Sugarcane is generally regarded as one of the most significant and efficient sources of biomass for bio‐fuel (ethanol) production. Sugarcane offers production alternatives to food, such as feed, fibre, and energy, particularly the co‐generation of electricity and ethanol. Strong linkages between world sugar and oil prices have emerged in recent years, driven in part by the relationships between sugar as the primary ethanol feedstock in Brazil, and the dominant producer and exporter of both sugar and ethanol in the world.
The biggest producer of sugar in the world is Brazil accounting for 34%, and India for 33% as of FY 22-23. A significant amount of sugar is also produced in European Union, China, Thailand, and the United States
Sugarcane farming in India is among the largest agro-based sectors, employing over 5 crore sugarcane growers and over 5 lakh workers. India’s sugar consumption increased to 28MMT in FY 22-23 from 26.50MMT in FY20-21 with a CAGR of 2 percent. Sugarcane prices are expected to rise by Rs 15/- per quintal in FY 23-24.
The reasons why Sugar sector stocks will rise are as follows
- Global and domestic sugar prices have been rising for the past couple of months due to unseasonal rainfall in India, a poor European beat crop, and increasing demand.
- In February FY23, the central government rolled out a blend of 20% ethanol in petrol and a lower GST of 5% on ethanol. sugar mills are now allocating a larger portion of sugar cane juice for the production of ethanol blending due to the large profit margins. This shift in production has led to a decrease in sugar supply, which has resulted in a spike in sugar prices.
- Due to severe drought in Maharashtra and Karnataka, which account for one-third of the country’s production, sugar production in Maharashtra fell to 105 lakh tonnes from 126.5 lakh tonnes in FY 22-23, while Karnataka fell to 55.3 lakh tonnes from 58 lakh tonnes.
- India’s sugar production dropped nearly 6% as mills closed early in FY 22-23, resulting in less supply.
- An increase in raw sugar price of 17.01 percent from last month, surging to 11 years high, the white sugar prices hit a 10-year high in the previous month in the global market.
- Zero custom duty on sugar Exports results in less availability in the domestic market.
Here are the 3 high Market Cap stocks in Sugar Sector
Shree Renuka Sugars Limited
Shares of Shree Renuka Sugars Ltd(SRSL) were trading at ₹ 43.10 on Tuesday’s trading session. The company has a market capitalization of ₹ 9,184 Cr
In the past 3 years, the company’s share price rose from ₹ 4.70 to the current level, giving multibagger returns of 819.15 percent./
Shree Renuka Sugars Ltd is an agribusiness and bioenergy corporation present across the sugar value chain. It produces sugar, ethanol, power, etc., and is one of the largest sugar and green energy producers in the country.
As per Consolidated financials for YoY comparison, the revenues significantly increased from ₹ 5,648 crores during FY 20-21 to ₹ 6,432 crores in FY 21-22. Keeping the time frame of the same, net profit decreased from a loss of Rs 116 crores to a loss of Rs 136 crores and the negative debt-to-equity ratio stood at 8.58 for FY22.
E.I.D.-Parry Ltd
Shares of E.I.D.-Parry Ltd were trading at ₹ 498.10 on Tuesday’s trading session. The company has a market capitalization of ₹ 8,840 Cr.
In the past 3 years, the company’s share price rose from ₹ 158.20 to the current level, giving multibagger returns of 214.85 percent.
EID Parry is engaged in Sugar, Nutraceuticals, and ethanol production. It also has a significant presence in the Farm Inputs business including Bio pesticides through its subsidiary, Coromandel International Limited.
As per Consolidated financials for YoY comparison, the revenues significantly increased from ₹ 18,587 crores during FY 20-21 to ₹ 23,527 crores in FY 21-22. Keeping the time frame the same net profit increased from Rs 927 crores to Rs 1,572 crores and the debt-to-equity ratio stood at 0.15 for FY22.
Balrampur Chini Mills Ltd
Shares of Balrampur Chini Mills Ltd were trading at ₹ 379.25 on Tuesday’s trading session. The company has a market capitalization of ₹ 7,654 Cr.
In the past 3 years, the company’s share price rose from ₹ 90.90 to the current level, giving multibagger returns of 316.83 percent. Nuvama Wealth has recommended a target price of ₹ 445 or
Balrampur Chini Mills Ltd is one of the largest integrated sugar manufacturers in India. Their business portfolio consists of manufacturing and marketing of sugar, ethyl alcohol, ethanol, generation & selling of power & also manufacturing & marketing of organic manure.
As per Consolidated financials for YoY comparison, the revenues slightly declined from ₹ 4,846 crores during FY 21-22 to ₹ 4,665 crores in FY 22-23. Keeping the time frame the same net profit declined from Rs 452 crores to Rs 272 crores and the debt-to-equity ratio stood at 0.65 for FY23.
In Conclusion
Sugar demand may begin to show signs of scarcity in the months of October and November when India’s festival season begins. Summer season demand is also projected to be robust, and while families contribute to 33% of overall sugar consumption, it is bakeries, ice cream producers, and other businesses where sugar demand is likely to be strong.
Written By Omkar C
