The Karnataka-based company, which operates manufacturing facilities across Karnataka and Maharashtra, continues to grapple with structural challenges that have plagued the sugar sector. With a market capitalisation of ₹5,306 crores and a negative book value of ₹12.23 per share, the company's financial health remains under severe stress despite stable promoter holding at 62.48%.
The company's operational performance has deteriorated sharply, with operating profit before depreciation, interest, tax, and other income turning negative at ₹182.20 crores in Q2 FY26 compared to a positive ₹227.40 crores in Q2 FY25. This represents a complete reversal in operational profitability, with the operating margin collapsing from a positive 9.61% to a negative 7.33% year-on-year.
| Quarter | Net Sales (₹ Cr) | QoQ % | YoY % | Net Profit (₹ Cr) | Operating Margin |
|---|---|---|---|---|---|
| Sep'25 | 2,422.80 | +20.53% | -5.59% | -368.60 | -7.33% |
| Jun'25 | 2,010.20 | -25.31% | -34.17% | -263.00 | -4.29% |
| Mar'25 | 2,691.30 | +3.39% | -20.28% | 91.60 | 10.76% |
| Dec'24 | 2,603.10 | +1.44% | — | -203.60 | -0.06% |
| Sep'24 | 2,566.20 | -15.96% | — | -22.30 | 9.61% |
| Jun'24 | 3,053.70 | -9.55% | — | -165.50 | 2.76% |
| Mar'24 | 3,376.00 | — | — | -111.70 | 7.44% |
Financial Performance: A Quarter of Mounting Losses
In Q2 FY26, Shree Renuka Sugars posted net sales of ₹2,422.80 crores, representing a modest 20.53% sequential increase from Q1 FY26's ₹2,010.20 crores but a concerning 5.59% decline compared to Q2 FY25's ₹2,566.20 crores. The year-on-year revenue contraction reflects the challenging demand environment and pricing pressures in the sugar industry.
The company's profitability metrics paint an alarming picture. The net loss of ₹368.60 crores in Q2 FY26 represents a massive deterioration of 1,552.91% year-on-year from the ₹22.30 crores loss in Q2 FY25. Sequentially, losses widened by 40.15% from Q1 FY26's ₹263.00 crores loss. The profit after tax margin collapsed to negative 14.85% in Q2 FY26 from negative 0.98% in Q2 FY25, indicating severe operational stress.
The operating performance before other income turned deeply negative, with operating profit at negative ₹182.20 crores compared to a positive ₹227.40 crores in Q2 FY25. This represents a complete operational collapse, with the operating margin excluding other income plunging from a healthy 9.61% to a troubling negative 7.33%. The gross profit margin similarly deteriorated from 1.21% to negative 13.20% year-on-year.
Interest costs remain a significant burden at ₹183.60 crores in Q2 FY26, though marginally lower than the ₹210.70 crores in Q2 FY25. However, with the company reporting negative operating profits, the interest coverage has become severely strained. Depreciation stood at ₹73.00 crores, largely stable compared to ₹69.90 crores in the year-ago quarter.
Operational Challenges: Negative Book Value and Capital Erosion
Shree Renuka Sugars faces severe structural challenges reflected in its negative book value of ₹12.23 per share. The company's shareholder funds stood at negative ₹1,675.60 crores as of March 2025, deteriorating from negative ₹1,437.85 crores in March 2024. This capital erosion represents accumulated losses over multiple years, with reserves and surplus at negative ₹1,888.45 crores.
The balance sheet reveals a highly leveraged capital structure with long-term debt of ₹3,334.69 crores as of March 2025, though marginally lower from ₹3,432.25 crores in the previous year. Current liabilities stood at ₹7,079.38 crores, dominated by trade payables of ₹3,949.50 crores. The company's total assets of ₹8,713.49 crores are substantially funded by debt and liabilities, with negative equity capital.
