New Delhi, Nov. 9 -- Sugar mills' operating margins and credit profiles are expected to weaken in FY27 due to reduced ethanol production from sugar-based feedstocks, higher cane costs and rising borrowing requirements, Crisil Ratings said in a report.

The report highlighted that its analysis of 55 mills, accounting for nearly a fourth of last season's sugar production, expects operating margins to decline 140-160 basis points to around 6 per cent, despite firm sugar prices and 4-5 per cent growth in operating income.

The pressure follows restrictions on sugar-based ethanol production for ethanol supply year (ESY) 2027, effectively limiting output to C-heavy molasses. This reverses recent years' trend, when nearly 10 per cent of gross su...