Indian sugar companies will likely see their revenues increase 8-12% in FY23, supported by addition in installed capacity along with an rise in ethanol blending target and price, CareEdge Ratings said in a report.
Domestic sugar production is estimated at 340 lakh tonne in sugar season 2022-23, which runs from October-September, compared to the peak of 358 lakh tonne output in 2021-22; with the highest ever diversion towards ethanol estimated at 45 lakh tonne (up 41% year-on-year), according to Indian Sugar Mills Association (Isma).
“This increasing diversion towards high realisation ethanol is likely to support 8-12% revenue growth for sugar mills this fiscal. By the year 2025, the government is targeting to divert 60 lakhs tonne of excess sugar towards ethanol annually," the report said.
“The revenue for sugar mills is estimated to increase by 8-12% in FY23, based on analysis of top players accounting for about 50% of the organised sugar industry. The growth is expected to be supported by addition in installed capacity for sugar production and distilleries along with an increase in ethanol blending target and price," said Tanvi Shah, director, CareEdge Advisory & Research.
“With the government’s continuous support towards the sugar sector and increasing focus on diversion towards ethanol production to promote Ethanol Blending Program in India, the sugar sector is likely to gain traction going forward," she added.
As of 15 February 2023, sugar production was about 5.5% year-on-year (YoY).
According to report, sugar export quota has been set at 60 lakh tonne for this season, which is lower than 72 lakh tonne and 112 lakh tonne exported in 2020-21 and SS 2021-22, respectively. Additional sugar export quota will be decided after evaluating demand-supply scenario.
A GST reduction to 5% from 18% coupled with any additional export quota announcement by the government, could support the sugar mills’ performance in the near term.
“The price of ethanol derived from the C heavy molasses route to be increased by ~6% to Rs. 49.41 per litre," it added.
The price of ethanol derived from B heavy molasses route and direct route (sugarcane juice/ sugar/sugar syrup) to be increased by 3% to Rs. 60.73 per litre and Rs. 65.61 per litre respectively, which in turn will incentivise sugar mills for high margin ethanol production and support its profitability.