Avoid Shree Renuka, says Phani Sekhar

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Avoid Shree Renuka, says Phani Sekhar

Avoid Shree Renuka, says Phani Sekhar, Fund Manager, Angel Broking.

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Excerpts from Your Stocks on CNBC-TV18 Watch the full show » ALSO READ See previous views by Phani Sekhar See what other Experts & Brokerages are saying about Shree Renuka See messages about Shree Renuka

Avoid Shree Renuka , says Phani Sekhar, Fund Manager, Angel Broking.

Sekhar told CNBC-TV18, "As far as Shree Renuka Sugar is concern in the near-term a lot depends on what kind of news flow you hear, especially on the domestic front whether exports are allowed or not. Even if they are allowed I don't think apart from a small trading pop here or there you are going to get anything. Because my primary concerns are more related to medium and longer term which is that the Brazilian operations are not looking as good as they were maybe six months back because in January to March, which is in this current quarter, you are expecting a shortfall in ethanol production in Brazil and going by the evidence last year Brazil had to actually import ethanol from US because of risen domestic ethanol prices."

He further added, "Considering Brazilian Government's objective of promoting ethanol at domestic passenger car market, you might actually see that there might be both incentives for growing ethanol and disincentives for exporting sugar in the Jan to March quarter which also happens to be off-season, which exactly is not such good news for Shree Renuka."

"On top of that the balance sheet seems to be pretty stretched around 5.4 times net debt to EV EBITDA and this calendar year you are actually looking at a capex which is compulsory and inevitable in the form of planting maintenance and there is going to be buyback of shares from RdB."

"Working capital cycle is also going to be stretched for domestic operations which might actually increase the debt by Rs 1,000 crore for this calendar year. So considering all this my outlook for medium to longer term is pretty gloomy. Near-term I don't know it's all completely news driven, but at least for medium to longer term investors it's a clear avoid."