Shree Renuka Sugars gains after update on ethanol capacity expansion

Shree Renuka Sugars advanced 1.62% to Rs 50.25 after the company informed that the expanded capacity for ethanol production, from 720 KLPD to 1250 KLPD, is expected to go on stream by December 2022.

In February 2021, the board of directors of Shree Renuka Sugars had approved capacity expansion of ethanol production from 720 kilo litre per day (KLPD) to 970 KLPD. The said capex plan required an investment of Rs 204 crore, funded entirely via borrowings.

Considering the huge untapped demand for ethanol due to the policies of Government of India on ethanol blending, the board of the company, at its meeting held on 25 June 2021, approved further capacity expansion for ethanol production from 970 KLPD to 1400 KLPD. The further addition to capacity was done at a cost of Rs 450 crore and the investment was financed by borrowings.

The capacity utilization levels, as per the company's exchange filing, was 80%, subject to raw material availability.

Offering the rationale, for its capex plans, Shree Renuka Sugars said that the Government of India has mandated 20% ethanol blending in fuel by 2025 against a current blending of 7.79%.

Considering this, the company sees a huge untapped demand for ethanol for the ethanol blending program of the Government of India which can be of benefit to the company in the future.

Shree Renuka Sugars is one of the largest sugar and green energy (ethanol and renewable power) producers in India. The company is a leader in branded sugar segment in the country and the largest sugar refiner in India.

The company reported a consolidated net loss of Rs 113.30 crore in the quarter ended June 2022 as against net loss of Rs 240.40 crore during the previous quarter ended June 2021. Sales rose 134.90% to Rs 1953 crore in Q1 FY23 over Q1 FY22.

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