Introduction
Shree Renuka Sugars Ltd is an Indian sugar manufacturing and refining company incorporated in 1995. The company operates across multiple segments, including sugar production, ethanol manufacturing, and power generation. With a current share price of ₹42.6 and a market capitalization of ₹9,061 crores, Shree Renuka Sugars holds a significant position in the sugar industry. In this blog, we'll delve into the company's financial performance, key developments, and future prospects to understand its current standing.
Key Financial Metrics
| Metric |
Value |
| Current Price |
₹42.6 |
| Market Cap |
₹9,061 Cr |
| Book Value |
₹-0.68 |
| Dividend Yield |
0.00% |
| ROCE (Return on Capital Employed) |
9.61% |
| ROE (Return on Equity) |
-419% |
| Face Value |
₹1.00 |
Observations:
- The ROCE of 9.61% indicates moderate efficiency in capital utilization.
- A negative ROE of -419% suggests significant losses impacting shareholder equity.
- The Book Value being negative at ₹-0.68 implies that liabilities exceed assets.
- The Dividend Yield is 0%, indicating the company is not paying dividends.
Company Overview
About
Shree Renuka Sugars Ltd specializes in:
- Sugar Manufacturing and Refining: The company is the fourth largest sugar manufacturer in India and the largest sugar refinery.
- Ethanol Production: Produces various grades of ethanol for fuel blending.
- Power Generation: Generates power using bagasse and coal, selling surplus to state grids.
Business Divisions
-
Sugar Business (92% of Q1 FY25 Revenue):
- Sugar Milling: Operates 8 mills with a crushing capacity of 37,500 TCD.
- Sugar Refinery: Runs 2 refineries with a capacity of 5,500 TPD.
- Branded Sugar: The flagship brand Madhur holds around one-third of the branded sugar market, with branded sales forming 50% of total sales.
- Performance: Refinery segment revenue grew by 116% between FY22 and FY24 due to increased sales volumes and higher realizations.
-
Distillery (4% of Q1 FY25 Revenue):
- Produces ethanol used for fuel blending.
- Production Decline: Ethanol production decreased due to restrictions on production from cane juice and B-Heavy molasses.
-
Co-generation & Other (4% of Q1 FY25 Revenue):
- Uses by-products for power generation.
- Power Sales: Sold 177 million units to the grid in FY24, down from 257 million units in FY22.
Geographical Split
- Exports: Accounted for 75% of revenue in FY24, up from 69% in FY22.
- Domestic Sales: Made up the remaining 25% in FY24.
Expansion and Acquisition
- Distillery Capacity Expansion: Aimed to double capacity from 720 KLPD to 1,400 KLPD; reached 1,250 KLPD by FY24.
- Acquisition of Anamika Sugar Mills Pvt. Ltd:
- Acquired a 100% stake for ₹345 Cr in October 2023.
- Expanded presence in Uttar Pradesh with plans to increase crushing capacity beyond 4,000 TCD.
Financial Performance
Quarterly Performance
| Quarter |
Sales (₹ Cr) |
Operating Profit (₹ Cr) |
OPM (%) |
Net Profit (₹ Cr) |
EPS (₹) |
| Jun 2022 |
1,920 |
51 |
3% |
-103 |
-0.49 |
| Sep 2022 |
2,130 |
60 |
3% |
-104 |
-0.49 |
| Dec 2022 |
2,484 |
191 |
8% |
19 |
0.09 |
| Mar 2023 |
2,045 |
237 |
12% |
52 |
0.25 |
| Jun 2023 |
2,214 |
78 |
4% |
-104 |
-0.49 |
| Sep 2023 |
2,486 |
69 |
3% |
-174 |
-0.82 |
| Jun 2024 |
2,872 |
60 |
2% |
-135 |
-0.64 |
Observations:
- Sales Growth: Consistent increase in sales, reaching ₹2,872 Cr in June 2024.
- Operating Profit Margin (OPM): Fluctuated between 2% and 12%, indicating variability in operational efficiency.
- Net Profit: The company has reported losses in several quarters, with significant losses in Sep 2023 and Jun 2024.
Annual Performance
| Year |
Sales (₹ Cr) |
Operating Profit (₹ Cr) |
OPM (%) |
Net Profit (₹ Cr) |
EPS (₹) |
| Mar 2021 |
5,539 |
567 |
10% |
56 |
0.26 |
| Mar 2022 |
6,125 |
364 |
6% |
113 |
0.53 |
| Mar 2023 |
8,575 |
542 |
6% |
-136 |
-0.64 |
| Mar 2024 |
10,825 |
621 |
6% |
-560 |
-2.63 |
| TTM |
11,490 |
513 |
4% |
-590 |
-2.78 |
Observations:
- Revenue Growth: Annual sales have increased significantly over the years.
