Uttam Sugar Mills is promoted by the Adlakha family which has experience in providing turnkey solutions for setting up sugar mills for over 20 years. The sugar manufacturing operations were started in January 2001 by setting up a 2500 TCD sugar plant alongwith co-generation facility of 6 MW of power in village Libberheri, Tehsil Roorkee, District Hardwar, Uttaranchal. Currently the capacity has been expanded to 6250 TCD alongwith expansion of co-generation facility to 16 MW of power.

Financials

The company has witnessed a rapid growth in the revenues for the 12 months ended Sep 2005 when the revenues stood at Rs.190.56 crores up from 105.5 crores in the same period an year ago. Subsequently the profit has also shown exponential growth from just Rs.8.20 crores to Rs.26.71 crores in the same time period. Consequently in the large three years the EPS has also shown significant growth from Rs.2.95 in 2003 to Rs.5.98 in 2004 to Rs.17.19 in the September ended 2005. The price band for the proposed IPO is Rs.290 to Rs. 340. The average P/E for the sugar industry is 14.6 times earnings and at the upper end the P/E for this issue comes out to be 19.77 without taking into account the new issue of shares, once that is taken into consideration the P/E will move further up.

Objects of the Issue

Thee IPO has been planned to raise money to set up two new grassroot units for manufacture of premium quality white sugar with a capacity of 4500 TCD and 5000 TCD along with co-generation of power with a capacity of 15 MW & 30 MW at village Khaikheri and village Shermau respectively. The IPO will open on March 16 2006 and will close on March 21 2006.

Conclusion

The sugar industry in Indian is highly government regulated as well as quite competitive.
Peers which have listed in the recent past including like Dwarikesh Sugar and Oudh Sugar had listed on a much lesser multiple.
Uttam Sugar does not have the necessary experience as a player in the sugar manufacturing or financial history to justify the premium it is demanding in its price.