New Delhi [India], July 18 (ANI): The revenue of sugar mills is likely to rise by 10 per cent in financial year (FY) 2025, supported by an expected increase in sales volumes along with firm domestic sugar prices and higher distillery volumes after the operationalisation of new capacities, said ICRA.
The rating agency further added that the operating profit margins of the sugar mills are projected to remain comfortable in FY2025, in line with FY2024, because of firm sugar realisations and higher cane prices for SY2025.
It said that the outlook for the sugar sector is stable in the country, backed by the anticipated improvement in revenues, stable profitability, and comfortable debt coverage metrics, along with the Government’s policy support, including the ethanol blending programme (EBP).
India ranks first internationally in the production of sugar. The country produced about 34 million metric tons of sugar in 2023-2024. Sugar farming is not only a major source of income and livelihood in different states of India but also provides employment to about 500 thousand workers in the sugar mills.
Maharashtra, Uttar Pradesh, and Karnataka are among the key suger growing states. Maharashtra ranks first in the country in the production of milled sugar.
Commenting on the expected domestic sugar production and prices, Girishkumar Kadam, Senior Vice President & Group Head – Corporate Ratings, ICRA, said: “ICRA projects the net sugar production to decline to 30.0 million MT in SY2025 from 32.0 million MT in SY2024 based on the expectation that higher diversion will be allowed towards ethanol production amid the high sugar stock level. Even if the diversion towards ethanol is increased to 4 million MT in SY2025, the closing sugar stock level is likely to remain moderately high. Therefore, clarity on the policy for allowing diversion beyond the cap of 1.7 million MT and the exports remains the key monitorable for the sector. Further, domestic sugar prices, which are currently in the range of Rs. 38-39/kg, are expected to remain firm till the start of the next season, thereby supporting the profitability of the mills.”
ICRA also expected that the closing sugar stock would be around 9.1 million MT as of September 30, 2024, appreciably higher than the sugar stock of 5.6 million MT as of September 30, 2023. This would be equivalent to 3.8 months of consumption.
Commenting on ethanol blending and key challenges related to the segment, Kadam said: “The ethanol blending trend has remained encouraging till Ethanol Supply Year (ESY) 2024, given the higher contribution from grain-based distilleries. For ESY2025, the extent of the increase in diversion towards ethanol production over and above the cap remains critical to meet the 20 per cent blending target set by the Government of India. The other key challenges that also need to be addressed include the availability of sufficient feedstock for grain-based distilleries and the infrastructure ramp-up required to support higher blending levels. Further, the timely launch of the E-20 (20 per cent ethanol blended)-compliant vehicles and public adoption of the same would be key to achieving the blending targets.” (ANI)
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