New Delhi [India], April 7 : An improvement in the balance sheets of sugar mills driven by robust closing inventory forecast is likely to firm up their profitability in the current season, as per a sectoral report by Centrum Broking.
Sugar marketing season in India runs from October to September.
Additionally, the anticipated hike in the Minimum Support Price (MSP) for sugar offers significant optionality for the mills, the brokerage firm said. It has maintained a "constructive" view on the sugar sector.
The MSP of sugar remains unchanged at Rs 31 per kg, a rate fixed in February 2019.
"The sector also stands to benefit from elevated global raw sugar prices and a weak Rupee, which could make exports more attractive if any quota is permitted for SSY26 (next sugar season starting October 2025)," Centrum said.
Furthermore, the report added that the recent move by the central government to allow the use of Food Corporation of India (FCI) rice for ethanol production is a meaningful development and is likely to boost distillery capacity utilization going forward.
Rice is being offered for sale to ethanol distilleries for the production of ethanol at a fixed price of Rs 2,250 per quintal (pan-India) for a total quantity not exceeding 24 lakh tonne as per the current Open Market Sale Scheme (OMSS) policy. The supply of FCI rice can be carried out to ethanol distilleries in both deficit and surplus states throughout the year.
Lately, the recovery in sugar prices has likely substantially boosted the EBITDA margins of sugar companies in the January- March quarter of 2024-25.
Sugar prices witnessed a sharp rebound during the January-March quarter, rising by 10 per cent. In Uttar Pradesh, refined sugar prices even touched Rs 42,000 per tonne and largely stayed above Rs 40,000 per tonne throughout the quarter.
Indian Sugar and Bio-Energy Manufacturers Association (ISMA), an apex sugar industry body, remains optimistic about the upcoming 2025-26 season, backed by favourable weather conditions and improved planting.
"The 2024 monsoon has enhanced cane planting, particularly in Maharashtra and Karnataka, setting the stage for an on-time start of the crushing season in October 2025," ISMA said in a recent report.
The apex industry body said the government's recent sugar export policy is a boon for the industry. After restricting the sugar trade in the 2023-24 season, the central government allowed sugar producers to export 1 million tonnes of sweetener on January 21 this year. The government restricted sugar exports in the previous year, presumably to maintain price stability in domestic markets.
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