Sugar shares in focus; Dwarikesh, Balrampur, Dhampur, Dalmia gain up to 5%

India has a cushion to export an additional 1 million tonnes of the sweetener if the domestic output reaches an estimated 33.6 million tonnes this year

Shares of sugar companies were in focus on Wednesday, with most of the frontline stocks trading up to 5 per cent higher on the BSE, in the intra-day trade. This came amid expectations of additional 1 million tonnes sugar exports, if the output meets estimate.

Balrampur Chini Mills, Uttam Sugar Mills, Dwarikesh Sugar Industries, Dhampur Sugar, Avadh Sugar & Energy, Magadh Sugar & Energy, Dalmia Bharat Sugar, and Vishwaraj Sugar Industries gained in the range of 4 per cent to 5 per cent on the BSE. In comparison, the S&P BSE Sensex was down 0.04 per cent at 60,197 at 10:28 AM.

India, the world's second largest sugar producing nation after Brazil, has a cushion to export an additional 1 million tonnes of the sweetener if the domestic output reaches an estimated 33.6 million tonnes this year, a senior food ministry official said on Monday, as per a PTI report.

The government will take a call next month on allowing more quantities of sugar exports, after assessing domestic production, he said. CLICK HERE FOR FULL REPORT

For export sales, the sugar export quota is set at 6 million tonnes by the government in the current sugar season (SS) 2022-23, which is still lower than exports made of 7.2 million tonnes and 11.2 million tonnes in the SS 2020-21 and SS 2021-22, respectively.

The additional sugar export quota will be decided after evaluating the current demand-supply scenario. Furthermore, a GST reduction from 18 per cent to 5 per cent, coupled with any additional export quota announcement by the government, could support the sugar mills' performance in the near term, CareEdge Advisory & Research said in a sector report.

Sugar production is estimated to be 34 million tonnes in SS 2022-23, as compared to the peak of 35.8 million tonnes produced in the previous SS 2021-22; with the highest-ever diversion towards ethanol estimated at 45 lakh tonnes (higher by 41 per cent y-o-y), according to the Indian Sugar Mills Association (ISMA). This increasing diversion towards high realisation ethanol is likely to support 8-12 per cent revenue growth for sugar mills this fiscal, the rating agency said.

"The growth is expected to be supported by addition in installed capacity for sugar production and distilleries along with increase in ethanol blending target and price. With the government's continuous support towards the sugar sector and increasing focus on diversion towards ethanol production to promote Ethanol Blending Program in India, the sugar sector is likely to gain traction going forward," Tanvi Shah, Director, CareEdge Advisory & Research, said.

The additional sugar export quota will be decided after duly evaluating overall production and prevailing demand scenario. This additional sugar export quota, if any, would help support sugar mills operating performance and remain a key monitorable, CareEdge said.