Balrampur Chini Mills Ltd Management Discussions

Global economic review Overview

Global growth is forecast to slow from 3.5% in 2022 to estimated 3% in 2023. Asia is projected to rise from 4.5% in 2022 to 5.2% in 2023. Asia is expected to contribute significantly to the global growth in 2023, despite the weaker recovery in China, Ukraine-Russia war, weakness in USA, rising energy cost in Europe and increased logistic cost due to Red Sea crisis. Despite the disruptions in energy and food markets caused by the war, and the unprecedented tightening of global monetary conditions to combat decades-high inflation, the global economy has slowed, but not stalled. Growth in advanced economies is estimated to decline from 2.6% in 2022 to 1.5% in 2023 and further, 1.4% in 2024 as policy tightening takes effect. Emerging market and developing countries are projected to report a modest decline in economic growth from 4.1% in 2022 to 4.0% in 2023 and 2024. Global inflation is projected to decline steadily from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024 on account of a tighter monetary policy coupled with relatively lower international commodity prices. Core inflation, excluding food and energy prices, is also projected to decline albeit more gradually than inflation. The US Federal Reserve approved a much-anticipated interest rate hike that raising the benchmark borrowing costs to their highest in over 22 years.

Global trade in goods was expected to have decreased by an approximate US$2 trillion in 2023; trade in services increased by an estimated US$500 billion.

The average cost of Brent crude oil in 2023 stood at $83 per barrel, a downturn as compared to $101per barrel in 2022. This decrease comes on account of from Russia finding crude oil destinations outside the European Union and global crude oil demand falling short of expectations.

Global equity markets ended 2023 on a strong note, with major global equity benchmarks achieving double-digit returns. This outperformance was driven by a downturn in global inflation, slide in the dollar index, declining crude prices and higher expectations of rate cuts by the US Fed and other Central banks.

Regional growth (%)	2023	2022
World output	3.0	3.5
Advanced economies	1.5	2.6
Emerging and developing economies	4.0	4.1

Performance of major economies, 2023

United States	China	United Kingdom	Japan	Germany
Reported GDP growth of 2.5% in 2023 compared to 1.9% in 2022	GDP growth was 5.2% in 2023 compared to 3% in 2022	GDP grew by 0.4% in 2023 compared to 4.3% in 2022	GDP grew 1.9% in 2023 unchanged from 1.9% in 2022	GDP contracted by 0.3% in 2023 compared to 1.8% in 2022

Outlook

Asia is poised to continue leading global growth in 2024-25. Infiation is expected to ease gradually as cost pressures decreases; headline inflation in G20 countries is projected to decline. Amid high inflation and monetary tightening, the global economy has shown resilience as the growth is expected to be stabilised at previous levels over next two years.

Indian economic review Overview

In FY2023-24, India?s economy demonstrated remarkable resilience and adaptability in the face of global uncertainties. The period was marked by several notable developments in inflation management, trade dynamics, capital inflows, and currency stability, all of which contributed to the country?s robust economic performance.

In India, retail inflation in FY2023-24 experienced a noteworthy decline, reaching its lowest level since the COVID-19 pandemic. The RBI has projected CPI inflation for FY2024-25 at 4.5%, considering various factors such as geopolitical conflicts, potential adverse domestic weather conditions, and the India Meteorological Department?s (IMD) forecast of an above-normal monsoon this year.

Global trade experienced a contraction in 2023. This slowdown led to a moderation in India?s merchandise exports and imports. As a result, the merchandise trade deficit narrowed in FY 23-24, with exports showing a smaller contraction than imports.

Growth of the Indian economy
	FY 21	FY 22	FY 23	FY 24
Real GDP growth (%)	-6.6%	8.7	7.0	8.2

Growth of the Indian economy quarter by quarter, FY 23-24

	Q1 FY 24	Q2 FY 24	Q3 FY 24	Q4 FY 24
Real GDP growth (%)	8.2	8.1	8.6	7.8

India?s capital inflows experienced a significant turnaround in FY2023-24. The country?s foreign exchange reserves reached an all-time high in March 2024, sufficient to cover 11 months of projected imports and exceeding 100% of total external debt.

