India Ratings Revises Sugar Sector Outlook to Negative to Stable from Negative
Waseem Ahmad / 02 Apr 2014
India Ratings & Research (Ind-Ra) revised its FY15 outlook from negative to stable from negative for the sector and the companies within the sector. The agency has revised the rating on account of improvement in the credit profiles of millers based in south India from FY14 levels. However, the Uttar Pradesh (UP) based mills will likely continue to struggle with higher leverage.
South India-based millers are expected to perform better as compared to FY14 with sugar segment profitability improving in the range of INR0.5/kg-INR1/kg due to the lower cost of opening inventory (crushed in SS14) and better by-product realisations. Their improved profitability and negligible capex would help them improve their credit profiles as compared to FY14 levels and service debt while UP based millers' cost of sugar produced is expected to be 3%-4% higher after declining by 2%-3% in FY14.
On liquidity front, the agency notes that both UP and south India-based mills would continue to be exposed to liquidity pressures to clear farmer dues at the earliest providing limited inventory holding power. Liquidity woes for the UP based millers would be more pronounced.Currently Indian sugar industry is struggling with many problems like fall of global sugar prices, high inventory level and poor stock to consumption level. India is largest producer and exporter of sugar after Brazil. Since sugar price in global market is less than the price in domestic market, due to this it is resulting in less import from the country. Based on the assumption of 15.5 cents per pound, the domestic raw sugar prices fare 19%-20% higher than international raw sugar prices in spite of factoring in the subsidy of INR3,333/mt (under the government initiated scheme to make raw sugar exports lucrative to clear domestic inventory of 4mmt) and by-product sales.
Further Ind-Ra expects domestic sugar supply to outpace demand resulting in higher closing inventory levels for both SS14 and SS15. Based on projected demand growth of 2.1% over SS13 to SS15, the country is expected to close with stock-to use of 34.5% and 33.9% for SS14 and SS15 respectively (SS13: 38.3%) still higher than the deficit years of SS09 and SS10.If you want to stay updated with the share market news today, keep a close watch on the indian stock market today with real time movements like sensex today live and overall stock market today trends. Investors tracking ipo allotment status, ipo news today, or the latest ipo india can also follow daily updates along with bse share price live data. Whether you are learning how to invest in stock market in india, preparing for a market crash today, or searching for the best stocks to buy in india, insights on top gainers today india, top losers today india, trending stocks india and long term stocks india help in making informed investment decisions.