Andhra Sugars Ltd Management Discussions

The Business Operations of the Company are into Sugar, Chloro-Alkali, Chemicals, Pharma and Power

SUGAR:

Sugar Industry is an important Agro-based Industry that impact the rural livelihood of 50 Million farmers and around 5 lakh workers directly employed in Sugar Mills. This also generates indirect employment like transport services, trade servicing of machinery and supply of Agricultural inputs.

Sugar Industry continues to be in a difficult situation that has culminated into a crisis. The Cane Pricing Policy of the Central and State Governments without linking to the Sugar price has been detrimental to the financial health of the Sugar Industry. This has made many Sugar Mills sick in view of the mounting arrears of cane payments. In such a dismal scenario, there is an urgent need for the Government to ensure parity of cane price payable by Mills to farmers and the sale price realisation to the Mills which would enable the Mills to ensure prompt payment to the farmers without any arrears. Further, the land available for planting Sugarcane crops is coming down year by year due to the low yield of Sugarcane per hectare and also in view of farmers opting to grow other crops where they can get a quick realisation of cash. The high cost of production, especially increasing labour cost and the un-scientific method of cane price fixation has severely impacted the financial health of the Mills.

At present the focus of the Government should be to provide incentives for development of high yielding and high sucrose content varieties of cane and to ensure that diseases and pest do not damage the Sugarcane crop. In view of the slow movement of Sugar stocks in the domestic market, there is also a need for the Government to continue export subsidies. It is welcoming that to give encouragement to Mills to step-up Ethanol production, a significant step has been taken by the Government permitting production of Ethanol directly from Sugarcane juice. This will facilitate the Mills in creating new Ethanol capacities. This would also give impetus to the Governments Ethanol Fuel Blending Programme. However, it is important that the price paid by Oil Marketing Companies matches the efforts and cost of production of Ethanol.

Sugar Mills are not even able to recover Fair Remunerative Price, fixed by Government of India. This is making it difficult for Sugar Mills to meet the cane payment obligation. Measures such as Rural Employment Guarantee Scheme which is being offered by the Government of India requires to be introduced for cane harvesting labour also to be helpful to the cane growers. Arranging Awareness Programmes by State and Central Governments is very much needed to motivate the Cane Growers to realise the benefits of Mechanization in Sugarcane farming, good ratoon crop management and adopting of other new agricultural practices to improve the yield.

With the above Scenario and after the assessment of Cane Plantation, the Company has temporarily suspended Sugar Cane Operations at Taduvai and Bhimadole for the Crushing Season 2025-26 and permanently closed the Operations of Sugar Plant at Tanuku.

Your Company has an Integrated Chemical Complex at Saggonda manufacturing Caustic Soda, Chlorine and other Allied Products. Caustic Soda Plant has a capacity of 600 TPD as on 31.03.2025. Further Sulphuric Acid with 500 TPD expansion commissioned and put into use on 27.04.2024, the total Capacity is 800 TPD. A 25 TPD Caustic Potash Plant is in operation at Kovvur, East Godavari District, Andhra Pradesh.

During the year 2024-25, Caustic Soda market scenario has witnessed severe fall in domestic markets, owing to the following reasons :

Increasing imports from other countries is one of the factor causing steep decline in the Market Price.

Major players have expanded their capacities thereby causing surplus in the market.

End users of Chloro-Alkali products have not lifted the stocks due to slow down in their operations.

Levy of FPPCA charges relating to earlier years by Discoms in Andhra Pradesh.

In addition, enhanced production capacities came into existence, which lead to accumulation of stocks of co-products of Chlorine and HCL. Owing to power holiday and raw materials shortage,

some of the Pharma Units as well as medium scale industrial segments reduced their production capacities by 30% to 40%. All these factors have adversely influenced domestic manufacturers in terms of disposal of Chlorine and HCL.

Power which is a major input for the production of Caustic Soda is required to be available at an economical price. The high cost of Power is always a matter of concern and there is a need for the Government to classify this Industry under "Energy Intensive Industry" in order to get the benefit of availing Power at a concession rate.

Despite the market constraints as prevailed, consequent upon long lasting association, your Company has been getting consistent support from the bulk Customers and Traders who have been honoring their off takes. This has given an advantage to your Company to produce Caustic Soda as per the Production and Marketing Plans perceived.

In the year 2018-19 there was a great amount of consolidation in the number of manufacturers of Aspirin formulations at the premium end, with the brands of Novartis, Sandoz and Pfizer all being consolidated under one single umbrella of GSK Consumer Health. And the year 2022 saw GSK bifurcating and merging its Pharmaceutical business into HALEON Group of Companies, Headquartered in the UK. Moving forward we expect to restart the US business of HALEON (earlier Novartis/GSK) by the end of 2025, and also get approvals from prospective new customers in the US for supply of our Aspirin Starch Granules along with Aspirin Crystals. Their usage is around 900 MT per annum.

We continue to work to increase the Global business particularly in Regulatory Markets, as our Aspirin Plant is Meeting international standards under the current Good Manufacturing Practices (cGMP) and approval from USFDA, EDQM and TGA, our clientele has increased in recent years because of the availability of regulatory documents facilitating our customers to register their end products in respective markets. These are to get results in coming years with increased commercial value.

Meanwhile, indigenous business is continuing which is currently helping in reducing the gap of decreased export sales.

We manufacture various grades of Salicylic Acid and Sodium Salicylate.

The focus is on Cost competency with better quality in the coming years and to widen our Overseas and Indigenous client base.

Your Company operates Chlor Alkali Plants which are Power Intensive with Power being a major input cost. Therefore, it is essential for your Company to ensure the availability of quantity and quality of Power to be self-sufficient in production and remain competitive. Keeping this in view, your Company established a 33 MW Captive Generation Thermal Power Plant at Saggonda. This is in addition to Solar Power Plant in operation at Kovvur. These two Plants will ensure adequate Power for Chemical Plants. Apart from this, the Company as a Shareholder avails Power from Andhra Pradesh Gas Power Corporation Limited (APGPCL), a Gas based Power Generation Company. The Power availed from this source is cheaper compared to State Electricity Board Power. From October, 2022 onwards there was no allocation of Natural Gas to APGPCL which resulted in the operations of APGPCL came to a halt. The Company also opts to avail Open Access Power to ensure that the Power is obtained at an economical rate. This would facilitate in augmenting the Power requirements of Chemical Plants.

Management and Audit Committee, regularly reviews the financial and operating controls of the various Units. The Internal Control System of your Company is commensurate with its size and nature of business.

As per the provisions of the Companies Act, 2013 the Statutory Auditors have annexed a Report on Internal Control System to the Independent Auditors Report pertaining to Financial Year 2024-25.

Segment-wise performance has been given separately vide Annexure – II of Group Consolidated Accounts.

Your Company has earned a Gross Profit of Rs.118.70 Crores (before interest and depreciation) against Rs. 137.08 Crores (before interest and depreciation) in last year. The main reason for the decrease in profitability is fall in the selling prices of Chloro-Alkali and Chemical Products.

The gross Fixed Assets of your Company as on 31.3.2025 is Rs.1247.54 Crores compared to Rs.1167.63 Crores during the previous year 2023-24. Your Company has a net worth of Rs. 1332.85 Crores.

As on 31.03.2025 the Fund based working capital limits is Rs.50 Crores and Non-fund based working capital limits is Rs.47.10 Crores.

Your Company continuously reviews and monitors its manpower requirements to ensure that it has human skills commensurate with its needs. Industrial relations continued to be cordial. As on 31.3.2025 your Companys employees strength stands at 2,045.