Sugar stocks rally on rising demand, MSP hopes

Mumbai: Shares of sugar companies rallied on Friday tracking the renewed optimism in the broad market and on potential hike in minimum selling price.

Dalmia Bharat Sugar and Industries ended up 20% at Rs 89.50 and those of Dhampur Sugar Mills gained 14.7% to Rs 124.20. Balrampur Chini Mills gained nearly 12%, Avadh Sugar gained 10% and Shree Renuka ended up 5%.

Analysts said these stocks are catching up after a period of steep decline during the lockdown phase.

“With lockdown easing, demand is expected to come back. Sugar demand would have gone down by 2 million tonnes during the lockdown...ethanol demand is also robust,” said Pratik Tholiya, AVP-institutional research at Elara Capital. “All stocks had corrected significantly so valuations are inexpensive,” said Tholiya.

Following the hike in MSP for kharif crops by the central government recently, there are hopes that MSP for sugar will be increased as well. ET reported in its Friday edition that the government may increase MSP of sugar by up to Rs 2 a kg to help millers clear cane dues that have crossed Rs 22,000 crore.

The sugar industry argues that the raise in MSP would not affect public much as 65% of the sweetener is being used by bulk consumers like food products and soft drink manufacturers, according to a report by ET on Friday.