Sugar company stocks gained sharply on expectations of improved demand during the festival season in the domestic market and the government announcing fresh sops for the ailing sugar sector in the season that started this month.
Widespread gains Stocks of sugar companies, including Dhampur Sugar Mills, Dwarikesh Sugar Industries, Shree Renuka Sugars, Bajaj Hindusthan Sugar, Rana Sugars, Dalmia Bharat Sugar and Industries, Balrampur Chini Mills and EID-Parry India rose 2-20 per cent.
Some of these stocks have plunged to new lows in the last few months as the glut in supply led to low prices. The huge debt burden added fuel to the fire.
Despite the long-term prospects of the industry appearing to be hazy, there are signs of revival with the government showing special interest in the sector to support distressed farmers.
Govt’s 4-mt export move The government recently made sugar export of four million tonnes mandatory, though it is not clear whether it will extend the export subsidy of ₹4,000 a tonne paid for the last season (ended September).
Interestingly, global sugar prices have increased 27 per cent to 13.63 cents a pound from 10.69 cents a pound recorded in August due to financial and political crisis in Brazil — the world’s largest producer of sugar. Similarly, sugar prices in India were up 9 per cent to ₹2,856 a quintal from ₹2,611 in August.
India is expected to produce 270 lakh tonnes of sugar this season that started this month against 283 lakh tonnes registered last season. The industry will be left with a supply of 366 lakh tonnes, including an inventory of 96 lakh tonnes, according to Indian Sugar Manufacturers Association data. The annual demand is pegged at about 250 lakh tonnes.
Supply overhang, big worry Paras Bothra, Vice-President (Equity), Ashika Stock Broking, said the long-term trend of sugar industry stocks is still bearish given the supply overhang and the debt burden. However, he added, investors have to wait and watch as the government may announce a special package for the industry soon.
The Indian Sugar Exim Corporation, a private industry body run by the Indian Sugar Mills Association and cooperative sugar mills body National Federation of Cooperative Sugar Factories plans to export one million tonnes of the sweetener this month, within the overall mandatory export target of four million tonnes for the full year.