Avadh Sugar & Energy Ltd Management Discussions

Global economy Overview

The global economy grew marginally at 3.4% in 2025 compared to 3.3% in the previous year, influenced by the US tariff shock of April 2025. Despite being partially unwound through subsequent trade deals, it left effective tariff rates well above pre-2025 levels and heightened trade policy uncertainty.

Advanced economies witnessed a marginal growth from 1.8% in 2024 to 1.9% in 2025, while emerging market and developing economies demonstrated relative resilience, expanding by 4.4% in 2025 compared to 4.3% in 2024.

Global inflation continued its multi-year downward trend in 2025, declining to an estimated 4.1% from 5.8% in 2024.

Regional growth (%)	2025	2024
World output	34	3.3
Advanced economies	19	1.8
Emerging and developing economies	44	4.3

(Source IMF, un.org)

Performance of the major economies, 2025

GDP growth of 2.1% in 2025 compared to 2.8% in 2024

China

GDP growth was 5.0% in 2025 compared to 5.0% in 2024

United Kingdom

GDP growth was 1.3% in 2025 compared to 1.1% in 2024.

was 1.2% in 2025 compared to (0.2) % in 2024.

Germany

GDP growth was 0.2% in 2025 compared to a -0.5% in 2024.

(Source IMF April 2026 Outlook, World Bank)

Outlook

Given the challenge of forming stable, real-time assumptions for projections, the IMF World Economic Outlook report adopted a reference forecast instead of a conventional baseline, assuming the war remains contained in duration, intensity, and reach, with disruptions easing by mid-2026, in line with commodity futures as of March 10, 2026.

Under this reference view, global growth is projected at 3.1% in 2026 and 3.2% in 2027. Global inflation is expected to rise to 4.4% in 2026 before easing to 3.7% in 2027.

(Source OECD Interim Economic Outlook, IMF, World Economic Forum, Federal Reserve, Bank of England, European Central Bank, Bank of Japan)

Indian economic overview

The Indian economys real GDP grew at 7.7% in 2025-26, compared to 7.1% in 2024-25. This growth was driven by strong consumption and increasing investments, reaffirming Indias position as the fastest-growing major economy.

Indias Real GDP at Constant Prices was estimated at H323.12 Lakh Crore in 2025-26, compared with H299.89 Lakh Crore in 2024-25.

Growth of the Indian economy

	FY23	FY24	FY25	FY26
Real GDP growth (%)	7.0*	7.2	7.1	7.7

E Estimated. Note 2023-24 figure restated under new base year 2022-23. (Source MoSPI)

* The FY23 figure (7.0%) is from the old base year series (2011-12) as the new series back-data for 2022-23 will only be available after December 2026

Growth of the Indian economy quarter by quarter, FY 2025-26

		Q1FY26	Q2FY26	Q3FY26	Q4FY26
Real GDP growth (%)		6.7	84	7.8	7.8

Note Q2 revised upward from 8.2% and Q3 from 735% under the new base year 2022-23 series released February 27, 2026. Q4 remains an estimate.

(Source MoSPI)

Inflation, policy and currency dynamics

Inflation remained benign through much of 2025-26, with full-year CPI estimated at an exceptionally low 2.1%. This created room for 125 basis points of cumulative rate cuts, supporting consumption and investment.

However, macro stability was accompanied by currency volatility. The Indian rupee depreciated sharply by 9.88% during 2025-26 - its steepest fall since 2011-12 - touching H94.83 against the US dollar. This reflected global capital flows, a strong dollar environment, and geopolitical uncertainties.

Capital flows and market behaviour

Foreign portfolio investors remained risk-averse, withdrawing a record H1.8 Trillion during 2025-26 - the largest outflow in 36 years. However, strong domestic institutional inflows of H8.50 Trillion provided a crucial counterbalance, highlighting the growing maturity and depth of Indias domestic capital markets.

Indias market capitalisation declined 8% year on year in 2025-26 to USD4.5 Trillion from USD4.83 Trillion in 2024-25, marking the sharpest drop since 2022-23. The BSE Sensex declined 7% or 5,467 points in 2025-26, against a gain of 5.1% or 3,763 points, in 2024-25. Similarly, the Nifty 50 fell 5%, or 1,188 points, in 2025-26, compared to a gain of 5.3% or 1,192 points, in 2024-25. against a gain of 5.34%, or 1,192 points, in the corresponding period. The downturn was largely driven by the ongoing West Asia conflict and concerns around potential tariff measures under Donald Trump, which weighed on global investor sentiment.

