production capacity of Indian-made foreign liquor (IMFL) to 5,000 boxes a day, Kumar said. Vishwaraj Sugar would also use part of the IPO proceeds to expand its power co-generation capacity to 66 MW from the current 36 MW. At present, the company has surplus power of 22 MW, of which 14 MW is sold through Tata Power Trading Company while the balance is supplied to Hubli Electricity Supply Company. Kumar said the company would take a bank loan of R70 crore to meet its total expansion expenditure of R425 crore.

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He said sugar mills in Karnataka are doing better than those in Uttar Pradesh and Maharashtra, thanks to high recovery rates and a reasonable cane purchase price. Vishwaraj Sugar has an association with farmers of 49 villages for assured cane supplies. ?The Rangarajan panel report has cretaed a feel-good factor… which is good for the industry in the long term,? Kumar said.

The Rangarajan panel has recommended freedom for mills from the obligation of supplying subsidised sugar for state-run welfare programmes. It has suggested scrapping the monthly sugar sales quota fixed by the government and linking sugar price to that of cane and other by-products.