I tried to check few sugar companies based on their capacities and compared it as below:
• Balrampur remains best play in sugar sector with strongest balance sheet
o Compared to Balrampur, Dhampur Sugars have similar capacity of Cogen and Distillery however sugar capacity is half of what Balrampur have. Dhampur’s MCap Rs 279cr vs Balrampur’s Rs 1530cr. On Leverage side, Dhampur is more levered at 3.8x D/E than Balrmapurs’s D/E of 1.5x based on FY15 numbers.
• In Small cap, Dalmia Sugars remains better play given best in the industry recovery rate and have history of turning around sick units which they acquired in Kolhapur. It is one of the very few sugar company to report net profit in FY15
o However, Dwarikesh Sugars have almost similar capacity but have MCap of only Rs 77cr vs Dalmia’s MCap of Rs 280cr. This is partly due to high leverage in Dwarikesh (6x D/E). However, both companies have over 75% of debt locked in inventory.
• I would like to highlight that Debt figure is based on FY15 numbers and there is high likelihood of these figures at present will be much lower after liquidating sugar inventory as well as release of financial assistance by UP Govt in Q1-Q2. For e.g Balrampur had debt of over Rs 1675cr which came down to Rs 1200cr in June and another Rs 200cr which got released by UP govt will bring that debt figure to Rs 1000cr.
• Have not compared Shree Renuka in the list as their losses and debt figures are too high to make any sense plus their Brazilian ops is under bankruptcy.
One can play around the replacement cost for divisions – changing the numbers as feel fit – but just to highlight here…in FY13 and FY14 Dalmia Sugar have acquired 2 units in Kolhapur one was operating and another one was closed for 7 years and have turned it around..Operational one was bought at Ev/tcd of around 5cr (2500tcd at Rs 125cr) while closed one was bought at Rs 1.4cr (Rs 1750tcd at Rs 24.3cr). I have taken Rs 3.5cr/tcd valuation which i think is fairly conservative. Cogen (Rs 5cr/mw for a wind farm, Rs 4cr/mw for cogen is fair) and Distillery (based on interaction with Balrampur Chini IR).
Discl: Not invested in any of the above mentioned stocks, but as mentioned earlier it does look interesting.
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