Dr. G.S.C Rao, Executive Director and CEO, Simbhaoli Sugars Limited, with over 29 years of industry experience. He has Masters Degree in Plant Physiology and Biochemistry and has a Doctorate from National Sugar Institute, Kanpur India. He also holds a postgraduate diploma in management. He has published/presented over 80 research papers in National and International Forums on various aspects of sugar industry. He has involved in rehabilitation of sick-sugar units, expansions and insulation of Greenfield projects. He is Chairman of Cane Development sub-committee, Co-Chairman of Ethanol Sub- committee of ISMA. He is also a member of UP state varietals release committee and core group for cane development. He is also President of Sugar Technologist Association of India (STAI).
Simbhaoli Sugars Limited (SSL), formerly known as The Simbhaoli Sugar Mills Limited (SSML), a 75 years old company is reinventing itself as a growth oriented, innovative and customer facing enterprise. A culmination of a process that started at the turn of the century, SSL has transformed itself into a leaner, fitter and stronger corporation. The Company is in the process of evolving a de- risked growth model that mitigates the volatility of the commodity market by investing in the diversified revenue streams, stringent quality and branding, in a cost effective manner.
Replying to Jasmine Kohli of IIFL, G.S.C Rao says "SSL started off season campaign in 2009 that made it capable to produce sugar round the year with technical expertise."
What prospects do you see for the Indian sugar industry?
The sugar production is expected to be approx 24 mmt in 2011-12 and 25 mmt in 2013-14 with a minimal increase thereafter. Against this, the consumption is estimated at 24 mmt and 25 mmt respectively. There could be year to year variations, but in a block of 4 years, the production is estimated to be around 85 mmt, against the demand of 95-100 mmt; implying a shortfall of 10-15 mmt.
This warrants a quantified jump and consistency in sugar production in India. Whereas, milling capacities are sufficient, in order to meet this additional demand annually, 50 mmt of additional sugar cane will be needed.
This can only come from bringing additional land of 0.70 mn hectares into cane cultivation. This seems difficult in view of competition between the crops. Any increase in ethanol production directly from sugar cane will further affect the availability of sugarcane for production of sugar.
What are the challenges faced by the sugar industry? How has SSL tackled them?
Sugar industry is cyclical in nature and its performance depends on availability and yield of sugarcane in a given season. Yield and returns that farmers get from sugarcane compared to other crops affects area under sugarcane. Beside this, sugar availability and price are controlled by various government regulations, which in turn affect the realizations that a company gets.
Thus, the sugar industry has to face challenges such as keeping the interest of farmers in sugarcane crop and to maintain sufficient availability of sugar amid unpredictable weather conditions to cater to the ever increasing demand in the country while complying with various orders and notifications issued at various points of time.
To overcome this cyclical nature of sugar and allied businesses, SSL has de-risked its business profile. It has turned itself into an integrated sugar complex and is producing an optimum combination of sugar, alcohol, ethanol, potable spirits, power and bio manure. Apart from this, it initiated a raw refining campaign in 2009 to refine raw sugar in off season and from cane in sugar season, thereby utilizing the installed capacities to the maximum levels and around the year.
SSL has also started generating power in the off season by using the saved bagasse and other alternate fuels, for captive consumption as well as for exporting the surplus power to the grid.
SSL has gone into branding of Alcohol and sugar so that price volatility in alcohol and sugar can be minimized.
How do you address the demand-supply gap?
To meet growing sugar demand SSL started off season campaign in 2009 that made it capable to produce sugar round the year with technical expertise. SSL has also focused on providing agri solutions to sugar cane farmers and supported mechanization of cane farming.
Apart from raw refining SSL has been working to increase sugarcane yield by promoting high yield sugar variety and provide maximum returns to the farmers. The Company produces optimum combination of sugar and alcohol and can switch to more profitable options in case of sugar surplus.
It is setting up a port based 1000 TPD sugar refinery near Kandla port in Gujarat for refining imported raw sugar and supplying white sugar in the domestic and international markets in periods of shortfall.
What measures has SSL taken for sugarcane availability?
To maintain sugarcane availability SSL has given its hand in agriculture management to improve sugarcane quality and yield by way of providing demonstration farming, training of farmers, field trials, and R&D of bio- pesticides. It has encouraged farmers for multi cropping with sugarcane. It is carrying out replacement to change outdated variety, with high yield, high sugar varieties. It is giving other training to farmers as well. The overall idea is to not only increase the productivity of land, but also increase earnings of farmers.
