Overview
The global economy grew at an estimated 3.4% in 2022 as against 6% in
2021. The moderated growth was triggered largely by the Russian war with Ukraine,
inflation, pandemic-induced lockdown in China, prohibitive interest rates, global
liquidity crunch and quantitative tightening by the US Federal Reserve.
Global inflation was 8.7% in 2022, among the highest in decades. Gross
FDI inflows (equity, reinvested earnings and other capital) moderated by 8.4% to $55.3
billion in April-December 2022. Brent crude oil softened from USD 120 per barrel in June
2022 to USD 80 per barrel at the end of the calendar year following the increased
availability of low-cost Russian oil.
| Regional growth (%) |
2022 |
2021 |
| World output |
3.4 |
6.1 |
| Advanced economies |
2.7 |
5 |
| Emerging and developing economies |
4.6 |
6.3 |
Performance of major economies
| United States |
China |
United Kingdom |
Japan |
Germany |
| Reported GDP |
GDP growth |
GDP is expected |
Reported growth |
Reported GDP |
| growth of 2.1% |
is expected to |
to grow 4.1% in |
of 1.7% in 2022 |
growth of 1.8% |
| compared to 5.9% |
contract from 8% |
2022 compared |
compared to 1.6% |
compared to 2.6% |
| in 2021 |
in 2021 to 3% in |
to 7.6% in 2021 |
in 2021 |
in 2021 |
|
2022. |
|
|
|
Outlook
The global economy is expected to grow 2.8% in 2023, global inflation
is projected to fall to 7% and interestingly, approximately 70% of the global economy
demonstrates resilience. Despite high inflation, the US economy demonstrated robust
consumer demand in 2022. Driven by these positive factors, global inflation is likely to
be still relatively high at 4.9% in 2024
Indian economy
Overview
India reported an economic growth of 7.2% in FY 2022-23, higher than
what had been estimated. India emerged as the second fastest-growing G20 economy in FY
2022-23. India overtook UK to become the fifth-largest global economy. India surpassed
China to become the worlds most populous nation
Growth of the Indian economy
|
FY 20 |
FY 21 |
FY 22 |
FY23 |
| Real GDP growth (%) |
4.2 |
(7.3) |
8.7 |
7.2 |
Growth of the Indian economy quarter by quarter, FY 2022-23
|
Q1FY23 |
Q2FY23 |
Q3FY23 |
Q4FY23 |
| Real GDP growth (%) |
13.1 |
6.3 |
4.4 |
6.1 |
Indias exports (merchandise and services) in April-February
2022-23 grew by ~16% over the same period of the previous year. Steady domestic demand
amidst global slowdown resulted in a ~20% growth in imports during April-February 2022-23
over the corresponding period of the previous year.
Till Q3, FY23, Indias current account deficit reduced to $18.2
billion, or 2.2% of GDP from $22.2 billion (2.7% of GDP) a year ago. Indias fiscal
deficit was estimated in nominal terms at ~ RS.7.55 lakhs crore and 6.4% of GDP for the
year ending March 31, 2023. Indias headline foreign direct investment (FDI)
increased from US$81.97 billion in 20-21 to a record $83.6 billion in 21-22, a 1.95% Y-o-Y
increase due to 100% FDI approval via automatic route in sectors such as insurance, civil
aviation, coal, telecom, pharma, infrastructure.
After three consecutive years of rise, Indias foreign exchange
reserves declined by around $ 70 billion in 2022 amid rising inflation and interest rates.
The countrys forex reserves, which stood at $606.47 billion on 1 April 2022,
declined to $578.44 billion on March 31, 2023. Indias currency weakened from RS.5.91
to a US dollar to RS.2.34 as on 31 March 2023 due to a stronger dollar and weaker current
account deficit.
The countrys retail inflation, measured by the consumer price
index (CPI), slipped 16-month low to 5.66% in March 2023. Inflation data on the wholesale
Price Index (which calculates the overall prices of goods before selling at retail prices)
eased to 4.73% during the period. In 2022, CPI hit its highest of 7.79% in April 2022; WPI
reached its highest of 15.88% in May 2022.
