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Sugar stocks rally up to 10% as govt approves Rs 10,540 crore soft loan

Uttam Sugar Mills, Dharani Sugars, Triveni Engineering, DCM Shriram Industries, Thiru Arooran Sugars and Dwarikesh Sugar were up in the range of 5 to 10 per cent on the BSE in intra-day trade.

SI Reporter  |  Mumbai 

From the 2018-19 sugarcane season starting October, the Centre not only increased the base recovery rate from 9.5 to 10 per cent, but also raised the premium extra yield in sugar from Rs 2.68 per quintal to Rs 2.75 a quintal

Shares of companies rallied up to 10 per cent on Friday, extending their previous day’s gains on the BSE after the government approved Rs 10,540 crore to help mills clear cane arrears.

Uttam Mills, & Chemicals, & Industries, DCM Shriram Industries, and Dwarikesh Sugar Industries were up in the range of 5 to 10 per cent on the BSE in intra-day trade.

Balrampur Chini Mills (up 4 per cent at Rs 137) and Dalmia Bharat Sugar and Industries (6 per cent at Rs 130) hit their respective 52-week highs. In comparison, the S&P BSE Sensex surged 0.53 per cent to 36,058 levels, at 10:04 am.

According to a PTI report, the government on Thursday announced a of up to Rs 10,540 crore to the to help mills clear mounting arrears to cane growers, a move that would cost exchequer up to Rs 1,054 crore as interest subsidy.

The decision to provide comes a fortnight after the Centre raised benchmark selling price of sugar at factory gate by Rs 2 to Rs 31 per kg.

In the last one-and-a-half years, the central government has taken a number of measures to bail out sugar mills as well as cane farmers. The steps include doubling of the import duty on sugar to 100 per cent and scrapping of the export duty, added report. CLICK HERE TO READ FULL REPORT

The hike in minimum selling price of sugar by 7 per cent to Rs 31 per kg from Rs 29 per kg, approved by the union cabinet recently, is expected to address the profitability and liquidity issues of sugar mills, and ease their cash crunch, thereby enabling payment of accumulated arrears to sugarcane farmers.

According to rating agency CRISIL, Ebitda (earnings before interest, taxation, depreciation and ammortisation) margins are expected to improve by 200-300 basis points for mills in the north and by 300-400 basis points (bps) for those in the south, given that cost of cane is lower in the region. However, stagnant cane costs and higher sugar prices would enable mills in the north to make higher margins compared with their southern peers.

Over the past one month, the market price of Uttam Sugar Mills, Magadh Sugar, Dhampur Sugar Mills, Avadh Sugar, Dalmia Bharat Sugar & Industries, and Industries, Dwarikesh Sugar Industries, Balrampur Chini Mills have surged over 30 per cent, against 6 per cent rise in the S&P BSE Sensex.

COMPANY LATEST 1-WEEK BEFORE GAIN(%)
UTTAM SUG.MILLS 156.00 110.55 41.11
DHARANI SUGARS 12.88 10.00 28.80
KM SUGAR MILLS 9.25 7.41 24.83
MAGADH SUGAR 133.00 108.75 22.30
DWARIKESH SUGAR 30.45 24.90 22.29
DALMIA BHARAT 126.60 104.20 21.50
DCM SHRIRAM INDS 206.00 171.60 20.05
KESAR ENTERPRISE 33.80 28.85 17.16
AVADH SUGAR 500.10 431.95 15.78
SIMBHAOLI SUGAR 9.99 8.78 13.78
DHAMPUR SUGAR 244.75 216.10 13.26
DHAMPUR.SPL.SUG. 16.55 14.65 12.97
TRIVEN.ENGG.IND. 58.30 51.70 12.77
SAKTHI SUGARS 10.75 9.58 12.21
THIRU AROOR. SU. 19.00 17.30 9.83
RAJSHREE SUGARS 22.70 20.80 9.13
INDIAN SUCROSE 16.75 15.45 8.41

First Published: Fri, March 01 2019. 10:23 IST
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