Balrampur Chini, Bajaj Hindusthan, EID parry share prices dip up to 6%: Should you Buy or sell sugar stocks?

Stock Market Today- Balrampur Chini Mills Ltd, Shree Renuka Sugars Ltd, Bajaj Hindusthan Sugar Limited, E.I.D.-Parry (India) Ltd , Dwarikesh Sugar Industries Ltd, Triveni Engineering & Industries Ltd, Dhampur Sugar Mills Ltd share price saw sharp corrections of up to 6% on Monday. Bajaj Hindusthan share price saw largest corrections followed by EID Parry share price.

The sugar mills have been demanding rise in MSP for Sugar and Ethanol

ISMA requests for Higher sugar and Ethanol MSP

The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) has issued an appeal to the government, urging timely policy interventions to support the sustainability of the sugar industry, as it confronts rising production costs, stagnant ethanol procurement prices, and a significant anticipated sugar surplus.

ISMA has recently requested the government for formula-based increase in MSP of sugar to Rs. 39.14 per kg for 2024-25 Sugar Season

It has also requested formula-based increase in ethanol prices to Rs. 73.14 per litre (Sugarcane), Rs. 67.70 per litre (B-Heavy Molasses), Rs. 61.20 per litre (C-Heavy molasses) to offset heavy losses being incurred by manufacturers

With an excess stock of around 31.21-32.21 lac tons, ISMA urges the government to allow 20 lac tons of sugar exports immediately.

Higher inventories and rising costs adding to concerns

It is the rising production costs and higher inventories that are adding to concerns.

Recently India Ratings and Research had said that “India’s sugar inventory is likely to remain higher than the normative requirement, despite some correction post lifting of the restrictions on sugar diversion towards ethanol production".

The current Sugar Season (October 2024- September 2025) could be the first year of production deficit in the past seven to eight years, where the high opening inventory will result in the availability exceeding the domestic demand of 29-29.5 Million Tonne in Sugar season 25, as per India Ratings. During Sugar season 2024: demand stood at 28.8 Million Tonne. The higher-than-expected sugar production coupled with the restrictions on sugar diversion towards ethanol resulted in a closing stock of around 8.6mnt in SS24

Muted Q2 expectations

Q2FY25 is likely to be a subdued quarter for the sugar industry, due to declining sugar and ethanol volume, led by lower quota allocation year on year as per Elara Securities India Pvt Ltd. Flat ethanol realizations also added to discomfort while the only saving grace was ~2-3% YoY increase in sugar realization for their coverage universe.

Elara however has maintained positive outlook for the sector. Increased blending as per Elara would scale up demand for ethanol by 25% for the industry. The government policies continue to drive the fortunes of the sugar industry, and Elara expect the upcoming policy triggers to be favorable. Balrampur Chini is Elara's top pick in the sector

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.