Security Analysis and portfolio management

Mini Project

Submitted to,

Prof. Maya Balaji

By,

Hardik Karnavat

Prn: 092067

1. BRIEF INDUSTRY ANALYSIS:-

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 Balrampur Chini Mills Ltd is one of the largest integrated sugar manufacturing companies
in India. Its allied business consists of manufacturing and marketing of Ethyl Alcohol &
Ethanol, generation and selling of power and manufacturing and marketing of organic
manure. Company has nine sugar factories located in Eastern U.P. having an aggregate
crushing capacity of 73,500 tons per day.

Balrampur Chini Mills Limited (“BCML”) was incorporated in 1975 under the Companies
Act as a wholly-owned subsidiary company of Balrampur Sugar Company Limited (Name
changed to Balrampur Commercial Enterprises Limited) (“ BCEL ”). By an indenture of
conveyance dated 21 February 1976 , BCEL transferred to BCML the land, building and other
assets and the entire staff of its Balrampur Sugar Factory with effect from 1 July 1975 .
BCML ceased to be a subsidiary of BCEL with effect from 25th June, 1979 and its shares
were listed on the Calcutta Stock Exchange (CSE) in 1979. The Balrampur Mill started with a
crushing capacity of 800 TCD (Metric Tons crushed per day) in 1975 and has since been
expanded to its present capacity of 12,000 TCD.

In 1990, BCML acquired a controlling stake in Babhnan Sugar Mill Ltd, which at that
time, had a crushing capacity of 1,000 TCD. BCML undertook expansion and modernization
programs at the sugar mill in Babhnan (the “Babhnan Unit”) which resulted in an increase in
crushing capacity from 2,500 TCD in the year 1992-1993 to the current crushing capacity of
10,000 TCD. Babhnan Sugar Mills Ltd. was merged with BCML with effect from 1 April
1994.

In 1995, BCML set up a distillery in Balrampur with a capacity of 60 KL per day which
has now been raised to 160 KL per day for the production of distillery products using
molasses, which is a by-product of the sugar production process.

In April 1998, BCML acquired a controlling stake in Tulsipur Sugar Co. Ltd. (“ TSC ”), a
profit-making sugar company located near Balrampur in Eastern Uttar Pradesh with an
installed capacity of 2,500 TCD. TSC was merged with BCML with effect from 1 April 1999.
The crushing capacity of Tulsipur Sugar was subsequently expanded to 7000 TCD.

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 In March 2003, BCML commissioned a bagasse based co-generation power plant with a
capacity of 19.55 MW at Balrampur and the said capacity has been increased to 24.55 MW.
During the period of 2003-2004 BCML set up an integrated sugar complex at Haidergarh (the
“ Haidergarh Unit ”) consisting of a plant with a crushing capacity of 4,000 TCD and a
bagasse based co-generation power plant with a capacity of 20.25 MW. Today, the capacity of
the co-generation power plant has been increased to 23.25 MW . he crushing capacity of the
Haidergarh sugar division has since been increased to 5000 TCD.

A new greenfield integrated sugar complex has been set up at Mankapur, Dist. Gonda,
Eastern U.P. with a capacity of 8000 TCD sugar plant, 34 MW co-generation power plant,
100 KLPD distillery and 20 MT Organic Manure facility. The plant has begun operations in
November 2006.

A new greenfield integrated sugar complex has been set up at Kumbhi, Dist. Lakhimpur,
Kheri, U.P. with the capacity of 8,000 TCD sugar plant and 20 MW co-generation power
plant. The plant begun operations in April 2007.

A greenfield integrated sugar complex has been set up at Gularia, Dist. Lakhimpur, Kheri,
U.P. having sugar cane crushing of 8,000 TCD and co-generation power plant capacity of
31.3 MW. The plant began operations in November 2007.

BCML has acquired a 53.96% stake in the equity capital of Indo Gulf Industries Ltd.
(IGIL). BCML has taken over the management of IGIL after receiving of the approval from
SEBI and completion of the open offer .IGIL has a sugar unit having crushing capacity of
3000 TCD at Maizapur in Eastern U.P.

2. BRIEF BACKGROUND OF THE COMPANY:-

 PRODUCTS PORTFOLIO

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 1. Sugar:-

Sugar is produced from the evaporation of the juice that is extracted from the crushed
cane. This is widely used as a sweetener in food and beverages. Interestingly, in a country
like India, sugar is also emerging as an index of upward mobility. For instance, as income
rise in rural India, consumers migrate from the consumption of alternative sweeteners,
towards sugar. The principal portion of sugar sold within India is loose and packaged.

2. Alcohol:-

Molasses is distilled to produce rectified spirit, extra neutral alcohol, denatured spirit,
potable alcohol and ethanol.

3. Power:-

Since bagasse has a high heat factor, it is also used in the generation of electricity,
which substitutes the conventional thermal alternative and eliminates the emission of
greenhouse gases. Presently, sugar mills generate their power requirements from bagasse-
fired boilers. The government of India has begun to encourage the co-generation of power
from bagasse. This is expected to achieve two things: an improved return for sugar mills
and the generation of a resource - electricity - which is in short supply in India.

