Mumbai, March 14Sugar stocks hit a sweet spot on the bourses with the Transport Minister Nitin Gadkari’s recent announcement on the launch of flex-fuel engines and the government plan to operate public transport entirely on clean energy sources.

A flexible-fuel or flex-fuel vehicle – also known as dual-fuel vehicle – is an alternative with an internal combustion engine designed to run on more than one fuel, usually gasoline blended with either ethanol or methanol fuel. Avadh Sugar & Energy and Triveni Engineering and Industries gained 12 per cent and 10 per cent to ₹788 and ₹334 respectively. Balrampur Chini and EID Parry rose three per cent and two per cent to ₹502 and ₹436 respectively.

Flex-fuel variants

At a recent industry event, Gadkari said automobile companies had assured that they would start manufacturing flex-fuel variants of vehicles in six months.

Companies such as TVS Motor and Bajaj Auto have started producing flex-fuel two- and three-wheelers, he said. The government is also working on a plan to shift public transport to 100 per cent clean energy sources, he said. S Ranganathan, Head of Research at LKP Securities, said integrated sugar complexes have expanded distillery operations to meet the demand for ethanol from the oil marketing companies. Attractive ethanol prices are margin-accretive for sugar mills, since it helps them de-risk their sugar business and improve cash flows, he added.

Mohit Nigam, Head-PMS, Hem Securities, said operating profits of sugar companies are expected to improve with a favourable balance of ethanol toward B-heavy/ juice (feedstock) and greater sugar realisation. The Centre's ethanol blending programme has got a shot in the arm with the price of Brent crude rising due to concerns on supply disruptions on the back of Russia’s invasion of Ukraine, and a substantial increase in domestic fuel prices on the horizon, he said.