Dalmia Bharat, Balrampur Chini Mills: Sugar stocks decline in trade; here is what you need to know

Sugar stocks traded lower on Thursday, December 7, after raw sugar prices dropped 7 per cent to a five-month low amid reports that the government plans to curb ethanol production from sugarcane as India battles a sugar shortage in the domestic market.

At around 10:45 a.m., shares of Dalmia Bharat Sugar and Industries traded over 5 per cent lower, while Triveni Engineering Industries shares were down 2 per cent. Dhampur Sugar Mills and Balrampur Chini Mill were down over 1 per cent each, and Shree Renuka Sugars traded nearly 1 per cent lower.

According to a Reuters report, the government's move will be in line with the decline in the production of sugar because of below-normal rainfall in key growing states. With this move, the centre will lower the diversion for ethanol, which will help the world's second-biggest sugar producer increase the output of the sweetener.

According to Reuters, the government's move is a setback for the industry, which has invested billions of dollars in the last five years to increase ethanol production capacity. 

Several sugar companies rely on ethanol production for a significant share of their earnings.

In addition, the government is likely to ask mills not to use sugar cane juice and B-heavy molasses—a byproduct with higher sucrose levels—to produce ethanol and instead would allow mills to produce ethanol only from C-heavy molasses. This cane by-product has hardly any sugar content left in it.

The Indian Sugar Mills Association, a producers' body, said last month that sugar production will likely fall 8 per cent to 33.7 million metric tonnes in the 2023–24 marketing year.

Sugar stocks share price: Past performance

Since January 2023, shares of Dalmia Bharat Sugar have risen over 6 per cent, Triveni Engineering over 25 per cent, Balrampur Chini over 3 per cent, and Dhampur Sugar over 3 per cent. On the other hand, Shree Renuka Sugars shares have declined over 16 per cent against the Nifty50's rise of over 14 per cent. 

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