Sugar Stocks Gain On Debt Restructuring

In trade today, FMCG Sugar saw a collective

upward movement. Stocks like Upper Ganges,
Sakthi Sugar, Dalmia Sugar, Mawana Sugar, Ugar
Sugar, Dwarikesh Sugar, Dhampur Sugar, KM
Sugar and Oudh Sugar gained anywhere from 3 per
cent to 10 per cent. And heres why-

The rise in the sweet sector:

The gain in the sector has been mostly due to the
plans of Debt Restructuring by Union Finance
Ministry. The Union finance ministry is
deliberating a proposal to restructure sugar mills debt, which is under severe pressure due to
lack of capacity utilization. While sugar crushing started two months ago, some mills in
Maharashtra and Karnataka dont have sufficient sugarcane to crush and are said to be
closing operations. The sugar sectors total debt is projected at Rs 50,000 crore.
In a meeting with sugar sector representatives on Tuesday, Finance Minister Arun Jaitley
emphasized on the need for debt restructuring. T Sarita Reddy, president of Indian Sugar
Mills Association (Isma), said the Finance Minister gave them a patient hearing. He sounded
positive. The Finance Minister said that the main issue is debt restructuring. He marked a
copy to the finance department to take it further.
Isma appealed the government to restructure sugar mills debt under a scheme similar to S4A
(Scheme for Sustainable Structuring of Stressed Assets), which is for major industries having
exposure of Rs 500 crore and above. As the majority sugar mills individually will not have
exposure of Rs 500 crore, they requested to modify the scheme specifically appropriate for
the sugar industry by modifying the exposure to Rs 100 crore and taking internal cash growth
of one year period as the basis since sugar is a seasonal business.

Sugar prices have started increasing but the industry is unable to make money because
capacities are not completely utilized owing to lower availability of cane. In the meeting with
the Finance Minister, the subject of lower production was also discussed. Ismas estimate for
October-September 2016-17 sugar season is 23.4 million tonnes (mt) as compared to the
Government's 22.5 mt. Last year, sugar production was 25.2 mt. Among the other things,
demands of Isma are keeping the industry under the lowest goods and service slab, which
could be 5%.

Declining Export prospects:

According to industry body ISMA, exports have stopped since a 20 per cent export duty was
imposed in June as shipments from India are no longer feasible in the Global market. India,
which is the worlds second major sugar producer after Brazil, exported 1.6 mt of the
sweetener till May in the 2015-16 marketing year (October-September). The export duty
imposed in June this year has managed to hold exports and ensure adequate availability of the
sweetener in the domestic market for the present. The idea behind imposing the export duty
of 20 per cent in June this year was that if there are no exports then the sugar stock might be
managed without imports. Right now there is no urgent need to encourage imports as with
production estimated at 22-23 mt in the 2016-17 sugar season that began in October, the
shortfall of 2-3 mt could be managed by the carryover stock if exports dont happen.
With no exports happening, India could manage with a sugar output of 23.4 mt , as estimated
by the industry, with a carryover stock of 7.7 mt as on October 1, 2016 as it would result in
total sugar availability of 31.1 mt against estimated consumption of 25.5 mt.
However, things could change if the estimates go wrong. There is no accurate system of data
collection for agriculture. Now that crushing season has begun, after two-three months
different data could appear on production. But as of now, there are no intentions to import
according to the officials.
Sugar prices are ruling at about Rs. 40/kg in the open market, about the same point as was in
June this year, but there have been fluctuations following the Governments decision to
demonetize high-value notes in November.

Stock gains on debt restructuring:

Dwarikesh Sugar Share price leaped 10.27 per cent and traded at the days morning high of
329.50. The stock had opened at Rs. 302.40 while it had closed at Rs. 298.80 on the previous
day.
Andhra Sugar share price gained 5.81 per cent at Rs. 215.50. It had opened at Rs. 205.95
against its previous close of 203.65.
Oudh Sugar share price surged 10.67 per cent t the high of Rs. 109.90. The stock previously
closed at Rs. 99.30 and today it opened at Rs. 100.90.
Dhampur Sugar share price hiked 6.58 per cent at Rs. 134.75. Dhampur Sugar opened today
at Rs. 129.70 while yesterday it had closed at Rs. 126.10
Mawana Sugar share price went up by 8.80 per cent to trade at the morning high of Rs.
48.40. The stock opened right at its previous close price of Rs. 44.85.
Upper Ganges Sugar share price hiked 10 per cent at Rs. 314.25. The stock opened higher at
Rs. 288 than its previous close price of Rs. 285.70.
Dalmia Bharat Sugar share price gained 8.08 per cent and traded at the morning high of Rs.
139.65. The stock had closed at Rs. 129.20 the previous day and today it opened at Rs. 131.
KM Sugar share price traded at the days morning high of Rs. 29.50 up by approximately 4
per cent. The stock had opened a tad higher than its previous close price.
Balrampur Chini share price gained 3.62 per cent at Rs. 127.15. It opened at Rs. 124 while it
had closed at Rs. 122.70 the previous day.
Triveni Engineering share price also witnessed some movement gaining over 2 per cent in
trade today at Rs. 62.25.
KCP Sugar share price gained approximately 4 per cent while Sakthi Sugar surged
approximately 8 per cent.

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The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of the research
team. Users are advised to use the data for the purpose of information and rely on their own judgment while making investment decision.
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Article Written by
Tanaya Nath