Shree Renuka to gain from govt’s ethanol push | Economic Times

Mumbai: With the Indian ethanol story getting bigger by the day, the country’s largest producer Shree Renuka Sugar is headed for a turnaround after eight successive years of losses.Financial performance slid since 2012 with the collapse in global sugar prices, pushing the company toward bankruptcy.But now it has started turning the corner, aided by firmer global sugar prices and several government incentives linked to ethanol blending and exports.“For Shree Renuka, all good things come at the right time, beginning with the change in management, a clean-up in the balance sheet, an increase in capacity and, finally, an aggressive ethanol push and incentives by the government,” said Varinder Bansal, founder, Omkara Capital. “The Wilmar group has been strengthening the operations of the company for the last five years, with its owner Kuok Khoon Hong on board.”Shares of Shree Renuka have rallied123% in the last two months to close at ?21.65 on Wednesday, its highest closing in nearly seven years.Singapore-based Wilmar Sugar Holdings (WSH) originally bought a 27.24% stake in Shree Renuka Sugars in 2014, which it later raised to 38.57% as part of the debt-restructuring programme approved by the lenders. In June 2018, it further increased it to 58.34%. Wilmar Holding has funded an additional $300 million in June 2020 to Shree Renuka to refinance its existing debt and to meet working capital requirements. Currently, Wilmar holds 62.48% in the company.Shares of the Shree Renuka plunged over 94% from a high of ?122 in January 2010 to a low of ?7.25 in September 2015 after its two Brazilian acquisitions backfired badly with the collapse in global sugar prices.In 2018, Shree Renuka sold lossmaking Brazilian operations and wrote off all the losses and investments. It also reduced its debt substantially in the last four years from ?9,875 crore in March 2017 to ?2,894 crore in September 2020.The company is expanding its distillery capacity from 250 klpd (kilolitre per day) to 970 klpd and is expected to be commissioned in October 2022. The new distillery will be utilized for the production of ethanol directly from cane juice. Its 100% subsidiary KBK Chem-Engineering facilitates turnkey distillery, ethanol, and bio-fuel plant solutions.“We believe the company is poised to achieve significant growth in earnings by riding the ethanol drive in India and expect the company to start being profitable from FY22 due to sharp Ebitda jump from ethanol and fall in interest costs,” said Rajesh Majumdar, director of research, B&K Securities. “Also, the company now being an MNC should trade at a 40-50% premium to its domestic peers.”