In 2022-23, total receipts (other than borrowings) were estimated at
6.5% higher than the Budget estimates. Tax-GDP ratio was estimated to have improved by
11.1% Y-o-Y in RE 2022-23.
For 2022–23, the government collected RS.6.61 lakhs crore in
direct taxes, according to data from the Finance Ministry, around 17.6% higher than
collections in the previous fiscal.
Per capita income almost doubled in nine years to RS.72,000 during the
year under review, a rise of 15.8% over the previous year. Indias GDP per capita was
2,320 USD (March 2023), close to the magic figure of $2500 when consumption spikes across
countries.
Outlook: India is expected to grow 6.8% in FY2024, catalysed by 35%
capital expenditure growth by the government.
Global sugar scenario
The global sugar market size reached 177.3 million tonnes in 2022 and
is anticipated to reach ~196 million tonnes by 2028, exhibiting a growth rate (CAGR) of
1.64% during 2023-2028. Global production of sugar reached 177.3 million tonnes against
173.5 million tonnes in the previous season. Exports are projected higher as the drop in
India is more than o_set by higher exports from Brazil and Thailand.
During the year under review, the global sugar consumption was
estimated at 175.7 million tonnes, as compared to 173.8 million tonnes in 2021- 22 on
account of growth in markets like China, Indonesia and Russia. Stocks are estimated lower
as growth in global consumption exceeds the rise in production.
Higher exports from Brazil and Thailand are expected to o_set the
decline in India. Stocks are expected to remain at a low level as growth in global
consumption surpasses production growth.
This would lead to a global surplus of ~1.6 million tonnes as compared
to deficit of ~0.3 million tonnes last year.
India sugar industry overview
Sugar production in India is expected to decline ~10.1% from the
initial estimates of 36.5 million tonnes to 32.8 million tonnes, mainly on account of
yield impact in Maharashtra and Karnataka. Sugar consumption is expected at 28.0 million
tonnes in 2022-23 as compared to 27.4 million tonnes in the previous season. Indias
sugar inventory is expected to decrease from 7.0 million tonnes in 21-22 to 5.7 million
tonnes in 22-23 after considering the sugar exports of 6.1 million tonnes and diversion of
4.0 million tonnes equivalent of sugar for ethanol production.
The domestic sugar prices remained stable with su_cient availability.
Indian sugar millers received attractive realizations (RS.7-41 per Kg for export compared
to domestic realisations of RS.3-36 per Kg). The top three states (Uttar Pradesh,
Maharashtra and Karnataka) contributed 85% of Indias total sugar production.
Sugar production in Uttar Pradesh was expected to increase slightly to
10.5 million tonnes in the 2022-23 season compared to 10.2 million tonnes in the previous
season.
Indian sugar Balance Sheet (million tonnes)
|
2017-18 |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
2022-23 |
| Opening stock as on 1st October |
3.9 |
10.7 |
14.6 |
10.7 |
8.2 |
7.0 |
| Production during the season |
32.5 |
33.2 |
27.4 |
31.2 |
35.8 |
32.8 |
| Imports |
0.2 |
- |
- |
- |
- |
- |
| Total availability |
36.6 |
43.9 |
42.0 |
41.9 |
44.0 |
39.8 |
| Consumption/ sales |
25.4 |
25.5 |
25.3 |
26.6 |
27.4 |
28.0 |
| Exports |
0.5 |
3.8 |
6.0 |
7.2 |
11.1 |
6.1 |
| Closing stock as on 30th September |
10.7 |
14.6 |
10.7 |
8.2 |
5.5 |
5.7 |
| Stock to use ratio |
42% |
57% |
42% |
31% |
20% |
20% |
Note: Opening inventory for sugar season 2022-23 has been recently
re-stated by Government of India from 5.5 million tonnes to 7.0 million tonnes.
Sugar exports and imports
India is the second largest exporter of sugar in the world. Indian
sugar exports touched an all-time high of around 11.1 million tonnes in the 2021-22 sugar
season. The country is expected to export around 6.1 million tonnes of sugar in the
2022-23 sugar season. On 5th November, 2022, the sugar export policy of 2022-23
was announced which allowed exports of 60 lakhs tonnes of the sweetener on a quota-basis
till 31st May, 2023.