Gold prices surged 64.1% during 2025-26 reflecting global risk aversion and safe-haven demand.

Indias net direct tax collections rose 5.12% y-o-y to H2340 Lakh Crore in 2025-26, though this fell short of the Revised Estimate of H24.21 Lakh Crore by approximately H80,000

crore. Corporate tax collections came in at H10.99 Lakh Crore against a target of H11.09 Lakh Crore, while personal income tax (including STT) stood at H12.41 Lakh Crore against a target of H13.12 Lakh Crore - the larger of the two misses, partly reflecting the income tax relief extended to the middle class in the Union Budget 2025-26.

Banking sector

Indias banking sector reflected improving financial health, with the gross non-performing asset ratio declining to a robust 2.1% as of September 2025, indicating stronger asset quality and disciplined lending practices. This stability was mirrored in profitability metrics, as scheduled commercial banks reported a return on assets of 1.3% and a return on equity of 12.5% during the first half of 2025-26, underscoring sustained operational efficiency and a healthier balance sheet trajectory.

Indias growth story

Real Gross Value Added (GVA), which measures economic output excluding taxes and subsidies, grew 7.9% in 2025-26, compared with 7.3% in 2024-25. At current prices, nominal GVA rose 9.1% to H314.87 Lakh Crore from H288.54 Lakh Crore a year earlier.

The tertiary services sector remained a key growth driver, expanding by 9.0% in 2025-26 and increasing its share in nominal gross value added to 54.3% from 52.8 % in 2024-25, supported by broad-based momentum across segments.

During 2025-26, financial, real estate, IT and professional services grew by 9.9%, while trade, hotels, transport, communication and broadcasting recorded a strong 10.1% growth, and public administration and other services expanded by 5.8%.

The secondary sector grew 9.1%, accelerating from 8.0% in the previous year, driven by manufacturing alongside

construction growth of 7.1%. This combination of services- led scale and manufacturing acceleration is shaping a more balanced and resilient economic structure.

Consumption and investment

During 2025-26, Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) maintained above-7% growth, reflecting a well-balanced demand composition across household spending and investment activity.

Growth catalysts

Policy-led consumption boost: The Union Budget 2026-27 tax relief measures-particularly income tax exemptions up to H12 Lakh-are expected to stimulate discretionary spending and reinforce consumption- led growth.

Anticipatory Pay Commission impact: The 8th Pay

Commission, though expected to be implemented from FY28, is already shaping consumer sentiment, creating a forward consumption impulse.

Monetary stability: The Reserve Bank of Indias calibrated stance, with the repo rate at 5.25%, balances inflation risks with growth support, ensuring macroeconomic stability.

Credit expansion: Improved banking health and liquidity conditions are expected to sustain strong credit growth across MSMEs, housing, and retail segments.

Fiscal prudence with growth focus: The Union Budget maintains fiscal discipline while prioritising infrastructure, MSME support, skilling, and innovation-key levers for long-term productivity.

Outlook

The year under review underscores a defining divergence: a world grappling with uncertainty, and an India navigating it with confidence.

In a global environment marked by fragmentation and caution, India stands out as a rare convergence of stability, scale and structural opportunity. The World Bank has revised its 2026-27 growth estimate upward to approximately 6.6%, reflecting resilient domestic momentum even as growth moderates from the previous year. India is expected to retain its position as the fastest- growing major economy.

Growth will be shaped by a combination of strong domestic demand and resilient private consumption, supported by low inflation and GST rationalisation, alongside stable export performance with improved access to key markets. This momentum is further reinforced by sustained policy support, ongoing economic reforms, and a favourable demographic advantage.

While risks persist, particularly from elevated energy prices, subsidy pressures on government spending, and uncertainty in global demand, Indias macroeconomic fundamentals remain strong.

Over the medium term, sustained consumption, gradual investment recovery, and expanding global trade linkages are expected to reinforce Indias position as a key driver of global economic growth.

(Source: Upstox, Economic Times, India Today, 5paisa, Livemint, The Logical Indian)

Global sugar industry

The global sugar market outlook for the 2025/26 season marks a decisive reversal from the preceding years supply stress. Global sugar production is expected to reach 181.287 Million Tonnes in 2025/26 - an increase of 5.231 Million Tonnes compared to the 2024/25 seasons output of approximately 176.056 Million Tonnes, ending a run of underwhelming harvests that had weighed heavily on global availability. World consumption for 2025/26 is estimated at 180.069 Million Tonnes, up 0.549 Million Tonnes from the previous seasons 179.520 Million Tonnes, and notably below the 2023/24 seasons all-time high of 181.2 Million Tonnes, reflecting a period of more modest demand growth.

