Presentation on acquisition of Pratapur Sugar by Bajaj Hindustan prepared as part of M&A course

1. BAJAJ HINDUSTAN
&
PARTAPPUR SUGARS
Group 4
Navin Bafna
Preet Sabharwal
Hardik Doshi
Sajeev Rao

2. The Deal………..
 30th August 2005
 Bought 55% though SPA @ Rs55/- per share
 Bought another 4.81% through open offer @
63.50/- per share
 Plant capacity 3200 Tcd
 Located in eastern UP

3. VALUATIONS
 Market Price of the share using the SEBI
formula Rs 56.80/-
 Book Value Rs 13.47/-
 EPS for 2005 was negative Rs -1.62/-

4. Valuation in Sugar Industry
Capacity Replacement Cost per unit Replacement Cost (Crores)
Sugar (TCD) 3200 200000 64
Alcohol (KLPD) 25 250000 0.625
Total Cost 64.63
Total Debt 5.18
Net cost 59.45
Total no of shares 3600000
Cost Per share 165
Discount Replacement 20%
Net Price per Share 132

5. Book Value = Rs13.47 Replacement Cost = Rs 132
Acquisition Cost = Rs 55.70
EPS Last 3 Yrs = Rs 1.2
Industry PE = 11.6
Value = 13.92 Market Price = Rs 56.8

6. Synergy……………
 Most of the big capacities are in West UP
 Pratappur was in eastern UP
 Most of the government factories were in eastern UP
 The idea was to get relations with farmers before hand
 After 14 months Shishir Bajaj bid for 11 east UP factories
 It gives him direct route to Bihar and other states
 The Travelling time between Agricultural land and factories is a major
factor in Sugar business
 Only 1/5 of the possible land was under efficient sugar cultivation in East
UP due to government inefficiency

7. DCF valuation not Jusitified
 As the revenues coming from sugar sell are
market priced
 The sugar cane prices are also uncertain
 Sugar cane prices comprises more than 70% of
the total costs

8. Business Intelligence

9. Capacity Expansion
SS 2008
-3 new Sugar mills with
34,000 TCD Capacity
SS 2006 taking total capacity to
SS 2007
1 Mill, 3200 Cap expanded 40,000 TCD
TCD - New Distillery of 160
to 6000 TCD
KLPD
- Exportable Co-gen
15 MW
210
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10. Company Overview
1. BHSIL among India’s top 5 Sugar manufacturers
2. Capacities in place:
Sugar : 40,000 TCD (4 Units, all in Eastern UP)
Distillery : 160 KLPD
Co-Gen : 15 MW Exportable surplus
6.Ideally positioned to service sugar deficient North Eastern / Eastern markets, where
Sugar realisations are marginally higher
7. Synergies with parent which has mills in Western & Central UP
8.Close proximity to Kolkata provides opportunity to export sugar, if reqd.
9.Support from multilateral agencies like IFC through subscription to FCCBs indicates
confidence in business model and the company management
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11. Thank You
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