Sugar shares rally up to 13% on positive outlook; Balrampur hits 52-wk high

Shares of sugar companies were on a roll with most of the stocks trading higher on the bourses up to 13 per cent higher on positive outlook.

Magadh Sugar & Energy, Avadh Sugar & Energy, Uttam Sugar Mills and Dalmia Bharat Sugar and Industries rallied in the range of 10 per cent to 13 per cent on the BSE in Thursday’s intra-day trade.

Dhampur Sugar Mills, Simbhaoli Sugars, Ponni Sugars (Erode), Shree Renuka Sugars, Dwarikesh Sugar Industries, Triveni Engineering & Industries and Ugar Sugar were up between 2 per cent and 5 per cent. In comparison, the S&P BSE Sensex was up 0.06 per cent at 66,062 at 02:10 PM.

Shares of Balrampur Chini Mills hit a fresh 52-week high of Rs 469.50, up 2 per cent in intra-day trade today, and has rallied 5 per cent in past two days. In past one month, the stock has surged 17 per cent.

While the industry anticipates a general decline in sugar production in India for the next crushing season, the management of Balrampur Chini said the company is preparing for an expected upswing in its own production volumes. The company had reported healthy improvement in volumes and realizations across the Sugar and Distillery divisions that supported its overall performance in September quarter.

As per Indian Sugar Mills Association (ISMA) reports, gross sugar production estimates before diversion into ethanol for SS 23-24 is expected to be lower at 33.7 Mn MT mainly due to lower production in Maharashtra and Karnataka due to agroclimatic conditions. Domestic sugar prices have firmed-up in last 2-3 months and are expected to remain so in future also, according to the managements of sugar companies.

According to media reports, sugar worldwide is trading at the highest level since 2011, mainly due to lower global supplies after unusually dry weather damaged harvests in India and Thailand, the world's second- and third-largest exporters.

The Indian agri-economy was impacted by the El Nino effect in 2023 resulting in a rainfall deficit during the critical months of the sugarcane cycle. With an anticipated lower production in the upcoming sugar season, domestic sugar prices are likely to remain firm this fiscal, reinforcing our positive outlook on the sector, C.S. Nopany, Chairperson, Magadh Sugar & Energy said earlier this month.

While India exported 6 mnt of sugar in SS-23, the exports are unlikely to be allowed until a clarity emerges on the sugar production and domestic surplus. However, with opening stocks remaining close to the normative carryover requirement and the likelihood of a lower production and diversion towards ethanol, India Ratings and Research (Ind-Ra) expects the stock levels to remain in check in SS-24. The sugar prices averaged Rs 38/kg in September 2023 and are likely to remain healthy in the near- to medium-term given the demand-supply position.

Furthermore, the government has continuously increased ethanol prices over the past five seasons to ensure continued incentive for mills to produce ethanol even with an increase in cane prices and Ind-Ra expects the trend to continue.