Global sugar markets have stabilised after two years of volatility. Stronger harvests, improved rainfall across Asia, and increased output from key producers such as India, Thailand, Pakistan, and Brazil have helped restore balance to a market that remained in deficit through 2023/24. However, prices continue to be closely linked to crude oil and ethanol dynamics: when oil prices rise, mills divert more cane toward ethanol production, while weaker oil prices shift more cane back into sugar. With crude oil softening through 2025 and global ethanol demand still growing but at a measured pace, a larger share of cane has been directed toward sugar, supporting overall supply and keeping trade flows broadly in surplus.

In 2026, price movements are expected to be driven more by competition among exporting countries and the timing of export releases rather than by fears of physical shortages. The market will be particularly sensitive to instances where substantial export volumes are released simultaneously, which could temporarily exert downward pressure on prices despite an otherwise stable annual supply-demand outlook.

(Source USDA, Chini mandi)

Overview

	2025-26	2024-25 Change in Million Tonne	Change in %
Production	181.287	176.056 5.231	2.97
Consumption	180.069	179 520 0 549	0 31
Surplus/ Deficit	1.218	-3 464 -	-
Import demand	63.222	64 731 -1509	-2 33
Export availability	64.324	64.796 -0472	-0.73
End stocks	93.300	93.184 0.116	0.12
Stocks/Consumption ratio in %	51.81	51.91

Source ISO - Quarterly Market Outlook, February 2026

Production

Global sugar production is projected to increase in the 2025-26 season, supported by higher output in India and Brazil amid favourable weather conditions. This growth is expected to offset production declines in the European Union.

Global sugar production for 2025/26 is projected to increase by 5.231 Million Tonnes year-on-year, reaching 180.069 Million Tonnes. The growth is primarily driven by higher output in Brazil and India, which is expected to more than compensate for the decline in production in the European Union. Export volumes are also anticipated to rise, supported by increased shipments from Brazil, India, and Thailand, offsetting reduced exports from the European Union. Consequently, global ending stocks are forecast to expand, largely led by higher stock accumulation in India and China.

Brazils sugar production is forecast to rise by 700,000 Tonnes compared to 2024/25, reaching 44.4 Million Tonnes, supported by improved yields due to favorable weather conditions. The production mix is expected to

tilt slightly towards sugar, with 51% allocated to sugar production and 49% to ethanol. Domestic consumption is likely to remain stable, while exports are projected to increase in line with higher production levels.

Indias net sugar production is estimated to surge by 6.50% year-on-year to 37.9 Million Tonnes, driven by favorable weather conditions, expanded planting area, and improved yields following a recovery from the adverse impacts of El Nino. Domestic consumption is expected to grow, supported by increased demand from the food service sector. Higher production is also likely to boost both exports and ending stocks.

Chinas sugar production is forecast to increase by 340,000 Tonnes to 11.5 Million Tonnes, supported by an expansion in sugarcane cultivation and improved sugar beet yields due to favorable weather. As production growth is expected to outpace consumption, ending stocks are projected to rise significantly, increasing by nearly 50% to 2.4 Million Tonnes.

(Source Chini Mandi, Informist, USDA)

Production rise and falls in 2025/26 (October/ September)

Rises	Changes from 2024/25 in Million Metric Tonnes (MMT)	Falls	Changes from 2024/25 in Million Metric Tonnes (MMT)
Thailand	0.25	UK	0.6
China	0.3	EU	0.6
India	7.25	Pakistan	0.45
Brazil	1.0
Consumption	Although demand continues to grow in parts of Asia and

On the demand side, there are no immediate catalysts expected to significantly alter the markets short-term trajectory. In developed economies, sugar consumption is either stable or gradually declining, shaped by evolving consumer preferences and stricter health regulations.

Africa, the incremental increase is not substantial enough to offset the current global surplus within a single season.

Global sugar consumption in 2026/27 is expected to rise by 0.5% to 194.72 Million metric Tonnes. However, estimate for sugar consumption in 2025/26 by 466,000 Tonnes to

180.069 Million metric Tonnes,, reflecting slowed demand in developed markets due to health trends and rising use of sugar alternatives, while moderate growth continues in developing regions. Global production is forecast to increase more sharply, resulting in a substantial production surplus as supply outpaces demand. This surplus is anticipated to support a rise in ending stocks, enhancing market stability compared with the prior two seasons, when inventories declined. Despite the build-up in stocks, price risk persists due to factors such as trade policies and stock concentration rather than overall volume alone.

