Bangalore: The agri business arm of the GMR group, GMR Industries Ltd (GIL) has acquired a dormant cooperative sugar mill in Belgaum, Karnataka, through a 25-year lease agreement under a build, own, operate and transfer basis in an effort to further strengthen its presence in the ethanol business.
According to V. Raghunathan, managing director of GIL, work on the mill—Shri Dhanalaxmi Sakkare Kharkhana Niyamit, with a capacity of 2,500 tonnes (of sugar cane) crushed per day (tcd) and a cogeneration power plant to produce 7MW power per annum started in 2002—was 80% complete but had stalled because of certain financial problems.
GIL acquired the mill in a bidding process. The company said more than the sugar business itself, it was interested in ethanol, a by-product with growth potential as the government is making it mandatory for 10% ethanol to be blended with fuel.
GIL expects to complete the remaining 20% of the work by investing an additional Rs30 crore and the mill is expected to go on stream by January.
“To set up a similar greenfield venture, it would cost anything between Rs275 crore and Rs300 crore. Also the recovery rate of sugar from molasses here is a high 12% compared with 6-9% elsewhere because of its good catchment area,” said Raghunathan.
He declined to disclose the terms of the lease agreement between GIL and the cooperative.
Over the next four years, it would expand capacity of the mill to 4,000tcd with a cogeneration capacity of 14MW of power with incremental investment, GIL said.
GIL already has a 5,000tcd, fully integrated plant in Andhra Pradesh and is setting up another 3,500tcd greenfield unit at Haliyal in Karnataka.
“After both the Belgaum and Haliyal units come on stream, we would have more than doubled our capacity from 5,000tcd to 11,000tcd,” Raghunathan added.
GIL looks after the GMR group’s interests in sugar and jute. Sugar accounts for 67% of GMR Industries’ revenues. The group is into businesses such as airport development, power and road building.
For the year ended March, GIL posted revenue of Rs202.7 crore and a net profit of Rs19.87 crore. On the Bombay Stock Exchange, shares of the company lost around 1% to close at Rs141 on a day when the exchange’s benchmark index Sensex rose 1.39%.