Critical Concern: Negative Book Value
Shareholder Funds: Negative ₹1,675.60 crores as of March 2025
Book Value per Share: Negative ₹12.23
Accumulated Losses: Reserves & Surplus at negative ₹1,888.45 crores
The negative book value indicates that the company's liabilities exceed its assets, representing a severe erosion of shareholder capital. This raises significant concerns about long-term financial viability and the company's ability to service its substantial debt burden of over ₹3,300 crores in long-term borrowings.
From a profitability perspective, the company's return on equity remains at 0.0% given the negative book value, whilst the return on capital employed averaged 6.38% over recent periods but turned negative 6.81% in the latest calculation. The average EBIT to interest coverage ratio stands at a deeply concerning negative 0.27 times, indicating the company's inability to service interest obligations from operating profits.
Working capital management shows some improvement, with cash flow from operations at ₹950.00 crores in FY25 compared to ₹913.00 crores in FY24. However, this was largely driven by changes in working capital rather than core operational improvements. The company's closing cash balance stood at ₹62.00 crores as of March 2025, up from ₹37.00 crores in the previous year.
Sugar Sector Headwinds: Pricing Pressure and Regulatory Constraints
The sugar industry in India continues to face significant headwinds from regulatory price controls, surplus production, and export restrictions. Shree Renuka Sugars, despite being India's largest sugar refiner with 4,000 tonnes per day capacity, has been unable to escape these sector-wide challenges. The company operates three owned facilities in Karnataka and three leased facilities in Maharashtra and Karnataka, but capacity utilisation and pricing power remain constrained.
The company's 5-year sales growth stands at 12.65%, which appears reasonable on the surface. However, the 5-year EBIT growth of negative 215.72% reveals the fundamental profitability challenge. Revenue growth has not translated into earnings growth, with operating leverage working against the company as fixed costs and interest expenses consume any top-line gains.
Sector Positioning: Market Leadership Without Profitability
Shree Renuka Sugars holds India's largest sugar refining capacity at 4,000 tonnes per day, giving it a significant scale advantage. However, this operational scale has not translated into sustainable profitability. The company's integrated model spanning sugar, power, and ethanol has been insufficient to offset the structural challenges of regulated sugar prices, high debt servicing costs, and volatile raw material availability.
The company's debt to EBITDA ratio averages an extremely high 37.60 times, reflecting the mismatch between debt levels and cash generation capacity. Whilst the company is technically classified as having net cash (average net debt to equity of negative 2.67), this is misleading given the negative equity base. The absolute debt burden of over ₹3,300 crores remains a critical constraint.
Peer Comparison: Underperformance Across Metrics
When compared to industry peers, Shree Renuka Sugars' financial metrics lag significantly across profitability and valuation parameters. The company's return on equity of 0.0% (due to negative book value) compares unfavourably with peers like Balrampur Chini (13.34%), Triveni Engineering (14.85%), and Piccadily Agro (13.09%).
| Company | P/E (TTM) | P/BV | ROE % | Div Yield | Debt/Equity |
|---|---|---|---|---|---|
| Sh.Renuka Sugar | NA (Loss Making) | -2.28 | 0.0% | NA | -2.67 |
| Balrampur Chini | 22.31 | 2.31 | 13.34% | 0.78% | 0.19 |
| Triveni Engg. | 25.93 | 2.64 | 14.85% | 0.67% | 0.22 |
| Piccadily Agro | 42.97 | 7.08 | 13.09% | NA | 0.27 |
| Dalmia Bharat | 8.62 | 0.77 | 12.38% | 2.07% | 0.00 |
| Bajaj Hindusthan | NA (Loss Making) | 0.55 | 0.0% | NA | 0.86 |
The company's negative price-to-book value of -2.28x reflects the market's assessment that the stock trades below its negative book value, indicating deep distress. In contrast, profitable peers trade at positive P/BV multiples ranging from 0.77x to 7.08x. The inability to generate positive P/E multiples (due to sustained losses) places Shree Renuka alongside only Bajaj Hindusthan in the loss-making category amongst major sugar companies.
