I tried that but there seem to be some issue with the link.
DWAR SUGAR : Earnings Call Transcript
http://dwarikesh.com/pdf/2018/Transcript-Q3-2018-earnings-call.pdf
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Balrampur Chini to buy back 2.81% equity shares: https://www.thehindubusinessline.com/markets/stock-markets/balrampur-chini-to-buy-back-281-equity-shares/article22816054.ece
Does anyone have a view on thisâŚas a retail shareholder should I participate?
Companies that do buybacks are wealth generators in the long term. You could participate but if the acceptance ratio is very small, it wont be worth the effort. Ideally this could be bought for a 2-3 year view.
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What is the view on sugar sector now, the sector as a whole is in downtrend currently. Is it prudent to play on the cyclical theme that it is going to make a turn around from here.
Sugar up cycle ends with the production estimated at 27 million tons against a consumption of 25 million tons.
Next year the monsoon is expected to be normal monsoonâŚHence the sugar production for the next sugar season maybe around 29 million tons.
We may now have to wait for 2022/23 for the next up cycle. Till then, sugar companies stocks will be in a down trend.
Some stocks like Dhampur are showing signs of rallying in March / AprilâŚI expect massive distribution to take place in sugar stocks in the next few months.
In the coming sugar down cycle, highly debt laden companies like Bajaj Hind may finally collapseâŚAs they were not able to strengthen their balance sheet in this up cycle. While others sugar stocks such as balrampur, Dhampur, dwarikesh have become almost debt free and can survive the next few 4-5years of losses quite wellâŚ
Canât say the same about Simbhaoli and Bajaj HindâŚAnd Renuka
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This is when the upcycle started
And it lasted for two years. Now brace for 3- 5 years long downcycle
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@Mehnazfatima Thank you so much for your response and for the information shared.
Some one please help me understand the rationale behind investments made by Anil Kumar Goel, Seema Goel, Dolly Khanna. I would like to comprehend what value are they seeing in such a sector which is undergoing through such a downward business cycle. As recent as a fortnight ago Mr Anil Kumar Goel made a bulk deal in Avadh Sugar.
This is particularly unfathomable to me since day in day out both media and ISMA are bombarding us with negative news that Sugar production is going to increase leaps and bounds for this year and as well as next year. Consequentially the sugar price is dropping continuously based on this information where supply is going to outstrip demand.
Anyone who can throw some light on this conundrum and come up with a reasoning and investment rationale kindly respond. To put it succinctly what is that these marquee investors are seeing that we are not seeing?
Thank you in anticipation.
@duranvskp Sugar sector has also become more of a political agenda. Fy19 Being election year govt cannot ignore the pile up of payments to farmers.
And the way actions are being taken till now it seems that they will be able to export 1-1.5million Tonnes of sugar easily out of the country. Moreover it will be a long term contract to export sugar to Bangladesh and Sri Lanka.
Although there is fear among traders and stockist but if things go as per plan, then there can be re-rating of sugar sector.
CONTRA-PLAY!!!
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Very nice analysis, Aditya. Maybe Balrampur and other strong sugar players are great buys now for a one year view (pre May 2019).
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Bad News
Even exports will not help in jacking up of prices
as there will be surplus of about 3-4 million tonnes.
Jiten Parmar plays the cyclicals very well. It would pay to listen to what he says.
Incidentally, i too think that copper is due for upcycle
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Latest figure from ISMA project sugar production at 29.5 million tons, with Indian consumption at 25 million tons surplus will be 4.5 million tons.
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Indian producers are talking (media report) of exporting this surplus with government support. At Govt. support of Rs. 10/kg. Govt. will need to provide a support of 4500 crore for 4.5 million ton and 2500cr for 2.5 million. Later seems to most likely scenario since Indian producers will like to keep some buffer stock.
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With Spot prices in NCDEX hovering around Rs. 30.5/kg and production cost at Rs. 32 industry is likely to make a loss of Rs. 2/kg. This will lead to cane arrears which are hovering around Rs. 14k cr as per Livemint news report.
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I think most of the mills will do losses in Q4FY18 except for I do not know how Distillery and Cogen plant of some of the mills like Triveni etc will do. Also, how does Distillery dynamics work? Can companies produce as much Ethanol as their capacities are? Who buys this Ethanol? Can the sell it in open market or it has to sold to Oil marketing companies for compulsory blending?
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Cogen - The exact number will depend on the fiber content in the sugarcane. If the fiber content in sugarcane is lower the Bagasse availability and hence the cogeneration will be lesser, but if the Bagasse content in the sugar is higher obviously the cogeneration will be more.
Distillery - Two markets. 1. Potable alcohol 2. Fuel blending. These days, more high end whiskey manufactures are moving towards grain alcohol. Molasses were earlier being supplied to liquor companies but now trend is changing. Governmentâs blending target is ~ 5%-10% which is resulting in good demand for ethanol (ethyl alcohol). Ethyl alcohol or Ethanol is the only potable alcohol.
Oil Marketing Companies agree to blend when crude is higher. Earlier, the problem was that ethanol demand was not fulfilled when needed due to inconsistency in production numbers. But now government wants to reduce fuel imports big time and is very serious on this blending front. So, Ethanol should do well and should come for rescue of sugar companies amid mess around sugar pricing.
One can check Dwarikeshâs last concall to understand the price dynamics.
THE END!! (most prob.)
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There seems to be a short supply of ethanol for blending with Petrol. Why cannât Sugar companies produce more ethanol instead of sugar to balance demand-supply dynamics?
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