The H/US$ exchange rate remained within the range of H82-83.5/US$, making it one of the least volatile major currencies among its emerging market peers and even some advanced economies in FY2023-24. The rupee also exhibited the lowest volatility compared to the previous three years.

Looking ahead, robust foreign inflows and manageable trade deficits are expected to stabilise the rupee. This stability, along with strong economic indicators and strategic policy measures, positions India favourably in the global economic landscape.

Despite global challenges, India?s economic resilience and strategic measures support its growth trajectory. The focus will remain on leveraging strengths in inflation management, foreign exchange reserves, and currency stability to navigate uncertainties and drive sustainable growth.

India experienced its weakest monsoon in the last five years in 2023, with August being the driest month in a century. The nation received only 94% of its average long-term rainfall from June to September. Total foodgrain production is estimated at 329 MMT, which is slightly lower than foodgrain production of 2022-23 while higher by 21 MMT from average foodgrain production of last 5 years (2018-19 to 2022-23) of 308 MMT. Total rice production is estimated at 137 MMT as compared to 136 MMT in 2022-23, showing an increase of ~ 1 MMT. Production of wheat is estimated at 113 MMT which is higher by 2.3 MMT from previous year?s wheat production. Despite persistent global challenges, overall exports (merchandise + services) estimated to surpass last year?s highest record. It is estimated to reach US$ 776.68 billion in FY 23-24 as compared to US$ 776.40 billion in FY 22-23. The estimated value of services export for FY 23-24 (April-March) is US$ 339.62 billion as compared to US$ 325.33 billion in FY 22-23 (April-March). Main drivers of merchandise export growth in FY 23-24 include electronic goods, drugs and pharmaceuticals, engineering goods and iron ore, among others.

India?s net direct tax collections saw a 17.7% increase to H19.58 lakh crore in FY 23-24. Gross GST collections reached H20.2 lakh crore, an 11.7% rise, with an average monthly collection of H1.68 lakh crore, exceeding the prior year?s average of H1.50 lakh crore.

Real GDP, or GDP at constant prices, rose from H160.71 lakh crore in 2022-23 (provisional GDP estimate released on May 31, 2023) to an estimated H173.82 lakh crore in 2023-24. The growth in real GDP during 2023-24 was 8.2%, up from 7.0% in 2022-23. Nominal GDP, or GDP at current prices, was estimated at H295.36 lakh crore in 2023-24, compared to the provisional estimate of H269.50 lakh crore for 2022-23. Additionally, the gross non-performing asset (NPA) ratio for scheduled commercial banks improved from 3.9% in March 2023 to 2.8% in March 2024.

India reached a critical point in its development trajectory, characterised by rapid urbanisation, industrialisation, rising household incomes and increased energy consumption. By 2023-24, India became the fifth-largest economy globally, boasting a GDP of US$3.6 trillion. During the fiscal year 2023-24, the Nifty 50 index saw a remarkable 30% growth, positioning India?s stock market as the fourth-largest worldwide, with a market capitalisation of US$4 trillion. There was a notable rise in foreign investment in Indian government bonds towards the end of 2023. India was ranked 63^rd among 190 countries in the World Bank?s ease of doing business index. Additionally, India?s unemployment rate fell to 3.2% in 2023, a significant decrease from 6.1% in 2018.

Outlook

In 2023, India effectively navigated through global economic challenges and is set to maintain its position as the world?s fastest-growing major economy. This growth is supported by increasing demand, moderate inflation, stable interest rates and strong foreign exchange reserves. The Indian economy is expected to exceed US$ 4 trillion by the fiscal year 2024-25.

Union Budget FY 24-25

The Interim Union Budget for 2024- 25 emphasised sustained capital expenditure, targeting infrastructure development, solar energy projects, tourism enhancement, healthcare system improvements and technological advancements. The Budget allocated 54% of its total estimated expenditure to the top 13 ministries. Notably, the Ministry of Defence received the largest share with an allocation of H6,21,541 crore, representing 13% of the total budgeted expenditure of the central government. Significant allocations were also made to the ministries of Road Transport and Highways (5.8%), Railways (5.4%), and Consumer Affairs, Food and Public Distribution (4.5%).