From a leverage perspective, Shree Renuka's debt-to-equity ratio of -2.67 (negative due to negative equity) contrasts sharply with healthier peers maintaining ratios between 0.00 to 0.27 times. This indicates that competitors have either deleveraged successfully or maintained stronger balance sheets, whilst Shree Renuka continues to struggle with its debt burden relative to its eroded capital base.
Valuation Analysis: Deep Value Trap Territory
Shree Renuka Sugars currently trades at ₹24.88, representing a 33.23% decline from its 52-week high of ₹37.26 but still 8.84% above its 52-week low of ₹22.86. The stock's valuation metrics are distorted by the company's loss-making status and negative book value, making traditional valuation approaches challenging.
The company's enterprise value to EBITDA multiple stands at an astronomical 522.28x, reflecting the minimal EBITDA generation relative to the enterprise value. The EV to EBIT ratio is negative 43.54x due to negative EBIT, whilst the EV to sales ratio of 1.18x appears more reasonable but masks the underlying profitability challenges. The EV to capital employed ratio of 2.97x indicates the market values the company's assets at nearly three times the capital employed.
The company's valuation grade has been classified as "RISKY" since March 2014, reflecting over a decade of financial distress. The stock has not paid dividends since August 2013, when it distributed ₹0.50 per share. With negative book value and sustained losses, dividend payments remain a distant prospect until the company achieves sustained profitability and rebuilds shareholder equity.
From a relative valuation perspective, Shree Renuka trades at a significant discount to profitable sugar peers on an EV/Sales basis (1.18x vs industry average of approximately 1.5-2.0x). However, this apparent discount is more than offset by the complete absence of profitability and the structural balance sheet challenges. The stock represents a classic value trap—cheap on certain metrics but fundamentally impaired.
Shareholding Pattern: Stable Promoter Base, Limited Institutional Interest
The shareholding pattern of Shree Renuka Sugars has remained remarkably stable over the past five quarters, with promoter holding steady at 62.48%. The promoter entity, Wilmar Sugar And Energy Pte. Ltd., has maintained its majority stake without any changes, providing some governance stability despite the operational challenges. Importantly, there is zero promoter pledging, which eliminates one potential risk factor.
| Quarter | Promoter % | FII % | MF % | Insurance % | Other DII % | Non-Inst % |
|---|---|---|---|---|---|---|
| Dec'25 | 62.48% | 3.30% | 0.13% | 0.89% | 9.09% | 24.10% |
| Sep'25 | 62.48% | 3.49% | 0.13% | 0.89% | 9.09% | 23.91% |
| Jun'25 | 62.48% | 3.37% | 0.17% | 0.90% | 9.09% | 23.98% |
| Mar'25 | 62.48% | 3.46% | 0.16% | 0.90% | 9.09% | 23.91% |
| Dec'24 | 62.48% | 3.28% | 0.14% | 0.90% | 9.09% | 24.10% |
Foreign institutional investor (FII) holding has remained minimal, fluctuating between 3.28% and 3.49% over the past five quarters, with a marginal decline of 0.19% in the December 2025 quarter. This low and declining FII participation reflects limited institutional confidence in the company's turnaround prospects. The presence of 62 FII entities suggests fragmented rather than concentrated foreign institutional interest.
Mutual fund holdings are negligible at just 0.13% in December 2025, down from 0.17% in June 2025, with only 5 mutual fund schemes holding positions. This minimal mutual fund participation is telling—domestic institutional investors, who typically conduct thorough fundamental analysis, have largely avoided the stock. Insurance company holdings stand at 0.89%, whilst other domestic institutional investors (DIIs) hold 9.09%, both categories showing minimal quarterly movement.
The non-institutional shareholding (retail and others) accounts for 24.10% of the equity, showing a marginal increase of 0.19% in the December 2025 quarter. The overall institutional holding of just 13.42% (combining FII, MF, insurance, and other DIIs) is significantly below the typical 30-50% range seen in quality mid-cap companies, indicating limited institutional conviction in the stock.
