Prices may remain firm for 2 yrs on supply lack -:- Equity Research

Sugar prices are likely to stay firm over the next couple of years according to M Manickam, MD of Sakthi Sugars, who says production in Maharashtra and Karnataka might be down by around 4 million tonnes each this year. In an interview to CNBC-TV18 Manickam says although currently the real problem is sugar supply shortage, elections in Uttar Pradesh will prove beneficial as the government there has been supportive of the industry and are likely to be more prudent on the matter. For every Re 1 increase in sugar prices, the company’s earnings improve by nearly Rs 20 crore, he says. Currently, sugar prices are around Rs 34-35 per kilogram, which is the breakeven level for sugar companies and anything above this price proves to be profitable, he adds. Sugar prices have risen nearly 10 per kg from end of FY16 to now, so earnings for the current year should be fairly good, he says.