Western Europe and North America are expected to record either flat or marginally declining demand due to increasing health awareness, obesity-related policy interventions, sugar taxes, and ongoing product reformulation by food and beverage manufacturers. The growing adoption of alternative sweeteners including high-intensity sweeteners and high-fructose syrups continues to limit per capita sugar consumption in these developed markets. In contrast, demand growth remains concentrated in emerging economies. Sub-Saharan Africa and parts of South America are projected to post stronger growth rates of around 1.5-2.0%, supported by population growth and rising urban consumption. Meanwhile, Asia shows mixed trends: while South and Southeast Asia continue to expand consumption moderately, demand in China remains relatively stable due to subdued imports and adequate domestic supplies.

Overall, although global sugar consumption continues to expand in 2025-26, the growth trajectory remains moderate and insufficient to fully offset rising global production, thereby contributing to a relatively balanced- to-surplus market outlook.

(Source Chini Mandi, Reuters, Foodcom, USDA)

Export: Global sugar exports in 2025/26 are projected at approximately 64.324 million tonnes, reflecting a recovery from the tighter trade volumes seen in 2024/25. The increase is primarily driven by higher export availability

Fig. A23 Growth rates of global consumption (in %)

from Brazil, which remains the worlds dominant supplier, supported by a larger crop and improved export capacity.

Brazils exports are projected to rise to about 38 Million Tonnes by 2034, despite ongoing port and logistics constraints, though the country will continue to prioritise raw sugar shipments. Thailands exports are expected to grow to 10.4 Million Tonnes, while Indias exports are forecast to increase to around 6 Million Tonnes over the same period subjected to domestic policy and production conditions.

Indias exports are likely to remain policy-driven, contingent on government quotas and domestic stock considerations, with ethanol diversion continuing to influence exportable surplus. The ability to divert about 5 Million Tonnes of sugar towards ethanol in 2025-26 will help the mills balance stocks, stabilise prices, and ensure timely payments to farmers. At the same time, mills will benefit from quicker realisations through Oil Marketing Companies (OMC), reducing reliance on above-quota sugar sales for working capital during the crushing season.

India has approved an additional 500,000 Metric Tonnes of sugar exports for the 2025-26 marketing year (October-September), raising the total export quota to 2 Million metric Tonnes. The extra quota will be allocated on a pro-rata basis to sugar mills that confirm their intent to export. Mills are estimated to divert 34-3.9 Million Tonnes of sucrose or sugar for ethanol production, leaving the country with surplus stocks that need to be managed through exports.

Despite improved global supply, export flows remain sensitive to freight rates, logistics constraints, and trade policy decisions in major producing countries. As a result, actual world market availability depends not only on production but also on export strategies and administrative controls.

(Source USDA, ISO Sugar, Informist Media, Chini Mandi, SP Global)

Domestic sugar industry Overview

The Indian sugar industry is currently in a transition phase, shaped by evolving government policies, global price movements, and the continued push toward ethanol blending under the national biofuel programme. While the sector faced production pressure in 2024-25 due to weather-related yield concerns and higher cane diversion to ethanol, the 2025-26 season is expected to see a recovery supported by improved cane availability and policy recalibration.

For the 2025-26 crushing season, Indias sugar production is estimated at 27.90 Million metric Tonnes (MMT), reflecting a recovery from the lower output recorded in 2024-25 (which was around 26.20 MMT after ethanol diversion adjustments). Improved rainfall in key states

such as Maharashtra, Karnataka, and Uttar Pradesh, which together account for over 80% of national production, has supported higher cane availability.

The earlier decline was attributed to lower cane yields, delayed crushing operations in Maharashtra, and higher diversion to ethanol. However, 2025-26 is expected to witness stronger output as cane acreage and recovery rates improve.

For the 2025-26 crushing season, Indias sugar production is estimated to increase significantly compared with the 2024-25 season, supported by improved sugarcane availability, early crushing in some states and better field conditions. Industry estimates indicate net sugar output could reach roughly 27.90 Million Tonnes, up from about 26.20 Million Tonnes in 2024-25, reflecting an expansion of 6-7% year-on-year as farmers planted more cane and operations progressed smoothly. India continues to prioritise ethanol blending under the Ethanol Blending Programme (EBP), targeting 20% blending.

In the previous season, diversion was moderated due to relatively unchanged ethanol procurement prices for juice and B-heavy molasses, making sugar production comparatively more viable. As a result, actual diversion was lower than initially projected.

