Best Sugar Stocks in India: Should You Invest in Them?
Best Sugar Stocks in India: An Overview
The most usual response to the query "What is the one item that experts advise to avoid to live a healthy lifestyle?" is "Sugar." Even though it is at the heart of many diseases and health issues, the sugar business remains among the most important ones in India's agricultural sector. Water and the monsoon are key factors affecting the sugar business, and Karnataka, Maharashtra, and UP account for 89% of production. India is not only among the top three producers of sugar worldwide, but it also consumes the most sugar globally.
Sugar Companies in India: Industry Walkthrough
The second-largest agro-based sector in India is the sugar industry. With over 12% of all work prospects in rural India, it is also a significant contribution to employment opportunities in the nation. India, which supplies 20% of the world's supply of this commodity, is the world's largest sugar producer. Gujarat, Maharashtra, Andhra Pradesh, Bihar Karnataka, Haryana, Punjab, UP, and Tamil Nadu are the top nine sugar-producing regions in the nation.
Maharashtra is regarded as the nation's leading sugar producer. 20% of sugar is produced from sugar beet, while 80% comes from sugarcane extraction. The bulk of the sugar used in India is made from sugarcane. The erratic nature of sugar output directly impacts the price of sugar. The following are some of the elements influencing sugar supply and production:
- Significant reliance on the monsoon
- Delays in payment to farmers, which causes them to switch to other crops
- worsening of the drought, which further dissuades farmers from growing water-intensive sugarcane crops
- The government implements various policies and programs to increase sugar output and maintain domestic market rates.
Top Sugar Companies in India: Why Invest in Them?
The sugar business in the nation is expanding due to various causes. Below is a discussion of a few leading causes of the same.
- Total sugar consumption has increased at an average CAGR of 3%.
- Molasses, a by-product of the sugar industry, contains ethanol. This ethanol creates a more affordable and environmentally friendly energy source when combined with gasoline. To support this, the administration has set the objective of integrating 10% ethanol underneath the EBP by 2022 and 20% by 2025. The sugar business has dramatically benefited since it can now employ the excess ethanol produced underneath the EBP program and profit from more significant margins.
- Consumption rising in the confectionery sector by an estimated CAGR of 6.35% is another market factor for the sugar sector (between 2021 and 2025). Sugar is another factor driving the sugar industry's development, which makes up around 25% of the segment's raw materials.
- The market growth for soft drinks is the last sector or component in the sugar business. The rise of the sugar business has received another significant boost from the nearly doubling per capita use of soft drinks over the past few years.
Best Sugar Stocks in India 2022
There are several firms engaged in India's colossal sugar sector. Here, we examine some of India's top sugar stocks.
EID Parry, one of the oldest businesses in India, was established in 1788 and operated in the sugar and nutraceuticals industries.
The firm is among the earliest businesses to create fertilizers and build India's first sugar mill. The Murugappa Group, which acquired EID Parry in 1981, now owns the company.
One of India's biggest and most effective sugar producers, Balrampur Chinni, was established in 1975. The corporation operates ten factories.
The installed crushing capability of Balrampur Chini is 77,500 tonnes of cane each day. The company's sugar business accounts for 82% of its revenue.
The distillery & Co-gen poser business cover the other revenues. Alcohol & ethanol are the main products made at its distillery. Five hundred sixty kilolitres may be produced daily at its distilleries.
Since its founding in 1998, Shree Renuka Sugars has advanced significantly. Seven sugar mills support the company's operations. The business can produce 36,500 tons of cane each day in total. Similarly, Balrampur Chinni Shree Renuka Sugar has ethanol and co-generates electricity in addition to sugar.
The firm also has a capacity factor of 930 kilolitres per day, making it one of the biggest ethanol manufacturers in the nation.
Even though it is one of the biggest sugar firms in India, its financial situation is problematic. Since 2017, the business has consistently experienced losses.
Triveni Engineering and Industries Ltd., among the nation's most prominent sugar manufacturers, was established in 1932. For usage in many sectors, the company's product line comprises a variety of high-quality multi-grade (giant, medium, tiny) crystal, refined, & pharmaceutical-grade sugar. The business operates out of 7 sites that are well-placed in UP. The firm can produce 61,000 tons per day in total.
Since its founding in 1951, Dalmia Bharat Sugar has been involved in producing sugar, ethanol, alcohol, and electricity. The business runs via the nation's five manufacturing plants. The firm can produce 39,000 tons each day in total.
77% of the company's revenue comes through sugar sales, 15% from ethanol, & 8% from electricity. The distilleries of the firm have a daily output capacity of 240 kiloliters. Additionally, the corporation intends to quadruple its ethanol capacity.
Sugar is cyclical and is highly volatile in the market. Despite this instability, the sugar industry significantly contributes to the nation’s GDP and generates income for the federal and state governments. The government's initiatives to produce and mix ethanol to provide a cleaner energy source have also resulted in the expansion of this sector and additional job possibilities.
This is not an investment advisory. The blog is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed.
Why are sugar stocks soaring?
Owing to the government’s interest in blending ethanol with fuel the prices of sugar stocks have soared in recent times.
What are some of the significant drawbacks of the sugar industry?
The primary drawbacks for the sugar industry are its heavy reliance on rainfall, the years of surplus products that have driven prices under their production costs, the decline in the value of this commodity globally, etc.
Is sugar a commodity that is traded on stock exchanges?
Yes, sugar is traded mostly on NCDEX, a national online commodities exchange market powered by technology.
What is the government's main argument for mixing ethanol?
Because ethanol is a more cost-effective and environmentally friendly fuel than gasoline, the government is promoting or providing incentives for its production. The administration's long-term goal is to decrease oil imports gradually and conserve their foreign currency.