Balrampur Chini: Sugar glut

Record worldwide production has tempered both sugar prices and the stocks

Balrampur Chini reported a disappointing performance in the September 2007 quarter, given the weakness in sugar prices on a y-o-y basis.

As a result, its standalone operating loss was Rs 1.51 crore in the last quarter compared with Rs 59 crore y-o-y, while its net sales declined 24.7 per cent y-o-y to Rs 292.5 crore.

On the cost front, there has been no respite with the cost of sugarcane staying high. As a result, the segment loss of Balrampur's sugar division was Rs 39.6 crore in the September 2007 quarter compared to Rs 39.9 crore y-o-y.

However, a small cushion for the company's margins came from an improved performance of its two other divisions: Distillery and co-generation.

A marginal improvement on realisations on a y-o-y basis to Rs 2.94 per unit in the last quarter helped segment profit of the co-generation division expand 102 per cent y-o-y to Rs 12.3 crore.

Going forward, Balrampur Chini is focused on expanding its sugar capacities. Like other sugar manufacturers, Balrampur's price too has gone up-it has nearly doubled over the past three months.

However, with a bleak outlook for sugar prices in the medium term, given the global surge in production, there is little reason to buy stocks of sugar manufacturers.

Gitanjali Gems: Global footprints

In its bid to expand its footprint abroad, Gitanjali has made yet another acquisition in the US of speciality retailer Rogers. In an all-cash deal for $20 million, Gitanjali has acquired Rogers at four times sales and about 9 times net profit, which is not expensive.

Gitanjali has been aggressive on the acquisition front-it had acquired Tri-Star Worldwide and Samuels Jewelers in the past.

According to the company, Rogers along with the earlier acquisitions will form 35 per cent of its jewellery turnover of Rs 2,500 crore in FY09, which in turn will contribute more than 50 per cent to the total revenues of Rs 4,500 crore. Besides the US, the company also plans to tap the UK and and China. It already has 65 outlets in the UAE.

In the domestic market, besides expanding its retail network for jewellery sales, Gitanjali announced its entry into other lifestyle-related businesses on Tuesday.

The business outlook is positive as it penetrates the US market and is among the few listed luxury players in India. At Rs 383, the stock trades at 19 times and 13 times estimated FY08 and FY09 estimated earnings respectively.

With contributions from Amriteshwar Mathur and Priya Kansara