Sugar exports (in million tonnes)
| Sugar Season |
Export |
| 2018-19 |
3.8 |
| 2019-20 |
6.0 |
| 2020-21 |
7.2 |
| 2021-22 |
11.1 |
| 2022-23 (estimated) |
6.1 |
Market dynamics
The government hiked the fair and remunerative price (FRP) of sugarcane
for the 2022-23 sugar season by RS.5 per quintal to RS.05. For every 0.1% rise in recovery
over 10.25%, a premium of Rs..05
per quintal will have to be paid to the farmer, while for every 0.1%
reduction in recovery below 10.25%, fair and remunerative price paid will be reduced by
Rs..05 per quintal. The government decided to fix a price of RS.82.12 per quintal in
2022-23 compared to RS.75.50 per quintal in 2021-22 in case of 9.5% recovery for the
farmers who dont have very high yielding varieties.
| Year |
Rs. per quintal |
| 2018-19 |
275 |
| 2019-20 |
275 |
| 2020-21 |
285 |
| 2021-22 |
290 |
| 2022-23 |
305 |
Indian ethanol sector overview
India is the worlds fifth largest producer of ethanol after the
US, Brazil, European Union and China. Ethanol is largely used for blending with petrol.
India is expected to save an estimated $ 4 billion annually due to the blending of petrol
with 20% ethanol. This increased blending is expected to enhance the use of renewable
energy in the worlds third-biggest oil importer and consumer Oil marketing companies
announced a proposed allocation of around 512 crore litres at di_erent OMCs location
across the country. Sugar mills are expected to divert about 40 lakhs tonnes of sugar
towards ethanol production. The government has increased the purchase price of ethanol
across all categories by up to Rs.~2 per litre for the 2022-23 Ethanol supply year. The
purchase rate for ethanol produced from C-heavy molasses was increased to RS.9.41 per
litre from RS.6.66 litre and for B-heavy molasses was increased to RS.0.73 per litre from
RS.9.08 per litre.
India achieved the target of supplying petrol mixed with 10% ethanol
ahead of schedule in June 2022. The country has advanced the target of making petrol with
20% ethanol by five years to 2025. Reduced greenhouse gas emissions of 27 lakhs tonnes and
also led to farmers being paid in time.
Ethanol capacity requirement to achieve 20%
| Year |
Capacity requirement (in million
litres) |
|
Grain |
Molasses |
Total |
| 2019-20 |
2580 |
4260 |
6840 |
| 2020-21 |
2600 |
4500 |
7100 |
| 2021-22 |
3000 |
5190 |
8190 |
| 2022-23 |
3500 |
6250 |
9750 |
| 2023-24 |
4500 |
7250 |
11750 |
| 2024-25 |
7000 |
7300 |
14300 |
| 2025-26 |
7400 |
7600 |
15000 |
(Source: Niti Ayog)
Co-generation
Sugar cane crushing generates bagasse, which is used in power
co-generation. The prudent use of bagasse marked by reduced transmission and distribution
losses, no carbon emissions, low fuel cost, fuel diversity and energy security represents
a cleaner alternative energy source.
Government initiatives
The government announced the sugar export policy with the focus to
ensure price stability in the sugar sector in the interest of domestic consumers. By
restricting sugar exports, domestic prices will remain under control and no major
inflationary trends will arise in the domestic market. The policy will also ensure the
availability of su_cient sugarcane/ sugar/ molasses for ethanol production. By
facilitating the diversion of sugar to ethanol production and export of surplus sugar as
per availability, the government has taken care of about 5 crore sugarcane farmer families
as well as 5 lakhs sugar mill workers along with a whole ecosystem of sugar sector,
including ethanol distilleries, taking them to a new growth trajectory.
More than 3,600 lakhs tonnes of sugarcane is expected to be purchased
by sugar mills in 22-23 for which the total remittance to the sugarcane farmers is
expected to be more than Rs.,20,000 crore. The Government, through its pro-farmer
measures, will ensure that sugarcane farmers get their dues on time. The industry cleared
more than 90% cane dues in the 21-22 sugar season, which is higher than the earlier
seasons.
