Bajaj Hindusthan Plans $500 Million Brazil Investment
Aug. 22 (Bloomberg) -- Bajaj Hindusthan Ltd., India's biggest sugar company, plans to invest $500 million in Brazil, the world's largest producer of the sweetener, to tap the growing market for alternative fuels.
Chief Executive Kushagra Nayan Bajaj wants to acquire mills in South America that can produce sugar and ethanol, helping the Mumbai-based company build on a 10-fold increase in crushing capacity that has driven four years of record profits.
``If I need to grow exponentially I need to be in Brazil,'' Bajaj, 29, said in an interview on Aug. 17. ``If an investor expects another 10-fold increase out of me in the next five years, or three years, I can't do it in India.''
Bajaj Hindusthan is expanding in the world's No. 1 ethanol market, where production costs are half the global average, as record-high crude oil prices boost the alternative fuel's appeal. Cargill Inc. is increasing ethanol exports from Brazil by a fifth this year, while Societe Generale is backing a $500 million fund that aims to acquire sugar mills in the nation.
``Sugarcane area can't be increased in India and whatever expansion Bajaj Hindusthan had to do in India it has done,'' Vinit Birla, an analyst at Pranav Securities Ltd., said in Mumbai. He has a ``buy'' rating on the company's stock.
Bajaj said he expects the 75-year-old sugar producer to meet its annual profit target this year as it releases stocks built up in the past quarter. Four years of profit growth have lifted shares of Bajaj Hindusthan 23-fold in the past three years, valuing the company at $1 billion.
Bajaj is the great grandson of Jamnalal Bajaj, founder of the Bajaj Group, which has companies that make scooters to sugar to hair oil to electric bulbs.
Ethanol Expansion
In India, Bajaj Hindusthan is expanding its ethanol-making capacity to 800 kiloliters a day, equivalent to 10 percent of the nation's total, from 320 kiloliters a day. It's also boosting power generation capacity to 270 megawatts from 151 megawatts. Ethanol and power are produced from byproducts of sugar -- molasses and bagasse.
Shares of Bajaj Hindustan gained 1 percent to 337.7 rupees, compared with a 0.7 percent rise in the benchmark Sensex index.
The stock has fallen 16 percent since India, the world's biggest consumer of sugar, on July 4 banned exports of sugar through March 2007 to all countries except the U.S. and the European Union.
``There is a negative sentiment in the market because of the government ban on exports,'' Soumendra Nath Lahiri, who helps manage about $2 billion in Indian equities at DSP Merrill Lynch Fund Managers Ltd. in Mumbai.
Brazilian Push
Ethanol costs about 19 cents a liter to produce in Brazil, compared with a world average of 40 cents, according to KPMG International. Brazil added 19 new cane-processing mills this year as rising global demand for the sweetener encouraged investments, according to data from the Center-South Sugarcane Industry Association.
Cargill, the largest U.S. agricultural company, expects to export 600,000 cubic meters (159 million gallons) of ethanol from Brazil in the crop year ending April, 20 percent more than in the previous year, Luiz Pretti, financial director of the company's Brazil unit, said in May.
Societe Generale, France's third-largest bank, holds a 7.8 stake in a fund set up by Patrick Funaro, a former sugar broker at the bank's Fimat USA unit in New York, to acquire mills.
Slower expansion in the area planted to sugarcane in India, the world's second-biggest sugar producer, and curbs on exports of the sweetener by the Indian government are also encouraging Bajaj to enter the South American nation.
``I can own land in Brazil and expand my capacity,'' said Bajaj, who's briefed morning and evening by the 11-strong team he's set up in Brazil ``Ninety-eight percent of my time, energy and life is focused on Brazil.''
Profit Target
Bajaj said the sugar maker expects to meet its annual profit target of 2.66 billion rupees for the year ending Sept. 30. That indicates fourth-quarter profit of 1.13 billion rupees, according to Bloomberg calculations, compared with 557.9 million rupees a year earlier.
Indians, the world's biggest sugar consumers, are buying more colas, chocolates, pastries and biscuits as economic growth boosts wages. That's encouraging companies to expand.
The sugar maker, along with its unit, is more than doubling sugarcane crushing capacity to 150,000 tons a day in India from 59,000 tons by November 2007, Bajaj said. That compares with 14,000 tons in 2002.
The company is also spending 2.4 billion rupees through its new unit BHP Agro Products Pvt. to make medium density fiber board and particle board by using bagasse as the key raw material. The boards will be used to make furniture, Bajaj said.
``They have expanded in the domestic market quickly,'' said Anoop Bhaskar, who helps manage $1.2 billion at Chennai-based Sundaram BNP Paribas Mutual Fund, including Bajaj Hindusthan shares. Rising profit ``will help the company acquire plants overseas and make it a big player in the world market as well.''
