Shares of sugar companies surged up to 20 percent during Tuesday’s intra-day trade, following various sugar bodies indicate decline in sugar production in India.
Recently, the National Federation of Cooperative Sugar Factories (NFCSF) revised the sugar production estimates to 259 lakh metric tonnes (LMT) for the sugarcane crushing season of 2024-25. The recent estimate is 6 lakh tonnes lower than the earlier projection of 265 LMT. In the previous season, sugar production was 319 lakh tonnes. Also, ISMA had reduced net sugar production estimates to 264 lakh tonnes.
Shares of Uttam Sugar Mills have locked in 20 per cent upper circuit at Rs 230.90 on the NSE after India Ratings and Research (Ind-Ra) said the company’s earnings before interest, tax, depreciation and amortisation (Ebitda) is likely to recover in FY26, led by an increase in both sugar and ethanol sales, an uptick in sugar prices as well as its capex towards improving operational efficiency. While ethanol sales remained flat at 45.5 million litres (mnL) in 9MFY25 (9MFY24: 46.8mnL), the allocation in the first two cycles of ethanol supply year 2025 (ESY25) is significantly higher, indicating a revival after the government lifted the restrictions of diversion of sugar towards ethanol. While the lower recovery could lead to reduced production in FY25, Ind-Ra expects the net working capital to remain range-bound given the lower sugar sales. This, coupled with a lower EBITDA, could lead to an increase in the net leverage in FY25. With a gradual reduction in the inventory and the recovery in the EBITDA, the net leverage is likely to improve in FY26.
At the time of writing this report, among the other individual stocks, Magadh Sugar & Energy surged 11.45 per cent, followed by, Dalmia Bharat Sugar and Industries (around 8.50 per cent), Avadh Sugar & Energy (around 8 per cent), Dwarikesh Sugar Industries (around 6.50 per cent), Mawana Sugars (around 5.60 per cent), Shree Renuka Sugars (around 4.55 per cent), Triveni Engineering (around 4.55 per cent) and other sugar stocks witnessed surged today.
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