Indian sugar mills poised for stable profits despite market volatility: Crisil Ratings
Crisil Ratings on Monday projected a promising outlook for Indian sugar mills, with expectations of steady operating profitability for integrated mills amid market fluctuations. In a report, the agency said that key contributing factors include a surge in domestic sugar prices and rising sales of ethanol.
It has projected a stable operating profitability for integrated sugar mills in India, despite facing hurdles. The report highlights that higher domestic sugar prices and increased sales of ethanol are expected to offset the rise in sugarcane costs and reduced exports during fiscal year 2024.
According to the report, domestic sugar prices have surged by around 5% between March and June this year, reaching ₹34/kg, following two years of steady rates at ₹32/kg. The rise in prices can be attributed to an estimated 7% decline in total sugar production during the current season ending 30 September, primarily due to unseasonal rains adversely affecting major sugarcane-growing regions such as Maharashtra and Karnataka.
The report has forecast that sugar prices will remain at current levels in the short term, with only a modest increase in net sugar production expected for 2023-24 (October-September), as more sugarcane is diverted towards ethanol production. The estimated ethanol diversion is set to rise to 5 million tonne compared to 4 million tonne this season, signaling a positive trend for the ethanol market.
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