Company overview
Balrampur Chini Mills Limited is among leading sugar mills in India.
The Company is a comprehensive and integrated sugar producer with substantial interests in
sugar, ethanol and power co-generation. Over the years, the contribution of non-sugar
revenues in the total revenues of the Company enhanced, expanding the
Companys profile and reinforcing its counter cyclicality.
The Company possesses ten manufacturing facilities across the East and
Central Uttar Pradesh. The Companys operational capability resulted in its ability
to generate more from less. As a result, the Company utilises optimal resources to
generate superior performance, which is evident through improvements in recovery,
operating e_ciency, cost management, gearing, cash flows and operating margins, making the
Company an eminent value-creator in the countrys agriculture sector, thereby taking
care of Purpose, People and Planet.
SWOT analysis of Indian sugar industry
| Strengths ? Sugar cane is one of the most profitable
cash crops in India ? India is poised as the largest producer and consumer of sugar
globally ? The sugar industry reinforces downstream sectors and Indias vast
rural economy ? The Indian sugar industry is considered as the driver of local
economy by the government ? The Indian sugar sector provides livelihood to around
50 million sugarcane farmers and o_ers direct employment to 5 lakhs workers. |
Weakness ? Cane prices are relatively
high compared to global standards ? Prevalence of outdated technology in many
companies across the sector ? Economic instability of many mills |
Opportunities ? Indias per
capita consumption is around 20 Kg of sugar per person against the global average of 23
Kgs ? Advanced farming practices can result in substantial cane yield and recovery
growth ? Compulsory ethanol blending program of the government is fueling ethanol
production ? Technological upgradations can result in greater by-product use |
Threats ? Climate change has impacted
cropping and yields ? Political agendas have repeatedly a_ected the sector ?
The sector is highly dependent on monsoon ? Absence of required infrastructure
makes cane farming reliant on climatic fluctuations. |
Financial overview
Analysis of the profit and loss statement
Revenues
Revenues from operations stood at RS.665.86 crore in FY22-23 as
compared to RS.846.03 crore in FY21-22, reflecting a decline of 3.7%.The revenue from
distillery and other segment improved over the previous year except for the sugar
business, wherein revenues declined due to lower sugar volume, which was partially o_set
by higher sugar realization. Other Income of the Company reported a 31.1% growth and
accounted for a 1.3% share of the Companys total income, reflecting the
Companys dependence on core business operations.
Expenses
Total expenses increased by 1.0% from Rs.,291.06 crore in 21-22 to
Rs.,331.68 crore in 22-23. Raw material costs accounted for a 73.3% share of the
Companys revenue from operations. Employee expenses accounted for a 7.8% share of
the Companys revenues from operations and increased by 18.2% from RS.07.80 crore in
21-22 to RS.63.79 crore in 22-23. The increase in employee cost was due to the normal
increase in salaries and towards a retrospective revision of wages by the Government of
Uttar Pradesh relating to wage board employees.
Analysis of the Balance Sheet
Sources of funds
The capital employed in the Company increased 17.4% to RS.561.74 crore
as on 31 March, 2023 from Rs.,034.22 crore as on 31 March, 2022 owing to new distillery
capacities and also to modernize its legacy sugar units. Return on capital employed, a
measurement of returns derived from every rupee invested in the business, declined 817
basis points from 20.72% in
21-22 to 12.55% in 22-23. Full operational benefit of incremental
capacity will start accruing from FY 23-24. In addition, profitability from existing
operations were on the lower side.
The net worth of the Company increased by 4.3% from Rs.,705.16 crore as
on 31 March, 2022 to RS.822.43 crore as on 31 March, 2023 owing to a plough back of
profits. The Companys equity share capital comprised 201749245 equity shares of Rs.
each.
