Sugar shares extend fall; Balrampur, Dhampur, Praj tank up to 15% in 2 days

The central government has directed all sugar mills not to use sugarcane juice or syrup for making ethanol in 2023-24 season, as the sugar production expected to be down in this year.

Shares of sugar manufacturing and its related companies were under pressure for the second straight day falling up to 15 per cent on the BSE in Friday’s intra-day trade amid heavy volumes after the central government directed all sugar mills not to use sugarcane juice or syrup for making ethanol in 2023-24 season, as the sugar production was expected to be down this year. However, the government has allowed the production of ethanol from B-heavy molasses as it is.

Praj Industries, Bajaj Hindusthan Sugar, Shree Renuka Sugars, Ugar Sugar Works, Dhampur Sugar Mills and Avadh Sugar & Energy were down in the range of 5 per cent to 11 per cent on the BSE in intra-day trade today.

Dwarikesh Sugar Industries, Uttam Sugar Mills, Balrampur Chini Mills and Triveni Engineering shed between 3 per cent and 4 per cent. These stocks were down up to 15 per cent in past two trading days. In comparison, the S&P BSE Sensex was trading higher by 0.32 per cent at 69,746.86 at 12:33 PM.

The sector has underperformed in the past two days, as investors felt that ethanol realisations would get impacted as the major feedstock moved to produce more sugar.

Meanwhile as per Indian Sugar Mills Association’s (ISMA’s) preliminary estimates for sugar year 2024 (SY2024), the gross sugar production is likely to remain at 33.7 million tonnes (mt), 8 per cent lower compared to 36.6 mt in SY2023.

India’s sugar inventory reduced to 5.5 mt at the end of SY2023 from the peak of 14.6 mt over SY2019, owing to an increasing diversion towards ethanol and healthy exports.

Among individual stocks, Praj Industries, the top loser among pack, slipped 11 per cent to Rs 542.90 in intra-day trade today on back of over 6-fold jump in trading volumes. In past two days, the market price of the company was down 15 per cent on profit booking. It had hit a record hit a record high of Rs 650.30 on November 30 and zoomed 91 per cent since April.

Praj Industries is engaged in the business of process and project engineering. The company caters to both domestic and international markets. Further, the company also provides design and engineering services.

The sustainable aviation fuel (SAF) blended in the aviation turbine fuel (ATF) was produced by Praj using sugary feedstock. Praj’s Bio-Mobility platform comprises of Biofuels both in liquid as well as gaseous form. Biofuels are produced using bio-based feedstock such as sugary (C molasses, B molasses, sugar syrup etc.), starchy (damaged/ surplus grains) and cellulosic (agri residues and biomass).

A change in domestic grain policy stopped the supply of rice for ethanol production which halted several prospective and existing grain-based projects, although revised prices for grain-based ethanol by oil marketing companies (OMCs) and reduction on GST for molasses have given certain comfort for Praj Industries.

On the other hand, lower sugar production guidance by the ISMA may have a possible impact on sugar-based plants. Analysts at Axis Direct in September qurater result updat said it remain cautious about the impact of these developments.