The allocation of ethanol procurement by Oil Marketing Companies remains a critical determinant of effective sugar supply in the domestic market.

(Source PIB, DFPD, Indian Sugar.com)

Production

As of 31st January 2026, the ongoing 2025-26 sugar crushing season in India has seen a strong production momentum, with mills reporting significantly higher output compared to the previous year. According to the National Federation of Cooperative Sugar Factories Ltd (NFCSF), Indias sugar output reached 273.90 lakh Metric Tonnes (LMT) by the end of March 2026 driven by higher cane crushing and improved recovery rates. Uttar Pradesh, Maharashtra and Karnataka continued to lead production, with Uttar Pradesh producing about 55.10 LMT, Maharashtra 78.95 LMT, and Karnataka 35.60 LMT up to that date. The average recovery rate was around 9.11%

In the 2025-26 sugar season, Uttar Pradesh remained one of Indias leading sugar-producing states, though production dynamics shifted slightly compared with the previous year. As of 15 February, 2026, Uttar Pradesh had produced about 66.27 Lakh Tonnes of sugar, up modestly from around 64.04 Lakh Tonnes during the same stage in the 2024-25 season, reflecting stable output supported by improved recovery rates. The states sugar mills processed 66.2 Million Tonnes of cane, with recovery showing signs of improvement, although cane supply

remained somewhat constrained compared with last year. Uttar Pradesh had around 111 operational sugar factories involved in crushing as of mid-February, slightly lower than the 119 mills active during the same period in the previous season.

In the 2025-26 sugar season, Maharashtra remains a leading sugar-producing state. As of 23 February, 2026, the state produced about 922.95 Lakh quintals (92.3 LMT) of sugar after crushing 980.85 LMT of cane, with an average recovery of 9.41%, as per the Maharashtra Sugar Commissionerate. Around 210 mills participated in crushing this season, though 60 mills had closed by late February as the season progressed. Despite closures, overall production remains higher than the previous year, supported by better cane availability and improved recovery rates.

Karnataka continued as one of the key sugar-producing states in the 2025-26 season. As of 31 January 2026, it had produced about 35.60 LMT of sugar after crushing roughly 436.81 LMT of cane, with an average recovery rate near 8.15%. A special crushing season in South Karnataka planned between June-September 2026. In the special season last year, 1.12 Lakh Tonnes of sugar were made.

NFCSF and related industry updates project that gross sugar production for the full 2025-26 season may reach approximately 350 LMT, with about 35 LMT of sugar diverted for ethanol production under the Ethanol Blending Programme, resulting in net marketable sugar of 315 LMT for the year.

Production is considerably higher than the 26.20 LMT output recorded for the full 2024-25 season (October- September), reflecting a strong recovery in cane availability and crushing activity. NFCSF estimated around 31.5 Million Tonnes of sugar production for 2025-26 excluding ethanol diversion in some reports, underscoring the upward trend in output.

Overview

Sl. no Particulars	Number of working factories		Actual sugar production (after diversion into ethanol)
	2025-26	2024-25	2025-26	2024-25
1. Uttar Pradesh	38	57	87.45	87.70
2. Maharashtra	8	6	98.95	80.10
3. Karnataka	1	4	46.75	39.90
4. Others	27	46	38.05	40.95
Total	74	113	271.20	248.65

Indian sugar Balance Sheet

Particulars	Sugar season 2025-26		Sugar season 2024-25
Opening balance as on October 1 (LMT)	47		80
Sugar Production (LMT)	279		262
Total Availability	326		342
Domestic consumption (LMT)	272		287
Sugar exports (LMT)	8		8
Closing balance as on September 30 (LMT)	46		47

Exports: The Government of India has approved an export quota of 15 Lakh metric Tonnes (LMT) of sugar for the 2025-26 sugar season to help manage surplus stocks and support domestic prices amid rising production. An additional 5 LMT pool was opened of which only 87,587 Tonnes were approved

Under this policy, sugar mills are allowed to export up to the allocated quota on a pro-rata basis, based on their average production over the past few seasons.

As of February 2026, India had shipped over 5.0 Lakh Tonnes of sugar in the 2025-26 marketing year (October- September), as per industry estimates with destinations including the United Arab Emirates (UAE), Afghanistan, Djibouti and Bhutan. Within this, white sugar constituted the dominant share, while refined sugar accounted for a comparatively smaller portion, indicating a gradual pickup in export activity in line with the governments approved quota.

