Shree Renuka Sugars eyes stronger prices in next tender

Shree Renuka Sugars has announced its results for the quarter ended June 2008 (Q3). The company's net sales were at Rs 612 crore versus Rs 194.1 crore. Its other expenses were at Rs 2.9 crore versus other income of Rs 21.5 crore.

The company's Q3 operating profit was at Rs 70.9 crore versus Rs 34.3 crore. Its Q3 net profit was at Rs 23 crore versus Rs 31.5 crore. The interest costs was at 21.7 crore versus Rs 4.3 crore.

The company acquired 2 companies for Rs 26.5 crore and set up 2 subsidiaries in Sharjah. The company's board will meet on July 31, 2008 to mull GDR/ADR/FCCB/QIP issue.

Narendra Murkumbi, MD of Shree Renuka Sugars said that the company is looking at stronger prices in the next tender.

Excerpts from CNBC-TV18’s exclusive interview with Narendra Murkumbi:

Q: Pretty good sent of numbers on the top line, bottom line as expected was a bit flat but you would be concerned about the raw material costs and the interest costs more importantly?

A:  As you can see we have grown and doubled our topline and that’s the reason why the interest cost has increased, and also all our projects are now completed and the full interest costs is on the balance sheet.

The outlook price wise is much better in the current quarter and therefore we are comfortable with the numbers and usually our renewable part of our energy business has put a very strong performance over the last quarter.

Q: You think that’s the trend going ahead for companies such as yourselves and the contribution of ethanol and cogen would be significantly higher than sugar never mind the fact that sugar price might go up?

A: Looking forward, the renewable energy business will continue to be strong but there will be quite a bit of recovery on the sugar side. Sugar prices currently are about at Rs 14.5 per kilo ex-mill in Maharashtra and last quarter they were about Rs 12.50 per kilo.

Q: A quick word on the ethanol movement, we have heard some reports about how corporative bodies in Maharashtra have asked for ethanol prices to be increased to Rs 30 per litre, what’s the current off tick price that he OMC’s would be paying to companies such as yourself and how is it likely to pan out even a touch on the 10% blending and whether we have equipped for that or not?

A: When the sugar industry is ready to sell ethanol at Rs 21.50 per kilo for three years, the oil companies refused and said they would like to buy by a tender. So they have bought ethanol between Rs 18-Rs 21.50 per kilo and our contracts with them are at Rs 21.50 per kilo. But what the oil companies have found is people who had contracted lower prices and mainly small traders etc, they have all defaulted on that, so since they want to buy by tender, I think the for the new tenders we are seeing much higher price being quoted by the suppliers. There is still almost a Rs 25 per kilo savings that the oil companies do by choosing ethanol instead of gasoline so I am still very much competitive against petrol, we are seeing strong interest in them to raise (interrupted in between)

Q: Would you believe that the prices would go as high as Rs 30 per kilo and the government to probably agree to that as well?

A: I don’t see us selling any more than Rs 21.50 per kilo and export prices are now at about Rs 25 per kilo and we would look for stronger prices in the next tenders.

Q: One word on the GDR issue - how much money are you planning to raise and what could be the possible dilution?

A: We are having a Board meeting on July 31 to consider this as well as any new investment we may consider and we will let you know after that Board meeting.