1. At a Glance

Kothari Sugars & Chemicals Ltd (KSCL) is a 1961-vintage company that makes sugar, alcohol, and power in Tamil Nadu. Market cap: ₹300 Cr. Sales: ₹287 Cr. Profits: barely ₹7 Cr. Stock P/E at 41.8x – as if this is an FMCG giant, not a sugar mill running on TANGEDCO’s mercy. Investors paying champagne prices for country liquor.

2. Introduction

Kothari Sugars is one of those old-school companies where the name feels like it belongs to a family wedding invite more than a listed entity. Incorporated in 1961, the company has been doing the same three things for decades: crushing sugarcane, distilling alcohol, and generating power from bagasse.

On paper, it’s an integrated sugar company. In reality, it’s struggling with weak sales, falling profits, and margins thinner than hostel sambhar.

Revenue split (9MFY24): Sugar 62%, Distillery 20%, Power 18%. Not bad diversification, except each leg of the stool is wobbly. Cane recovery rates are ~9.6%, alcohol production 178 lakh litres, and power generation ~88 MU. The company even has an R&D centre at Sriperumbudur (₹10 Cr capex), but what exactly is being researched is anyone’s guess – maybe how to stop TANGEDCO from delaying payments.

Promoter holding is a chunky 73.5%, which means the public float is small. But ROE at 1.7% and ROCE at 3.2% make this stock less “cash cow” and more “stray cow roaming highway.”

3. Business Model – WTF Do They Even Do?

Simple:

• Sugar: Two factories, 6,400 TCD crushing capacity. FY23: 10.9 lakh tons cane crushed → 10.4 lakh quintals sugar produced. Recovery ~9.6%.
• Alcohol: 60 KLPD distillery. FY23: 178 lakh litres produced. Ethanol supply to OMCs is tiny (under 1 Cr litres). Basically, they’re not riding the ethanol wave the way Balrampur or Triveni are.
• Power: 33 MW capacity, of which a part is under PPA with TANGEDCO at ₹4.67/kWh. The rest sold via open access and IEX.

So it’s integrated, yes. But unlike peers who built ethanol as their jackpot, KSCL looks more like a three-legged stool where each leg is shaky.

4. Financials Overview

Commentary: Sales fell 26% YoY, but PAT turned positive thanks to other income. EBITDA margins are yo-yoing like Sensex on Budget day.

5. Valuation – Fair Value Range Only

• P/E Method:
  EPS (TTM) = ₹1.47
  Industry P/E = 18.4
  Fair P/E range: 15–20
  Fair Value = ₹22 – ₹30
• EV/EBITDA Method:
  EV = ₹349 Cr
  EBITDA (TTM) ≈ ₹29 Cr
  EV/EBITDA = ~12
  Fair Value = ₹25 – ₹35
• DCF (Rough Cut):
  Sales CAGR assumed 5%, margin 6%, discount rate 12%. Value range = ₹24 – ₹32.

👉 Fair Value Range: ₹22 – ₹35
(Current CMP: ₹36.1, so priced above fair zone)

Disclaimer: For educational purposes only, not investment advice.

6. What’s Cooking – News, Triggers, Drama

• Change of Holding Co.: Parvathi Trading (holding 70%) merged into NBK Real Estates. So now, a real estate co. owns this sugar co. Irony = sweet.
• Ethanol Policy: KSCL supplies only ~1 Cr litres, too small to move the needle. Unless capacity expands, they’ll miss the ethanol gold rush.
• Litigation: Madras HC dismissed an industry writ appeal, possible