Indian sugar mills association

Sugar Cos Hit 52-wk Lows as Sentiments Turns Bitter

Date:	16 Dec 2011

Source:	The Economic Times

Reporter:	Nihar Gokhale

News ID:	770

Pdf:	DIM-PROSPECTS.pdf
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MUMBAI: Shares of leading sugar makers fell to 52-week lows on Thursday as investors turned pessimistic about the sector`s near-term prospects ahead of the upcoming Uttar Pradesh elections and after international product prices weakened.

Shree Renuka Sugars fell 6%, Balrampur Chini Mills dived 9% and Bajaj Hindusthan and Andhra Sugars declined 3% on Thursday.

The Sensex dropped 0.3%. "The sugar industry is facing a double whammy, because of falling prices and impending elections in UP," said AK Prabhakar, senior vice-president of Anand Rathi Securities.

"As election nears, the government will try to increase sugarcane support prices to appease farmers. This will affect companies adversely." UP, the second-largest sugar producing state in India, may hold the elections by March. The UP government recently hiked the state-advised price for sugarcane to be procured by sugar companies from farmers by 17%.

Investors are worried that such steps by the election-bound UP will drive up costs and hurt profits. Sugar prices have slumped in the past few days after sugar mills in UP started selling existing sugar stocks to meet a state`s deadline to make payments to cane growers.

Sugar companies were eagerly awaiting permission from the central government for exporting excess sugar. While this was allowed for a maximum one million tonne recently, global prices have also tapered off recently, diminishing hopes of robust export revenue.

On the NYSE Liffe Exchange in London, futures for the March delivery of 50 metric tonne of white sugar fell from a peak of $742 in mid-August, to $597 on Wednesday.

In a late November report, Angel Broking had said as the crushing season starts, excess supply will depress prices in both domestic and global markets. "If global prices decline sharply on supply pressure from India and Thailand, then Indian origin exports may turn unviable thus restricting major upside in prices," the broking firm said.

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