The Hindu Business Line : SC ruling on cane price lifts sugar stocks

Mumbai, May 15 Sugar stocks surged sharply on Thursday. This was mainly due to the Supreme Court allowing sugar mills in Uttar Pradesh to pay farmers Rs 110 per 100 kg for cane, said analysts.

“The price set now is lower than what was set by the State. The Court has given four weeks time for the millers to clear all the cane arrears. What we saw today was the investors covering their short positions, which they had built earlier,” said an analyst tracking the sugar sector at a brokerage.

Positive outlook

The State Government had earlier asked the mills to pay Rs 125 per 100 kg for buying cane from farmers in this season this year.

Shree Renuka rose by 6.22 per cent, Mawana Sugar climbed 4.99 per cent, Bajaj Hindustan Sugar and Industries rose 6.88 per cent, Thiru Arooran Sugar went up by 9.41 per cent and Oudh Sugar Mills rose 4.99 per cent on the bourses on Thursday.

If cane costs decrease, sugar mills will become more profitable, said Ms Anita Gandhi, Head of Institutional Business at Arihant Capital Market Services. “We have a positive outlook for the sugar sector as we expect sugar prices to firm up over the next few quarters on the back of lower production estimates, stable growth in consumption and exports,” said a PINC research report.

Buffer stock

However, prices should stabilise at the current Rs 15-15.2/kg for the next 3-4 months as the Government has allowed the mills to sell the two mt of buffer stock in the open market from May 1. The second tranche of 3 mt buffer stock will be dismantled on July 31 and it remains to be seen whether this stock is allowed to be sold in the open market, which will be over and above the normal monthly releases. However, with estimated production of 22-23 mt and consumption of about 22.5-23 mt during sugar season 2007-08, the situation tends to favour the demand and this augurs well for upswing in sugar prices from current levels, the PINC note added.

The share prices of these companies have risen considerably in the past one month, with most of these them posting a rise of between 8 per cent and 37 per cent. As against the gain of 7.43 per cent by the BSE Sensex, Mawana Sugar surged 33.69 per cent, Oudh Sugar Mills rose 36.45 per cent, Simbhaoli 20.90 per cent and Shree Renuka 26.67 per cent. Thiru Arooran, Bannari Amman and Dharani Sugar stock prices rose between 10 and 15 per cent.

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