Top Sugar Stocks in India – Sector Market Size, Share Market, Present status, Future Prospects

What is the one thing that the doctors ask to avoid to have a healthy lifestyle, the most common answer to this is sugar. It is the root cause of many illnesses and health concerns but the sugar industry is still one of the most prominent industries in the Indian agricultural sector. 

The sugar industry is heavily dependent on water and monsoon and approximately 89% of the produce is from three major states namely Maharashtra, Karnataka, and Uttar Pradesh. Apart from being in the top 3 in terms of sugar production in the world, India is also the largest consumer of sugar in the world. Therefore, the future projections for the sugar industry look quite bullish even in the face of market uncertainty due to the ongoing war and the pandemic.

Given below is a brief analysis of the sugar sector in the country and related details of the same.

Sector overview

The sugar industry is the second largest agro-based industry in India. It is also a huge contributor to the employment sector in the country with approximately 12% of the overall employment opportunities in rural India. India is the largest sugar-producing country in the world and contributes approximately 20% of the global supply of this commodity. There are 9 top sugar-producing states in the country which include Maharashtra, Gujarat, Bihar, Andhra Pradesh, Haryana, Karnataka, Punjab, Uttar Pradesh, and Tamil Nadu. 

Among these states, Maharashtra is considered to be the top sugar-producing state in the country. The production of sugar includes 80% from sugarcane extraction and 20% from sugar beet. In India, the majority of sugar is produced through sugarcane. Sugar production is quite volatile and has a direct impact on its prices. The factors responsible for the production and supply of sugar include 

1. Heavy dependence on the monsoon
2. Delay in payment to the farmers that drive them away from the crop to other crops,
3. An increase in the drought conditions that further drives the farmers away from the water-intensive sugarcane crop,
4. Government makes various policies and initiatives to boost sugar production and stabilize the prices in the domestic market.

Government initiatives

The government has time and again taken many decisions and policy initiatives to boost sugar production, provide the necessary assistance to the farmers as well as ensure that the prices of this commodity are in a manageable range. Some of the initiatives taken by the government include the following.

1. The government has levied an import duty of 100% and eliminated the export duty of 20% to boost the exports and reduce the dependence of the country on imports to meet its demands.
2. The government has increased the MSP (Minimum Selling Price) by 7% to ensure fair prices to the farmers for their produce.
3. Other government initiatives include the issue of soft loans to the tune of Rs. 12,900 crores to the sugar mills for the production of ethanol.
4. Another soft loan is up to the amount of Rs. 10,540 crores are intended to help the mills in clearing the rising arrears to cane growers.
5. The government has also initiated the Ethanol Blended Petrol Programme and directed the oil marketers to target a 10% blending of ethanol with petrol.
6. The government has also initiated a Private Entrepreneurs Guarantee Scheme for the construction of storage godowns in association with private players. The total sanctioned capacity under this project is 152.40 LMT and up to 144.50 LMT has been already completed as of 30th September 2020.

Factors driving growth in the sugar industry

There are many factors that drive the growth of the sugar industry in the country. Some of the key factors contributing to the same are discussed below.

1. The sugar sector has seen growth in overall consumption at an average CAGR of 3%.
2. Ethanol is a by-product in the sugar industry in the form of molasses. When this ethanol is blended with petrol, it produces a cheaper and cleaner source of energy. To promote this, the government has set a target of blending 10% ethanol under the EBP by 2022 and 20% by the end of 2025. This has given a huge boost to the sugar industry as they can use the surplus ethanol production under the EBP program and also enjoy the higher margins for the same.
3. Another market driver for the sugar industry is the increase in consumption in the confectionery segment by an average CAGR of 6.35% (between 2021 and 2025). As sugar accounts for approximately 25% of the raw material in this segment, it is another driving factor for the growth in the sugar industry.
4. The final segment or contributor in the sugar industry is the increasing demand for soft drinks. The per capita consumption of soft drinks has almost doubled in the past few years giving another important push for the growth in the sugar industry.

Top stocks in the Sugar industry by market capitalization

After discussing the broad relevant points for the sugar industry, let us not have a look at the top stocks belonging to this sector. 

1. Balrampur Chini

Balrampur Chini is one of the pioneer names in the sugar industry. The company was formed in 1970 and is in the business of manufacturing and refining sugar from sugarcane. The key details of the company are tabled below.

Category	Details
Market Capitalization	Rs. 10,127.53 crores
PE Ratio	22.08
Return on Equity	18.28 (March 21)
Debt Equity Ratio	0.47 (March 21)
Promotor’s Holdings	42.42%
Share price	Rs. 496.70
Dividend Yield	0.50%

2. Shree Renuka Sugar

Shree Renuka Sugars Limited is a company incorporated in the years 1995 and is in the business of producing sugar, ethanol, power, and more. The key details of the company are tabled below.

Category	Details
Market Capitalization	Rs. 11,515.13 crores
PE Ratio	–
Return on Equity	–
Debt Equity Ratio	-2.73 (March 21)
Promotor’s Holdings	62.48%
Share price	Rs. 54.15
Dividend Yield	0.00%

3. EID Parry

This is the third-largest company in the sugar sector in terms of market capitalization. This company has a huge presence in the Farm Inputs Business which includes bio pesticides as well as the production of sugar, ethanol, and Nutraceuticals. The key details of the company are highlighted hereunder.

Category	Details
Market Capitalization	Rs. 8,955.63 crores
PE Ratio	14.96
Return on Equity	24.70 (March 21)
Debt Equity Ratio	0.17 (March 21)
Promotor’s Holdings	44.66%
Share price	Rs. 503.80
Dividend Yield	0.00%

4. Dalmia Bharat

This company was incorporated in the year 1951 and is engaged in the business of manufacturing sugar, generation of power, manufacturing of refractory products as well as industrial alcohol. The key details of the company are, 

Category	Details
Market Capitalization	Rs. 4,400.27 crores
PE Ratio	15.12
Return on Equity	14.77 (March 21)
Debt Equity Ratio	0.45 (March 21)
Promotor’s Holdings	74.91%
Share price	Rs. 543.90
Dividend Yield	0.55%

5. Dhampur Sugar

Dhampur Sugar Mills Limited is among the top 10 companies in the sugar industry. The company is in the production of sugar along with renewable energy, fuel ethanol, alcohol, alcohol-based chemicals, and biofertilizers. The key details of the company are tabled below

Category	Details
Market Capitalization	Rs. 3,754 crores
PE Ratio	15.8
Return on Equity	15.7 (March 21)
Promotor’s Holdings	49.08%
Share price	Rs. 564
Dividend Yield	1.06%

Conclusion

Sugar is a cyclical product and is subject to huge market volatility. Despite this volatility, the sugar sector is a huge contributor to the country’s GDP as well as revenue for the Central and the state government. The government’s efforts toward the production and blending of ethanol to derive a cleaner form of energy have also yielded the overall growth of this industry and created more employment opportunities. 

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