Are you able to pass on the increase in raw material to consumers?
In sugar, the cost of production, including raw materials and cost of products are fixed independently. Thus most of the time millers are not able to pass the cost of materials to consumers on one to one basis. However, as a cycle, the expensive raw material means lower production and higher prices, with a time lag in actual realization of cost. The cost can be generally passed on but for fixed price contracts.
How do you expect the monsoons to fare?
This year a good monsoon forecast has been made which is expected to facilitate in sowing of rice, sugarcane, soyabean and corn. This could lead to a rebound in the agricultural output. It means that cane production will be better and sugar production will rebound to 24-25 mnt after a gap of two years.
Please brief us about the progress of your refinery at Kandla?
SSL is setting up a standalone port based sugar refinery of 1000 TPD capacity expandable to 2000 TPD near Kandla port, Gujarat. Land has already been acquired and major approvals are in process. The project is expected to start by November 2011. The company’s banks are processing the credit needs.
Please brief us on the SSL’s facilities and capacities. Any expansion plan?
The total cane crushing capacity for SSL is 20100MT, the refining capacity stands at 2000MT; Alchol- cum-ethanol capacities stand at 210MT and SSL’s power capacity are 34MT, whereas organic manure capacity are 35MT.
Please throw some light on your season and off-season sugar production numbers.
Off season and season production numbers of 2009-10 (upto Sep ’10) as per announced business plan are estimated to be:
The company aims to produce 335,000 MT sugar from raw sugar in 2009-10 while sugar manufactured from cane crushing is envisaged at 160,000 MT.
Production of refined sugar from raw sugar during the off-season is estimated at 200,000 MT while the same during the season is forecast to touch 135,000 MT.
What is your competitive edge? What are your USPs?
Our branding and FMCG Model in the key differentiator, alos our de-risked business model (utilization of buy products) and fullest utilization of asset base both in season and off season ad of all our professional and responsive management are USP’s.
What is the break-up between retail and institutional sales?
In sugar about 35 % of turnover is from institutional sale. In alcohol segment SSL, with 210 kl/per day capacity at 3 locations is capable to produce RS, E.N.A, Ethanol etc.
SSL is also in the Alchol segment. Brief us about the same? Which are the umbrella brands?
Its area of marketing reaches and commenced the export of extra natural alcohol to create new market for bulk products with first order of 25 lacs BL already executed. It is emerging as one of the large supplier of ethanol to Petroleum Company.
Under IMFL segment, SSL is expanding its reach. In Vodka, we have Xing Vodka, Blue Magic; in Whisky we have Seven Knight, Old Tribute, Board Verdict, High Bird; for Rum we have Seven Knight Rum, Hunter Rum, Knight Racer. In Premix we have Ice Blue Duet, Ice Blue Tango and Trust brandy.
What is the progress of your tie-ups with IMFL?
SSL has over 19 tie ups with different bottling chains in more than 10 States in India, facilitating a wider and timely distribution of the potable spirits. In future, it is proposing to increase the reach in other states. It is already recommended supplies to CSD for its products.
How many cases have you targeted for this fiscal?
We have targeted a 1.6mn to 2mn cases for sale in the year ending in Sept. 2010.
Please give us a breakup of your revenue from various segments?
For the six months ended on March 2010SSL’s total income for sugar was at Rs6964.5mn, for alcohol Rs858.8mn and for power it was Rs1410.1mn. EBIDTA for sugar was at Rs577mn, while it decreased to Rs42.46mn for Alcohol and for Power EBIDTA was at Rs330.13mn. EBIDTA margin for sugar was 8.29% for power was 3.41%.
SSL is in the process of launching new, instant fruit-drink mix powder- Trust Sipp. Please brief us about this new venture?
SSL has recently launched its new product Trust Sipp in four flavors i.e. Tender Coconut, Orange Delight, Tangy Lemon and Alphonso Mango in various market of Northern India and gathered an appreciation from customers and users. This is fruit based natural thirst quencher with the goodness o vitamin C, A, E and B. With this, the Company has entered into FMCG products segment. Trust Sipp has been well received by various markets and is expected to be launched in many other states in North India.
Any retail tie-ups for the same?
Not for the time being, but we are working for it.
Please brief us about your marketing strategies?
SSL believes in value marketing and wishes to give the best available products to it s customers at reasonable prices. It believes in continuous product innovations and brand development. New products like Trust Sunehra (natural sugar); Trust Sipp (fruit drink), Boad verdict, (Premium whisky) have been created so they become Brands in future.