Recently global sugar prices have crossed US cents 20 per pound from a low of US cents 10 per pound one year back and more importantly domestic prices are following global price trend and moved to a four-year high of Rs 34 per kg in Maharashtra and Rs 36 per kg in Uttar Pradesh. The impact of this on share prices of sugar companies is substantial. Year till date most of the sugar companies shares have doubled in their values and some of them have even seen an increase by three fold.
Most old-time investors, who have seen many market cycles, might see this as another sugar cycle. They may also think that it will reverse soon. Their point of view has a reason behind it. They are still under impression that sugar is a highly regulated, cyclical commodity with greater degree of local level of politics. All these factors have led to sugar stocks being under-owned in one’s portfolio.
Sugar economy improving
Nevertheless, we believe that the current change in the landscape of sugar sector is structural and will have far reaching consequences on the entire sector. Factors such as improving sugar prices, government measures and higher distillery capex to leverage ethanol opportunity will help to sustain the current momentum in sugar companies.
Massive distillery Capex to leverage ethanol opportunity
This story is from the September 2021 edition of Indian Economy & Market.
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This story is from the September 2021 edition of Indian Economy & Market.
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