Login To Trade  |  About IIFL
  • NIFTY  7935.25  -7.45 -0.09%
  • SENSEX 26145.67  17.47 0.07%
Mawana Sugars Ltd

BSE: 523371 | NSE: MAWANASUG ISIN: INE636A01039
Market Cap: [Rs.Cr.] 68.46 Face Value: [Rs.] 10
Industry: Sugar

Watchlist +
Management Discussions


Sugar Season 2014-15

The Indian sugar outlook is again very bleak. FRP went up from Rs. 210/qtl to Rs.220/qtl. Maharashtra and Karnataka sugar mills are not in a position to pay even FRP dueto low sugar prices. Similarly, in UP mills have aggressively represented to Government& public in general highlighting the most distressing situation of their financialperformance where they cannot pay more than Rs.220/qtl but the UP Govt kept cane pricesame at last season of Rs.280/qtl with initial payment of Rs.240/ qtl is to be paid within14 days and thereafter interest will be charged @ 14%p.a.

• Balance Rs.40/qtl is to be paid within 3 months of the end of crushing season.

• Of the Rs.40/qtl, Govt will directly incur Rs.11.40/qtl as incentive to millsviz Rs.6.60/qt cane society commission, Rs.2.0/qtl cane purchase tax and Rs.2.80/qtl entrytax on sugar. Balance Rs.8.60/ qtl will be given to the mills after they have paid tofarmers.

• For balance Rs.20/qtl, high level state committee would consider average priceof sugar, molasses, bagasse, press mud over a period of 8 months (October,14-May,15). Thefloor price has been set at Sugar Rs.3100/qtl, Molasses Rs.390/qtl, Bagasse Rs.167/ qtland press mud Rs.26/qtl.

• If the average price stays at these levels, mills will bear Rs.20/qtl.

• If an average price is more than floor price, Govt may deduct in the ratio fromdirect subsidy of Rs.8.60/qtl and If the prices fall below floor price, mills would becompensated in proportionate ratio.

Season opened with stock of 7.5 million tons, with production now estimated at 26million tons, with total an off take of 25.50 million tons( 24 million tons in domestic& 1.50 million tons of exports), closing stock will go up by 0.50 million tons to 8million tons.

In the international market, World sugar prices like to remain soft. Season will openwith inventory of 43.60 million tons. 2014-15 production is estimate at 183.80 milliontons, consumption 182.45 million tons, thus a marginal deficit to balance.

Distillery Operations

The Ethanol program is moving forward with the Government of India making blending ofethanol with petrol mandatory for the Oil Marketing Companies (OMC).

The price of ethanol has improved from Rs. 27/litre to Rs. 35/litre. The capacity ofETP of the distillery unit was augmented to increase the production of ethanol andincreasing the capacity utilization of the plant. However, our capacity was severelyhampered last year due to restriction imposed by CPCB on all UP Distilleries dischargingeffluent in Ganga in view of Kumbh Mela. Last year pollution norms in general also becamevery stringent as NGT directed Pollution Control Authorities to inspect all Unitspolluting Ganga and submit their report to the Court. Distillery industry has beenclassified as highly polluting.


Industry Structure and Development

A) Products

The Chlor-Alkali is a basic heavy Chemical Industry comprising of products such asCaustic soda, Chlorine, Hydrogen and Hydrochloric acid. These products are basic buildingblocks in the Chemical processing industry and are used in diverse industrial sectors,either as raw materials or intermediates or auxiliary chemicals.

Caustic Soda is used in Alumina, Pulp & Paper, Textile, Soap, Edible OilRefineries, Dyes & Chemicals, Drugs & Drug Intermediates, Thermal Power Plantsetc. whereas Chlorine is used in PVC, CPW, Pulp & Paper, Pesticides, Chloromethanes,Water purification, Stable Bleaching Powder, Aluminium Chloride, Chlorinated Solvents etc.Hydrochloric Acid is used in Steel Pickling, Water Treatment, Effluent Treatment inChemical Process industries, Thermal Power Plants etc. while Hydrogen is used inHydrogenated Vegetable Oils, Sorbitol, Stearic Acid, Pesticides, Filament Lamps, Picturetubes, Steel units and Power Plants. The Chlor-Alkali sector plays an important role inthe overall development of the economy. It contributes immensely to the manufacturingsector and to the external trade of the country. The Chlor-Alkali industry is a sectorproviding inputs to a large number of other end user industries and the demand of itsproducts is linked to the performance of the end user products of these industries.

