Shree Renuka slides as promoter pledges shares: Reports

NEW DELHI: Shares of Shree Renuka Sugars Ltd slipped over 5% in trade on Monday after two promoters pledged 5.76 crore shares or 23% of equity, according to a filing on the National Stock Exchange (NSE).

“Apart from promoters pledging shares in Shree Renuka Sugars, there is no such negative news on the sector. On the contrary, the sugar stocks were abuzz in last few sessions on expectations that the government may allow sugar exports,” said an industry analyst.

The government is likely to take a decision later today on allowing sugar exports in the 2011-12 marketing year. No final decision has been made on the quantity of exports that will be permitted.

“The industry is expecting that the government may soon allow companies to sell 1-2 million tonnes sugar in the international markets where the prices are higher by Rs 3-4/kg as compared to domestic prices. The weak rupee is also likely to help in getting higher realization from export sales. The stocks which had rallied are just witnessing profit booking,” said a sector analyst from local brokerage.

“The Empowered Group of Ministers (EGoM) on Food, headed by Finance Minister Pranab Mukherjee, is meeting on November 21 to discuss the possibility of sugar exports this year,” according to reports.

Earlier in the month, Shree Renuka Sugars reported a net loss of Rs 618.5 crore for the quarter ended September 30, hit by higher interest rates and foreign exchange losses.

“Due to volatile global market developments, there was an unusual depreciation in the value of the Indian rupee (9.5 per cent) and Brazilian Real (18.8 per cent) against the US dollar during the quarter.

“As a result, there was a net exchange loss of Rs 569.8 crore on consolidated results for the quarter,” the company said in a filing to the BSE.

At 12:39 pm, shares of Shree Renuka Sugars Ltd were trading 4% lower at Rs 33.60. The stock has hit a low of Rs 33 so far in trade today. For the year the stock has plunged over 60%.

Shares of other sugar companies were also under pressure, Balrampur Chini Mills Ltd was down 4% to Rs 45.50 and Bajaj Hindustan Ltd slipped 1.8% to Rs 29.70.

Analyst Call:

Deepak Mohoni, Director, trendwatchindia.com

Sugar stocks did bounce back on Friday but that came after a massive decline and relative to the decline the bounce was quite small. So given that, I would not bet that sugar stocks have bottomed out. The only thing going for them was very high volume activity at the time they bottomed out.

So there is a chance with certainly but it does not confirm a bottom for sugar stocks yet. So I would not buy sugar stocks until there is any positive indication. Sugar stocks have never been investor friendly for investors for years now except for Renuka Sugars.

Ashwani Gujral of ashwanigujral. com

It is very difficult for Bajaj Hindustan to give any upside because there is not much left on the stock. But it has gone below its 2008 lows. So at least Bajaj Hindustan needs to get past levels of Rs 35-36 to show some kind of strength.

It is very difficult to believe that all these companies are going bankrupt. So may be the best of the lot which I believe is Renuka Sugars as of now. People can consider buying in sugar space because as any positive news on sugar space can take these stocks up 30%, 40%, and 50% from here.

If you have to buy a sugar stock, consider buying Renuka with a stop loss around levels of Rs 28.30 and with an upside potential to Rs 50-52. So this is probably one sector where the beating has been far too much and may be some longer term sugar bulls can get in now.