Sugar shares surge as Govt permits grain-based distilleries in rice procurement e-auctions

Sugar firm shares rallied as the federal government eliminated the cap on sugar diversion for ethanol manufacturing. It will scale back the closing inventory and assist maintain sweetener costs larger.

Furthermore, the federal government has allowed grain-based distilleries to take part within the e-auctions by the Meals Company of India for rice procurement of as much as 23 lakh tonnes. It will assist firms to enhance their margins.

Triveni Engineering and Avadh Sugar and Power elevated 8 per cent and seven per cent to ₹472 and ₹756, whereas Bannari Amman Sugar and Dalmia Bharat Sugar and Industries jumped six per cent every to ₹3,309 and ₹467.

Shree Renuka Sugar and Bajaj Hindustan gained 5 per cent every to ₹50 and ₹43, whereas Balrampur Chini and DCM Shriram Industries rallied three per cent every to ₹599 and ₹202. EID Parry was up two per cent at ₹827 on Friday.

Sugar stock ranges are anticipated to be a lot larger, at 8 million tonnes (mt) as of October 1, in opposition to the minimal requirement of 5 mt. Gross sugar manufacturing is predicted to the touch 32 mt, in opposition to consumption of 29 mt.

The surplus 5 mt of sugar stock will be diverted to ethanol from the B-heavy and sugarcane Juice route.

‘We estimate 4-5 mt of the equal of sugar diversion in direction of ethanol, which might be adequate for 4.5 to five billion litres of ethanol manufacturing within the nation,” mentioned Sanjay Manyal, Analysis Analyst, DAM Capital.

Restriction on FCI rice for ethanol manufacturing final 12 months squeezed the grain ethanol margin at mid-single digit. With the FCI rice out there for ethanol manufacturing by sugar and standalone mills and adequate molasses availability would lead to a 10-12 per cent working margin for grain ethanol, he mentioned.

Girishkumar Kadam, Senior Vice President – Company Scores, ICRA mentioned the elimination of cap on sugar diversion for ethanol manufacturing is predicted to extend mixing with petrol to the goal of 20 per cent for the 12 months, a lot larger than the estimated 14 per cent in ESY2024.

He added that the decrease closing sugar inventory will assist preserve sugar costs at an affordable degree, thereby supporting the profitability of sugar mills and enabling well timed cost to farmers.