Sugar stocks turn sour, Sharekhan cuts target prices - here’s why

livemint.com:

Praj Industries, Dhampur Sugar and Dwarikesh Sugar have been seen massive decline between 15-20% in the past week, following government’s instruction to sugar mills not to utilize sugarcane juice and syrup for ethanol production in the upcoming 2023-24 season. The shares of Balrampur Chini were down 1.89% to ₹389.50 per share on Tuesday, December 12, meanwhile, Praj Industries closed at ₹545.95 apiece, Dhampur Sugar shares were trading 0.53% lower and Dwarikesh Sugar shares ended at ₹86.50 per share.

"Restrictions on the use of sugar juice for ethanol production stems primarily from the concerns regarding sugar crops this year in Maharashtra and Karnataka which experienced uneven rains. Since sugar price can be a sensitive issue during election time, it would be unrealistic to expect any relaxation in this measure till the elections are over.

This is certainly a negative from the perspective of sugar companies which have invested heavily in producing ethanol. The sugar stocks, particularly the ethanol-oriented ones, are likely to remain under pressure for some time," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The provision of Ethanol sourced from prevailing proposals received by Oil Marketing Companies originating from B-Heavy Molasses will persist. In contrast to the other entities, Praj Industries specializes in supplying technology for ethanol production rather than being a sugar producer.