Sweet or sour?

IPO REVIEW

Commercial
production Expansion at Munoli from
2500TCD to 7500TCd63.50Dec-06 Expansion of distillery at Munoli 
from 60KLPD to 120KLPD15.00Oct-06 Setting up of 15 MW 
co-generation plant at Unit III20.00Nov-06 Setting up of distillery capacity
of 120KLPD at Unit III30Dec-06 Debt repayment9.86  Total138.36   Issue details
Shree Renuka Sugars has a Rs 138.36 crore capex plan which is likely to financed through the public offer (Rs 100 crore) and internal accruals. The company plans to enhance cane crushing, cogeneration and distillery capacity at its plants and also repay some of its debt (See table on capacity expansion).  The company's valuation stand at 12.2x and 14.7x at lower and upper end of the price band respectively, for 9 months ended June 2005. For the corresponding period, the valuations of company's peers, Bajaj Hindustan, Balrampur Chini Mills, EID Parry (India) Ltd, Dhampur Sugar Mills and Bannari Amman Sugars Ltd are quoting at a P/E of 22.8x, 3.5x, 6.1x, 12.2x and 22.2x respectively.  According to analyst Vikram Suryavanshi of Karvy stock Broking, the company's current valuation looks stretched compared to its larger peers but going by the possible earnings growth, it may not be so expensive. The company quotes at a forward P/E of 7-8x FY06 earnings which is comparable with its peers.  The business
Shree Renuka Sugars is a fully integrated sugar company engaged in manufacturing, marketing and trading of sugar, power co-generation and ethanol production. The company has a plant at Munoli at Karnataka with a capacity of 2500 TCD (tonnes crushed per day) and a leased plant at Ajara in Maharashtra with a capacity of 2500 TCD.  The company has recently bought another sugar mill on lease in July 2005 at Mohannagar in Maharashtra (Unit III) with a capacity of 2500 TCD. It has the largest capacity to manufacture refined sugar in India of 1000 TPD (tonnes per day) capacity. It is also engaged in trading of sugar through its wholly owned subsidiary in Dubai, Renuka Commodities DMCC for wholesale trading in international market.  Analysts say that setting up of a greenfield sugar plant is capital intensive venture and takes around 1-1.5 years. So the company