Dear Girishji: Thanks for posting your constructive view on Shree Renuka. I am posting my reply with some clarifications on Shree Renuka covering apprehensions raised by you.
Partnership with Wilmar:
-
Shree Renuka, is now equally owned by its initial promoters Murkumbi family and Wilmar International(WIL) of Singapore after a deal in
February 2014, Both Wilmar and Murkumbi family hold 27.72% each in
SRSL. Stake was sold to Wilmar in Rs. 517 Crores. -
Jean-Luc Bohbot and AtuI Chaturvedi are Nominee Directors of Wilmar Sugar Holdings, w.e.f. 24 June 2015
Chapter 11 law :
In an exclusive interview to CNBC-TV18, Narendra Murkumbi, VC & MD, Shree Renuka , says that:
– The plan to file for protection was a well-thought out one to restructure the company’s debts.
– We acquired this company in 2010 and we have had a series of bad events especially very bad weather and now for the last two years very low prices. We are seeking court protection to come out with the comprehensive restructuring plan for debt. Brazil has a Chapter 11 law, which means that the company is protected while it does this.
– Shree Renuka Sugars believes that re-organisation under judicial recovery is the best way to re- organise, protect our Brazilian subsidiaries and provide a path to our eventual turnaround in Brazil. Underlying operating business has been quite steady this year in these companies with combined cane crushing of 5.7 million tonnes till 27 September 2015.
– After the acceptance of bankruptcy request under the judicial recovery law, Renuka Brazil will be under the so-called judicial protection for a period of 180 days during which it has to present a plan to the court for approval with the creditors including banks.
– I want to emphasise here that there is no cash impact of this filing because we have not been investing further or supporting additionally the Brazilin subsidiaries since the last couple of years.
Points supporting My view:
- The capital value of the assets in Brazil is about USD 1 billion. The debt is about USD 650 million. Thus Brazil subsidiary can be isolated at any point of time.
- Prices in Indian market have increased by 20 to 25 % . International sugar prices have improved by 45 % from bottom of 10.67 C/lb to 15.48 C/lb
- Thus sugar cycle has bottomed out and fundamentals of sugar business are improving and.
- After consecutive surplus for 5 years a big jump in prices can not be ruled out. Expecting even moderate increase will bring substantial revenue for company to wipe off the existing debt and post good results.
Stocks are attractive in heydays but at the same time it attracts many investors and market price is always high in most case stock is overvalued. We get such good stocks at discounted price or undervalue only during days of poor fundamentals or bottom of cylce. We can get good return provided we grab them at low price, if we are confident of improvement in fundamentals and successful turn around by management. I am sure at the peak of sugar cycle Shree renuka will enjoy heydays and will be darling of not only investors but traders as well as it was in past.
