BCML buys 51% stake in Tulsipur Sugar

Explaining the rationale of the acquisition, Vivek Saraogi, managing director of BCML said: "Tulsipur and Balrampur had identical capacities in the late fifties when they were part of the same group. They also have comparable command areas for cane cultivation. Tulsipur has the potential to feed a 5,000tcd sugarmill."

With the takeover of Tulsipur Sugar, BCML will have three plants located within a radius of 100 km (Tulsipur is 40 km from Balrampur in east UP). According to company sources, the inter-unit flexibility in operations will increase "thereby ensuring that cane availability in all three factory command areas is distributed in such a manner that crushing operations are completed during the peak recovery period – November to March/April."

The proximity of the plant is also expected to improve utilisation of Tulsipur’s output of molasses at Balrampur’s alcohol distillery. Saraogi pointed out that the takeover will also increase cane output for Tulsipur in the 1998-99 season as farmers are "aware of our track record in cane payments." Saraogi categorically stated that immediately after the acquisition process was over, BCML would proceed with expansion of the crushing capacity at Tulsipur. Company sources informed that the plant capacity would progressively be raised to 10,000 tcd to match the capacity ofBalrampur.

Funding of the expansion programme would be made out of debt and soft loans from the centre. As a result of this acquisition, BCML’s crushing capacity will go up from 16,000 tcd (Balrampur-10,000 tcd; Babhnan- 6000 tcd) to 18,500 tcd straightaway with a further addition of 2,500 tcd on completion of the expansion project.

As for Tulsipur Sugar’s fundamentals, it had a crushing capacity of 2,500 tcd and a gross block of Rs 22.20 crore on March 31, 1997.

Its current day replacement cost, according to Saraogi, works out to Rs 55 crore. The book value stood at Rs 33.