Global sugar sector review

Global production is estimated to be up ~1 million tonnes year-on-year to 179.5 million tonnes in 2023-24 as higher production in Brazil is expected to more than cover up a decline in Thailand and India. Global sugar consumption is expected to reach a new record due to growth in markets including India and Pakistan. Global sugar consumption is pegged to surpass 180 million tonnes in 2023-24. Global sugar consumption grew even during high prices and this trend is expected to continue alongside population growth, leading to an additional 2 million tonne consumption growth in 2024-25.

The global sugar market is expected to grow at a CAGR growth rate of 1.4% during 2024-2032. Based on the product type, the global sugar market has been divided into white sugar, brown sugar and liquid sugar where white sugar holds the largest market share. The global sugar market is experiencing a significant rise as key players operating in the industry are including organic sugar varieties in their existing portfolios to attract health-conscious consumers. Moreover, these companies are focusing on developing advanced production facilities to increase overall production less expenditure on raw materials and labour. Besides, the introduction of innovative products and technological advancements to reduce costs and increase sugar sales is offering lucrative growth opportunities to key players.

Performance of major sugar growing countries

United States

Sugar production is estimated fiat at 8.4 million tonnes. Sugar imports are estimated down 10% to 2.8 million tonnes based on projected quota programs set at minimum levels consistent with World Trade Organisation and free-trade agreement obligations and on projected imports from Mexico, re-exports and high-tier tari_ imports. Sugar consumption is expected to slightly higher while stocks are reduced with the lower imports, modest growth in consumption and decline in production.

Brazil

Sugar production for the year 2023-24 is estimated to rise by ~9 million tonnes to a near-record 42.5 million tonnes as favorable weather and increased area are expected to result in additional sugarcane available for crushing.

Favorable sugar prices encouraged farmers to use their land for growing sugarcane instead of grains. The sugar/ ethanol production mix is expected to favor sugar relative to the previous season; sugar mix is expected to go up towards 51-52% against Ethanol for the year 2024-25. Consumption and stocks are down while record exports are expected with higher supplies. Sugar production for 2024-25 is expected to drop to ~41.5 million tonnes.

China

The country?s sugar production is anticipated to increase to ~10.1 million tonnes as favorable weather is expected to result in higher sugarcane yields. Sugar consumption is estimated to remain unchanged. Sugar imports are expected to rise to help fill the gap between supply and demand, but total supply remains tight due to curbed imports related to high global sugar prices. Stocks are expected to reduce by 50% due to lower beginning stocks and increasing number of stocks sourced to support consumption. Sugar production for 2024-25 is expected to increase marginally to ~10.5 million tonnes.

Thailand

Sugar production in Thailand in 2023-24 is estimated to touch to ~8.7 million tonnes due to strong rains in the end part of 2023 monsoons during the intensive growth stage. Sugar consumption is expected to increase in line with anticipated economic recovery and tourism that will boost domestic demand for sugar. Exports are estimated higher and are expected to exceed production, while stocks are projected to drop sharply following strong domestic and export demand. Sugar production for 2024-25 is expected to increase by ~22% to ~10.6 million tonnes.

EU+ UK

The beet processing season for 2023-24 concluded in the EU but remains ongoing in the UK. Total sugar production estimate was ~16.7 million tonnes. Looking ahead to the 2024-25 season, an increasing number of producers are announcing higher prices for 2023 beets, encouraging farmers to expand cultivation. Notably, larger producer countries such as France and Germany are anticipated to modestly expand their cultivation areas by approximately 2.2% and 1.5% respectively, while Belgium, the Netherlands, and Austria are expected to experience substantial increases. Considering five-year yield averages, it is anticipated that sugar production for the EU and UK will reach approximately ~17 million tonnes in 2024-25.

Pakistan

Sugar production is estimated to reach ~6.8 million tonnes on higher sugarcane harvested area and better yield prospects. Sugar consumption is estimated to increase in line with population growth. Due to an expected production upgrade, exports of ~1 million tonnes could be a possibility in the ongoing sugar year. However, Pakistan Government is worried about the domestic price increase and hence no final decision has been taken as yet.

Mexico

Sugar production is estimated ~5.0 million tonnes in 2023-24. For 2024-25 the forecast is ~5.5 million tonnes on account of unseasonal rains in several sugarcane-producing states and expected changes in weather conditions as La Ni?a phenomenon could begin towards the middle of 2024.

