Moreover, the Brazilian subsidiaries (half of consolidated revenues; reported losses last year) have improved operating performance during the quarter on account of higher crushing.
Many analysts, believe that financial performance is likely to improve in the coming quarters, owing to higher realisation in standalone business and better operational performance in Brazil. However, debt concerns still persist. You will get some more inputs on Sugar Stocks if you, CLICK HERE.
Also, the CCEA (Cabinet Committee for Economic Affairs) recently approved the proposal to free ethanol producers to fix the selling price in consultation with the end-user. In addition to the 13 States where ethanol blending is prevalent on a limited scale, the proposal for mandatory 5 per cent ethanol blending has now been extended to other states too. In the event of short supplies, the end-users are now free to import ethanol directly. With this, the ethanol realisation for Indian sugar producers is expected to move in tandem with the international prices.
Decontrol, a big positive:
The committee headed by C. Rangarajan has suggested de-control of the sugar industry. If accepted, the current 10 per cent levy obligation (sugar sold at a discounted price) may be removed and sugar trade may be liberalised by freeing import and export. The committee has also suggested abolition of the sugarcane reserve area and a revenue-sharing formula for cane procurement. Under this, farmers will be paid the FRP upfront and a 70 per cent share of the value realised from sugar and other by-products.
If the committee recommendations are implemented, it can lend stability and sustainability to the industry’s profitability, leading to re-rating of sugar stocks.