Simbhaoli Sugar lines up rights to fund spread

The Simbhaoli Sugar Mills, an integrated sugar refinery, has come out with a rights issue of 4 shares for every 5 held to raise Rs 52.70 crore to part-fund its expansion.

The company plans to expand its production capacities at Simbhaoli (western Uttar Pradesh) to 9500 TCD from the current level of 7500 TCD and Chilwaria from 3800 TCD to 6000 TCD.

The ethanol capacity of Simbhaoli Distillery unit has also been increased from 60,000 litres per day to 90,000 litres per day. The additional capacity at Chilwaria unit as well as the proposed plant will start sugar production in October 2006.

The company also announced setting up a new sugar plant in village Brijnathpur in Ghaziabad.

"The total cost of expansion is estimated at Rs 80 crore of which Rs 30 crore would be met through internal accruals while Rs 20 crore more would be spent on development of land, plant & machinery purchase. Remaining Rs 30 crore was proposed to be spent on long term capital investment", said G S C Rao, executive director, on Tuesday.

"The relationship with sugarcane farmers is good and they have a long-term contracts to supply sugarcane to us. Hence, the company has bright potential for sugarcane crushing," Rao said adding "We are in sugar consuming belt. Delhi - the national capital - is closed to us. Therefore, our growth prospects give an edge for development."

Per capita sugar consumption in India is much lower at 17 kg compared with 54 kg of that of Brazil. Hence, there was a lot of potential for growth in sugar consumption.

"Simbhaoli Sugar was also exploring potential in Pakistan, Nepal and other west Asian countries where per capita consumption is much lower. The company has also tied up with Dubai base company to sell sugar under the brand name of "SOM" in Qatar, Oman and Dubai with an initial offerings of 2000 tonnes. As and when demand arises we will raise the export quantity as well", Rao added.

The company produces all possible products and utilises maximum potential to use the resources from sugar to sugarcane, bagasse to power etc.

"Bagasse produced at our plant is used for power generation in house. At Simbhaoli, we generate 13 megawatt and consume 8 megawatt while at Chilwaria we generate 8 megawatt power and consume 5 megawatt. Remaining 8 megawatt power from both plants is exported to the nearby areas", Rao quipped.