The Hindu Business Line : Court order magnifies meltdown in sugar stocks

Sugar stocks were among the worst hit on Monday’s market meltdown, with stocks of select large manufacturers such as Bajaj Hindusthan and Triveni Engineering shedding as much as 25-28 per cent during the day. A Supreme Court ruling on Friday stayed an earlier Allahabad High Court order which asked the Uttar Pradesh Government to review the fixation of State Advised Prices for cane in the preceding sugar season. The staying of the earlier order effectively means that UP-based sugar manufacturers would have to pay cane prices of Rs 125-130 per quintal of cane procured, instead of the minimum price of Rs 85-90. The higher procurement prices, which implies that mills may now have to shell out additional sums towards their procurement in the 2007 season, may create liquidity and margin pressures for mills and lead to splashes of red ink on their financials, at a time when sugar prices are ruling well below last year’s levels. The stock of Bajaj Hindusthan was among the worst hit by this development. The company had reported a profit in the recent quarter, after accounting for cane procurement costs at the minimum price, instead of the State Advised Price, on the strength of the earlier judgment.

More Stories on : Sugar | Stocks | Courts/Legal Issues

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page