Stock Performance: Severe Underperformance Across All Timeframes
Shree Renuka Sugars has delivered severely negative returns across most timeframes, significantly underperforming both the broader market and its sector peers. Over the past one year, the stock has declined 32.28% compared to the Sensex's positive return of 6.44%, resulting in a negative alpha of 38.72 percentage points. The stock has also underperformed the sugar sector, which declined 18.60%, by 13.68 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +3.54% | +0.91% | +2.63% |
| 1 Month | -4.71% | -2.49% | -2.22% |
| 3 Months | -14.91% | -0.17% | -14.74% |
| 6 Months | -16.68% | +3.23% | -19.91% |
| YTD | -4.93% | -2.24% | -2.69% |
| 1 Year | -32.28% | +6.44% | -38.72% |
| 2 Years | -51.49% | +16.15% | -67.64% |
| 3 Years | -45.85% | +36.94% | -82.79% |
| 5 Years | +152.85% | +64.22% | +88.63% |
The medium-term performance is equally concerning, with the stock declining 51.49% over two years and 45.85% over three years, whilst the Sensex delivered positive returns of 16.15% and 36.94% respectively during these periods. The negative alpha of 67.64 percentage points over two years and 82.79 percentage points over three years highlights the severe wealth destruction for shareholders.
Interestingly, the 5-year return shows a positive 152.85%, outperforming the Sensex's 64.22% return by 88.63 percentage points. However, this long-term outperformance is misleading as it reflects recovery from extremely depressed levels in 2021 rather than sustained value creation. The 10-year return of 111.38% significantly lags the Sensex's 238.44% return, indicating long-term underperformance.
The stock exhibits high volatility with a beta of 1.26, indicating 26% higher volatility than the market. With negative returns and high volatility, the stock falls into the "HIGH RISK LOW RETURN" category. The risk-adjusted return over one year stands at negative 0.92 compared to the Sensex's positive 0.56, with the stock's volatility at 35.07% versus the Sensex's 11.52%.
Technical Analysis: Entrenched Bearish Trend
From a technical perspective, Shree Renuka Sugars remains in a firmly bearish trend, with the current trend classification as "BEARISH" since November 6, 2025, when it changed from "Mildly Bearish" at ₹28.92. The stock is trading below all key moving averages, with the current price of ₹24.88 significantly below the 200-day moving average of ₹29.47.
All major technical indicators point to continued weakness. The MACD shows bearish signals on both weekly and monthly timeframes, whilst Bollinger Bands indicate bearish conditions across both periods. The KST (Know Sure Thing) indicator similarly displays bearish readings on weekly and monthly charts. Even the traditionally lagging Dow Theory shows only "Mildly Bullish" on the weekly chart with "No Trend" on the monthly, insufficient to override the broader bearish technical picture.
Key Technical Levels
Current Price: ₹24.88
Immediate Support: ₹22.86 (52-week low)
Immediate Resistance: ₹24.65 (20-DMA)
Major Resistance: ₹27.77 (100-DMA), ₹29.47 (200-DMA)
Strong Resistance: ₹37.26 (52-week high)
The stock is trading just 8.84% above its 52-week low, indicating limited downside cushion. Any breach of ₹22.86 could trigger further selling pressure.
The delivery volume data shows some stability, with the 1-month delivery percentage at 40.13% compared to 40.31% in the previous month. However, the most recent session saw delivery volumes at 32.97%, below the 5-day average of 41.09%, suggesting reduced conviction in recent buying. The volume analysis does not provide sufficient evidence of accumulation or distribution to alter the bearish technical outlook.
Investment Thesis: Fundamental Challenges Outweigh Scale Advantages
The investment case for Shree Renuka Sugars is severely challenged by multiple structural headwinds. Despite being India's largest sugar refiner with significant operational scale, the company has been unable to translate this advantage into sustainable profitability. The Mojo overall score of just 12 out of 100 with a "STRONG SELL" rating reflects the comprehensive weakness across valuation, quality, financial trends, and technical parameters.
