Even as sugar production is estimated to grow by 6.8 per cent year-on-year to 33.3 million tonnes for SY2022 (sugar year), higher exports and domestic consumption are likely to trim down the inventory levels, according to a report.
This would result in lower total debt even as debt-funded distillery expansions are ongoing, Icra said in the report.
“With the current favourable international sugar realisations in light of global demand-supply balance and geopolitical tensions, the industry is likely to manage its closing inventory levels for the current season,” Icra Senior Vice President and Group Head Sabyasachi Majumdar said.
He pointed out that higher sucrose diversion towards ethanol supported the government’s focus and policies.
This would, therefore, support sugar realisations, which would result in expanded profits and strengthened balance sheets, he added.
The revenues of the sugar companies that Icra covers are expected to remain stable over FY22-23, supported by higher domestic and international sugar prices and improved ethanol realisations, in addition to expected healthy and ethanol volumes, partially offset by lower sugar volumes.
Further, a favourable mix of ethanol towards B-heavy or juice (feedstock), coupled with higher sugar realisations are expected to support the operating margins at 12.7-13.7 per cent in FY22-23 (slightly higher than FY21 levels), the report noted.
Meanwhile, the report said the uptick in sugar prices continued in September-October 2021, reaching Rs 35,700-Rs 37,000 per tonne, tracking the global prices.
Further, the report said that while the global prices of raw sugar moderated to around USD 401-407 per tonne in January-February 2022 against USD 423-435 per tonne in November-December 2021, it improved in March 2022 on account of geopolitical and logistic issues.
Around 6.4-6.5 million tonnes have already been contracted for exports by Indian traders, the report stated. PTI SM BAL BAL
