Correct!!! However according to the data, the promoter had acquired 32000 shares @ 499, before this news broke!!!
But interesting case study HOGA for our community!!
The government has decided to allocate 1.7 million tonne (MT) of sugar for ethanol production in the current season against 3.8 MT sweetener used for biofuel production in 2022-23 season from both sugarcane juice and molasses, food secretary Sanjeev Chopra on Friday said.“The government will review the sugar production in the next one to two months to explore the possibility of allocating additional volume of sugar for ethanol manufacturing,” Chopra said at the sidelines of Indian Sugar Mills Association (ISMA) meet.
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Highlights correctly how longer-term investing is impaired by government actions to build ethanol capacity.
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In Maharashtra: The Fact are correct and there will be another problem in next year as farmers in many places are showing new seeds.
GOI: will not be want any surprise inflationary pressure from Jan to April period.
Sugar recovery in UP has increased by almost 0.5% in December. It could be higher in Jan and Feb.
every 0.25% improvement in recovery leads to Re. 1 per kg reduction in cost of sugar. If a decent size mill making 1.5 lac tons a year sugar can increase profit by 30 crs p.a.
This year UP mills will make good money. Next year it could be even more as all mills are focusing on cane development - yield increase, pest reduction, etc. rather than expansion of capacity.
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GOI to tighten screws against sugar mills violating monthly sugar sale quota; to cross-check GST data to verify actual sell.
The Department of Food and Public Distribution (DFPD) controls the monthly sale of sugar, by allocating a quota to every sugar mill as to how much sugar it can offloaded in the market during the said month. Cumulatively, it is known as the ‘monthly sugar sale quota’. The objective of this is to maintain a steady supply of sugar in the market, sufficient enough to cater to domestic demand. This also aims to check the distressed sale of sugar in the market, thereby maintaining that sugar is sold at or above the Minimum Selling Price of Rs.31/kilo set by the Government. Hence, the monthly sugar sale quota is a carefully thought policy of the Government designed to maintain sugar equilibrium in the country.
The quota was introduced at the request of the sugar mills, who had represented to the Government for the same. However, reports suggest that several sugar mills flout this quota, and sell more sugar than the quota allocated to them, which goes unreported in the system.
The Directorate of Sugar wants to tighten the loose screws. According to sources, come January 2024, the Directorate will have access to the GST data of each sugar mill to validate the sale of sugar as per the quota allocated. The data will be cross-checked to find any discrepancies.
The sources say that the process will start from January 2024, and to begin with, the December 2023 monthly sales quota will be scrutinized. The Government will take strict action against those who are found violating the sugar supply quota under the Essential Commodities Act. An official notification is awaited for the same.
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sugar mills are happy selling lesser sugar now as prices are anticipated to go up after elections. after elections we could see prices going up by 10%.
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A simple yet insightful observation shared by Mr. Anil Goel in a recent interview (CFA Society) is that for sugar companies involved in ethanol production, both raw materials and fuel come at no extra cost (molasses), unlike in the case of pure-play ethanol production who are subject to market forces on both raw materials (grains) as well as fuel cost. Given ethanol cost is fixed for a period, this seemingly straightforward yet crucial point underscores the distinct economic advantage enjoyed by sugar companies in this context.
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Looks like conflicting messages, and too early to call on current year’s cane cultivation and sugar production - At the national level, the sugar production is expected to reach 305 lakh tonnes as against the 291.50 lt at the start of the crushing season.
Maharashtra, as per the fresh estimates, would produce 90 lt (7.55 lakh tons estimated earlier), while Karnataka’s production figure would stand at 42 lt.
The numbers are extrpolated from yield in specific pockets to across MH and Karnataka. In this is indeed true than good for Industry as Govt may allow extra diversion to ethanol
So, here is another one. UP mills are on fire. https://timesofindia.indiatimes.com/city/lucknow/up-clocks-9-increase-in-production-of-sugar-amid-11-dip-nationally/articleshow/106140477.cms
Sugar sector is no longer cyclical - it may be govt dependent but govt also cant make the industry unprofitable. One thing is for sure, that sugar companies will not add more ethanol capacity (due to the recent flip-flop on Govt. policy) . But more importantly optimise sugar and ethanol production - which will lead to higher margins. As per Shri Renuka Sugars (and other companies) - when sugar price is more than Rs. 37 per kg then sugar is more profitable than ethanol - so why will sugar companies make ethanol when ex-mill sugar prices are 39/ 40 - as supply of cane is limited.
Investors should look at companies which are focusing on cane development and recovery improvement (Balrampur, Dhampur Bio, Dwarikesh, Awadh…). Companies adding ethanol capacity are putting themselves in debt trap and lower margins - exactly opposite of what was happening a year back when companies with higher ethanol were being valued more. Ideally not more than 20% of revenue should come from ethanol.
Ultimately ethanol prices are linked to sugar prices and also with crude oil prices. Petrol prices in India will remain high for years to come as crude prices will remain above USD 80 per barrel and INR will depreciate year on year. There are some views that USD INR can go to 85 by March 2024. And also that govt is more concerned about diesel prices than petrol !!
From share price perspective - Over next 2 years, EPS of all UP based sugar companies will be least 25% to 40% of the mkt price - meaning balrampur mkt price is 400 today and cumulative EPS for next 2 years will be 90 to 100. Dhampur Bio mkt price is 150 and cumulative EPS for next 2 years will be 55.
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Covers mosts aspect as current, except that C-Molasses procurement price has been raised significantly, apart from ISMA’s continued over-projections.
Despite the flip-flops and some uncertainty for further ethanol capacity investment perspectives, some of the sugar domain expert friends are saying this situation is actually - even better than before (for UP Sugar mill profits). Will try and capture here as I understand more
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Through C-heavy route, production is only 4% sugar equivalent - volumes will be hardly anything to compensate for losses of sugar/ ethanol companies. C Heavy prices will have to be increased further by 10 to 15% and even then the losses will not be compensated - this is simple maths. Instead govt has increase prices of maize based ethanol - now sugar mills will move from cane to maize and cereal prices will shoot up… biggest losers are farmers…
Sugar mills have already cancelled their expansion plans for ethanol. the owners (i have spoken to a few) will prefer to dividend out profits (or through buyback as Balrampur, Triveni and Dhampur Sugar have done) and invest elsewhere. As far as current capacities are concerned they will try to optimise between sugar and ethanol and increase margins.
Ethanol plants in Maharashtra also shut…
Only way forward for ethanol supplies to increase is govt backed co-op mills will set up ethanol plants - and probably make losses and then shut down !!
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Hi @Aarti Ma’am & @Donald Sir,
The conversation in this thread is really enlightening. Entered sugar (Dhampur Bio & Dalmia) at 165 & 430 levels. Just wanted to know why do you say that UP based sugar mills would have good year in 2024? Is it because of higher recovery and no dependance of ethanol from cane juice?
Really looking forward for the answers.
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Sugarcane production was not affected in UP