Govt May Relook At Restrictions On Sugar Exports Only By The End Of CY24: Elara Sec | CNBC TV18

Summary

The transcript discusses the sugar industry's fluctuating stock values, with a focus on the impact of Minimum Support Price (MSP) expectations. Prashant, a sector expert, suggests that despite industry hopes for an MSP increase between 40 to 41 rupees per kilogram, it's unlikely due to current high sugar prices and profitability. He also addresses ethanol pricing stability and the potential for sugar exports, emphasizing that government decisions on these matters will be influenced by the upcoming cane crop's quality and yield. Prashant's top pick for investment in the sector is Balamur Chini, citing its efforts to improve cane quality and yield, and its venture into PLA production.

Takeaways

• 📉 Stock reversals are occurring, with companies like Balamur Damur experiencing mild negative movements.
• 📈 Ruka is currently up by about half a percent, following a significant rally due to expectations of a minimum support price (MSP) hike for the sugar industry.
• 🍬 The sugar industry has been advocating for an MSP of 40 to 41 rupees per kilogram, but the expert, Prashant, does not expect an increase in the next 3 to 4 months due to inflation concerns.
• 💡 Prashant suggests that even if there is an MSP increase, it may be lower than the industry's request and may not impact current sugar prices, which are already resilient.
• 🔄 The profitability of the sugar industry is decent, supported by good ethanol offtake and government support for better grain prices.
• 🌾 The government is expected to assess the cane crop's performance in the current season before making decisions on sugar exports or MSP increases.
• 🌎 Global sugar prices are elevated, but the decision on exports will depend on the domestic sugar stock and the next season's crop yield.
• 🚫 There is no expectation of an immediate increase in ethanol prices for the current season, as the government has already revised the prices.
• 📊 The retail price of sugar is between 48 to 54 rupees, depending on the type, with mill prices varying by region.
• 🚀 Prashant's top pick in the sugar sector is Balamur Chini, which is expected to benefit from resumed blending programs and efforts to increase cane acreage and quality.
• 💡 Balamur Chini is also venturing into PLA production, expected to commence from FY 27, indicating long-term growth potential.

Q & A

What was the reason for the recent rally in sugar stocks?

The rally was triggered by expectations of an increase in the minimum support price (MSP) for the sugar industry.

What is the industry's expectation for the MSP of sugar?

The industry is advocating for the MSP of sugar to be set between 40 to 41 rupees per kilogram.

What is Prashant's view on the likelihood of the government increasing the MSP to the industry's desired level?

Prashant does not expect an increase in MSP in the next 3 to 4 months, and even if there is an increase in the next season, it could be lower than what the industry has been asking for.

How does the current sugar price resilience affect the impact of an MSP increase?

Due to the current resilience of sugar prices, even if an MSP increase is announced, it may not have an impact unless it is at a reasonable level.

What is the current situation with sugar company margins considering the existing sugar prices?

Margins of sugar companies are not expected to be impacted by an MSP increase as prices are already above the MSP and profitability is decent due to good ethanol offtake and government support.

What are the government's current ethanol prices for the heavy and grain ethanol?

The government has already increased the prices for both heavy and grain ethanol for the current season, and there are no further price increases expected for the remainder of the season.

What is the expected impact of the ethanol program on the sugar industry next year?

With high sugar stock in the country, the ethanol program is expected to return to normal levels next year, with the main variable being the ethanol price set by the government.

What are the retail prices of sugar currently?

The retail prices of sugar are between 48 to 54 rupees per kilogram, depending on the type of sugar.

What factors could potentially be the next trigger for sugar stocks, if not MSP or ethanol price hikes?

The next trigger could be related to the export front, with the government's decision on sugar exports and the quality of the next season's sugar cane crop being critical factors.

What is the current projection for sugar closing stock at the end of the year?

The projection is to end the year with around 8 billion tons of sugar as closing stock.

What is Prashant's top pick in the sugar sector and why?

Prashant's top pick is Balrampur Chini, due to its efforts to increase cane acreage and improve quality and yield, as well as its venture into PLA production expected to commence from FY 27.