With the State Government in UP, which is the country's largest sugar cane growing state, hiking the cane procurement prices by about 19 per cent to Rs 235-250 a 100 kg, the sugar stocks came under some pressure in the markets on Wednesday.

While the announcement did not have a significant impact on the South-centred sugar companies, even those companies with huge presence in UP such as Bajaj Hindusthan, Balrampur Chini and Dhampur Sugar Mills did not react sharply to the cane price increase.

Reasons

What could have come to the aid of the sugar mills is that most of them have significant capacity to produce by-products such as ethanol, molasses and bagasse and have distillery which could provide some cushion from any cane price hike. Besides, some are also selling the surplus power from their cogeneration plants to the concerned states.

The South has many established players in the industry including Bannari Amman Sugars, Rajshree Sugars, Sakthi Sugars and Parrys Sugar while Balrampur Chini, Bajaj Hindustan, Shree Renuka Sugars, Dhampur Sugar, etc, are largely present in the Western or Northern regions.

Already, the sugar stocks have been reeling under negative market sentiments and most of them are way off their year highs. Being a highly regulated sector, the sugar stocks fluctuate not only depending on the open market sugar price but also on global prices, and also on the export quota permitted by the Government since it has a bearing on the inventory levels of the industry.

Low volumes

The Southern sugar mills' shares suffer from low trading volume. For instance, while Parrys Sugar Industries that closed on the BSE today at Rs 90.85, with a loss of about five per cent saw only 91 shares being traded (52-week high on BSE is Rs 180). Rajshree Sugars, which ended the day at Rs 41 (year high Rs 86.80), gained 2.12 per cent and the trading volume was 1,602 shares. The high volume trading was witnessed in the sugar stocks of the Western and Northern belt probably because of their large crushing capacity and hence higher turnover.

Bajaj Hindusthan Ltd has 14 sugar plants, all of which are located in UP with a total crushing capacity of 1.36 lakh tonnes. Its distillery has capacity to produce eight lakh litres of alcohol a day and BHL produces 38 million litres of ethanol a year.

Balrampur Chini Mills Ltd is another UP firm having an aggregate crushing capacity of 76,500 tonnes a day (tpd). Besides it is into manufacture of ethyl alcohol and ethanol, generation and sale of power and produces organic manure. Dhampur Sugar Mills is another UP heavyweight with a crushing capacity of 39,500 tpd. It also has significant power generation capacity. Shree Renuka Sugars has seven mills located in Karnataka and Maharashtra seven mills with a total crushing capacity of 35,000 tpd. It also has 173-MW power generation capacity and produces 930 kilo litres a day of ethanol.

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