Indian sugar sector review

India?s sugar production in marketing year (MY) 2023-2024 (October-September) is expected to reach 32 million metric tonnes. Sugar production in MY 2022-23 was 32.8 million tonne as adverse weather conditions in Maharashtra during the vegetative-growth stage led to a significant drop in cane yields following consecutive seasons of record yields. India?s sugar exports in MY 2023-2024 are estimated to be negligible as the Indian government could maintain tight export controls to prevent any domestic shortages or price fluctuations during the national election year. Sugar consumption in the year is expected to continue its upward trajectory and reach ~28.7 million tonnes as India?s ethanol and potable alcohol industries support growing demand of sugarcane and derivatives.

According to FAS New Delhi, India?s sugarcane planted area for MY 2023/2024 is expected to slightly increase to 5.6 million hectares and production to reach to 32 million tonnes following the significantly strong crushing tail in Maharashtra and Karnataka. Despite the increased potential on account of adverse weather conditions from the El Ni?o weather phenomenon, the Indian government?s market price supports and augmented diversion of sugar to both ethanol and potable alcohol production will ensure sugarcane remains as the most remunerative crop for farmers.

Indian sugar sector balance sheet

Particulars	SS2020-21	SS2021-22	SS2022-23	SS2023-24
Opening stock	10.7	8.2	7.0	5.55
Production during the season	31.2	35.8	32.8	32.00
Imports	-	-	-	-
Total availability	41.9	44.0	39.8	37.55
Consumption	26.6	27.4	27.85	28.70
Exports	7.2	11.1	6.40	-
Closing stock	8.2	5.5	5.55	8.85
Stock to use ratio	31%	20%	20%	31%

Note: Opening inventory for sugar season 2022-23 has been re-stated by Government of India from 5.5 million tonnes to 7.0 million tonnes

Performance of major sugar growing States

As per the latest data, 121 operational units in Uttar Pradesh has crushed ~98 million tonnes of sugarcane to produce 10.35 million tonnes of sugar in 2023-24 sugar season.

In Maharashtra, 207 mills operated compared to 217 mills in the previous year. The State?s cane crushing is estimated to reach to ~106 million tonnes and about ~11.0 million tonnes of sugar has been produced. During the previous year, around 105 million tonnes of sugarcane was crushed to produce ~10.5 million tonnes of sugar. The average sugar recovery rate in the State has gone up to 10.25% from ~10.0% in the previous year.

In Karnataka, sugarcane crushed fell to ~54 million tonnes in sugar season 2023-24. Sugar production in the State is expected to reach ~5.25 million tonnes including the special session.

Sugar exports and imports

During the marketing year 2023-2024, India?s sugar exports was restricted on account of higher domestic demand and the likelihood that the Indian government maintains export caps to control inflation. India extended curbs on sugar export for the 2023-24 sugar season according to a federal notification, a measure that may result in a complete halt of overseas sales for the first time in seven years amid an estimated fall in domestic output and the worst global shortage in decades. According to the Director General of Foreign Trade,

India had earlier restricted exports of the sweetener until October 31, 2023, and those curbs have been extended until further orders. The restrictions on shipments abroad are aimed at boosting domestic availability during 2023-24 and keeping prices stable during the ongoing festive season, when demand typically soars.

The decision is expected to worsen a global supply crunch due to a smaller crop since India is a major international supplier. The sweetener is one among 22 notified food items deemed ‘essential? because consumers are sensitive to a rise in its prices. A de_cient and uneven monsoon this year coupled with lower plantation across the Deccan plateau, a global weather anomaly is expected to reduce the output of sugarcane. India is unlikely to allow any export this season to stem inflation. The country had limited overseas shipments to 6.1 million tonnes in 2022-23, compared to 11.1 million tonnes in 2021-22. India?s decision to curb export also comes of the back of higher demand for ethanol under a high-priority national programme.