Long-term debt of the Company increased to RS.17.05 crore as on 31
March, 2023 from RS.56.95 crore as on 31 March, 2022 owing to borrowings for funding the
capex. The long-term debt-equity ratio of the Company stood at 0.21 in 22-23 compared to
0.09 in 21-22. The ratio is still at a very comfortable level. Finance costs of the
Company increased by 57.6% from RS.0.87 crore in 21-22 to RS.8.65 crore in 22-23 owing to
higher borrowings for funding the capex and due to impact of interest rates hike,
especially to fund working capital. The Companys gross debt (including working
capital) / equity ratio was comfortable 0.65 at the close of 22-23 (0.44 at the close of
21-22).
Applications of funds
Fixed assets (net block) of the Company increased by 42.7% from
Rs.,837.95 crore as on 31 March, 2022 to RS.622.88 crore as on 31 March, 2023 owing to an
increase in capex during the year. Depreciation on assets increased by 13.7% from RS.13.86
crore in 21-22 to RS.29.50 crore in 22-23 owing to an increase in fixed assets during the
year under review.
Investments
Non-current investments of the Company increased from RS.57.50 crore as
on 31 March, 2022 to
RS.75.00 crore as on 31 March, 2023 owing to investment in an associate
of the Company viz. Auxilo Finserve Pvt. Ltd..
Working capital management
Current assets of the Company increased by 8.5% from Rs.,376.52 crore
as on 31 March, 2022 to Rs.,577.74 crore as on 31 March, 2023 primarily owing to higher
inventory. The current and quick ratios of the Company stood at 1.31 and 0.13,
respectively at the close of 22-23 compared to 1.60 and 0.12, respectively at the close of
21-22. Inventories including raw materials, work-in-progress and finished goods among
others increased by 5.4% from Rs.,200.51 crore as on 31 March, 2022 to Rs.,318.68 crore as
on 31 March, 2023. The inventory turnover ratio stood at 2.06 in 22-23 as compared to 2.12
in 21-22. In line with decline in revenues, trade receivables declined by 8.7% from
RS.36.72 crore as on 31 March, 2022 to RS.24.82 crore as on 31 March, 2023. Trade
receivables turnover ratio stood at 37.38 as on 31 March, 2023 as compared to 35.44 as on
31 March, 2022.
Margins
Cost absorption impact due to lower revenues impacted margins during
the year. The EBITDA margin of the Company reduced by 346 basis points from 14.44% in
21-22 to 10.98% while the net profit margin of the Company reduced by 471 basis points to
5.91% compared to 10.62% in 21-22.
Key ratios
| Particulars |
22-23 |
21-22 |
| Operating profit margin (%) |
10.98 |
14.44 |
| Net profit margin (%) |
5.91 |
10.62 |
| Debt-equity ratio |
0.21 |
0.09 |
| Return on equity (%) |
9.78 |
19.34 |
| Return on capital employed (%) |
12.55 |
20.72 |
| Book value per share (Rs.) |
142.53 |
135.18 |
| Earnings per share (Rs.) |
13.51 |
24.86 |
| Debtors turnover ratio |
37.38 |
35.44 |
| Inventory turnover ratio |
2.06 |
2.12 |
| Interest coverage ratio |
10.53 |
22.67 |
| Current ratio |
1.31 |
1.60 |
| Debt service coverage ratio |
1.93 |
4.52 |
| Return on networth |
9.97 |
19.73 |
Internal control systems and their adequacy
The Companys internal audit system is being continuously
monitored and updated to ensure that assets are safeguarded, established regulations are
complied with and pending issues are addressed promptly. The audit committee reviews
reports presented by the independent internal auditors on a routine basis. The committee
makes note of the audit observations and takes corrective actions, if necessary.
It maintains constant dialogue with statutory and internal auditors to
ensure that internal control systems are operating e_ectively.
Human resources
The Company believes that the quality of the employees is the key to
its success and is committed to equip them with skills, enabling them to seamlessly evolve
with ongoing technological advancements.
During the year, the Company organised training programmes in di_erent
areas such as technical skills, behavioural skills, business excellence, general
management, advanced management, leadership skills, safety, values and code of conduct.
The Companys employee strength stood at 6270 as on 31 March, 2023.
+91-9892691696
