CRISIL Ratings sees higher sugar exports and ethanol prices boosting sugar companies

In India, high sugar exports for the second sugar season (SS; October-September) in a row, coupled with increased supplies of ethanol – and at remunerative prices – for blending with petrol, will improve the operating profitability of integrated sugar mills by 75-100 basis points (bps) to 13-14% this fiscal, a CRISIL Ratings analysis shows. Also, the recent announcement by the government to advance the ethanol-petrol blending target of 20% by two years to 2023, could help sustain this momentum over the medium term.

Additionally, sugar closing stocks are expected to decline to their lowest levels in the past four SSs to 9-9.5 million tons (MT) in SS 2020-21, resulting in lower working capital borrowings. The improvement in profitability and controlled debt levels will, in turn, bolster the credit profiles of CRISIL-rated integrated mills this fiscal. The credit outlook on non-integrated ones, at the other end, will remain largely stable.