- Profitability Challenges: Despite higher revenues, the company reported losses in recent periods due to increased expenses and interest costs.
- Operating Margin Pressure: OPM decreased to 4% in the trailing twelve months (TTM), indicating pressure on margins.
Key Developments
High Debt Levels
- Increase in Debt: Total debt rose to ₹5,794 Cr in FY24 from ₹5,234 Cr in FY22.
- Reasons: Debt-funded acquisition of Anamika Sugar Mills and additional working capital requirements.
Acquisition of Anamika Sugar Mills Pvt. Ltd
- Strategic Move: Acquiring Anamika provided access to established sugarcane catchment areas in Uttar Pradesh.
- Expansion Plans: Intends to expand the crushing capacity beyond the existing 4,000 TCD.
Distillery Expansion
- Capacity Doubling: Aimed to increase distillery capacity to meet growing ethanol demand.
- Progress: Achieved 1,250 KLPD capacity by FY24, moving towards the 1,400 KLPD target.
International Litigation
- Brazilian Subsidiaries: Facing labor litigations where the company has been made a party due to the economic group concept.
- Financial Impact: Deposits of ₹42 Cr paid over FY22-FY24 to contest judgments in higher courts.
Merger and Fundraising
- Amalgamation: Merging subsidiaries to simplify the group structure.
- Fundraising Initiative: Proposed raising ₹2,500 Cr through a qualified institutional placement in February 2024.
Debt and Restructuring
- High Interest Expenses: Interest costs increased from ₹376 Cr in Mar 2022 to ₹828 Cr in Mar 2024.
- Debt Management: The company needs to focus on reducing debt to alleviate financial strain.
Shareholding Pattern (September 2024)
- Promoters: 62.48%
- Foreign Institutional Investors (FIIs): 4.25%
- Domestic Institutional Investors (DIIs): 10.12%
- Public: 23.15%
- No. of Shareholders: 8,01,611
Observations:
- Stable Promoter Holding: Consistent at 62.48%, reflecting promoter confidence.
- **Increasing F
II Stake:** FII holdings increased from 2.06% in Dec 2021 to 4.25% in Sep 2024.
- Public Shareholding: Slight decrease, potentially reducing market liquidity.
Peer Comparison
| Company |
Market Cap (₹ Cr) |
P/E Ratio |
Div Yield (%) |
NP Qtr (₹ Cr) |
Qtr Profit Var (%) |
Sales Qtr (₹ Cr) |
ROCE (%) |
| EID Parry |
14,037.68 |
15.91 |
0.51 |
225.87 |
-16.10 |
6,746.79 |
20.29 |
| Balrampur Chini |
12,771.72 |
24.05 |
0.47 |
70.15 |
-4.57 |
1,421.60 |
13.46 |
| Sh.Renuka Sugar |
9,061.34 |
N/A |
0.00 |
-135.20 |
-29.38 |
2,871.50 |
9.61 |
| Triveni Engg. |
8,985.88 |
25.06 |
0.85 |
30.99 |
-54.16 |
1,300.68 |
14.77 |
| Bajaj Hindusthan |
4,632.98 |
N/A |
0.00 |
-67.05 |
25.07 |
1,385.68 |
0.80 |
Observations:
- Market Position: Third-largest market cap among peers.
- Profitability: Reporting losses, while some peers remain profitable.
- ROCE Comparison: Lower than some competitors, indicating room for improvement in capital efficiency.
Key Strengths
- Market Leadership: One of the largest sugar manufacturers and refiners in India.
- Strong Brand Presence: Madhur brand commands a significant share in the branded sugar market.
- Export-Oriented: High export revenue, capitalizing on global sugar demand.
Potential Risks
- High Debt Burden: Increased borrowings leading to higher interest costs and financial risk.
- Profitability Concerns: Ongoing losses may impact future operations and investor confidence.
- Regulatory Challenges: The sugar industry is subject to government policies affecting pricing, exports, and ethanol blending.
- Litigation Risks: International legal cases could result in financial liabilities.
Conclusion and Recommendation
Shree Renuka Sugars Ltd has shown substantial revenue growth and maintains a strong position in the sugar industry. However, the company faces significant challenges, including high debt levels, profitability issues, and potential liabilities from international litigation. The recent acquisition and capacity expansions may yield long-term benefits but have increased the financial burden in the short term.
Given these factors, investors should approach with caution. Existing investors may consider a 'Hold' position, monitoring the company's efforts in debt reduction and return to profitability. Potential investors might wait for clearer signs of financial improvement before committing.
Recommendation: Hold
Disclaimer: This analysis is for informational purposes only and should not be construed as investment advice. Please conduct your own research or consult a financial advisor before making investment decisions.
