Wilmar group of Singapore has acquired 25% of Renuka Sugars. Consequent to that the company has come out with an Open office with offer price at 21.89 which is less than today’s closing price of 22.6 on NSE.
Sugar stocks are already bottomed out due to heavy losses thought just yesterday there was news of sugar prices climbing back due to less production anticipated.
Market was expecting some premium in the open offer. What to make out of the current Open offer and going forward with the company?
Markets may have expected premium in the open offer. But looking at Wilmar’s viewpoint the current market price looks like a RICH valuation as the company had less tangible net worth with high debt. Nearly Rs. 1800 crores locked up in shree renuka global ventures which had invested in loss making brazil sugar mills and have Taken sizeable debt.
From a long term (5 - 10 years) strategic viewpoint, this appears to be a good deal for both Renuka and Wilmar.
For Renuka, the debt on Indian books will reduce to some extent. Plus they will have a regional commodity player who displays confidence in their business model and future prospects.
For Wilmar, an opportunity to expand their scope of overall business. An entry into India and Brazil.
Is there any possibility of open offer price revision if wilmar not able to acquire desired about ~25% equity
I think once open offer period is over it should collapse below 15 … it would have crashed below 15 now itself but wilmar took smart move of open offer
Narendra Murkumbi on NDTV profit today
Post the preferential allotment, open offer and rights issues; Murkumbi family and Wilmar will have equal stake each; around 23%
That is good.
Otherwise there were rumors that the Murkumbi’s will divest most of their stake and be reduced to minority shareholders.
From a short to medium term this stock could be volatile either ways.
How ever long term prospects of the company have vastly improved.
Factors which could reverse the company:
1). Improvement of margins in indian operations; expand to newer markets
(govt allowing more exports could be a big positive wildcard)
2). Improvement in brazilian operations
3). Reduction of debt
4). Turnaround in sugar cycle
Strong potential for Renuka sugars to emerge as a leading global sugar company!!
Ever since the Wilmar deal was announced on Feb 20, Renuka is trading in a very narrow price band around 21.2
I can understand that the price cannot go down too much because of the open offer. But why can the price not go up? One the contrary, other sugar companies have gained over 15% . But somehow something is stopping the price of Renuka to go up.
I would be very grateful if Hemanth or anyone with the understanding of this situation could epxlain.
Any gurus here know what would be the floor price if they have to do an offer? ie if there is an arbitrage opportunity here?
Now that the open offer had failed, would like to know opinion from experts as to where you see renuka share going from here
Any idea why the stock is going down?