The 2025-26 export strategy is being viewed as a temporary but positive step that can help reduce domestic inventories without compromising local supply. With a stronger projected production for this season compared to 2024-25, the larger export quota is expected to facilitate smoother balance sheet management for mills.

(Source DFPD, Economic Times, News24 Online, Chini Mandi)

Sugar price scenario: Global sugar prices, which had touched multi-year highs during 2023-24 on concerns over lower output in key producing countries such as India and Thailand, have moderated in 2025-26 as production prospects improved in Brazil and parts of Asia. However, volatility persists due to weather uncertainties and movements in crude oil prices, which influence ethanol diversion.

While international sugar and crude oil markets have witnessed periodic corrections amid global trade tensions and tariff-related uncertainties, Indias domestic sugar market has remained relatively stable. This resilience is largely due to calibrated export controls, ethanol diversion policies, buffer stock management, and limited direct exposure to global price fluctuations.

Policy and market development

In recent years, the Government of India has continued to provide strong policy support to the sugar sector, with a clear emphasis on enhancing farmer welfare and ensuring the financial stability of sugar mills. A significant structural shift has been the accelerated diversion of sugarcane towards ethanol production under the Ethanol Blended Petrol (EBP) Programme, which has transformed the sectors revenue mix and reduced its dependence on cyclical sugar prices.

India achieved 20% ethanol blending in petrol during 2024-25, five years ahead of the initial 2030 target. This milestone has substantially improved demand visibility for ethanol-linked revenues in 2025-26 and reflects the governments sustained focus on strengthening domestic biofuel production, reducing crude oil imports, and creating more stable and diversified revenue streams for the sugar industry.

For the 2025-26 sugar season, the Government of Uttar Pradesh has continued its supportive stance by maintaining remunerative sugarcane prices to safeguard farmer incomes and ensure consistent cane availability for mills. The State Advised Price (SAP) has been fixed at H370 per quintal for early variety, H360 per quintal for general variety, and H355 per quintal for rejected variety. These pricing measures, coupled with robust ethanol demand, are expected to enhance stability in the sector and improve revenue predictability for sugar producers.

The transportation reimbursement remains in place at H045 per quintal per kilometre, subject to the prescribed cap, providing further cost support to mills. In a move aimed at supporting farmers and managing surplus production, the Government of India has also withdrawn the earlier 50% export duty on molasses in 2025, facilitating better market realisation and aiding inventory management amid expectations of production exceeding domestic demand.

(Source Cane Up, DFPD, CBIC.gov)

Ethanol industry

Indias ethanol industry has witnessed a structural transformation in recent years, propelled by strong policy support and a strategic focus on strengthening energy security, promoting rural incomes, and advancing environmental sustainability. At the core of this transition is the National Policy on Biofuels, which laid down an ambitious roadmap to reduce dependence on crude oil imports and accelerate domestic production of renewable fuels through expanded ethanol blending.

The India ethanol market size reached USD 3.4 Billion in 2025 and is expected to reach USD 11.8 Billion by 2034, exhibiting a growth rate (CAGR) of 13.95% during 2026-2034. Indias ethanol industry has experienced substantial growth and transformation, fuelled by government policy initiatives and a strategic focus on energy security, rural development, and environmental sustainability. A cornerstone of this effort is the national policy on biofuels, 2018 (amended in 2022), which established ambitious targets to curb dependence on crude oil imports and expand domestic renewable fuel production.

Ethanol Blending Program (EBP)

By early 2026, Indias ethanol blending programme has made significant progress, with petrol blending levels reaching around 20% (E20) under the Ethanol Blended Petrol (EBP) Programme, achieving the governments target ahead of schedule for the 2025-26 ethanol year. This milestone reflects steady implementation of the blending mandate and the rapid expansion of the countrys ethanol supply chain.

The progress strengthens Indias efforts to reduce crude oil import dependence, lower transport emissions through cleaner fuels, and support agricultural and rural economies by creating additional value for crops used in ethanol production. Building on this momentum, discussions are underway within government and industry about raising the blending target potentially toward 30% by around 2030 as ethanol production capacity continues to expand.

Industry stakeholders have advocated for an accelerated roadmap to increase ethanol blending in petrol beyond the current 20% level, suggesting a higher blending range of 22-27% in light of ongoing global energy market uncertainties.

Indias heavy reliance on crude oil imports, accounting for nearly 85% of its requirement, continues to expose the economy to international price volatility. It is estimated that every USD 1 bill by approximately USD 2 billion, with cascading impacts on inflation, logistics costs, and the overall fiscal balance. Recent geopolitical tensions in the Middle East and disruptions in global shipping routes have further amplified these risks.

