Sugar stocks zoom up to 15% as govt hikes FRP; Renuka Sugars, Dalmia Bharat Sugar and Industries gain

Industrial demand for sugar, which accounts for 60 per cent of the total domestic consumption, is expected to fall 8-9 per cent in this sugar season

Sugar companies stocks zoomed up to 15 per cent on BSE after the government decided to raise the Fair & Remunerative Price (FRP) of sugarcane by Rs 10 per quintal to Rs 285 per quintal for the 2020-21 marketing year starting October 1. KM Sugar Mills share price soared up to 15 per cent to Rs 13.90 apiece, while Indian Sucrose shares jumped over 11 per cent and Kesar Enterprises rose 6.5 per cent in trade today. In comparison, S&P BSE Sensex was trading 278 points or 0.72 per cent down at 38,336. According to CRISIL Research report, industrial demand for sugar, which accounts for 60 per cent of the total domestic consumption, is expected to fall 8-9 per cent in this sugar season due to hotels, restaurants and cafes remaining shut and people avoiding crowded places.

Among other individual stocks, Gayatri Sugars, Simbhaoli Sugars, and Piccadily Sugar & Allied Industries shares hit 5% upper circuit in today’s trade. While Shree Renuka Sugars share price gained 3.28 per cent and Dalmia Bharat Sugar and Industries shares rose over 1 per cent. Triveni Engineering & Industries shares were trading half a per cent higher. The report also added that household consumption, which accounts for the remaining 40 per cent, however, is expected to slip just 2-3 per cent as prolonged confinement at home has seen a surge in appetite for biscuits and bakery products.

Brokerage firm SMIFS Research observes that Balrampur Chini Mills is the most efficient sugar company with sustainable earnings and strong cash flows. With sustained consumption and export subsidy extensions, inventory levels are likely to reduce to 9.0 MT by September 2021. “This could eventually keep the sugar prices strong leading to better realisation and margins for the company,” it said.