Shares of Balrampur Chini Mills rose 2% to Rs 355 in intraday trade on the BSE on Wednesday, with share buybacks starting today. The sweetener stock was quoted higher for the third day in a row, surging 8% over the same period.
On November 9, Balrampur Chini’s board meeting approved the buyback of shares of Rs 145.44 crore at Rs 360 each through the open market route.

The company believes that buybacks will create long-term value for shareholders. Balrampur Chini said buybacks are unlikely to have any material impact on the company’s profitability/earnings other than a reduction in investment income, which the company would otherwise have earned from the amount allocated to buybacks.

It added that buybacks would not impair the company’s ability to pursue growth opportunities or meet its cash needs for business operations and ongoing capital investments.

Despite gains over the past three sessions, Balrampur Chini has underperformed over the past six months, falling 14%, while the S&P BSE Sensex gained 17%. Meanwhile, an analyst at ICICI Securities has a ‘buy’ call on Balrampur Chini with a 12-month target price of Rs 485 per share.

The company reported poor results in the July-September quarter (Q2FY23), with revenue down 8.3% YoY. Sales fell 8.3%, with sugar and ethanol sales down 1% and 14%, respectively. The company posted an EBITDA loss of Rs 15.9 crore due to higher production costs. As a result, the company posted a loss of Rs 28.9 crore for the quarter.

The adverse impact was more pronounced at Balrampur Chini as the season saw a lower cane crush (down 18% compared to capacity). However, analysts believe that increased cane availability in its catchments, higher sugar recovery expectations, higher mix realization of refined sugar exports and commissioning of large distillery capacity will boost profitability for the 2022-23 sugar season.

Elsewhere, from the sugar sector, Balrampur Chini, Magadh Sugar & Energy, Dhampur Sugar Mills, Dwarikesh Sugar Industries, Avadh Sugar, Shree Renuka Sugar, Uttam Sugar Mills, Dalmia Bharat Sugar and Triveni Engineering & Industries gained 2% in trade – 5% range. The S&P BSE Sensex was up 0.13% at 10:41 am.

The government has allowed the industry to export 6 million tonnes in the first phase of the 2022-23 sugar season. After reassessing sugar production forecasts, it may allow another 3 tonnes by January-February 2023. The industry has contracted about 4 tonnes of sugar from the allowed 6 tonnes.

The prevailing global price for raw sugar is 18-20 cents/lb, while the prevailing price for refined white sugar is $540/ton. These prices are better than the domestic sugar price of Rs 36/kg. The broker believes the industry will be able to easily export 9 tonnes this season. This will help keep sugar stocks at 5.5-6.0 metric tons in September 2023.

The OMC hopes to achieve a 12% ethanol blend for the 2022-23 procurement year, which would result in purchasing around 550 crore litres of ethanol. Most of this will be provided by the sugar industry. The government has raised the price of ethanol from Rs 1.65 per litre to Rs 2.65 per litre for different feedstocks. The brokerage said this would further encourage millers to set up distilleries in the future.