4. Molasses:-

Molasses is a byproduct generated from the manufacture of sugar. It holds out

interesting possibilities - it can be sold untreated on one hand. On the other, it can be used
as the principal feedstock for the manufacture of alcohol and a host of downstream
chemicals.

5. Organic Manure:-

Spent wash, an effluent generated from the processed molasses during distillation
process, is used with press mud for the production of organic manure. This is gaining

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 popularity at the expense of fertilizers with a high chemical content. This bio-fertilizer is
manufactured by spraying the non-disposable spent wash over the press mud. The product
is best suited for tea cultivation.

6. Bagasse:-

Bagasse, generated as a by-product, can be used profitably in two ways - for making paper
and for the generation of electricity. The manufacture of paper from Bagasse is an
environment-friendly alternative over the conventional route of extracting pulp from trees.

Product % of % Sales Sales

Unit Production Sales Qty
Name Stock Cap. Util. (Cr.) (Rs.) / Unit

Sugar Qtl 84.0 100.0 4,414,989 6,647,059 1,487.42 2,237.71

Alcohol-
BL 7.6 100.0 48,271,967 50,661,405 134.73 26.59
Industrial

Power KW 7.1 100.0 495,754,364 493,166,752 124.78 2.53

Molasses Qtl 1.1 100.0 2,373,926 2,578,937 19.09 74.02

Organic
MT 0.1 100.0 27,129 33,714 2.51 744.50
Manure

Bagasse Qtl 0.1 100.0 16,293,486 16,750,723 1.30 0.78

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 Data as per September 2009

COMPETITIVE PROFILE:-

Market Cap. Sales Net Profit Total Assets

(Rs. cr.) Turnover
Shree Renuka 5,555.99 2,234.20 143.50 2,563.71
EID Parry 3,735.11 1,179.43 205.28 1,671.58
Triveni Engg 3,152.58 1,895.94 169.78 1,756.78
Bajaj Hind 2,553.66 1,780.71 154.61 5,368.83
Balrampur Chini 2,407.76 1,704.58 226.51 2,147.28
Bannariamman 1,003.60 884.44 143.63 902.69
Dhampur Sugar 417.77 948.04 56.19 1,231.60
Andhra Sugar 340.06 578.34 66.84 587.49
KCP Sugar 225.07 301.55 23.74 212.99
Sakthi Sugars 220.66 1,374.71 103.49 2,159.63

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 MANAGEMENT OBJECTIVES:-

At BCML, we believe our mission to enhance value creation for the stakeholders can only be
achieved through the quality and commitment of our people. Towards this end, we
continuously strive to unleash the potential of each individual.

We leverage human capital for competitiveness by nurturing knowledge, entrepreneurship and

creativity. We believe it is these strengths that will help us successfully compete in a globalize
environment and exploit emerging opportunities. We reward the will to succeed and the desire
to compete with the best in the world. We stimulate the drive to the best and take immense
pride in being Indian.

Balrampur Chini Mills Ltd has informed BSE that in terms of the Rehabilitation Scheme
containing the Scheme of Arrangement sanctioned by the Hon'ble BIFR at New Delhi by an
Order passed on June 24, 2010, the Record Date has been fixed as August 24, 2010 for the
purpose of determining the eligibility of the shareholders of Indo Gulf Industries Ltd. (IGIL)
(since the Sugar Unit of IGIL merged with the Company) for allotment of shares by the
Company. The members of IGIL, whose names appear in the Register of Members as on
August 24, 2010, will be allotted 1 equity share of Re. 1 each in Balrampur Chini Mills Ltd.
credited as fully paid up for every 100 equity shares of Re. 1 each held by them in IGIL.

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 3. FINANCIAL PERFORMANCE ANALYSIS

 Ratio Analysis of BCML:-

PARTICULARS FORMULA DATA 30-SEP-09 DATA 30-SEP-08 DATA 30-SEP-07

Return on Equity
0.49 0.24 -0.12

Book Value Per Share 46.00 39.70 34.70

Earnings per share 22.65 9.703 -4.184

Dividends payout 0.34 0.13 0.00

ratio

9.53%
CAGR (Sales) -1 - - - -

32.78%
CAGR (Eps) -1 - - - -

Sustainable Growth ROE 0.49 (1- 0.32 0.24 (1- 0.21 -0.12 (1- 0.00
ratio 0.34) 0.13) 0.00)

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P/E ratio 2.20 11.95 -19.83

4. VALUATION OF THE STOCK:- (use D/P ratio or P/E Ratio to calculate Ke)

For year 2009:

Ke = 77.03/50 + 64.52

= 1.54+64.52

Ke = 66.06

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5. TECHNICAL ANALYSIS-CHART:-

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6. Bibliography:-

http://www.Google.com
http://www.bseindia.com
http://www.India infoline.com
http://www.Moneycontrol.com
http://www.Chini.com
http://www.topstockresearch.com

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