Aug. 22 (Bloomberg) -- Bajaj Hindusthan Ltd., India's biggest sugar company, plans to invest $500 million in Brazil, the world's largest producer of the sweetener, to tap the growing market for alternative fuels.
Chief Executive Kushagra Nayan Bajaj wants to acquire mills in South America that can produce sugar and ethanol, helping the Mumbai-based company build on a 10-fold increase in crushing capacity that has driven four years of record profits.
``If I need to grow exponentially I need to be in Brazil,'' Bajaj, 29, said in an interview on Aug. 17. ``If an investor expects another 10-fold increase out of me in the next five years, or three years, I can't do it in India.''
Bajaj Hindusthan is expanding in the world's No. 1 ethanol market, where production costs are half the global average, as record-high crude oil prices boost the alternative fuel's appeal. Cargill Inc. is increasing ethanol exports from Brazil by a fifth this year, while Societe Generale is backing a $500 million fund that aims to acquire sugar mills in the nation.
``Sugarcane area can't be increased in India and whatever expansion Bajaj Hindusthan had to do in India it has done,'' Vinit Birla, an analyst at Pranav Securities Ltd., said in Mumbai. He has a ``buy'' rating on the company's stock.
Bajaj said he expects the 75-year-old sugar producer to meet its annual profit target this year as it releases stocks built up in the past quarter. Four years of profit growth have lifted shares of Bajaj Hindusthan 23-fold in the past three years, valuing the company at $1 billion.
Bajaj is the great grandson of Jamnalal Bajaj, founder of the Bajaj Group, which has companies that make scooters to sugar to hair oil to electric bulbs.
Ethanol Expansion
In India, Bajaj Hindusthan is expanding its ethanol-making capacity to 800 kiloliters a day, equivalent to 10 percent of the nation's total, from 320 kiloliters a day. It's also boosting power generation capacity to 270 megawatts from 151 megawatts. Ethanol and power are produced from byproducts of sugar -- molasses and bagasse.
Shares of Bajaj Hindustan gained 1 percent to 337.7 rupees, compared with a 0.7 percent rise in the benchmark Sensex index.
The stock has fallen 16 percent since India, the world's biggest consumer of sugar, on July 4 banned exports of sugar through March 2007 to all countries except the U.S. and the European Union.
``There is a negative sentiment in the market because of the government ban on exports,'' Soumendra Nath Lahiri, who helps manage about $2 billion in Indian equities at DSP Merrill Lynch Fund Managers Ltd. in Mumbai.
Brazilian Push
Ethanol costs about 19 cents a liter to produce in Brazil, compared with a world average of 40 cents, according to KPMG International. Brazil added 19 new cane-processing mills this year as rising global demand for the sweetener encouraged investments, according to data from the Center-South Sugarcane Industry Association.
Cargill, the largest U.S. agricultural company, expects to export 600,000 cubic meters (159 million gallons) of ethanol from Brazil in the crop year ending April, 20 percent more than in the previous year, Luiz Pretti, financial director of the company's Brazil unit, said in May.
Societe Generale, France's third-largest bank, holds a 7.8 stake in a fund set up by Patrick Funaro, a former sugar broker at the bank's Fimat USA unit in New York, to acquire mills.
Slower expansion in the area planted to sugarcane in India, the world's second-biggest sugar producer, and curbs on exports of the sweetener by the Indian government are also encouraging Bajaj to enter the South American nation.
``I can own land in Brazil and expand my capacity,'' said Bajaj, who's briefed morning and evening by the 11-strong team he's set up in Brazil ``Ninety-eight percent of my time, energy and life is focused on Brazil.''
Profit Target
Bajaj said the sugar maker expects to meet its annual profit target of 2.66 billion rupees for the year ending Sept. 30. That indicates fourth-quarter profit of 1.13 billion rupees, according to Bloomberg calculations, compared with 557.9 million rupees a year earlier.
Indians, the world's biggest sugar consumers, are buying more colas, chocolates, pastries and biscuits as economic growth boosts wages. That's encouraging companies to expand.
The sugar maker, along with its unit, is more than doubling sugarcane crushing capacity to 150,000 tons a day in India from 59,000 tons by November 2007, Bajaj said. That compares with 14,000 tons in 2002.
The company is also spending 2.4 billion rupees through its new unit BHP Agro Products Pvt. to make medium density fiber board and particle board by using bagasse as the key raw material. The boards will be used to make furniture, Bajaj said.
``They have expanded in the domestic market quickly,'' said Anoop Bhaskar, who helps manage $1.2 billion at Chennai-based Sundaram BNP Paribas Mutual Fund, including Bajaj Hindusthan shares. Rising profit ``will help the company acquire plants overseas and make it a big player in the world market as well.''