Sugar export (in million tonnes)

Sugar season	Export
2018-19	3.8
2019-20	6.0
2020-21	7.2
2021-22	11.1
2022-23	6.1
2023-24 (Estimated)	-

Market dynamics

The government approved the fair and remunerative price (FRP) of sugarcane for the sugar season 2023-24 at H315 per quintal for a basic recovery rate of 10.25%. The government has approved to provide a premium of H3.07 per quintal for each 0.1% increase in recovery over and above 10.25% and reduction in fair remunerative price by H3.07 per quintal for every 0.1% decrease in recovery. Moreover, with a view to protect the interest of sugarcane farmers, the government has decided that there shall not be any deduction in case of sugar mills where recovery is below 9.5%. Such farmers are expected to get H291.975 per quintal for sugarcane in ensuing sugar season 2023-24 in place of H282.125 per quintal in sugar season 2022-23.

The cost of production of sugarcane for the sugar season 2023-24 is H157 per quintal. This fair and remunerative price of H315 per quintal at a recovery rate of 10.25% is higher by 100.6% over production cost. The fair and remunerative price for sugar season 2023-24 is 3.28% higher than sugar season 2022-23. The fair and remunerative price of sugarcane for sugar season 2024-25 has been increased to H340 per quintal.

The fair and remunerative price approved shall be applicable for the purchase of sugarcane from the farmers in the sugar season 2023-24 (with effect from 1^st October 2023) by sugar mills. The fair and remunerative price has been determined on the basis of recommendations of the Commission for Agricultural Costs and Prices (CACP) and after consultation with state governments and other stakeholders.

Fair and remunerative price

Year	H per quintal
2018-19	275
2019-20	275
2020-21	285
2021-22	290
2022-23	305
2023-24	315
2024-25	340

Indian ethanol sector review

India?s grain-based distilleries witnessed a significant capacity growth from ~200 crore litre in 2023 to 433 crore litres. The government has allowed sugar mills to use both cane juice and B-heavy molasses to produce ethanol but capped the diversion of sugar to 17 lakh tonnes (expected to reach ~18.2 lakh tonnes) for the ongoing 2023-24 supply year. The government permitted to convert 6.75 lakh tonnes of B heavy Molasses above the announced 17 lakh tonnes stipulated diversion.

The government?s target for attaining 20% ethanol-blended petrol by 2025-26 and 30% by 2029-30 is expected to face setbacks due to the restriction in ethanol production from sugarcane juice in 2023-24. Domestic ethanol production is expected to decline by 20%, which could bring the ethanol blending rate to less than 10% in the ethanol supply year 2023-24 However, the supply of ethanol from existing offers received by oil marketing companies from C heavy molasses and grains will somewhat compensate this decline from Juice based and B-heavy based Ethanol. Out of the total ethanol produced in the country, ethanol from cane juice accounted for ~25% while that from B heavy molasses accounted for around ~46%. Ethanol from C heavy molasses and grains accounted for the rest of the ethanol year 2022-23.

Co-generation

Crushing sugar cane produces bagasse, a valuable resource utilised in power co-generation. By utilizing bagasse, significant reductions in transmission and distribution losses can be achieved while avoiding carbon emissions. This sustainable approach offers a low-cost, diverse fuel source, enhancing energy security and providing a cleaner alternative energy solution.

Government policies Sugar subsidy scheme

The Indian government reviewed the existing sugar subsidy scheme for the distribution of sugar through Antyodaya Anna Yojana program (uplifting the poorest food plan) at H18.50/kg ($0.24/ kg), providing 1.0 kg of sugar per family per month. Furthermore, States and Union Territories are permitted to add on any extra expenses related to shipping and handling fees directly to the beneficiary to incur directly to the retail issue price of H13.50/kg ($0.16/kg)

National Biofuel Policy

The Indian government set a target for the national average ethanol blend rates in petrol of 10% and 20% by 2022 and 2025 under the 2018 National Biofuel Policy. The program?s objective is to boost the production of ethanol from sugarcane, broken grains and other feedstocks. To achieve this target, the Indian government is encouraging sugar mills and distilleries to divert surplus sugar derivatives to produce ethanol under the ethanol blending program. India achieved its target, reaching a national blending average of 10.1% in June 2022 and additional projects are in place to reach 20% ethanol blending. The Ministry of Petroleum and Natural Gas increased procurement prices for ethanol derived from sugarcane derivatives under the EPB program for ethanol supply year (ESY) 2022-23 (December-November).

