In otherwise negative trading session, sugar stocks provided some sweeteners on Thursday and surged up to 5 per cent on the BSE intraday. The sugar sector has been in the focus since the government proposed to levy additional excise duty of Rs 2 per litre on unblended fuel during the Budget 2022 on Tuesday.

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Lately, sugar stocks have been in focus mainly on the back of two reasons - one was overall crunch in sugar export globally and the government increasing the blend percentage to reduce the oil import bill.

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Individually, Triveni Engineering Industries shares jumped around 9 per cent to touch new 52-week high of Rs 285.3 per cent on the BSE, followed by Shree Renuka Sugar, which hit an upper circuit of 5 per cent, and KCP Sugar up over 3 per cent intraday.

 While other sugar stocks such as Balrampur Chinni, Dwarikesh Sugar, Dhampur Sugar, EID Parry, Dalmia Bharat Sugar Awadh Sugar among others are up around 2 per cent.

Domestic brokerage firm ICICI Direct believes that additional excise duty may encourage ethanol blending of fuel and may have direct positive impact on the sugar companies. Ethanol is a byproduct of sugar, and the government has planned to blend as much as 20 per cent ethanol in fuel by 2025.

The Sugar sector is witnessing tailwinds from higher sugar prices and healthy ethanol demand to achieve blending targets, Elara Capital said in its report. 

The brokerage expects topline of sugar firms to dip in Q3FY22, largely due to sugar diversion to ethanol manufacturing (sugar sacrifice) via the B heavy route. 

Besides, any sharp margin expansion in Q3 may be due to better pricing of both sugar and ethanol coupled with operating leverage benefits, it added. It chooses Coromandel International and Balrampur Chini as top pick for good returns.