Lower output warning crushes sugar stocks

MUMBAI: Shares of sugar manufacturers fell up to 4% on Tuesday after a Maharashtra government official warned that the commodity's production could fall due to lower sugarcane farming.

Balrampur Chini fell 4.42% to Rs 54.05, The Andhra Sugars fell 3.21% to Rs 141.90 while Bajaj Hindusthan declined 1.45% to Rs 30.55 on BSE on Tuesday.

On the other hand, Shree Renuka Sugars gained 0.8% to Rs 30.85. BSE Sensex gained 0.5% to 17,236.18 while the NSE Nifty gained 0.56% to end at 5,229 points.

Maharashtra's sugar commissioner Vijay Singhal told reporters on Monday that sugar output may fall to 7 MT in the harvest season from 9 MT earlier as a 22% rainfall deficit pushes farmers into shifting to other crops.

Analysts said the impact of lower production would be different for various companies across the country, mainly depending on their existing stocks.

"If the production indeed falls as per the comment, it will be negative for companies based on Maharashtra. Even UP-based mills are facing pressures from the lower monsoon and high debt," said AK Prabhakar, SVP - research, Anand Rathi Securities.

Analysts said the shares' mixed reactions on Tuesday could also be attributed to the expectations of higher sugar prices.

"There are companies already holding sugar stock as it can be stored for long periods of time. These could benefit from a rise in sugar prices," Prabhakar said.