Sugar stocks turn sweet

India is close to   achieving its target of 10% ethanol blended gasoline by 31st March’22 and of selling 20% ethanol blended fuel across the country by 2025, with sales beginning in some parts of the country from April 2023.

This news apart, to ensure that there is enough storage capacity for the ethanol produced, many PSU fuel retailers announced that they will be increasing their ethanol storage capacity by 51%.

Also in the works is a proposed a tax of Rs.2/litre on unblended petrol from October.

With so much happening in ethanol, sugar companies are today dominating the gainers list. Dalmia Bharat,  Balrampur Chini Mills, Triveni Engineering, Dhampur Sugar Mills, Avadh Sugar & Energy, Dwarikesh Sugar are all either hitting new highs or close to the high.

Ethanol is a byproduct of sugar manufacturing and the sugar stocks are up as this is expected to give a boost to their profit margins coupled with higher sugar realisations. Brokerage and analysts are unanimous in expecting improved profitability and reduced working capital leading to superior cash flows for sugar companies by 2024.