Dwarikesh Sugar zooms 53% in 12 days after ICRA upgrades credit rating

Dwarikeh Sugar Industries (DSIL) hit a new high of Rs 656, up 10% on BSE in noon deals, extending its 11-day rally after rating agency ICRA upgraded the company's rating for its Rs 600 crore line of credit. The outlook on the long-term rating is stable.

The stock rallied 53% from Rs 430 on July 19, as compared to 1% rise in S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 2.16 million shares changing hands on BSE and NSE till 1:59 pm.

According to ICRA , “the rating upgrade factors in the better-than-anticipated operational and financial performance of DSIL in FY2017 as well as the fact that the bulk of its operational cash flows have been used to reduce debt levels and thereby, improve debt metrics.”

“This apart, ICRA has factored in the continued favourable outlook for its core sugar business in FY2018, supported by the recent hike in import duty and a tight domestic stock situation. This is likely to support the sugar prices in the near term, and is expected to result in healthy profits and accruals in FY2018 as well,” DSIL said in a statement.

“Consequently, ICRA expects DSIL to use these cash flows for further debt repayment and largely complete its long-term debt obligations by March 31, 2018. The ratings continue to factor in the company’s forward integration into cogeneration and distillery businesses, which provide alternate revenue streams and reduce the impact of the cyclicality of the sugar business to an extent,” it added.

Meanwhile, the company fixed the book closure date from August 12, 2017 to August 19, 2017 (both days inclusive) for the purpose of sub-division of 1 equity share of face value of Rs 10 each into 10 equity shares of Re 1 each as well as for the dividend & Annual General Meeting  (AGM). The stock will turn ex-stock split on Thursday, August 10, 2017.

Other sugar stocks, Avadh Sugar, Dalmia Bharat Sugar, Triveni Engineering and Dhampur Sugar gained in the range of 3% to 5% on BSE. On comparison, the S&P BSE Sensex was up 0.06% at 32,258.

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