group 9 - financial analysis of shree renuka sugars (1)

8/9/2019 Group 9 - Financial Analysis of Shree Renuka Sugars (1)

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Financial Analysis of

Shree Renuka SugarsLtdroup 9 Section B


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GMP - Section B - Group 9 2

Company : Hig

hlights

Narendra Murkumbi & VidyaMurkumbi

Incorporated on October 25, 1995 at

Belgaum Corporate office Mumbai

Headquarters Belgaum (Karnataka)

CAGR revenues 75% CAGR profits 82%

Largest sugar refinery and ethanol

producer'

Last 4years


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Busi

ness & Products


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Ind

ustry dynamics: Demand

Largest consumer

Per capita consumption low

21kgs/year < 37kgs/year (world avg.)

Gur & Khandsari

39% household, 61% industries

Essential commodity prices areregulated by importing sugar andlimiting exports


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Nati

onal production

17Mmt in 2009

UP & MAH mostimportant

TN max. yield

UP max area undercultivation

UP Gur & Khandsari


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Sugarcane cycl

icality We are here

Up cycle-2 3 years

Down cycle-4 5 years


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Industry dynamics: Supply

2nd largest producer after Brazil

50 million farmers; 12% ruralpopulation

Bagasses used for power and ethanol

Extract used for alcohol too

Cane prices fixed by govt.2004 2005 2006 2007 2008 2009SMP .73 00 .74 50 .79 50 .80 25 .81 18 .81 18SAP .95 00 .107 00 .115 00 .125 00 .110 00 .140 00

ugarprices ,1 464 ,1 765 ,1 870 ,1 479 ,1 489 -


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Industry dynamics:Structure

Millers Highly fragmented Public, private, co-operative

Private millers on the rise Each mill procures from 18,000 farmers

Complex transaction Quality control an issue

Farmers Majority own 1 to 4 hectares land Less than 25% own more than 4

hectares Millers unable to develop farmers


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Factors affecting sugarproduction


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Industry Risks

Sugarcane and Sugar prices

SMP/SAP, sugar prices fixed by govt.

Sugar vs Ethanol

Bumper harvest

Climate

Sugar Imports


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Key Indicators of Industrycompetition


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SRSL: Financial Performance

Growth in topline andbottom line

Capital

Investments in newplants andacquisition

s Diversified

revenuesto reducecyclicality


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SRSL: Business Divisions

Mills located in Maharashtra and Karnataka whereSAP prices lower than UP

egment -007 08 -008 09ugar ,7 645 ,18 616

% f total income . %38 76 . %74 48rading ,9 102 ,1 703

% f total income . %46 14 . %6 81-o generation ,1 838 ,2 955

% f total income . %9 32 . %11 82thanol

,1 113

,1 686

% f total income . %5 64 . %6 75thers 28 33

% f total income . %0 14 . %0 13otal ,19 726 ,24 993

Most integrated

sugar producerin Indiaresulting in

higherrealizationper

unit of cane


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SRSL: Business Divisions

Mills located in Maharashtra and Karnataka whereSAP prices lower than UP

M o st in te g ra te d

su g ar p rod u cerin In d ia

re su ltin g in

h ig h e r

re a liza tio np e r

u n it of can e


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SRSL: Business Model

Cane

Raw Sugar

Owned Mills and Refineries

Distillery

Power Cogeneration

Sugar

Leased Mills Sugar

Total Sugar

Refinery

Traded Sugar

Domestic Market

International Market

Bagasse

Molasses

Molasses


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S R S L R iskm a n a g e m e n t

co m m itte e sh o u ld

fo cu s o n critica l

risks

D e la y in C a p a city

E xp a n sio n

In te g ra tio n

p ro b le m s o f

B ra zilia na cq u isitio n

H e d g e risks o f

re d u ce d ca n e

a cre a g eand

ype of Risks ProbabilitySourcing of Raw Material .0 3

Delay in Capacity expansion .0 5

Rainfall .0 4

Cane Acreage .0 4

Brazilian Acquisition .0 5

Regulatory Risks .0 2Business Cyclicality .0 3

Ethanol Blending Program .0 2

Legal Risks .0 1

Foreign Trade Policy .0 1

Industry Competition .0 3

Distillery and Cogeneration .0 2

Dependence of large customers .0 3

Permits and Licenses .0 1

Environmental Regulations .0 05

Promoter Holding .0 05

:SRSL Risk Analysis


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Performance

Manufacturing

Performance

Raw material

consum tion ra

Cane prices have increased

Mfg. labor cost ratio is low automation

Fixed asset turnover ratio hasreduced due to new projects

Operational Per

Fixed Assets T


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Working CapitalManagement

SRSL enjoys a longer creditorcollection period

Also maintains low debtor collectionperiod an industry standard

or ng ap ta

Management

Debtors Collect


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Profitability Ratios

Profitability

Operating Profi

Return on Oper

Ca ital Em lo


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Capital Structure

Capital Structure 2004-05 2005-06 2006-07 2007-08 2008-09 Trend GraphDebt-Equity Ratio 2.35 2.67 2.93 2.54 2.03 2.94

Retention Ratio 0.88 0.92 0.91 0.92 0.78 2.95

Interest Coverage Ratio4.72 4.18 5.18 2.79 3.75 2.84

Degree of Financial

Leverage1.58 1.78 1.88 2.64 2.23 3.21

D/E ratio has reduced issue of newequity

Retention ratio reduced betterdividends

DFL increasedTerm borrowings for CAPEX programs

and


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Altmans Z-score

Z-score less than the industryaverage

Low Sales/Total Assets Sales have not increased in

proportion with total assets

Increased current assets

Altman's Z Score

T1 = Net Working

T2 = Retained Ear

T3 = Earnings Bef


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SGR Analysis

SGR Analysis

SGR(t+1)

Actual Sales


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Q & A

THANK

YOU

group 9 - financial analysis of shree renuka sugars (1)

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