Shares of sugar companies were in focus with Balrampur Chini Mills, Triveni Engineering, Dalmia Bharat Sugar and Industries (DBSIL) and Uttam Sugar Mills having gained up to 5 per cent on the BSE in Monday’s intra-day trade on a record exports and healthy outlook.
India’s sugar export rose 20 per cent to an all-time high of 7.1 million tonne in the 2020-21 marketing year-ended September 2021 on the back of better demand and financial assistance from the government, industry body ISMA said on Friday.
Sugar exports stood at 5.9 million tonne in the 2019-20 marketing year (October-September).
Addressing a sugar conference, Indian Sugar Mills Association (ISMA) Director General Abinash Verma said sugar production is estimated to remain flat at 31 million tonne in the 2021-22 marketing year, starting Friday, the PTI reported. CLICK HERE TO READ FULL REPORT.
Meanwhile, DBSIL on Friday after market hours said that the rating agency ICRA upgraded the long-term rating of the company’s instruments and has reaffirmed the short-term rating. The outlook on the long-term rating is stable.
The rating action for the debt programmes of DBSIL factors in the expectation of healthy growth in revenues and operating profits, as well as strengthening of debt protection metrics in FY22.
DBSIL’s revenue growth would be driven by healthy sugar exports under maximum admissible export quota (MAEQ) of SY2021 and open general licence (OGL) on the back of firmed up global sugar prices, higher distillery volumes and improved domestic sugar realisations. Further, higher sucrose diversion towards B-heavy molasses/juice-based ethanol is expected to result in improved blended distillery realisations, coupled with lower sugar inventory and in turn, lower working capital debt levels.
Moreover, DBSIL is in process of expanding its crushing and juice/molasses-based distillery capacities and set up grain-based distilleries, which is likely to strengthen its operational profile and improve revenue diversification.
ICRA notes that the introduction of the minimum support price (MSP) for sugar in FY2019 gives some protection against any downside in the operating profits in sugar surplus years compared to the past. Over the medium term, DBSIL’s operating profits are likely to remain less volatile than the historical levels, supported by the expected continuation of MSP and the industry’s focus on diverting excess cane towards ethanol production. CLICK HERE FOR RELEASE
Sugar companies are undertaking 2-3x increase in distillery capacities, which would improve profitability given B-heavy & sugarcane juice route to produce ethanol is far more profitable compared to sugar & C-heavy ethanol. Moreover, we believe the uptick in sugar prices at a rational level would add to profitability, analysts at ICICI Securities said in August report.