Sugar stocks extended gains on Monday after Union Road Transport and Highways Minister Nitin Gadkari urged for an increase in ethanol production.  

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“Diversification of agriculture towards energy and power sector is the need of the hour. Farmers need to become Power Suppliers, besides being Annadata. Ethanol, methanol, bioethanol, bio-CNG, biodiesel, bio-LNG, green hydrogen and electric is where the future lies," said the minister asking to reduce production of sugar and increase production of ethanol. The Minister was addressing the Sugar & Ethanol India Conference (SEIC) 2022 in Mumbai today, 20th March 2022. 

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Amid calls of increasing ethanol production, all major sugar stocks gained on Monday.  

Balrampur chini mills and Ugar sugar gained 8% and 5% respectively to trade on new 52-week highs. Balrampur Chini Mill jumped 5% to trade at 52-week high value of Rs 521.60 per share on the BSE, while Ugar Sugar gained 5% to hit upper circuit of 5%.  Dalmia Bharat Sugar and Mawana Sugars gained nearly 6% each to Rs 523 per share and 157 a share respectively, Dwarikesh Sugar and Dhampur sugar rose 4% each to trade on the day's highs of Rs 132.95 and 552.20 per share on the BSE.  

Similarly, Triveni Engineering gained more than 2% to Rs 343.95 and Eid Parry jumped more than 1% to trade on Rs 447 per share on the BSE.  

Why brokerages are bullish on Sugar sector?

Earlier, brokerages have been bullish on sugar stocks.  

ICICI Securities was of the view that sugar industry is on the cusp of a mega transformation and has emerged as a potent driver of clean energy, driving India's shift to renewable energy faster than ever. "Ethanol demand should grow at a 15 per cent CAGR over FY22-30E driven by the government's mandate of 20 per cent ethanol-blending in petrol,"the brokerage added. 

HDFC Securities said that  sugar sector is known for its cyclical nature. However, it has seen structural changes rational alterations in the government's policies and flexibility provided, as diversion of surplus cane and B-heavy molasses is now allowed to produce ethanol that can be used for blending with petrol, it said. These structural changes in the basic fundamentals of the sugar industry in India  would automatically help to optimize the sugar production and inventory, thus improving profitability and liquidity position of sugar mills," It said. 

Gadkari, in his address at the "Sugar and Ethanol India Conference (SEIC) 2022" in Mumbai, said the decline in sugar production and rise in ethanol production is better for the industry.  

"Toyota, Hyundai and Suzuki have assured to launch flex engines in 6 months. Biofuel outlets will be opened for ethanol," said Gadkari, recounting that fighter jets which did the flypast two years back during the Republic Day Parade in Delhi had 100% bio-ethanol. 

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