The Covid pandemic is predicted to exert stress on sugar mills’ profit because of sharp fall in industrial usage of sugar, fall in exports and lower demand for sugar by-product ethanol.

The working revenue of 26 Crisil-rated companies with cumulative debt of ₹eleven,000 crore is expected to fall by 150-300 basis elements this fiscal.

Fall well-liked
The demand from food manufacturing units such as smooth beverages, chocolates, confectionery, bakeries, lodges, restaurants and cafes, which collectively account for 18 million tonne of the annual demand of 26 mt, have dried up because of the lockdown.

Following this, total domestic demand is anticipated to be shrink by 1.5-2 mt within the present sugar season, as reflected in softening costs during the last few weeks.

Additionally, oil advertising and marketing organizations would reduce ethanol off-take due to reduce demand for gasoline amid Covid lockdown. Apart from, they have got restrained storage potential to be had. Production of potable alcohol from ethanol would also be impacted because of scale back demand from distillers.

Global cost fall
global sugar prices have fallen 23 per cent between January and April as huge supplier-nations, including Brazil, are switching from ethanol to sugar as a result of low crude oil prices.

Accordingly, exports from India are likely to stay flattish compared with a 25-30 per cent growth anticipated earlier.

However the difficult market , the sugar season (started last October) with excessive opening stock of 14.5 mt. Despite 20 per cent lower creation, the closing inventory is more likely to be high at about 14 mt, equal to 6 months’ consumption.

Gautam Shahi, Director, Crisil rankings, stated sugar millers can assume an running revenue of 7.5-9.5 per cent within the present fiscal against 9-12.5 per cent in final fiscal.”

The saving grace for home sugar mills is the minimum promoting price of ₹31 per kg fixed through the federal government.