Dolat Capital: Sugar Coated Medicine For A Weak Balance Sheet

The earnings trajectory of Indian sugar companies is likely to point upwards due to the government’s policy on ethanol production.

A customer looks at sugar grains at a store in the Old Delhi area of New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

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Dolat Capital Report

Dynamics of the sugar-ethanol ecosystem have dramatically changed with cyclicality subsiding owing to government intervention.

The earnings trajectory of sugar companies is likely to propel with the advent of a sweeter alternative-Ethanol.

Stronger balance-sheet are expected to sail along smoothly as they are expected to ride the wave of this structural change.

Free-cash-flow generation will help them in furthering their ethanol capacity (translating into profitability) as against sugar companies with weaker balance-sheets lacking the propensity to scale up ethanol capabilities.

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