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Sugar stocks have surged in recent sessions after New Delhi eased ethanol blending rules; What investors need to know
Sugar Stocks
Sugar stocks have surged in recent sessions after New Delhi eased ethanol blending rules, with Balrampur Chini, Shree Renuka Sugars, and Dhampur Sugar among the key gainers. The optimism was reinforced by the Supreme Court’s nod to 20% ethanol-blended petrol and the Centre’s decision to lift curbs on producing ethanol from cane juice, syrup, and molasses for 2025–26.
But analysts caution the rally may not last. Chronic production shortfalls and stagnant ethanol prices could blunt the incentives for mills to divert cane away from sugar, raising questions about the durability of the ethanol-led growth story.
Production Forecasts Rarely Hold
InCred Capital flagged that India’s sugar output projections often disappoint. For 2023–24, an initial forecast of 34 million metric tonnes (MMT) ended at 29.5 MMT. This year’s estimates have already been slashed from 35.5 MMT to 28 MMT, while the 2025–26 target of 35.25 MMT also looks vulnerable if monsoons falter.
The brokerage reiterated a reduced stance on sugar-based players such as Balrampur Chini and Triveni Engineering, while remaining constructive on grain-based distillers like BCL Industries and Globus Spirits.
Ethanol Margins Don’t Stack Up
Despite policy support, the economics of ethanol diversion remain weak. Cane’s Fair and Remunerative Price (FRP) rose to Rs 3,400 per quintal in 2024–25, but ethanol prices from B-heavy molasses (Rs 60.73/litre) and juice (Rs 65.61/litre) have been stagnant for over two years. At ~22 litres per quintal yield, ethanol revenues amount to ~Rs 1,450—well below FRP and loss-making for mills.
In contrast, sugar sales fetch ~Rs 3,820 per quintal at wholesale prices of Rs 38/kg, making sugar the obvious choice. No surprise then that of 7.23 billion litres of ethanol supplied in ESY25, only 38% came from sugar, while 62% was grain-based.
Mixed Market Performance
With closing balances projected at 7–8 MMT for Sugar Season 2026, analysts expect the government may eventually allow higher exports to absorb surplus. Meanwhile, stock performance has been uneven: Shree Renuka Sugars, Dhampur Sugar, and Dwarikesh Sugar are down as much as 30% YTD, while Balrampur Chini and EID Parry have gained up to 22%.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
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