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Here's why 2019 was a 'sweet' year for Balrampur Chini Mills

As the year ends today, we take a look at some stocks that performed throughout the year. One such stock is Balrampur Chini Mills. Here's what led to the stock performing well this year:
  • The sugar sector hit a sweet spot after many years backed by various government incentives. As a result, sugar stocks clocked big gains in 2019 with sector leader Balrampur Chini Mills gaining over 80 percent this year and 20 percent in this month itself.
  • Higher sugar realisations on the back of an increase in minimum support price (MSP) from Rs 29 per kilogram to Rs 31 per kilogram offered support.
  • Increasing ethanol tenders from oil market companies (OMCs) led to ethanol revenues growing over 21 percent.
  • Cabinet approved incentives to boost exports to further reduce industry inventory at the time when global raw sugar prices are near 14-month high.
  • The sugar industry is expected to bring down its buffer stock to 10 million in 2020 and 7 million by 2021.
  • Also, sustainable sugar prices will help improve the cash flows for the companies.
  • The decline in sugar production by 35 percent so far will also help support the sugar prices. Going ahead, sugarcane diversion to B-Heavy ethanol and increase in blending rate of 7-8 percent will be other triggers along with commissioning of a new ethanol facility by the company last month.
  • Balrampur Chini Mills trades at 6 times premium compared to its peers.
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