Why Bajaj Hindusthan Sugar Share Price is Rising

A wave of optimism is sweeping across the sugar industry, and Bajaj Hindusthan Sugar is one of the companies profiting this sweet tide.

While the broader market did not reflect the same enthusiasm, sugar stocks like Bannari Aman Sugar, Avadh Sugar and Energy, Sambhaoli Sugars, and of course, Bajaj Hindusthan Sugar, all witnessed significant gains yesterday.

Bajaj Hindusthan Sugar, in particular, was on a tear, surging 5.9% yesterday alone. This impressive rise is part of a long trend, with the company's share price climbing 16.4% in the last one month. It 2024 so far it rallied 30.3%.

Let's explore the potential factors driving this surge in Bajaj Hindusthan Sugar share price, and whether this uptrend is likely to continue.

#1 Government's Ethanol Blending Policy

Yesterday, Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri, announced that the country achieved 15% ethanol blending in May 2024. He further said that he is confident that the country will achieve its target of 20% ethanol blending by 2025.

This underscores the positive trajectory of ethanol production in India. This news is particularly good for all top sugar companies, including Bajaj Hindusthan Sugar, as it indicates a growing and stable market for ethanol.

With the government's commitment to increasing ethanol blending, sugar companies can anticipate continued support and demand for their ethanol production. This not only strengthens their position in the market but also provides a reliable source of revenue, contributing to their overall growth and sustainability.

Additionally, the government's proactive approach in meeting ethanol blending targets signifies a favourable regulatory environment, fostering confidence and investment in the ethanol sector. Therefore, this development bodes well for all sugar companies, paving the way for further expansion and success in the ethanol market.

#2 Foray into Bio-Gas

In February 2024, Bajaj Hindusthan Sugar joined forces with EverEnviro. This partnership aims to build compressed biogas (CBG) plants in Uttar Pradesh. These plants will utilize the 5 million (m) metric tones of press mud generated annually by the company's 14 mills.

The collaboration boosts CBG production in the state, aligning with the Indian government's goals of reducing dependence on fossil fuels and promoting renewable energy. EverEnviro, India's leading CBG player, will spearhead the development, operation, and expansion of these projects.

Bajaj Sugar has two options under this agreement. They can choose to sell press mud at predetermined long-term prices or take equity in the CBG plants alongside EverEnviro.

By leveraging its experience in Uttar Pradesh, Bajaj Sugar will pursue a mixed strategy. They will receive a fixed cash value for some of their press mud and gain partial ownership in the CBG projects through equity.

This partnership marks a new chapter for Bajaj Sugar's growth. It adds another green fuel, CBG, to their portfolio alongside ethanol, contributing to a sustainable revenue model.

#3 Consistent FII Buying

The latest shareholding pattern of Bajaj Hindusthan Sugar revealed that foreign institutional investors (FIIs) are consistently buying stake in the company since last three quarters. At the end of Q4 FY24 their total stake in the company stood at 2.6%.

Take a look at how FIIs invested in the company in the past four quarters.

FII Holding in Bajaj Hindusthan Sugar

Quarter	Jun-23	Sep-23	Dec-23	Mar-24
FII Holding (%)	1.5	1.6	1.8	2.6

Data Source: Ace Equity

When FIIs increase their stake in a company, it sends a strong signal to the market about the company's potential for growth and profitability. This vote of confidence often encourages other investors to take notice.

Additionally, the increased liquidity resulting from heightened investor interest can contribute to a more stable and liquid market for the company's shares, further supporting upward momentum in its share price.

What Next?

Given the BJP government's prior emphasis on ethanol blending during its previous term, its return to power is likely to reinvigorate efforts in this direction.

As the Modi 3.0 government is expected to sustain its efforts in promoting ethanol blending, the ethanol blending business is poised to gain momentum in the medium to long term.

This sustained governmental support presents significant opportunities for Bajaj Hindusthan Sugar. With its expertise and infrastructure in sugarcane cultivation and processing, it can leverage the increased demand for ethanol to diversify its revenue streams.

Additionally, the stable market for ethanol production, backed by government policies, will provide the company with a reliable income source, reducing its dependency on volatile sugar prices and demand.

The company is also changing its stance and recouping its investments from group companies to reduce overall debt. In FY24 its total borrowing reduced 7% from last year to Rs 35.5 billion (bn).

It is important to note that over the last five years, growing sugar demand and ethanol production did not result into good profits for the company.

Hence, in the past good sectoral tailwinds did not translate into good numbers for the company.

Take a look at the company's historical financial performance.

Bajaj Hindusthan Sugar Financial Snapshot (2020-24)

Year	2020	2021	2022	2023	2024
Revenue (Rs in m)	66,693.00	66,660.00	55,757.00	63,380.00	61,043.00
Profit after tax (Rs in m)	-500	-2,908.00	-2,675.00	-1,347.00	-869
Gross profit margin (%)	6.8	2.4	3	4.1	4.1
Net profit margin (%)	-0.7	-4.4	-4.8	-2.1	-1.4
Return on capital employed (%)	3.2	-0.4	-0.3	0.9	0.8
Return on equity (%)	-1.9	-12.3	-11.8	-3	-1.9

Data Source: Ace Equity

How Bajaj Hindusthan Sugar Share Price has Performed Recently

In the past five days, Bajaj Hindusthan Sugar share price has rallied 13.9%. In the last month, it is up 16.4%.

In 2024, so far its share price has surged 30.3% and its up 129.6% in the last year.

The stock touched its 52-week high of Rs 40.5 on 20 February 2024 and a 52-week low of Rs 15.4 on 26 June 2023.

About Bajaj Hindusthan Sugar

Bajaj Hindusthan Sugar is engaged in the manufacture of sugar, alcohol, ethanol, and the generation of power.

As of June 2023, LIC holds a 3.2% stake in the company. Promoters of the company hold a little under 25% while FIIs have shown some interest in the sugar company for the past few quarters.

Its promoter Kushagra Bajaj has pledged all his shares. If the optionally convertible debentures (OCDs) are converted into shares, the promoter will be left with just an 8.76% stake.

To know more, check out Bajaj Hindusthan's financial factsheet and its latest quarterly results.

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