The fall of Rs.700 a tonne in sugar prices in November is unlikely to hit the prospects of sugar companies as the stable cane prices would help companies protect their profitability.

After remaining stable at Rs.36,000/tonne in September, sugar prices touched a five-year high at Rs.36,200 ain October. Post-demonetisation, it fell marginally to Rs.35,500 in November.

Domestic sugar prices have remained firm, having increased from about Rs.31,500 a tonne in March to Rs.36,000 in August and has maintained the firm trend ever since on the back of lower sugar production estimate this year.

Sabyasachi Majumdar, Head, Corporate Ratings, ICRA, said sugar prices may remain firm over the next three quarters as the recent government estimate pegged sugar production to fall by 10 per cent compared to last year.

This apart, he added, the moderate cane price hikes effected in most States including Uttar Pradesh bode well for the industry profitability outlook in the short-term.

While the mills in Maharashtra and Karnataka are likely to benefit from the rising sugar prices and relatively stable cane costs, several mills may see an impact on sales volume due to lower production.

“The UP government has increased the State-advised price for sugar cane to Rs.305/quintal this season for normal variety. The increase in SAP this year was moderate considering sharp increase in last three years,” said Majumdar.