At the same time, Indias ethanol ecosystem has witnessed significant capacity expansion, with total distillation capacity reaching around 20 Billion litres, including nearly 9 Billion litres contributed by the sugar sector. Given that the current E20 programme requires roughly 11 Billion litres annually, only about 55% of installed capacity is being utilised, indicating substantial headroom to support higher blending levels.

An increase in ethanol blending is expected to enhance energy security, reduce dependence on crude oil imports, and provide a strategic buffer against global oil market disruptions, while also supporting the long-term stability of the domestic sugar and bio-energy sector.

Ethanol supply and feedstock utilization

To ensure steady ethanol availability, the Government of India follows a flexible, multi-feedstock approach under the Ethanol Blended Petrol Programme. Approved raw materials include:

Sugarcane-based feedstocks: Sugarcane juice, syrup, B-heavy and C-heavy molasses

Grains: Surplus broken rice, maize, and other cereals

Biomass residues: Bagasse, cotton stalks, cassava, and similar agricultural residues

With rising ethanol demand, India has increasingly relied on maize supplies to bridge domestic gaps, leading to a shift toward corn imports in recent periods, including shipments from countries such as Myanmar and Ukraine. This diversified feedstock strategy enhances supply stability and reduces vulnerability to seasonal crop variations or market disruptions.

At the State level, Bihar has emerged as a key beneficiary of this policy framework. The growth of both grain-based and molasses-based distilleries has been supported by the Bihar Ethanol Production Promotion Policy, which encourages private investment and infrastructure development. At the national level, ethanol expansion is guided by the National Biofuel Coordination Committee (NBCC), ensuring that ethanol production remains aligned with food security considerations and long-term energy priorities.

(Source New Indian Express, Informist Media, PPAC, IMARC, ISMA)

Impact on vehicle performance

The roadmap for ethanol blending in India (2020-25), developed by an inter-ministerial committee, indicates that increasing ethanol blending up to 20% (E20) results in only a marginal reduction in fuel efficiency for vehicles originally calibrated for E10. Recent industry assessments suggest that the impact on mileage is limited to around 2-4%, with variations depending on vehicle type and driving conditions.

Testing across a wide range of vehicles has demonstrated that the reduction in fuel economy is modest and can be further mitigated through engine optimisation, calibration, and improvements in vehicle design. The regulatory and industry evaluations indicate that E20- compliant and properly tuned engines can maintain comparable performance levels, with some studies even noting improved acceleration due to ethanols higher- octane rating.

Importantly, the adoption of E20 fuel has shown no significant adverse impact on engine durability, wear, or engine oil degradation when used in compatible vehicles. Concerns around corrosion or long-term damage have been largely addressed through fuel standards and material compatibility upgrades.

(Source Economic Times, PIB)

Company performance Overview

Avadh Sugar & Energy Limited, a key company within the renowned K. K. Birla Group, brings over seven decades of experience in the sugar industry. With origins dating back to 1932, the company was formally incorporated in 2015 following a series of strategic mergers and demergers aimed at strengthening its operational focus and scale.

As an integrated sugar enterprise, Avadh is engaged in the manufacture of sugar, spirits, ethanol, and allied by-products, including power generation through cogeneration and sanitizers. Headquartered in Uttar Pradesh, the countrys largest sugarcane-producing state, the company operates [4] modern sugar mills with a combined licensed crushing capacity of 34,800 Tonnes of cane per day (TCD).

Avadh has distillation facilities with an aggregate capacity of 325 KLPD and cogeneration plants capable of producing 74 MW of power. Its strong operational efficiencies and high recovery rates have consistently positioned the company among the leading performers in Indias sugar sector in recent years.

Segmental performance

Particulars	Sugar
	FY26	FY25
Sugar cane crushed (Lakh Tonnes)	48.99	49.46
Sugar recovery (%) (C equivalent)	10.98	10.80
Segmental revenue (H Crore)	2571 51	2557.37
PBIT (H Crore)	10184	160.37
Production qty (In Lakh Tonnes)	4 84	4.57
Sales qty (In Lakh Tonnes)	4.88	5.09
Average realisation (H / Lakh Tonnes)	401	384

Ratio analysis

Key financial ratios and details of significant changes therein (i.e. change of 25% or more in comparison to the previous financial year).

