I have briefly analyzed the recent restructuring. If it clicks it provides good optionality.
Recent Financial Restructuring
1) Currently Renuka's standalone debt stands at Rs 3600 cr. Post this exercise, according to the management, debt will come down to Rs 1500cr (As reflected from above Equity, RPS and OCPS totals close to Rs 2220cr). Though the above debt is payable but largely starting from 8th to 10th year from date of restructuring. So interest will be charged on balance Rs 1500cr.
2) Finance cost stood at Rs 365cr in FY17, this will come down close to Rs 150-175cr.
3) Company has put one of the units in Brazil for sale (Madhu Mills). It owns 2 units. According to the company if sales succeeds then Brazilian debt (Rs 5000cr) will cease to exist. Bids will be submitted by August 8, 2017. They will be opened on 5th Sep, 2017.
Equity issued will go up from 929 mn shares to 1923 mn shares (more than double). Promoter stake coming down to 13% isn't positive.
1) Yearly interest cost will come down by Rs 150-175cr. Close to Rs 2000cr of debt (Principal) will be paid from 8-10 years onwards.
2) Brazilian unit sale will be good trigger since it settles Rs 5k cr debt and frees one unit as debt free.
3) Stock has hardly participated in entire sugar bull run. a) with debt restructuring b) brazil unit sale, provides good optionality to play sugar cycle. If above doesnt work downside is as good as what stock has been all through sugar cycle (which started from Oct-Nov 2015) at Rs 13-14/share.
4) For long term holding, one needs to analyze potential EBIDTA company can make post restructuring, since there will be operating efficiency and financial efficiency which will need to be factored into. Most Sugar companies are generating close to 20-20% operating margins, While Renuka did 4% EBIDTA in FY17.
Disc - Recently Invested.