Balrampur, Rajshree zoom up to 20%; why sugar stocks are sweetening?

Sugar companies shares price today

 

Shares of sugar manufacturers zoomed by up to 20 per cent on the BSE in Tuesday’s intra-day trade on reports that the government has allowed sugar mills, distilleries to make ethanol from sugarcane juice, syrup and all types of molasses without any restrictions on volumes in Ethanol Supply Year (ESY) 2025-2026.

 

Shares of Rajshree Sugar & Chemicals locked in 20 per cent upper circuit at ₹45.36 on the BSE. Shree Renuka Sugars surged 14 per cent to ₹32.80, followed by Uttam Sugar Mills (14 per cent at ₹299), Dhampur Sugar Mills (13 per cent at ₹142.20), Magadh Sugar & Energy (12 per cent at ₹598.80) and Dwarikesh Sugar Industries (11 per cent at ₹44.60).

 

Avadh Sugar & Energy, Sakthi Sugars, Ugar Sugar Mills, Balrampur Chini Mills, Mawana Sugars and Triveni Engineering & Industries were up in the range of 5 per cent to 10 per cent on the BSE in intra-day trade.

 

Why sugar stocks are sweetening?

 

The government has allowed production of ethanol from sugarcane juice, syrup and all types of molasses without any restrictions on volumes in ESY 2025-2026, the government said in a notification on Monday.

 

In the new ethanol supply year starting from November 1, sugar mills and distilleries are allowed to produce ethanol without any quantitative restriction, the Ministry of Consumer Affairs, Food & Public Distribution said.

 

The government will periodically review sugar diversion to ethanol to ensure year-round domestic availability of the sweetener, it said.

 

In the new season, sugarcane supplies are expected to jump as ample monsoon rains for two straight years have helped farmers to expand area under the crop, Reuters reported. CLICK HERE FOR FULL REPORT

 

Meanwhile, most of the sugar companies reported decrease in EBITDA in the financial year 2024-25 (FY25) on account of lower crushing volumes and lower distillery volumes owing to restriction in diversion of sugar cane juice and BH molasses for ethanol production during ethanol season year 2023-24.

 

Elara Securities view on sugar sector

 

Despite expectations of closing stock of 4.9 million tonnes of sugar as at end-SS24-25, sugar prices are not rising due to adequate expectations on sugar production in the wake of higher sugarcane planting as well as non-remunerative ethanol production from sugarcane-based feedstock.  Increase in ethanol blending from the current levels and upgrade in ethanol price would be positive triggers for the sector, while any increase in state advised price (SAP) would be a negative trigger, Elara Securities said in sugar sector report.

 

Increase in ethanol price is the most important lever to improve profitability as this will lead to more diversion of sugarcane-based feedstock, lower sugar production and consequently, higher sugar prices as well, the brokerage firm had said in July month report.

 

Meanwhile, on outlook, Balrampur Chini Mills in FY25 annual report said distillery segment volumes should improve going forward considering that the Government has allowed diversion of sugar towards Juice and B-heavy routes for ESY FY 24-25. The company is also very hopeful on the increase in price of Juice and B-heavy route Ethanol to compensate for the increase in sugarcane price and cost of production, as per the past practice of formula based pricing.

 

To promote ethanol use, the government implemented the Ethanol Blended Petrol (EBP) Programme, enabling Oil Marketing Companies (OMCs) to supply petrol blended with ethanol. The government aims to achieve 20 per cent ethanol blending with petrol by 2025-26 and 30 per cent by 2030.