Why Shree Renuka Sugars Share Price is Rising

Shares of Shree Renuka Sugars have been climbing steadily and drawing significant attention from investors and analysts.

As one of India's leading sugar manufacturers, the company's remarkable growth trajectory has sparked curiosity about the factors driving this surge.

Could it be favourable industry conditions, strategic company initiatives, or shifting market dynamics that are propelling this rise?

Whatever the reasons, the upward momentum hints at a larger story unfolding within the sugar and allied industries.

Let's explore what lies behind this surge and what it could signal for the future.

#1 Stake Sale in Subsidiary

The recent uptrend in Shree Renuka Sugars comes following the company's decision to sell its entire holding in a subsidiary.

Earlier this week, the company reported that it has sold its remaining 17.1% stake worth nearly Rs 3.3 billion (bn) in Shree Renuka Global Ventures (SRGVL) to Freeway Trading (FTL).

Following this sale, SRGVL and its subsidiaries are no longer associates of the company.

By selling its stake, the company has generated a significant cash inflow. Investors typically view such actions positively as they reduce financial risk and provide growth opportunities.

The funds generated from the sale can be used for a variety of purposes, from repaying debts to strengthen its balance sheet or fund its core business operations or expansions.

Which brings us to the second reason...

#2 Focusing on Core Operations

The company recently approved a capex investment of Rs 1.8 bn for the expansion in the cane crushing capacity from 4,000 TCD to 7,000 TCD and setting up of a 15 MW power plant.

The strategy behind this could be to increase production and efficiency.

Note that Shree Renuka Sugars focuses on organic and inorganic expansion. It recently expanded its distribution channel to enhance its branded sugar business.

To increase its ethanol production, Shree Renuka has also doubled its distillery capacity to 1,400 KLPD.

As the government's export ban is ending, this expansion couldn't have come at a better time.

What Next?

Note that India's top sugar companies have reported a decline in sales or have posted flattish growth in sales volumes in the most recent September 2024 quarter.

Shree Renuka Sugars posted flat growth in sales while the company's net losses narrowed down to Rs 230 million (m) from a loss of Rs 2,060 million posted in the same quarter a year ago.

During the quarter, margins also improved to the highest point in as many as five quarters.

Shree Renuka Sugars earns the majority of its revenue from the sugar business (92%), followed by distillery (4%), and power generation (4%).

Despite a ban on exports in the last fiscal, the company's revenue has grown significantly on account of its well-established presence in the branded sugar business.

Its focus on expanding its geographical footprint within the country has helped the company grow its revenue despite the ban on exports.

In the last five years, its revenue has grown at a CAGR of 18.3%. In terms of net profit growth, Shree Renuka Sugar's losses expanded significantly on account of higher finance costs.

Financial Snapshot of Shree Renuka

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	48,812	56,485	64,326	90,207	113,190
Growth (%)	8%	16%	14%	40%	25%
Operating Profit	782	6,410	4,620	6,495	7,224
OPM (%)	2%	11%	7%	7%	6%
Net Profit	20,992	-1,148	-1,385	-1,970	-6,271
Net Margin (%)	43%	-2%	-2%	-2%	-6%
ROE (%)	0.0	0.0	0.0	0.0	0.0
ROCE (%)	0.0	22.2	8.1	11.7	13.2
Dividend (Rs)	0.0	0.0	0.0	0.0	0.0
Debt to Equity (x)	-1.6	-2.7	-2.9	-2.8	-2.4

Source: Equitymaster

The company's debt has increased significantly over the years. The company's borrowings are at Rs 16.5 bn and are expected to increase to Rs 20 bn on account of debt funded acquisitions.

Moreover, the company's working capital requirements are also pushing the debt levels upwards.

With the company's strong focus on expanding its business through organic and inorganic growth, the debt levels are expected to go up.

Nevertheless, positive factors such as high sugar consumption, government's ethanol blending program, and innovation in sugar production, could support the company's ambitious plans.

It should also be noted that the sugar industry is highly regulated, and it is important to practice caution before investing in this industry.

How Shree Renuka Sugars Share Price has Performed Recently

In the past five days, Shree Renuka Sugars share price has gained 9%.

In a month, the stock price is up 5%.

In 2024 so far, Shree Renuka Sugars has underperformed benchmark indices and lost around 10%.

Shree Renuka Sugars touched its 52-week high of Rs 56 on 1 October 2024 and touched its 52-week low of 36 on 4 June 2024.

In the past 1 year, shares of the company have fallen 15%.

About Shree Renuka Sugars

Shree Renuka Sugars is the fourth largest manufacturer of sugar in India.

It is also a leader in the branded sugar segment with its brand Madhur and has the largest refinery in India.

Apart from sugar, it manufactures ethyl alcohol and ethanol and generates power.

It has a manufacturing capacity of 37,500 TCD, 156 million (m) litres of ethanol production, and 46.07 metric tonnes of cane crushing capacity.

To know more, check out Shree Renuka Sugars' financial factsheet.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.