Shares of Ugar Sugar Works surged 12 per cent to Rs 79 per share in Thursday’s intra-day trade, on the back of heavy volumes after the company received consent for operation of 645 kilo litres per day (KLPD) distillery.
The stock of sweetener hit a six month high and quoted at its highest level since April 2022. Earlier, it had hit a 52-week high of Rs 86.50 on March 25. In the past seven days, the stock rallied 32 per cent.
At 12:38 PM; it traded 7 per cent higher, as compared to 0.81 per cent decline in the S&P BSE Sensex. In the past one year, the stock zoomed 165 per cent, as compared to 6 per cent decline in the S&P BSE Sensex.
The company said that it has completed the establishment of 645 KLPD distillery at Ugar plant. Further, they plan to update on the trial run of 645 KLPD distillery in due course.
“The short-term outlook for sugar looks to be reasonably good on account of stable domestic prices, good export of sugar, and diversion to Ethanol. However, the ethanol supply and exports prove to be a silver lining for the industry in the years to come,” Ugar Sugar said.
On October 4, CRISIL Ratings reaffirmed the long-term bank facilities of The Ugar Sugar Works with a ‘stable’ outlook.
Highlighting the rationale behind the ratings upgrade, CRISIL said, “The rating reflects steady improvement in business risk profile marked by healthy sugar cane crushing volumes which is expected to continue in the medium term as well. This coupled with stable performance of the distillery and co-generation units has resulted in stable operating profitability.”
Meanwhile, the company embarked upon on major capex of Rs 200 crore spread over the last and current fiscal to enhance its distillery capacity from 75 KLPD to 845 KLPD. Out of this, the company has already completed trial run of 155 KLPD in March 2022 and the balance 645 KLPD is expected to be commissioned in October 2022 – the beginning of sugar season 2023.
The unit will primarily be engaged to produce ethanol directly for sale to Oil Manufacturing Companies (OMC’s) in order to meet their ethanol blending targets.
That apart, the government has introduced a slew of benefits to promote ethanol blending including loans with interest subvention and remunerative offtake prices for ethanol.
With this, analysts expect the business risk profile to improve once the distillery unit is commissioned. They expect operating profitability to improve to over 10 per cent in the medium term.
“Within the distillery segment, the company plans to focus on ethanol produced through cane juice route resulting in reduced sugar production but will be balanced by higher remuneration of ethanol from cane juice and better margins,” CRISIL Ratings added.
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