In a recent analysis, DAM Capital has expressed a bullish view on India's sugar sector, significantly raising its sugar realization estimates for fiscal years 2027 and 2028 to Rs 47 per kilogram, up from Rs 43-44 per kilogram. This revised outlook comes as domestic sugar prices have seen a substantial reset at higher levels, leading the brokerage to highlight Balrampur Chini Mills Ltd, Dalmia Bharat Sugar Ltd, and Triveni Engineering Ltd as its top stock recommendations.
Indian Sugar Market Faces Tight Supply
Domestic sugar prices witnessed a sharp increase, moving from Rs 38-41 per kg in June 2026 to Rs 52-55 per kg by late August. A notable ex-factory spike to Rs 68 per kg prompted government intervention, including 10 lakh tonnes of duty-free imports, a 15-day stockholding cap for bulk buyers, and anti-hoarding measures. While these actions have cooled prices somewhat, they have not reverted to previous levels, with imported sugar effectively setting a price floor around Rs 50 per kg.
DAM Capital forecasts that cheaper supplies are unlikely until India receives the necessary 20 lakh tonnes of imports, expected by March 2027. India is projected to begin the new sugar season on October 1 with a decade-low stock of 30 lakh tonnes, sufficient for only 35 days of consumption. Production has declined from 3.9 crore tonnes in SS22 and 3.7 crore tonnes in SS23 to an estimated 3 crore tonnes and 3.1 crore tonnes in SS25 and SS26, primarily due to recurrent weather setbacks in Maharashtra and the weakening of Uttar Pradesh's key cane variety, CO-0238.
DAM Capital described the situation as being "down to the last spoonful" and noted that El Nino had become a "two-season drag."
The brokerage expects SS27 production to further decrease to around 2.9 crore tonnes, with the new crop unlikely to bridge the supply gap effectively. October production contributes minimally, and mills typically reach full operational capacity only after Diwali. The 2026 strong El Nino year could lead to yield-led disruptions in SS27, with SS28 facing broader risks of reduced acreage and increased competition for cane between jaggery units and mills.
Ethanol Production Adjustments
Given the tight sugar supplies, DAM Capital anticipates adjustments in ethanol production, stating "cane goes to the bowl, not the tank." The government is expected to restrict ethanol production from B-heavy molasses and sugarcane juice for the season, relying on maize, FCI rice, and broken rice to support blending targets. The estimated requirement of 1,450 crore liters is projected to be met through 1,150 crore liters of grain ethanol and 290 crore liters from C-heavy molasses. Brazil offers no relief, as it is also diverting cane to ethanol due to elevated crude prices.
Top Stock Recommendations
Triveni Engineering
DAM Capital has issued a 'Buy' rating for Triveni Engineering with a target price of Rs 415. The brokerage favors Triveni due to its reduced exposure to cane-based ethanol restrictions, with over half of its distillery capacity capable of switching to grain-based production. This flexibility is expected to boost ethanol volumes by 17 percent to 25 crore liters in FY27, with over 80 percent utilization. Despite a 12 percent fall in crushing over two seasons due to CO-0238 infestation, over 75 percent of its catchment has been replanted, projecting a 5 percent rise in crushing. Higher volumes and improved recovery are expected to drive a 79.5 percent operating profit growth to Rs 730 crore in FY27.
Dalmia Bharat Sugar
Dalmia Bharat Sugar received a 'Buy' rating and a target price of Rs 710. The company is identified as a "cleanest beneficiary" due to its low-cost inventory of 230 kilo tonnes at Rs 36.90 per kg at the end of June, significantly below the spot market price of over Rs 50 per kg. This price differential is expected to directly benefit FY27 earnings. Dalmia Bharat Sugar's industry-leading recovery and strong record in import contracting are also highlighted. While ethanol volumes are projected to fall by 14 percent to 16 crore liters in FY27, the Ramgarh dual-feed conversion is expected to restore them to 20 crore liters. Operating profit growth is estimated at 54.6 percent to Rs 660 crore in FY27.
Balrampur Chini
Balrampur Chini, rated 'Buy' with a target price of Rs 825, is considered the "purest sugar play." Crushing increased by 5 percent in SS26 and is expected to rise again in SS27, supported by over 90 percent of its catchment being replanted away from the problematic CO-0238 variety. Although distillery volumes may decrease by approximately 25 percent to around 20 crore liters, the benefits from higher sugar prices are anticipated to more than offset this decline, leading to 53.6 percent EBITDA growth in FY27. Furthermore, the commissioning of PLA in Q3FY27 is expected to contribute an additional 23.60 percent in FY28.