Renuka Sugar's Brazilian arm applies for bankruptcy protection

After the announcement, shares of Renuka Sugars fell by 2.98% in late afternoon trade on BSE

Sugar refiner Shree Renuka Sugars today said its Brazilian subsidiary has filed for bankruptcy protection as its operations were hit by a crash in sugar prices in the last two years.

After the announcement, shares of Renuka Sugars fell by 2.98% in late afternoon trade at Rs 7.50 apiece on BSE.

Mumbai-based Renuka Sugars had in 2010 forayed into Brazil, the world's largest sugar producer, by investing Rs 1,765.10 crore to acquire stakes in Renuka do Brasil and Renuka Vale do Ivai.

"Brazilian subsidiary Shree Renuka do Brasil Participacoes Ltd (SRDBPL) together with all of its subsidiaries (collectively 'Renuka Brazil'), has filed for protection under Judicial Recovery... in the designated court in the capital of the state of Sao Paulo," Renuka Sugars said in a regulatory filing.

Renuka Brazil expects that the court will authorise it to conduct its business as usual while it makes efforts to find a long-term sustainable solution for its capital structure, the filing added.

"After acceptance of the request under Judicial Recovery Law, Renuka Brazil will be under judicial protection for 180 days during which Renuka Brazil has to present a plan to the court for approval with creditors, including banks," the company said.

It further said it believes that restructuring under judicial recovery is the best way to reorganise, protect its Brazilian subsidiaries and provide a path to eventual turnaround in Brazil.

SRDBPL has two major subsidiaries - Renuka do Brasil SA in Sao Paulo and Renuka Vale do ivai SA in Parana.

Renuka Sugars said that its sugar business in Brazil has been quite steady this year, with combined cane crushing of 5.7 million tonnes till September 27 this year.

However, the operations of both Brazilian subsidiaries have been impacted due to vagaries of weather, including frost and drought in last few years, coupled with low sugar prices for the last two years.

The Indian firm had invested Rs 1,312.60 crore in 2010 to acquire 59.4% stake in Renuka do Brasil SA, which has cane crushing capacity of 10.5 million tonnes per annum. It also acquired 100% stake in Renuka Vale do ivai SA for Rs 452.50 crore.