Ratio	FY26	FY25	Reason for change of 25% or more
Debtors turnover	46.80	50.67
Inventory turnover	1 58	147
Interest coverage ratio	3 02	3 26
Current ratio	116	112
Debt equity ratio	1.25	1.24
Operating profit margin (%)	6.03%	8.41	Change in operating profit margin is 28.30% as compared to the preceding year due to lower profitability
Net profit margin (%)	2.13%	3.33%	Change in net profit margin is 36.23% as compared to the preceding year due to lower profitability
Return on net worth	5.10	7.99%	Change in return on net worth is 36.18% as compared to the preceding year due to lower profitability.

Particulars	Distillery (Ethanol)
	FY26	FY25
Segmental revenue (H Crore)	530	485
PBIT (H Crore)	42 00	63.20
Production qty (In Lakh litres)	892 94	735.78
Sales qty (In Lakh litres)	848.74	771.93
Average realisation (H / Lakh litres)	60.73	61.58

Particulars	Co-Generation (Power)
	FY26	FY25
Segment revenue (H Crore)	226.74	189.52
PBIT (H Crore)	34.47	14.65
Production qty (In Lakh units)	2130	2117
Sales qty (In Lakh units)	986.18	1175
Average realisation (H / units)	4.28	3.37

Risk management

At Avadh Sugar & Energy Limited, risk management forms a core component of the overall governance framework. The Risk Management Committee, constituted under the supervision of the Board of Directors, is responsible for formulating risk policies and overseeing the identification, assessment, and mitigation of risks. The committee ensures that risk controls, compliance systems, and assurance mechanisms are embedded across all business functions, enabling structured and timely responses to potential challenges.

Internal auditors play a critical role in strengthening this framework. Through periodic reviews, they assess the adequacy and effectiveness of internal controls, ensure compliance with statutory and regulatory requirements, and evaluate adherence to established accounting policies and operational procedures across units. Their observations and recommendations are reported directly to the Audit and Risk Management Committee, reinforcing transparency, accountability, and corrective action.

To manage structural risks such as sugar price volatility, fluctuations in recovery rates, and government-regulated State Advised Price (SAP) mechanisms, the company adopts proactive measures. These include focused research and development, farmer outreach programs promoting best agronomic and harvesting practices, and continuous operational efficiency improvements at manufacturing facilities. Such initiatives support higher cane yields, improved sugar recovery, and cost optimization.

By integrating risk management into its strategic and operational processes, Avadh Sugar & Energy Limited enhances organizational resilience, safeguards stakeholder interests, and positions itself for sustainable long-term growth.

Human resource and industrial relations

At Avadh Sugar & Energy Limited, employees are regarded as the cornerstone of the organisations sustained success. The company remains committed to strengthening workforce capabilities through structured learning and development initiatives. During the year, a wide range of training programmes were conducted, encompassing technical competencies, behavioural development, business acumen, leadership effectiveness, customer service excellence, safety practices, and ethical standards. These initiatives are designed to ensure that employees remain aligned with evolving technologies and industry best practices.

As of 31st March 2026, the companys total workforce stood at 1,890 employees, reflecting a skilled and dedicated team committed to operational excellence and long-term growth.

Corporate social responsibility

At Avadh Sugar & Energy Limited, environmental stewardship and social responsibility are integral to the way the business operates. The Company is committed to generating meaningful value for its stakeholders including employees, local communities, and the broader environment through structured and impactful initiatives.

Its Corporate Social Responsibility (CSR) programmes focus on multiple areas:

Healthcare: Regular medical camps are organised in nearby communities, providing free health check-ups, essential medicines, and emergency medical support to underserved populations.

Education: The Company promotes educational advancement among underprivileged children by distributing books and learning materials, helping improve access to quality education and supporting long-term community development.

Environmental Conservation: Recognising its environmental responsibilities, the Company adopts sustainable operational practices aimed at reducing its ecological footprint, conserving resources, and promoting environmental awareness.

By embedding social and environmental considerations into its core business philosophy, Avadh Sugar & Energy Limited seeks to contribute to inclusive growth and build a more sustainable future for coming generations.

Cautionary statement

The Management Discussion and Analysis section of this report contains statements that reflect the Companys objectives, projections, expectations, and assessments of the broader economic environment. These statements are forward-looking in nature and are based on managements current assumptions, estimates, and forecasts.

Actual outcomes may differ materially from those expressed or implied in these statements due to various uncertainties and external factors. Such factors may include changes in global supply and demand dynamics, shifts in macroeconomic policies, regulatory developments, market volatility, and pricing fluctuations.

The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances. As such, these statements should be viewed in the context of inherent risks and uncertainties that may impact future performance.