The Hindu Business Line : Price rise sweetens sugar stocks

SHARES of sugar companies are back in the limelight due to the rise in sugar price and expectation of shortfall in production during the current season, brokers said.

They said due to shortage of sugar production, most of the sugar companies are expected to show higher profits in the current fiscal. In the March quarter also sugar companies had reported substantial higher profits.

There was across the board buying in sugar stocks in today's trading. Some of the stocks witnessing major activity, included Balrampur Chini Mills, Bajaj Hindustan, Dhampur Sugar, Sakthi Sugar and Thiru Arooran Sugar. Shares of smaller sugar companies also gained.

In today's trading, the major gainers included Rajashree Sugar (up 19.37 per cent at Rs 37.60 on BSE); Kesar Enterprises (15.67 per cent at Rs 33.95); Bannariamman Sugar (10 per cent at Rs 352.10); Dhampur Sugar (9.94 per cent at Rs 45.90); Sakthi Sugar (9.93 at Rs 31.55).

Industry experts said domestic sugar prices have increased almost 20 per cent (Rs 300 per 100 kg) this year to Rs 1,580/1,661 per 100 kg as against Rs 1,330/1,381 per 100 kg in the beginning of this year due to increase in demand and reduced supply.

They said sugar production is estimated to reduce to 110 lakh tonnes for the season 2004-05 due to erratic rains in key sugarcane producing region and a drop in crop acreage.

Sugar production during the season 2003-04 (October-September) is estimated to be around 140 lakh tonnes, down from (the initial estimate of 155-160 lakh tonnes made by the Government) 201 lakh tonnes for 2002-03.

"World sugar markets may witness a supply deficit of up to 5 million tonnes in 2004-05. This gap could be halved by a modest rise in production in Brazil, as per International Sugar Organisation (ISO) report. Thus, global deficit may be 4 to 5 million tonnes," an analyst said.