FIIs up stake in top sugar firms

Prospect of the cos continuing their excellent performance attracts investors.

Foreign institutional investors (FIIs) have raised their holdings in top sugar companies like Bajaj Hindusthan, Balrampur Chini and Renuka Sugars to cash in on the sector’s improved performance.

The purchases were done in the quarter ended June 30. Analysts believe the trend will strengthen in the following quarters as these companies are expected continue their excellent performance.
 

SWEET ATTRACTION
Company	FII stake as  on March 31	As on 30-Jun
Bajaj Hindusthan	9.72	14.38
Balrampur Chini	16.75	18.44
Renuka Sugars	22.68	25.50
Source: Bombay Stock Exchange

“Investment interest in sugar is exceptionally high as all companies in the sector are making excellent profits, which are likely to improve further. FIIs’ stake in these companies is expected to rise further by the end of current quarter,’ said investment advisor SP Tulsian.

On the back of a sharp improvement in sugar prices after the output hit a three-year low, all sugar companies have registered a remarkable improvement in profitability. Bajaj Hindusthan, the country’s largest sugar producer, reported a net profit of Rs 60.08 crore for the quarter ended June 30 as against a loss of Rs 35.41 crore in the corresponding quarter of the previous year. Balrampur Chini reported 294 per cent jump in net profit to Rs 66.29 crore. The profit rose even as net sales dipped.

Ex-factory sugar prices in Uttar Pradesh have risen nearly 50 per cent since the start of the season in October last year and are currently around Rs 2,375-2,400 a quintal. This follows a 44 per cent drop in domestic sugar output to 14.7 million tonnes in the ongoing season (October-September). Domestic consumption is estimated at 22 million tonnes.

Domestic millers have been allowed to import raw sugar at nil duty to meet the shortfall in supply. India’s raw sugar imports are set to touch an all-time high of 2.5 million tonnes in the current sugar season ending September.

With the monsoon playing truant, the sugarcane crop is likely to be affected. Consequently, output in the season beginning October could be lower than the initial estimate of 18-19 million tonnes. Industry watchers now expect it to be 16-17 million tonnes, marginally higher than the output in 2008-09. This could further drive up prices. Concerns over India’s output and anticipation of India’s entry into the world market for importing in larger quantities have driven global sugar prices to a three-year high.