A preferred exposure in sugar space two years ago, Shree Renuka Sugars has seen its stock price plummet by 57 per cent in the last one year. A combination of factors has triggered the de-rating of the stock.
One, for a company regarded as a play on global sugar prices due to its significant Brazilian and refining operations, the cooling off of global sugar prices in the last one year signals weaker realisations.
Two, the company's acquisition of two Brazilian sugar mills with 45,000 tonnes a day (tcd) of crushing capacity has resulted in high debt levels. These were expected to be paid off through higher cash flows from the overseas operations.
However, a drought at a key unit resulted in the Brazilian operation suffering a setback to its profitability in the recent September quarter, resurrecting debt concerns.
Three, forex losses depressed the performance of the company's Indian operations too in the September 2011 quarter.
The company reported an unexpected net loss of Rs 615.9 crore on its consolidated books for the quarter ended September 30, against a profit of Rs 128 crore in the same period last year.
Recent reports of the government considering sugar decontrol have helped the stock bounce back from recent lows. But it still has a long way to go before it erases the losses of the past year.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.