SAP ruling unclear; sugar mills may approach SC

After dragging its feet for weeks, the Allahabad High Court has rejected Uttar Pradesh Sugar Mills' plea on state administered price for cane and has upheld SAP at Rs 140 per quintal for this fiscal.
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Dec 10, 2008, 04.11 PM | Source: CNBC-TV18

SAP ruling unclear; sugar mills may approach SC

After dragging its feet for weeks, the Allahabad High Court has rejected Uttar Pradesh Sugar Mills' plea on state administered price for cane and has upheld SAP at Rs 140 per quintal for this fiscal.

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SAP ruling unclear; sugar mills may approach SC

After dragging its feet for weeks, the Allahabad High Court has rejected Uttar Pradesh Sugar Mills' plea on state administered price for cane and has upheld SAP at Rs 140 per quintal for this fiscal.

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After dragging its feet for weeks, the Allahabad High Court has rejected Uttar Pradesh Sugar Mills' plea on state administered price for cane and has upheld SAP at Rs 140 per quintal for this fiscal.

 

Here is a transcript of Raja Rajeshwari’s comments on CNBC-TV18.

 

We have been hearing a whole host of companies come and talk about it or give comments. The general sense you get from most of the sugar companies is: there is a little lack of clarity in the order because the judge just came and gave the operational part of it. He said we are rejecting this case, but he has not gone into the nitty-gritty of it. He said that he is upholding Rs 140 per quintal SAP, which was fixed.

Now there is one clause, what most industry-watchers are asking for is: is there a Rs 10 deduction that you can get. Rs 140 will be paid if the farmers get the cane and give it to your gates, otherwise if they are going to incur the transportation charge is there a Rs 10 leeway, which they get? But more or less the cane crushing has started over the past 25 days and most of them have said that whatever the court upholds, we will pay that much of amount.

The general sense you get from talking to most of the UP-based sugar mills is that they are looking at going in to Supreme Court because in the previous two cases too — 2006-2007 and 2007-2008 — when they had gone to Supreme Court. There was an interim relief, so once the order comes in today, they will sit and talk it out on Thursday, Friday and going in for a Supreme Court because the interim relief has to come next week itself, because the Supreme court into recess by 19 and 20. So, there is a sense of urgency from Indian Sugar Mills Association (ISMA) also to go in for that.

Most of the analysts we spoke to have already factored in Rs 140 into the cost of production right now. HSBC came out with a report saying: we are looking at sugar prices in UP close to Rs 18/kg and we are taking sugar cost at close to Rs 140, we are going ahead with it and they have slashed down EPS estimates of Balrampur Chini and Bajaj Hindusthan. Bajaj Hindusthan is almost as high as 55% and Balrampur Chini by 29%. Why? Because Balrampur Chini has higher low cost inventory sitting with it and that is where they are likely to gain. Bajaj Hindusthan also has high frequency, high fluctuation with how the currency is likely to pan out. So, both of them had seen lot of downgrades coming in month ago itself when Rs 140 was announced. So, HSBC has price target of Rs 60 on Balrampur Chini and Rs 55 on Bajaj Hindusthan.

So, unless there is going to be a surprise coming in from the price side — it moves above Rs 18 — that's when you will see a positive kick in coming in on sugar stocks at least.

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SAP ruling unclear; sugar mills may approach SC

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