Revenues of sugar companies likely to increase by 10%, sugar prices to stay firm till the start of the next season, says ICRA
Revenues of integrated sugar mills in India are expected to grow by 10% this fiscal year, driven by increased sales volumes, stable domestic sugar prices, and higher distillery outputs due to new capacities, according to ICRA Ltd. Net sugar production is anticipated to decline in the 2025 sugar year as the government allows more sugarcane diversion for ethanol production. Domestic sugar prices, currently Rs. 38-39/kg, are expected to remain firm. ICRA maintains a stable outlook for the sugar sector, citing improved revenues and government policy support.
Revenues of integrated sugar mills in the country are likely to expand by 10% this fiscal, buoyed by an expected increase in sales volumes, firm domestic sugar prices and higher distillery volumes after the operationalisation of new capacities, ICRA Ltd has said.
The credit rating agency also expects net sugar production to decline in sugar year 2025 (October 2024-September 2025) compared to the current season because the government is expected to allow higher diversion of sugarcane towards ethanol production.
The domestic sugar prices, which are currently in the range of Rs. 38-39/kg, are expected to remain firm till the start of the next season, thereby supporting the profitability of the mills, ICRA said.
“The operating profit margins of sugar mills are projected to remain comfortable in FY2025, in line with FY2024, because of firm sugar realisations and higher cane prices for SY2025,” the agency said in a media webinar. “ICRA’s outlook for the sugar sector is ‘stable’, backed by the anticipated improvement in revenues, stable profitability, and comfortable debt coverage metrics along with the government’s policy support, including the ethanol blending programme (EBP),” it said.
“ICRA projects the net sugar production to decline to 30 million metric tonnes in SY2025 from 32 million mt in SY2024 based on the expectation that higher diversion will be allowed towards ethanol production amid the high sugar stock level,” said Girishkumar Kadam, senior vice president at ICRA. “Even if the diversion towards ethanol is increased to 4 million mt in SY2025, the closing sugar stock level is likely to remain moderately high.”
Therefore, clarity on the policy for allowing diversion beyond the cap of 1.7 million mt and the exports remain the key monitorables for the sector, he said.
ICRA expects the closing sugar stock to be around 9.1 million mt as on September 30, 2024, appreciably higher than the stock of 5.6 million mt a year earlier.
This year’s closing stock would be equivalent to 3.8 months of consumption. ICRA expects the closing stock at the end of sugar year 2025 to further increase to over four months despite the projected fall in production.
Commenting on ethanol blending and key challenges related to the segment, Kadam said: “The ethanol blending trend has remained encouraging till ethanol supply year (ESY) 2024 (November 2023 to October 2024), given the higher contribution from grain-based distilleries. For ESY2025, the extent of the increase in diversion towards ethanol production over and above the cap remains critical to meet the 20% blending target set by the Government of India. The other key challenges that also need to be addressed include the availability of sufficient feedstock for grain-based distilleries and the infrastructure ramp-up required to support higher blending levels. Further, the timely launch of the E-20 (20% ethanol blended)-compliant vehicles and public adoption of the same would be key to achieving the blending targets.”
Source Link : https://www.msn.com/en-in/money/markets/revenues-of-sugar-companies-likely-to-increase-by-10-sugar-prices-to-stay-firm-till-the-start-of-the-next-season-says-icra/ar-BB1qczF0
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