Shares of sugar companies were on a roll as frontline stocks traded higher by up to 10 per cent on the BSE in Wednesday’s trade in an otherwise weak market. Frontline stocks like Dwarikesh Sugar, Dalmia Bharat Sugar and Industries and Triveni Engineering rallied between 5 per cent to 10 per cent. Among others in the pack, Magadh Sugar & Energy, Rana Sugar, Uttam Sugar Mills, KM Sugar, Andhra Sugar, Mawana Sugar and Shree Renuka Sugar surged 10 per cent to 15 per cent on the BSE. In comparison, the S&P BSE Sensex was down 0.88 per cent at 59,644 points at 11:35 am.
According to a report by ISMA, India’s sugar export is likely to touch 8.5 million tonne in the ongoing 2021-22 marketing year ending September. “Sugar production reached 30.98 million tonne till March of the ongoing 2021-22 marketing year, higher than 27.87 million tonne in the year-ago period,” added the report.
Meanwhile, the government extended the timeline for disbursement of loan for ethanol projects under different schemes till September 30 this year, to boost domestic production and achieve ethanol blending of 20 per cent by 2025. The move is aimed at facilitating entities to complete their projects and avail benefits of interest subvention.
On the other hand, Triveni Engineering announced that the new 160 KLPD distillery of the company at its sugar unit at Milak Narayanpur in Uttar Pradesh, (which has the flexibility to operate with multiple feedstocks i.e. molasses/cane juice & syrup/grain based) has commenced commercial operations with effect from Monday, April, 4, 2022. The stock rallied 6 per cent to Rs 342.70 on the BSE in intra-day trade today. Earlier, it had hit a record high of Rs 358.90 on March 15, 2022.
“With a favourable mix of ethanol towards B-heavy/juice (feedstock) coupled with higher sugar realisations, operating margins of sugar companies are expected to improve,” said brokerage Systematix Shares and Stocks in a February report. The report also suggested that the ethanol demand is likely to grow at15 per cent CAGR over FY22-30E driven by the government’s mandate of 20 per cent ethanol-blending in petrol.
“Higher diversion of cane towards ethanol will solve the problem of surplus sugar inventory and reduce business volatility. Improved profitability and reduced working capital will ensure superior cash flows, which along with the improvement in RoE/RoCE, would lead to sector re-rating,” added the report