Sugar stocks outperform Sensex in returns

Sugar stocks have managed to outperform the benchmark index BSE Sensex, despite the poor financial performance of sugar companies in the first half of FY08.

The Business Standard Sugar Index posted an 43 per cent return over the last three months "� between August 21 and November 21 "� compared to a 25 per cent rise in the BSE Sensex over the same period.

Nineteen sugar companies had posted Rs 226.42 crore net losses in first half of FY08 compared to Rs 404.13 crore net profits reported in same period of FY07 and Rs 256.68 crore net profits in first half of FY06.

The depressed sale price of sugar and decrease in the quantity of sugar sold, had led to the steep fall in turnover and profit of sugar companies in the first half of the year.

However, the fact that the government announced a slew of measures "� like reduction in customs duty, extension of ethanol blending, export subsidy and conversion of outstanding loans related to cane harvesting and transport charges into term loans in October, to support the ailing sugar sector "� led to the revival rally in the stocks.

The measures taken by the government, however, are short-term ones. They could help sugar companies to get subsidised loans for the upcoming crushing season but the real problem of prohibitive cane prices in Uttar Pradesh remains unsolved.

The Uttar Pradesh Sugar Mills' Association (UPSMA) is planning to appeal to the Supreme Court against the high court order, which had fixed an interim cane price of Rs 110 per quintal against the state advised price (SAP) of Rs 125-130 per quintal declared by the state government.

The market price of most of the frontline sugar stocks such as Triveni Engineering, DCM Shriram Ind, Balrampur Chini, Bajaj Hindustan, Upper Ganges Sugar, Empee Sugars, Bajaj Hind and Shree Renuka Sugars has appreciated more than 50 per cent in last three months.

Triveni Engineering and DCM Shriram Ind are the largest gainers, appreciating by more than 100 per cent in the last three months.

The market price of the Triveni Engineering has gained 107 per cent from Rs 62.40 on August 21 to Rs 129.05 on Wednesday on BSE whereas share price of DCM Shriram Ind gain surges 104 per cent to Rs 79.95 from Rs 39.20 on August 21.

Bajaj Hindustan, India's largest sugar producer, gained as much as 51 per cent from Rs 126.05 to Rs 189.95 on Wednesday, while Balrampur Chini, the second largest producer, rose by 66 per cent to Rs 88.45 (Rs 53.35).

Bajaj Hind Sugars has gained 58.46 per cent to Rs 37 (Rs 23.35) followed by Upper Ganges Sugar 54.38 per cent to Rs 93.40 (Rs 60.50), Empee Sugars 54 per cent to Rs 10.40 (Rs 6.75) and Shree Renuka Sugars 52.45 per cent to Rs 716.60 (Rs 470.05).