Sugar Stocks In Focus Today: Will India’s Sugar Export Ban Hit Balrampur Chini, Shree Renuka, Bajaj Hindusthan And Other Sugar Stocks?

India’s sugar sector is once again in the news, not for its exports on the rise or profit margins better. Sugar stocks come into focus surprisingly after the government unexpectedly tightens norms for sugar exports, and investors try to assess the impact of the move on revenues, export prospects and future earning visibility for listed sugar companies.

The Directorate General of Foreign Trade (DGFT) in a notification dated May 13 amended India’s sugar export policy from “Restricted” to “Prohibited” with immediate effect until September 30, 2026, or till further orders. The restriction extends to raw, white and refined sugar under certain ITC (HS) codes.

The latest development is likely to have a direct impact on the export-orientated sugar companies and may impact the stock movement across the sector during Thursday’s trade.

Which sugar stocks will be in focus?

Shares of a few listed sugar companies are likely to remain active post-announcement. These include: 

Balrampur Chini Mills Limited
Shree Renuka Sugar
Triveni Engineering & Industries
Dalmia Bharat Sugar and Industries Ltd.
Bajaj Hindusthan Sugar Uttam Sugar Mill
Avadh Sugar & Energy Ltd
EID Parry Limited
Bannari Amman Sugars

Why did the government ban sugar exports?

The government’s decision comes amid growing concerns about the domestic availability of sugar.

Earlier, India had permitted exports of around 1.5 million metric tonnes of sugar on the expectation of a surplus in the current season. But poor sugarcane yields in key producing states have dented production estimates.

The current estimates for India’s sugar production now range to 27.5 mn tonnes for the season. The allowed quota for the export shipment of almost 700,000 tonnes has already been dispatched.

As worries about a second successive year of potentially lower production grow, it seems the government might have to put food security and availability ahead.

Adding another element of uncertainty in the sugar outlook is the threat of possible El Niño influence on the coming monsoon season.

What did DGFT say?

The DGFT notification was very clear that the export policy of sugar has been shifted from “Restricted” to “Prohibited”.

The notification read, “This prohibition shall not apply to sugar being exported to the EU and the USA under CXL and TRQ quota.’

Sugar exports under the Advance Authorisation Scheme (AAS) will continue to be governed by the Foreign Trade Policy, 2023, and the Handbook of Procedures, 2023, as they were before. The government further clarified that exports might still be permitted to other countries subject to their food security needs and country-to-country agreements.

“Export of sugar under the Advance Authorization Scheme (AAS) shall continue to be government as per existing provisions of the Foreign Trade Policy, 2023 and the Handbook of Procedures, 2023.”

Who Is Exempted From Export Ban?

But the government has carved out some exemptions, despite the wider restriction.

Exports under tariff rate quotas to the European Union and the United States will continue.

Shipments are also exempt from the ban under the Advance Authorisation Scheme (AAS).

The government has also permitted exports that were in the process of shipment prior to the issuance of the notification.

Loading of sugar on ships will still be permitted, according to the notification, if:

• Loading had begun before May 13
• The shipment had already been delivered to customs
• The shipping bill has been filed prior to the notification
• The vessel had berthing or anchoring in an Indian port prior to the date of notification

“The approval of loading in such vessels shall be issued only after confirmation by the concerned Port Authority regarding berthing/anchoring prior to the notification,” the notification added.

What is the impact of the export ban on sugar stocks?

The move could be met with mixed reactions in the market.

On the one hand, export curbs may hurt companies that were counting on higher overseas shipments and export-led revenue visibility.

Alternatively, a tighter domestic supply management could help support the prices of local sugar and improve domestic availability, which may partly cushion the impact for some players.

Since India is the second largest exporter after Brazil, global prices might also remain strong. It could even allow other exporters such as Brazil and Thailand to ramp up their sales in Asian and African nations. For now traders are advised to focus on management comments, export position and Indian sugar price direction before making fresh investments.

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(Disclaimer: This article is for informational purposes only and should not be considered investment advice. The views, opinions, and recommendations expressed herein are those of the respective experts. Readers are advised to consult a qualified financial advisor before making any investment decisions.)