Upper Ganges Sugar - Rs.172.00

Incorporated in 1932, Upper Ganges Sugar & Industries Ltd. (UGSIL) is the flagship sugar venture of the K.K. Birla Group, which has diversified interests in key industries like fertilizers, chemicals, sugar, heavy engineering, textiles, shipping, newspaper publishing, etc. Having a rich experience of more than seven decades and facing all ups and downing the sugar industry, UGSIL is one of the oldest and best sugar mills in India. Apart from sugar, the company also generates revenue from byproducts like molasses, bagasse, industrial alcohol, ethanol etc. It has also installed a Bio Compost Plant to produce organic fertilizer which is marketed under the brand name ‘Uttam Jaivik Khad’ and a tea estate by the name of ‘Cinnatolliah Tea Garden’ spread over 746 hectares in North Lakhimpur, Assam.

After acquisition of a sugar mill from group company, New India Sugar Mills Ltd. in 2004, UGSIL currently has three sugar plants, one in UP and two in Bihar, with a total capacity of 14,500 TCD. Its main plant i.e. Seohara Sugar Mills is located in UP and has a crushing capacity of 10,000 tonnes of sugarcane per day. This plant also has distillery unit with a capacity of producing 16.50 million litres per annum of Industrial Alcohol/Ethanol. Its other two plants in Bihar are Bharat Sugar Mills with a capacity of 2500 TCD and Hasanpur Sugar Mills with 2000 TCD capacity. Due to various fiscal benefits offered by the Bihar government and the strong uptrend in the sector, company is expanding its Bharat Sugar mill capacity to 5000 TCD with a sulphur free sugar refinery and is also setting up 18 MW co-generation plant thru a capex of Rs.125 cr. In view of the increasing demand for electricity and to provide for more remunerative utilization of bagasse, UGSIL is putting up a 24 MW co-generation plant at its UP mill for export and captive use at an estimated capital outlay of about Rs.100 cr. Moreover, to meet the increasing demand for ethanol, the company has undertaken expansion of the distillery unit from the existing capacity of 55 klpd to 100 klpd at an estimated cost of Rs.36 cr. For future growth, UGSIL is also contemplating a greenfield integrated sugar complex in UP having a capacity of 7000 TCD with a co-generation power plant and refinery. Post all its expansion, the company’s total capacity will stand enhanced to about 23000 TCD.

To part-finance its expansion plan, the company recently came out with a rights issue in the ratio of 13 shares for 20 shares held at Rs.150 per share. Currently, the scrip is trading ex-right and is available at around Rs.170 per share. For FY06 ending 30th June’06, company is expected to clock a turnover of more than Rs.400 cr. and PAT of around Rs.30 cr. This will work out to an EPS of Rs.26 on its fully expanded equity of Rs.11.55 cr. and may declare 50% dividend for FY06. For FY07, it may record Sales and net profit of Rs.525 cr. and Rs.40 cr. respectively which would mean an EPS of Rs.35. Hence at a reasonable discounting of 8 times, its share price has the potential to hit Rs.280 (60% appreciation) in 12-15 months.