Balrampur Chini Mills, a major integrated sugar producer in the country, is set to reap the benefit of better price realisation and higher production.
Sugar prices are on a high with a fall in production primarily due to unseasonal showers in key growing areas of Maharashtra and Karnataka in March. According to Crisil, sugar production would be down by 8 per cent for the season ending September 2023 (the sugar season is from October to September).
However, sugar production in Uttar Pradesh, where Balrampur’s mills are located, is set to be marginally higher at 10.42 million (mt) in sugar season 2022-23 compared to 10.15 million (mt) in 2021-22, figures from Crisil showed. Maharashtra and Karnataka were lower by 22.23 per cent and 5.5 per cent, respectively. UP, Maharashtra, and Karnataka are the key growing states accounting for more than 80 per cent production.
Vivek Saraogi, chairman and managing director of BCML, explained that UP would get its volume and derive advantage from a lower surplus in the country. “Balrampur would stand to gain solidly from that scenario. We would have higher volume and better prices. Normally, these two run inversely.”
Prices of some sugar grades are at a six-year high. Pushan Sharma, Director-Research, Crisil Market Intelligence & Analytics, said that for sugar season 2022-23, prices are estimated to be higher by 4-5 per cent as prices were under control at the beginning of the season. “However, an 8 per cent fall in sugar production due to lower recovery rates and unseasonal showers in March triggered a sharp rise in prices subsequently.”
BCML’s 10 sugar factories are spread across eastern and central UP. In sugar season 2022-23, its crushing was at 103.01 lakh tonnes, 16 per cent higher than sugar season 2021-22. The last two seasons were impacted by red rot disease and adverse weather conditions.
BCML expects 10 per cent higher sugarcane production in the ensuing sugar season 2023-24, Saraogi said.
Pramod Patwari, chief financial officer of BCML, said that in financial year 24, the company was expecting a 20 per cent increase in revenues. The increase would be on account of higher sugarcane crushing leading to higher availability of by-products, he said. “Also, the expected increase in realisations on both sugar and distillery segments will help achieve a 20 per cent increase in revenues.” In financial year 23, the company clocked in revenues of Rs 4,665.86 crore.
In addition, allied business opportunities from the group were also under consideration, according to Saraogi.
As far as sugar is concerned, Crisil’s Sharma said that a further fall in sugar production was expected in sugar season 2023-24, due to which the industry was anticipating an export ban.
“With India being the second largest sugar producer and third largest exporter, negative supply cues from India have affected global prices. Furthermore, supply from Thailand is expected to be stagnant this year as the country is suffering drought conditions in key sugarcane growing areas,” Sharma said.
According to Crisil, London white sugar prices have risen by 16 per cent year-on-year during the period October 2022 to August 2023 while New York raw sugar prices have risen by 12 per cent during the same period.