The prices of the products, especially Caustic Soda are influenced by import parityalong-with domestic demand-supply situations.

B) Industry Size

In India, as on 31.03.2014, there were a total of 32 Caustic Soda plants in operation.The installed capacity of Caustic Soda industry in the Country was 3.308 Million MT as on31.03.2014, as compared to 3.134 Million MT on 31.03.2013. There was an increase of 5.6%in the installed capacity during the year 2013-14 as compared to the previous year.

During the year, the domestic production was 2.62 Million MT Caustic Soda representing79.1% utilization of the installed capacity. There was an increase of 3.06% in productionby 0.078 Million MT during the year 2013-14 as compared to the previous year. The totaldemand of Caustic Soda was 2.95 Million MT, which grew by 4.9% over the previous year.

The Caustic soda production and capacity utilization for last five years is as follows:

Year 2009-10 2010-11 2011-12 2012-13 2013-14
Capacity 74.3 76.3 81.8 81.1 79.1
Utilisation %
Production 2.33 2.46 2.56 2.54 2.62
(Million MT)

In the year 2014-15, with a growth of around 5%, the domestic consumption of CausticSoda is expected to reach 3.10 Million MT. Overall production would be largely governed bythe demand growth in Chlorine. The limitation in lower demand of Chlorine compared toCaustic Soda would require Caustic Soda demand to be partially met through imports.

C) Market Scenario and Outlook

The Caustic and Chlorine Markets during the period Oct’13 –Dec’14witnessed a volatile scenario with Caustic and Chlorine prices being extremely strong inQE Dec’13, QE March’14 and prices of both products getting weak during the lastthree quarters i.e. QE June’14, Sep’14 & Dec’14.

During QE Dec’13 & QE March’14, demand-supply of both Caustic Soda,Chlorine remained in balance with reduced imports of both Caustic Soda, Chlorinederivatives into the Country. Production levels in the West Zone remained low because ofplant breakdowns due to torrential rains and unprecedented floods during Sep’13.

In QE June’14, QE Sep’14, the domestic markets in the Country witnesseddumping of low priced imports of Caustic Soda from various countries and there remained anoversupply situation with excess production and low demand of both Caustic Soda andChlorine. The markets in the North during QE Dec’14 were worse affected because ofslump in the Paper Industry. Caustic Soda and Chlorine prices went down to abysmally lowlevels. The increased rebate on the night power tariff given by PSPCL and improvedavailability in the open access power during the quarter helped in setting off the lossdue to low product realizations in the previous quarters.

Due to availability of Open Access Power while all other costs increased, ECU costscame down by Rs. 800 PMT. The ECU contribution margin reduced by Rs. 3200/PMT, thereduction otherwise would have been higher by Rs. 4000/MT.Post Dec’14 / Jan’15,the market of Caustic Soda has bottomed out and Caustic Soda prices have started firmingup as a result of reduced imports, increased exports and improved demand of Caustic Sodaflakes in the West Zone market. The market outlook for Caustic Soda seems to be betterthan that during the last nine months as there would be limited capacity expansions in theensuing period. The Caustic Soda consuming segments like Paper, Alumina, Textiles areexpected to perform better in the coming year. The demand of Chlorine in the PVC and CPWsegments also would improve with exports of CPW to various countries.

D) Power Scenario

Chlor Alkali is a Power intensive industry. Any change in the Power tariff has a directimpact on performance of the Unit. Punjab State Power Corporation Ltd (PSPCL) had reducedpower tariff w.e.f. 22nd Aug’14 by 1.41%. This had little impact on costs as duringthe last few years, power tariffs in the state have been continuously increasing. Withcommissioning of new Power Plant capacities in Punjab (around 2000MW), the power scenarioin the State has improved with supply matching the demand and even becoming surplus duringthe lean demand periods October to March. At present, power is being drawn by the Companythrough PSPCL and through open access from Indian energy exchange.

