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Buy Riddhi Siddhi Gluco – Kotak

May 21, 2008

Riddhi Siddhi [RSGB’s] 500 TPD maize-crushing plant at Uttarakhand has successfully completed trial runs and has commenced commercial production. The Uttarakhand plant is state-of-the-art and has been built with inputs from Roquette Ferres, which is one of the global leaders in maize starch and its value added derivatives. It was built at a cost of Rs.1.2 bn.The plant would be able to provide timely and effective service to its large number of corporate and institutional clients who have set up facilities in Uttarakhand and Himachal Pradesh.

The total capacity of the company has increased by 50% form 330,000 TPA to 500,000 TPA or from 1000 TPD to 1500 TPD. The financial performance of the company is poised for aggressive growth in the coming years in line with such an aggressive capacity addition.The capacity utilization of the Gokak, Karnataka plant has gone up from 40% in May 2007 to 80% in March 2008. The management is very confident of ramping it above 90% capacity utilization levels by June 2008.

Over the last nine months, the stock had underperformed the markets due to fire at its Gokak plant and couple of month’s delay of its Uttarakhand plant. Now with the Gokak plant back to normal and aggressive capacity expansion to 0.5 mn TPA becoming operational, the financial performance of the company is expected to improve significantly from now on.

Kotak Sec expects RSGB to report EPS of Rs.22.8 for FY08E moving upto Rs.48.2 for FY09E. It recommends a BUY with a target price of Rs 390.

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