Dhampur Sugar, Dalmia Bharat among other sugar stocks sweeten amid higher prices; here’s what experts say

Sugar stocks continued to sweeten on the back of multiple triggers including higher prices of refined sugar in global and domestic markets.

Individually, stocks such as Avadh Sugar and Energy, Magadh Sugar and Energy, Andhra Sugars Shree Renuka Sugars, Dhampur Sugar Mills, Dwarikesh Sugar Industries, and Dalmia Bharat Sugar were each up between 2-4 per cent intraday on the BSE today.

While other sugar companies’ shares such as EID Parry India and Triveni Engineering were up between 0.5-1 per cent on the exchanges.

Sugar prices in India have climbed more than 6 per cent in two weeks and are likely to rise further as production is set to fall and demand from bulk consumers to strengthen during the peak summer season, a Reuters report quoting industry officials.

This will have a positive impact on sugar producers as it will help their margins to improve, helping them make cane payments on time to farmers, the report said quoting sugar dealers.

However, a price rise in refined sugar may add fuel to elevated food inflation and discourage the government from allowing additional sugar exports and supporting global prices. This is at a time when sugar prices internationally are at an 11-year high, according to a Zee Business report.

Indian Sugar Mills Association’s Director General Sonjoy Mohanty justifying the price hike said that the sugar prices in India are depressed as they stand at Rs 34.5 per kg as compared to Rs Rs 42, Rs 48, Rs 106 and Rs 130 per kg in Brazil, Thailand, Bangladesh and the United Kingdom, respectively.

Despite this price hike, all Indian retail price has seen no change and it’s at Rs 40 per kg even today, ISMA DG said in his comment while speaking to Zee Business today.

Mohanty added, it should be noted that the cost of manufacturing per kg of sugar comes to around Rs 38, which is marginally higher than the selling price of Rs 34.5. However, reiterated that there is no supply-demand imbalance in the country and has surplus sugar to suffice the domestic needs.

Echoing the same views of Mohanty, All India Sugar Traders Association Chairman Praful Vithalani said the sugar producers are making losses somehow and, a 6 per cent price rise could be seen as the psychological impact of the massive price rise in the world market on Indian markets.

Vithalani believes this impact is temporary and the sector is expected to surge going ahead.

“We believe that the market will keep an eye on how the government will hike the quota on Indian sugar exports, the allowance for which currently is 6 million tonnes. As the sugar companies have a commitment to ethanol blending too,” Arvinder Singh Nanda, Senior Vice President, of Master Capital Services said in his comment on the sugar sector.

He added, “If the sugar prices rise further, the government has to intervene in order to cap it. The outlook is quite uncertain and a close watch needs to be kept on the El Nino trend across major sugar-producing countries and on the government's decision to review the hike in sugar quota.”

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(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)