E) Risks and Concerns

The energy costs have been coming down globally as a result of falling Crude Oil pricesand abundant availability of Shale gas in USA, which in turn is bringing down the globalprices of Caustic Soda, Chlorine and Chlorine derivatives.

In Punjab, there is an uncertainty in the Power Tariffs which are announced on annualbasis by PSPCL. Power tariffs in the State have always increased except during the lastyear, when these got reduced. Further, the demand of various industries to draw powerthrough open access is increasing which shall limit the availability of power to theCompany through this route.

The Company intends to focus on reducing power consumption, raw material costs andfreight rates for transportation of its finished products. The sudden surge of cheaperimports of Caustic Soda, reduced Caustic Soda, Chlorine consumption in the Paper segmentare other areas of concern in the coming year.

Chlorine prices in the North will remain under pressure, as demand is limited, with CPWand Paper as the only major segments utilizing Chlorine.

F) SWOT Analysis Strengths

– Located in sugarcane rich belt of Western UP

– Integrated sugar plants producing ethanol, supplying green power to the Stategrid

– Multiple product range with specialty sugars catering to food and pharmaindustry


– Strong governmental control on cane prices

– Deterioration of cane quality resulting in lower recoveries

– Soil deterioration following an overuse of fertilisers


– Higher value by-products

– Potential to increase cane productivity by varietal change to increase sugarrecovery

– Technology up-gradation in sugar and by-product utilisation


– Unfavourable Government regulations towards cane pricing, raw sugar imports andsugar exports

– Rising cane payment arrears may force farmers shifting their preference to othercrops or even diverting their cane to other mills/Kohlus resulting in lower caneavailability.

– Continuous decrease in sugar prices due to excess availability of cane is athreat to the viability of sugar industry.

– Cane quality dependent upon factors not entirely within our control.

– Impact on domestic operations due to raw sugar imports


Commensurate with the size and nature of its business, your company has proper systemsof internal controls which ensure acceptable utilization of resources and reliablefinancial reporting. Your company has a well defined comprehensive organization structure,authority levels and internal rules and regulations.

Extensive use of SAP and other software systems have also resulted in strengthening theinternal controls and accurate reporting of operational and financial data.


The H R vision of your company is committed to inspiring and developing the potentialof people and providing them opportunities for growth. Training and learning initiativesaim at upgrading the competencies, taking early responsibility and fostering a climate ofcreativity and innovation is our aim. Your company continuously evolves policies andprocesses to attract and retain its pool of technical and management resources through afriendly work environment that encourages individual and learn initiatives.

Owing to BIFR registration, several aspects of HR are coming under strain and we aretrying to manage the fall outs creatively.

Relations between the employees and management have remained cordial during the periodof the report.


Some of the statements in this Management Discussions & Analysis, describing theCompany’s objectives, projections, estimates, expectations and predictions may be‘forward looking statements’ within the meaning of applicable laws andregulations. Actual results may differ from those expressed or implied. Importantdevelopments that could alter your Company’s performance include change in materialcosts, technology developments and significant changes in political and economicenvironment, tax laws and labour relations.

Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

R S Bedi , Director

Mohan Dinesh , Director

Piar Chand Jaswal , Additional Director

Ashok Kumar Shukla , Company Secretary

Company Head Office / Quarters:

5th Floor Kirti Mahal,
19 Rajendra Place,
New Delhi,
New Delhi-110125
Phone : New Delhi-91-11-25739103 / New Delhi-
Fax : New Delhi-91-11-25743659 / New Delhi-
E-mail : amitkhurana@mawanasugars.com
Web : http://www.mawanasugars.com


MAS Services Ltd
T-34 2nd Floor,Okhla Industria Area,Phase-II,New Delhi-110020

Fund Holding
Scheme Name No. of Shares
Mon Tue Wed Thu Fri Sat Sun
22 23 24 25 26 27 28