Narendra Murkumbi, founder promoter of Shree Renuka Sugars Ltd (SRSL) Belagavi, has resigned as vice-chairman and managing director after foreign partner Wilmar International increased its stake in the company to 39 per cent from 27 per cent. Wilmar will now have to make an open offer at Rs 16.29 per share, 5 per cent higher than Friday’s closing price.
Failed bets in Brazil and mounting debt have finally caught up with Naredra Murkumbi, the man who until today was known as the promoter of Shree Renuka Sugars, following the takeover Murkumbi has resigned but will continue to retain his post till the stipulated notice period of 90 days or completion of open offer by Wilmar.
The move is part of a debt restructuring exercise, which began last year when Renuka Sugars allotted the preferential shares at ₹16.27 each to Wilmar Sugar Holdings.
The company’s debt, which stood at ₹1,343 crore in September 2009, had grown to₹6,500 crore in 2017. This affected its profitability.
The terms of agreement also gave Wilmar Sugar Holdings options to receive allotment of 481.84 million, 0.01 per cent, preferences shares at a price of Rs 16.27 per share, which can be converted into equity shares. Last month, the Competition Commission of India had approved the company’s acquisition of additional stake in Shree Renuka Sugars.
Murkumbi happens to be a first generation entrepreneur who set up one of the most profitable sugar firms along with his mother, Vidya Murkumbi, in 1998and this was just 4 years after he graduated from IIM, Ahmedabad.
Murkumbi became the poster boy of Indian sugar industry, his company enjoyed a market cap of Rs 76 billion in early 2010 (it is just Rs 14.7 billion now). Renuka’s first acquisition in Brazil happened in November 2009. Three months after taking control of VDI, Murkumbi went for another Brazilian acquisition, Equipav SA in early 2010. The debt driven acquisition of these two loss-making companies, however, did not work. Brazil suffered a drought in 2011, hitting production. The global surplus in sugar weighed on prices. The enhanced capacity utilisation that Murkumbi had envisaged did not happen and the two acquisitions continued to bleed.
With inputs from ET, Rediff, Businessline, Business Standard