Sugar consumption in India is growing by 0.5 million tons per annum. Therefore, it will take maybe 6 years or more for the consumption to rise to 29 million tons
Secondly, sugarcane is the sturdiest and the most remunerative crop for farmers. This there appears to be very little possibility of farmers moving away from sugarcane in the near future.
This time there was an upcycle in sugar
sector due to two consecutive years of drought. Even a single year of drought is not enough to cause a fall in sugarcane cultivation. And as per metrological reports, India may have a normal monsoon next year and as per the sowing data, the sugar production in the next sugar season will be above 30 million tons and that will ensure continued bad times for the sugar sector till September 2019 at least.
In the last down cycle, companies like Dhampur and Balrampur paid dividend for four out of six years of excess production BUT still the stockprice continued to linger around 30-50 for these stocks. In the coming downcycle too, all the sugar stocks may languish at lower level for next few years
In face of all of the above, I think investors should stay away from sugar stocks for the next 3-4 years