Sugar Industry: A step-in or a step-out?

The rising price of sugar has been a reason for concern in the Country. According to a report published by Rabobank, sugar prices have been on a roll for the last six months and it is likely to hold its zeal in the near to medium term. As a result of which the food and beverage (F&B) companies have been exposed to a high price risk.The report stated world raw sugar prices have surged by 30 per cent since mid-April 2016. It has gone from 14.3 US cents per lb (pound) to 18.8 US cents per lb (basis July futures). Experts concluded that this price surge is a result of potentially lower global sugar output in 2016­17.India is the second largest sugar producer in the world. As per the report, the production capacity of sugar may witness a fall of 3.7 million tonnes in 2016-17 due to droughts in the previous two years. It also added that the country will become a net sugar importer in the current fiscal. Domestic sugar prices across Asia also reflect the tighter supply situation.In 2015-16 fiscal, Asia witnessed its first deficit year in over five years as Chinese sugar production has declined by over 2.3 MT (raw value) over the last year and Indian sugar production might decline by over 4 MT, pushing Asia into an overall deficit of 2 MT, the report said.

India in the Sweet SpotIndian sugar industry was amid heavy loss with the strict regulations from the Central Government. The companies were facing heavy loss and some were very close to pulling their shutters down. This was an eye-opener for the authorities. Government decided to take a more lenient approach towards the sector. Regulations were softened. As a result of which the sugar industries which were earlier in loss, started their journey towards the greener zone.

Investment InterestCompanies like Upper Ganges Sugar, Dwarikesh Sugar, KM Sugar and Mawana Sugars gained massively in last one year. In the last one month all these companies have given major correction which has created a perfect opportunity for entry.

Today’s MarketAs of now (10:00 AM, 1st September 2016) Andhra Sugars share price is on the greener zone of the market. It is trading at Rs 223.00, up by 0.36 per cent. Balrampur Chini share price is trading at 107.95, up by 0.65 per cent.Ponni Sugars share price is down by 0.26 per cent and trading at Rs 208.00. Mawana Sugars share price is trading at 44.10, down by 0.79 per cent. The further drop in price in these two shares has presented a great point of entry.Deficit in the production of sugar in the future will create extra demand in the market which can boost the Industry. Sugar sector is in a good place now and can prove to be a smart investment decision.

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