Fortunately for everyone with a sweet tooth we live in India where a multitude of festivals revolves around sweets. The good news today is that you can also have a sweet tooth for stocks especially in India. In this article, we treat you with some insights into the sugar industry and also look into the yummiest and best sugar sector stocks in India! Keep reading to find out!
Sugar Industry – Overview
The Indian sugar industry is the second largest agro-based industry in the country. The industry supports around 50 million farmers. The sugar industries on the other hand also provide employment to over 6 lakh individuals directly and support many more indirectly.
However, the Indian sugar industry has a much broader role to play globally. India is the largest producer of sugar in the world. The country producer 25.51 million metric tonnes of sugar beating other top producers like Brazil Thailand and the USA.
A Goldmine in Ethanol
The Indian sugar industry unlike those in other countries has been dependant on government support. Hence it is also important to look into the policy changes taking place in the industry. The most important changes currently revolve around ethanol. Ethanol is a biofuel produced naturally through the fermentation of sugars by yeast. Ethanol is used in the production of drugs, plastics, polishers, cosmetics and also as an alternative fuel source.
Over the last few years, the Indian government has brought about several relief measures that revolve around ethanol. These are a boon to the Indian sugar industry as they could soon reduce their dependence on the government in times when global prices fall. The relief measures that have a major impact on the sector include the ethanol blending programme, the introduction of MSP and export incentives that are given to sugar companies.
Due to the increase in petrol prices in the recent past, the government has resorted to increasing the blend of ethanol with petrol. Currently, about 8.5% of ethanol is blended with petrol in India and the government has aims of increasing the amount blended to 20% by the year 2023.
This is huge news for the sugar-producing companies. Currently, the country has a production capacity of 684 crore litres. In order to achieve a 20% blend, the company will have to increase production to 1000 crore litres. In addition to this, we will also see ethanol-based flex engines and 2 wheelers compliant with 95% ethanol blended petrol will also be rolled out soon thanks to the push from the Modi government.
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Best Sugar Sector Stocks in India
The Indian sugar industry is extremely vast and has multiple companies operating in it. Here we take a look at the best sugar sector stocks in India.
Founded in 1788, EID Parry is one of the oldest companies in India and is engaged in the business of Sugar and Nutraceuticals. The company also set up India’s first sugar plant and is also credited with being one of the first companies to manufacture fertilizers. Today the company is part of the Murugappa Group which took over EID Parry in 1981.
After over 2 centuries the company is one the largest sugar companies in the country. The company currently has 9 sugar plants in the country. These plants have a sugar crushing capacity of 43,400 tonnes of cane per day. In addition to this, its distillery has a capacity of 234 kilolitres per day.
When it comes to the financials the company has continuously increased its profits since 2018 to Rs. 270 crores in 2021. The company also has a low debt-equity ratio of 0.43. The promoters of the company hold a 74.91% stake in the company giving it another positive. In terms of MCap, the company is the largest in the industry at Rs. 8945 crores.
Founded in 1975 Balrampur Chinni is one of the largest and most efficient sugar producers in India. The company has 10 manufacturing plants. Balrampur Chini has an installed crushing capacity of 75,500 tonnes of cane per day. The company earns 82% of its revenues from its sugar business.
The remaining revenues are made up by its distillery and Co-gen poser business. Its distilleries primarily produce alcohol and ethanol. Its distilleries have a capacity to produce 360 kilolitres per day. Out of all the players in the industry, Balrampur Chini could be the biggest beneficiary of the government’s ethanol policy.
In addition to this, the company is in further plans to capitalise on this. They have invested Rs 425 crores to expand to 320 kilolitres per day.
When it comes to the financials one concern however is its declining profits since 2019. The company however has a low debt-equity ratio of 0.43. The company has an MCap of Rs. 6439 crores.
Founded in 1998, Shree Renuka Sugars has come a long way in just 2 decades. The company functions through 6 mills and 2 port based sugar refineries. The company has a total capacity of 36,500 tonnes of cane per day. LIke Balrampur Chinni Shree Renuka Sugar is not only engaged in sugar but also ethanol and co-generation.
The company is also one of the largest ethanol producers in the country with an installed capacity of 750 kilolitres per day.
Despite being one of the largest sugar companies in India its financials are a concern. The company has made continuous losses since 2017. Another red flag is its negative debt-equity ratio. This is another cause of concern despite it being one of the top producers in India. Despite being one of the largest companies investors must take note of these facts.
Founded in 1932, Triveni Engineering is one of the largest sugar producers in the country. The company’s product portfolio includes diverse premium quality multi-grade (large, medium, small) crystal, refined and pharmaceutical-grade sugar for use across industries. The company has 7 facilities which are located strategically in Uttar Pradesh. The company has a total capacity of 61,000 tonnes per day.
In addition to this, the company is also engaged in the production of potable alcohol and fuel-grade ethanol. Their distilleries have a production capacity of 320 kilolitres per day. In addition to this, the company has plans to increase this capacity to 660 kilolitres per day.
The company has performed well financially increasing its profits from Rs. 100 crores in 2018 to Rs. 314 crores in 2020. In 2021 however, the company made a profit of Rs. 293 crores. The company also has a low debt-equity of 0.56.
Founded in 1951, Dalmia Bharat Sugar is engaged in the manufacturing of sugar, ethanol, alcohol and generation of power. The company operates through its 5 manufacturing facilities in the country. The company has a total capacity of 35,500 tonnes per day.
The company’s sugar sales account for 77% of revenues, 15% ethanol and 8% from power. The company’s distilleries have a production capacity of 240 kilolitres per day. The company is also in plans to double its ethanol capacity.
Financially the company has done well increasing its profits since 2018. The company also has a low debt-equity ratio of 0.43.
List of all the Companies in Sugar Industry
|S.No.||Name||Mar Cap Rs.Cr.||P/E||Div Yld %|
|11||DCM Shriram Inds||₹799.46||13.11||1.63%|
|17||Ugar Sugar Works||₹308.25||15.01||0.73%|
|19||KCP Sugar &Inds.||₹240.38||6.77||0.47%|
|20||KM Sugar Mills||₹233.22||6.21||0.79%|
|28||Sir Shadi Lal||₹74.42||N/A||N/A|
|33||Riga Sugar Co||₹11.54||N/A||N/A|
|35||Shree Hanuman Sg||₹8.12||N/A||N/A|
The Sugar industry has been finally reaping its benefits this year. The shares mentioned above have turned into multi-baggers offering returns ranging from 157% to 84%. The new ethanol measures discussed above have only added to this potential. In addition to this, CRISIL also reported a sugar production crisis in Brazil due to the weather conditions this year. This could further positively influence the exports of sugar from India.
Investors however must also stay up to date with the upcoming reforms from the government and the cyclical nature of the industry. That’s all for this post, let us know what you think about this article on Best Sugar sector Stocks in India and your top pics in the comments below!. Happy Investing!
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.