Improved balance sheets of sugar mills to firm up profitability this season: Centrum report

ANI April 7, 2025 171 views

The Indian sugar sector is poised for a significant financial turnaround in the upcoming season. A Centrum Broking report indicates improved balance sheets driven by robust inventory and potential export opportunities. Global raw sugar prices and a weak rupee are expected to enhance mill profitability. Government policies supporting ethanol production and strategic export quotas are further bolstering the sector's positive outlook.

"The 2024 monsoon has enhanced cane planting" - ISMA Report
New Delhi, 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.

Key Points

1

Sugar sector shows promising profitability with elevated global prices

2

Government allows FCI rice for ethanol production

3

Refined sugar prices rose 10% in January-March quarter

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.

Reader Comments

R
Rahul K.
Great news for the sugar industry! The combination of higher prices and improved distillery capacity should really help mills recover from previous tough years. Farmers will benefit too if this translates to better cane prices. 🚀
P
Priya M.
While the report is optimistic, I wonder how much of this will actually trickle down to sugarcane farmers. The industry often talks about profitability, but we rarely see proportional increases in FRP (fair and remunerative price) for farmers.
S
Sanjay T.
The ethanol production angle is interesting! Using FCI rice seems like a smart move to balance food security and energy needs. Hope this leads to more sustainable practices in the industry.
A
Anita R.
As someone who follows agri-stocks, this report confirms why sugar stocks have been performing well. The export potential combined with domestic price recovery makes this sector worth watching. Might be time to add some sugar stocks to my portfolio!
V
Vikram J.
The article mentions MSP hasn't changed since 2019. With inflation and rising costs, shouldn't there be a revision? The government needs to balance industry profits with consumer affordability.
M
Meena S.
Good monsoon = good sugarcane crop = happy mills and farmers! 🌧️🌱 Hope this positive cycle continues. The export policy change is particularly welcome after last year's restrictions.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Tags:
Sugar Mills Indian Sugar Sector Centrum Broking ISMA Ethanol Production Sugar Exports
You May Like!