Sugar market in India: A brief overview
The sugar industry is the second largest agriculture-based industry in India – the country is the world’s largest sugar producer, supplying around 20% of the world sugar production.
80% of sugar comes from sugarcane extraction while the remaining 20% comes from sugar beet. Therefore, the future of sugar stocks depends on the following factors –
1. Monsoon, irrigation and overall access to water
– As sugarcane is a highly water-intensive crop, lack of water reduces its supply.
2. Development of the processed food industry
– as sugar is a major component of various processed foods like cakes, jams, sauce and is also a major complimentary food to beverages like tea, coffee and soft drinks.
3. Pricing policy of the government
– Usually central and state governments declare their own Fair and Remunerative Price (FRP) and State Administered Price (SAP) respectively. If price increases and the procurement mechanism improves, then farmers produce more sugar
4. Price of ancillary products like animal feed, ethanol
– As sugarcane residue, molasses etc. are increasingly used as animal feed and as biofuels, farmers will produce more of sugarcane, despite the fall in price of sugar due to overproduction.
5. Competition and export opportunities
– Brazil (India’s biggest rival in sugar supply) has recently seen an election and may see change in policies. The world price of sugar is quite volatile and has slightly decreased in the last 12 months.
Improvements in the above variables allows sugar companies to acquire more profits and hence sugar stocks to increase in value.
List of best sugar stocks in India
The following are the best sugar stocks in India –
|Name of the sugar stocks||Market cap||% change in stock price in past 12 months|
|Shree Renuka Sugars Ltd||₹12,377 cr||127.12%|
|Triveni Engineering and Industries Ltd||₹6,882 cr||35.87%|
|EID Parry (India) Ltd||₹10,880 cr||33.64%|
|Balrampur Chini Mills Ltd||₹7,665 cr||21.17%|
|Dalmia Bharat Sugar and Industries Ltd||₹2,854 cr||-4.46%|
Shree Renuka Sugars Ltd.
This midcap sugar stock has shown phenomenal returns and can be a good buy for an investor as it has gained over 604%in price in the last 3 years. It is an agribusiness and bioenergy company that is engaged in sugar production, processing, distillery operations and ethanol production.
The company has revenues worth ₹6,433 cr and losses of ₹139 cr in the last financial year.
Triveni Engineering and Industries Ltd.
It has two separate segments – sugar and engineering. While the sugar segment focuses on sugar (including white crystal sugar) and alcohol manufacturing, the engineering division concentrates on high speed gears, gearboxes and waste water treatment solutions.
The company has revenues worth ₹4,694 cr and profits of ₹424 cr in the last financial year.
EID Parry (India) Ltd.
The company is engaged in sugar manufacturing, farm inputs, nutraceuticals (i.e. food products with health benefits e.g. pharmaceutical sugar, organic chlorella etc.), bio-pesticides, hand sanitizers and distilleries.
The company has revenues worth ₹23,528 cr and profits of ₹907 cr in the last financial year.
Balrampur Chini Mills Ltd.
The company is engaged in sugar manufacturing as well as production of ethanol (whose buyers include oil marketing companies), ethyl alcohol, fertilisers, generation and sale of power. It also has a distillery segment.
The company has revenues worth ₹4,846 cr and profits of ₹465 cr in the last financial year.
Dalmia Bharat Sugar and Industries Ltd.
The company has primarily two segments – sugar manufacturing and power production (including captive power for consumption by the company itself). It also produces manures and sanitizers.
The company has revenues worth ₹3,007 cr and profits of ₹295 cr in the last financial year.
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Disclaimer: This article is written for educational purposes only. The securities mentioned are examples and not recommendations.