Sugar stocks extend fall, slip up to 9% as government restricts exports

Shares of sugar companies were under pressure for the second straight day, falling up to 9 per cent on the BSE in Wednesday’s trade after the government on Tuesday imposed restrictions on sugar exports from June 1.

The government plans to regulate sugar exports and would allow 10 MT of exports in current sugar season. Sugar mills have already contracted for 9 MT of exports and exported 7.8 MT.

Dwarikesh Sugar Industries, Dalmia Bharat Sugar and Industries, Triveni Engineering & Industries, Balrampur Chini Mills, Avadh Sugar & Energy and Uttam Sugar were down between 5-9 per cent on the BSE in intra-day trade. In comparison, at 10:04 am, the S&P BSE Sensex was up 0.07 per cent at 54,092 points.

In the past one week, the stock prices of sugar companies have declined in the range of 15 per cent to 20 per cent, as against a 0.21 per cent fall in the benchmark index.

India for the first time in six years planned to restrict exports to around 10 million tonnes to prevent a drawdown in stocks and a surge in domestic prices, the Business Standard reported quoting sources. CLICK HERE FOR FULL REPORT

Market participants said in the immediate aftermath of the ban, prices of sugar might soften by at best 50 paise per kg before returning to their usual levels.

With 10 MT of exports, 35.7 MT of sugar production & 27.8 MT of sugar consumption, closing sugar inventory would be close to 6.0 MT. This would keep sugar prices firm. Brokerage ICICI Securities believes this would not have any impact on sugar companies’ fundamentals.