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Credit rating agency ICRA in its latest report has said that the revenues of integrated sugar mills are likely to expand by 10% in FY2025, supported by an expected increase in sales volumes along with firm domestic sugar prices and higher distillery volumes after the operationalisation of new capacities. Further, the operating profit margins of the sugar mills are projected to remain comfortable in FY2025, in line with FY2024, because of firm sugar realisations and higher cane prices for sugar year 2025 (October 2024-September 2025). ICRA’s outlook for the sugar sector is Stable, backed by the anticipated improvement in revenues, stable profitability, and comfortable debt coverage metrics along with the Government’s policy support, including the ethanol blending programme (EBP).

ICRA projects the net sugar production to decline to 30.0 million metric ton (MMT) in sugar year 2025 (SY2025) from 32.0 MMT in SY2024 based on the expectation that higher diversion will be allowed towards ethanol production amid the high sugar stock level. Even if the diversion towards ethanol is increased to 4 MMT in SY2025, the closing sugar stock level is likely to remain moderately high. Therefore, clarity on the policy for allowing diversion beyond the cap of 1.7 MMT and the exports remain the key monitorables for the sector. Further, domestic sugar prices, which are currently in the range of Rs 38-39/kg, are expected to remain firm till the start of the next season, thereby supporting the profitability of the mills.   

ICRA expects the closing sugar stock to be around 9.1 MMT as on September 30, 2024, appreciably higher than the sugar stock of 5.6 MMT as on September 30, 2023. This would be equivalent to 3.8 months of consumption. The closing stock is expected to further increase to over four months as on September 30, 2025.