The quality assessment reveals a "BELOW AVERAGE" company based on long-term financial performance, with this classification in place since November 2025. Key quality concerns include negative average EBIT to interest coverage of 0.27 times, extremely high debt to EBITDA of 37.60 times, weak average ROCE of 6.38%, and zero average ROE. The 5-year EBIT growth of negative 215.72% indicates sustained deterioration in operating profitability despite 12.65% sales growth over the same period.
The financial trend analysis for the most recent quarter shows a "FLAT" classification, though this masks underlying deterioration. Positive factors are limited to the operating profit to net sales ratio reaching 10.95% in one quarter. However, negative factors dominate, including ROCE at negative 3.12%, debt-equity ratio at negative 2.70 times, quarterly net sales declining 12.67%, and non-operating income constituting 113.56% of profit before tax—indicating the company is dependent on non-core income rather than operational profitability.
Key Strengths
- India's largest sugar refining capacity at 4,000 TPD providing scale advantages
- Integrated business model across sugar, power, and ethanol segments
- Stable promoter holding at 62.48% with zero pledging
- Strategic facilities across Karnataka and Maharashtra
- Positive operating cash flow of ₹950 crores in FY25
- Established market presence with over 25 years of operations
- Diversification into allied products providing revenue streams
Key Concerns
- Negative book value of ₹12.23 per share indicating capital erosion
- Sustained losses with Q2 FY26 net loss at ₹368.60 crores
- High debt burden of ₹3,334.69 crores with negative interest coverage
- Operating margins turned negative at -7.33% in Q2 FY26
- Minimal institutional participation at just 13.42%
- Stock down 32.28% over one year with severe underperformance
- Regulatory constraints on sugar pricing limiting profitability
- Debt to EBITDA ratio at extremely high 37.60 times
Outlook: What to Watch
The outlook for Shree Renuka Sugars remains challenging, with the company needing to demonstrate sustained operational improvements before any meaningful rerating can occur. Investors and analysts should monitor several key parameters to assess whether the company can stabilise its financial position and eventually return to profitability.
Positive Catalysts
- Return to positive operating margins on a sustained basis
- Reduction in debt levels through asset sales or refinancing
- Government policy changes allowing higher sugar prices
- Increased ethanol blending mandates boosting allied revenues
- Improvement in interest coverage ratio above 1.0x
Red Flags
- Further deterioration in operating margins below -10%
- Quarterly losses exceeding ₹400 crores
- Any increase in promoter pledging from current zero level
- Further decline in institutional holdings below 10%
- Breach of debt covenants or restructuring requirements
- Stock breaking below ₹22.86 support level
The company's ability to navigate the challenging sugar sector dynamics whilst managing its substantial debt burden will determine its medium-term trajectory. Without significant operational improvements and debt reduction, the stock is likely to remain under pressure. The negative book value situation requires urgent attention, potentially through capital infusion or asset restructuring.
The Verdict: Exit Recommended for Existing Holders
Score: 12/100
For Fresh Investors: Avoid initiating positions. The combination of negative book value, sustained operational losses, high debt burden, and bearish technical trends presents excessive risk. The stock trades in value trap territory—appearing cheap on certain metrics but fundamentally impaired. Until the company demonstrates sustained return to profitability and meaningful debt reduction, the risk-reward remains unfavourable.
For Existing Holders: Consider exiting positions on any technical bounce towards the ₹27-28 levels (100-DMA resistance). The deteriorating quarterly performance, widening losses, and negative operating margins indicate the turnaround remains elusive. With the stock having declined 32.28% over one year and showing no signs of fundamental improvement, holding on exposes investors to continued wealth erosion. The negative book value situation is particularly concerning for long-term capital preservation.
Fair Value Estimate: Given the negative book value and loss-making status, traditional valuation methods are inapplicable. The stock's liquidation value would be negative, whilst going concern value depends entirely on an unproven turnaround. Current price of ₹24.88 appears to price in some hope of recovery, but fundamental analysis suggests further downside risk towards ₹20-22 levels (15-20% downside) if operational metrics continue deteriorating.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Investments in equity markets carry inherent risks, including the potential loss of principal.
