These Sugar Stocks Gained the Most - Here Are the Top 3 Reasons
If you’ve been following the market, you might have noticed names like Triveni Engineering, Dalmia Bharat Sugar, and Bannari Amman posting impressive returns.
The Indian sugar industry has been on a sweet run lately, with several sugar stocks seeing significant gains. If you’ve been following the market, you might have noticed names like Triveni Engineering, Dalmia Bharat Sugar, and Bannari Amman posting impressive returns. But what’s behind this surge? Let’s break it down.
1. Government’s Green Light for Ethanol Production
One of the biggest catalysts for the recent surge in sugar stocks is the government’s reversal of the ban on using sugarcane juice and sugar syrup for ethanol production. This move, applicable for the 2024-25 ethanol supply year, has opened up new avenues for sugar mills.
Last year, the government prohibited the use of sugarcane juice or syrup for ethanol to ensure adequate sugar availability for domestic consumption. However, with the ban lifted, sugar mills can now produce ethanol from sugarcane juice and syrup, alongside B-Heavy and C-Heavy molasses.
This policy shift is crucial because ethanol production is a more profitable venture for sugar mills, helping them diversify their revenue streams. As a result, investors are betting big on sugar companies that are well-positioned to benefit from this regulatory change.
2. Rising Ethanol Blending Targets
India’s ethanol blending target has been gradually increasing, and it’s making a big difference for sugar companies. As of July 2024, ethanol blending in India has reached 13.3 per cent, up from 12.6 per cent the previous season. This growing demand for ethanol, driven by the government’s push for a 20 per cent blending target by 2025-26, is a clear positive for sugar stocks.
With the country’s ethanol production capacity at 1,589 crore litres, there’s a significant opportunity for sugar companies to supply ethanol to oil marketing companies (OMCs). In the 2023-24 season alone, OMCs purchased 505 crore litres of ethanol for blending purposes, ensuring a steady demand that’s boosting the outlook for sugar producers.
DSIJ's 'Large Rhino' service recommends blue chip stocks of Large Cap companies that have leadership positions in their category. If this interests you, do download the service details here.
3. Market Optimism and Stock Performance
The combination of favorable government policies and increasing ethanol demand has led to a surge in investor optimism. As a result, top sugar stocks have seen impressive gains. For instance, Triveni Engineering’s stock price surged by 8.60 per cent, Dalmia Bharat Sugar by 5.99 per cent, and Bannari Amman by 6.52 per cent. Other notable performers include Shree Renuka Sugars, Bajaj Hindustan Sugar, and Balrampur Chini, all of which have posted strong returns.
| Stock |
CMP (Rs) |
Gain (per cent) |
| TRIVENI ENGG |
476.85 |
8.60 |
| BANNARI AMMAN |
3,305.00 |
6.52 |
| DALMIA BHARAT SUG |
468.05 |
5.99 |
| SHREE RENUKA SUGARS |
49.97 |
5.40 |
| BAJAJ HIND. SUGAR |
42.65 |
4.69 |
| BALRAMPUR CHINI |
598.65 |
3.43 |
| DCM SHR.IND |
202.27 |
2.90 |
| E.I.D. PARRY |
829.4 |
1.74 |
| ANDHRA SUGAR |
115.1 |
1.06 |
Investors are particularly bullish on companies with strong ethanol production capabilities and efficient operations. The focus is on those that can capitalize on the ethanol opportunity while maintaining robust sugar production for domestic consumption.
The recent gains in sugar stocks can be attributed to a perfect blend of government support, rising ethanol demand, and market optimism.
Disclaimer: The article is for informational purposes only and not investment advice.