Balrampur Chini hits 18-month high; stock zooms 107% in 7 months

Last month, the company's board of directors had approved the buyback of 8.44 million equity shares at the price of Rs 175 per share on a proportionate basis through 'tender offer'

Shares of Balrampur Chini Mills continued their northward journey, with the stock hitting 18-month high of Rs 157, up 2 per cent on the BSE on Friday, on the expectation of strong earnings growth. The stock was trading at its highest level since December 6, 2017.

Last month, the company's the board of directors had approved the buyback of 8.44 million equity shares, representing 3.69 per cent of total equity of the company, at the price of Rs 175 per share on a proportionate basis through ‘tender offer’. The stock already turned ex-date for share buyback on April 16, 2019.

For nine months ended 31st December 2018, the sweetener company posted operating income of Rs 2,958 crore and operating margin of 14.5 per cent as against Rs 3,317 crore and 13.9 per cent in similar period in fiscal 2018.

The improvement in operating margin was mainly driven by strong performance in distillery segment, mainly driven by higher realisation and volumes of ethanol in distillery division. The profitability of distillery segment is expected to remain healthy over medium term due to the increase in ethanol prices announced by Government of India in fiscal 2019, according to rating agency CRISIL.

The management said the distillery and cogeneration performance was encouraging on the back of higher volumes and realizations. The company is expanding its distillery capacity at Gularia, which will further enhance the contribution from this segment going forward, it added.

CRISIL on April 18, 2019, had reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings to the bank loan facilities and commercial paper programme of Balrampur Chini Mills.

The ratings reflect the company's dominant market position in northern India, established relationship with farmers, diversified revenue profile, superior and improving operating efficiencies and comfortable financial risk profile. These strengths are partially offset by susceptibility of its business performance to cyclicality in the sugar business and to regulatory changes such as change in state advised price (SAP) of cane in Uttar Pradesh (UP), CRISIL said in rating rational.