October 18, 2021

The World Stock Markets Tips & Targets, News, Views & Updates

The World Stock Markets Tips & Targets, News, Views & Updates

Sugar companies likely to witness 5-7% revenue growth in FY’22: Report

companies’ revenue is likely to grow by 5-7 per cent in 2021-22, following firm domestic and global prices and expected growth in both exports and ethanol volumes, according to a report.

On the back of favourable pricing environments domestically and globally as well as increased share of ethanol in revenue mix, the revenues of a sample of are expected to grow by 5-7 per cent in FY22 on a year-on-year basis, Icra said in a report.

“Increased sucrose diversion towards ethanol in light of government’s complimenting policies is likely to result in ramp up of ethanol supplies while limiting the sugar production. This coupled with healthy sugar export prospects for the current fiscal would aid moderation in inventory position and thus, lower borrowing levels at the fiscal’s end notwithstanding ongoing debt funded capex plans (for distillery and crushing capacities) for various players,” Icra Senior Vice President and Group Head Sabyasachi Majumdar said.

With improved operating profits and reduced debt levels, the coverage metrics and capital structure would emerge stronger by end of fiscal year, he added.

The report further stated that the domestic rose to around Rs 34,000-36,000 per tonne in August-September 2021 after three years following sharp increase in global prices as well as onset of the festive season.

The international raw firmed up to USD 420-440 per tonne in August-September 2021 compared to USD 270-280 per tonne in August-September 2020 in the anticipation of decline in Brazilian sugar production and thus, balanced global supply position, it said.

In light of surged global sugar prices, the export prospects look promising for the upcoming sugar season even if export policy isn’t announced, said the report.

Icra estimates India to register sugar exports of around 4-6 million tonnes for SY 2022 (sugar year), thus the closing stock is expected to be at around 7.1-9.1 million tonne as on September 30, 2022, compared to 8.6 million tonne estimated as on September 30, 2021, it said.

Icra said that the sugarcane UP-SAP is expected to be hiked by Rs 25 per quintal while Fair and Remunerative Price (FRP) has been increased by Rs 5 per quintal for SY2022.

Thus, for SY2022, UP-SAP would be Rs 350 per quintal for early maturing variety and Rs 340 per quintal for normal variety while FRP would be Rs 290 per quintal, which would result in higher sugar production cost.

However, with a favourable mix of ethanol towards B-heavy or juice (feedstock) coupled with higher sugar realisations, the likely cane price hike is expected to be comfortably absorbed by the industry and the operating margin is expected to remain stable at 12.5-13 per cent in FY22.

Likely hike in cane prices, especially in Uttar Pradesh, though in line with industry’s expectations, would arrest the expansion in operating margins that could have flown from improved sugar realisations, healthy sugar exports in addition to ramped up ethanol supplies with favourable feedstock based mix. Nevertheless, the expanded scale and improved revenue mix would allow higher operating profits even as operating margin remains flat,” Icra Vice President and Sector Head Anupama Arora added.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Share This :