SHREE RENUKA SUGARS

Shree Renuka Sugar-On The Right Side Of Politics

Sugar prices in India have firmed on the expectation of low sugar output. The government has recently revised its production estimate from 22m tonnes to 20m tonnes for 2008-09. However, industry sources have indicated that production may be lower than 17-18m tonnes. Faced with an impending election in April-May 09 high Sugar prices are not acceptable to the GOI, at the same time it has no power over State Governments to lower Cane SAP prices.

To appease the millers, the GOI has allowed import of Raw Sugar-this will benefit coast based sugar mils in Karnataka, Tamil Nadu, Andhra Pradesh and Maharashtra. The move is positive for Shree Renuka, Rajshree Sugars, Bannari Amman, Sakthi Sugar, Saraswati Industrial Syndicate and KCP Sugar.

Tonne-to-tonne import

Under the tonne-to-tonne sugar import scheme, raw sugar may be imported and converted or refined to white sugar and sold in the domestic market. This is unlike the ALS (Advanced License Scheme) as sugar imported under ALS cannot be sold in the domestic market. This will likely benefit Shree Renuka Sugars as it has a sugar refining plant in the port city of Haldia in the state of West Bengal.

Import under open general license

Under the open general license (OGL) scheme, the government may allow duty-free import of white sugar. This is likely to have a big impact on the sector, as it may flood the domestic market with imported sugar. Also, sugar can be imported freely by a chipping company under OGL. This is unlike the ALS, under which only sugar millers can import raw sugar.
Shree Renuka to benefit from imports.

High sugar prices in the middle of the earnings season might lead to changes in the sugar import policy. Shree Renuka Sugars has strong connections with Maharashtra politicians, and its earnings are skewed towards non-cyclic businesses such as distillery and co-generation of power. A change in import policy to tonne-to-tonne import will benefit Renuka as it has a sugar refining plant in Halidia, a port with access to the eastern and north eastern parts of India, areas which have the highest sugar realisation.

source : AS Hameed

Visit http://equityadvise.blogspot.com for Detailed indepth Stock Analysis by Me.
The blogger is not responsible for any loss arising on account of transactions done on the basis of recommendations/opinions published here. You are advised to consult your Advisor before taking any decision.