Sugar stocks like Balrampur Chini Mills, Shree Renuka Sugar, Dhampur Sugar jumped between 3 per cent and 7 per cent, aided by rise in global sugar prices to a 12-year high, on tightening supply and expectations of better earnings.
In comparison, the S&P BSE Sensex was down 0.89 per cent at 63,986 at 1:50 PM.
Palka Arora Chopra, Director at Master Capital Services Ltd, said: “Global Sugar prices surged to 12-year high due to an increase in crude oil prices, and a shortage in supply. Going Forward, we have a neutral view of the sugar industry due to restrictions on export after a lower monsoon. High el-Nino, lower production, and government increase in incentives for the sugar companies for further ethanol increase usage (lack of clarity for the sugar industry) could pose challenges for the sugar sector.”
According to CRISIL, despite reduced exports and decline in ethanol production, Ebitda margins of micro, small and medium enterprises (MSMEs) in the sugar industry are projected to increase in the upcoming quarters.
This is due to their significant involvement in the sugar segment and limited exposure to exports and the distillery segment. Robust sugar prices will positively impact their financial performance this financial year.
The government has banned sugar exports this season because of low supply. The Directorate General of Foreign Trade issued a notification extending the restriction on sugar exports from October 31 onwards till further notice.
Lower cane availability is expected to reduce sugar production by 3-4 per cent, which will trigger a price rise. Sugar prices are likely to rise 2-3 per cent in the backdrop of weak supply and strong demand, CRISIL said.
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