(Source: USDA)

Company review

Balrampur Chini Mills Limited stands as a frontrunner among India?s leading sugar mills. The Company operates as a fully integrated sugar producer, boasting substantial involvement in sugar, ethanol and power co-generation. Over time, the Company?s non-sugar revenues have significantly contributed to its overall income, broadening its scope and fortifying its resilience against market fluctuations.

With ten manufacturing units spread across East and Central Uttar Pradesh, the Company?s operational prowess has been pivotal. The Company excels in maximizing output from minimal resources, showcasing superior performance in various facets including recovery rates, operational efficiency, cost management, financial leverage, cash flows and operating margins. This pro_ciency solidi_es the Company?s position as a significant value-generator in the agricultural sector, prioritizing Purpose, People and Planet along the way.

SWOT analysis of the Indian sugar industry

Strengths

Sugar cane is among the most profitable cash crops in India

India stands as the second largest producer and largest consumer of sugar worldwide

The sugar industry supports downstream sectors and enhances the country?s extensive rural economy.

The government views the Indian sugar industry as a key contributor to the local economy.

The Indian sugar sector provides livelihood to approximately 50 million sugarcane farmers and directly employs ~5 lakh workers.

Weaknesses

Cane prices in India are high compared to international standards.

Many companies in the sector use outdated technology.

Many mills face economic instability.

Opportunities

India?s per capita sugar consumption is approximately 20 kg per person, compared to the global average of 23 kg.

Implementing advanced farming techniques could significantly increase cane yield and recovery.

The government?s mandatory ethanol blending program is boosting ethanol production.

Technological upgrades could enhance the utilisation of by-products.

Threats

Climate change has affected crop patterns and yields.

Political agendas have consistently influenced the sector.

The sector relies on monsoon rains.

A lack of necessary infrastructure makes cane farming susceptible to climatic variations.

Financial overview

Analysis of the Statement of Profit and Loss

Revenues

Revenues from operations stood at H5593.74 crore in FY23-24 as compared to H4665.86 crore in FY22-23 reflecting an increase of 19.89%.The revenue from sugar and distillery segment has improved over the previous year except for other business, wherein the revenue declined by 2.57%. Increase in revenues in both sugar and distillery was on account of increase in both volumes and realisations. Other Income of the Company reported a 17.85% growth and accounted for a 1.31% share of the Company?s total income, reflecting the Company?s dependence on its core business operations.

Expenses

Total expenses increased by 16.76% from H4,331.68 crore in FY22-23 to H5057.56 crore in FY23-24. Raw material costs account for a 81.87% share of the Company?s revenue from operations as compared to 73.29% in FY22-23. Increase in raw material cost was owing to an increase in operations, increase in SAP of sugarcane and on account of raw materials (rice and maize) consumed to run the distillery during the off-season. Employee expenses accounted for a 7.13% share of the Company?s revenues from operations and increased by 9.56% from H363.79 crore in FY22-23 to H398.56 crore in FY23-24. The increase in employee cost was due to a normal increase in salaries and ~H23.96 crore on account of equity settled share-based payments to employees.

Analysis of the Balance Sheet

Sources of funds

The capital employed in the Company increased 8.87% to H3877.63 crore as on 31^st March, 2024 from H3561.74 crore as on 31^st March, 2023 owing to capacity expansion of sugar plant at Kumbhi and other modernisation of plants. Return on capital employed, a measurement of returns derived from every rupee invested in the business, increased 467 basis points from 12.55% in FY22-23 to 17.22% in FY23-24.

The net worth of the Company increased by 14.32% from H2,822.43 crore as on 31^st March, 2023 to H3226.51 crore as on 31^st March, 2024 owing to plough back of profits. The Company?s equity share capital comprised 201749245 equity shares of H1 each.

Long-term debt of the Company reduced to H461.30 crore as on 31^st March, 2024 from H617.05 crore as on 31^st March, 2023 post scheduled repayment of H186.08 crore. The long-term debt-equity ratio of the Company stood at 0.14 in FY23-24 compared to 0.21 in FY22-23. The ratio is at a very comfortable level in the sugar industry.

Finance costs of the Company increased by 71.90% from H48.65 crore in FY22-23 to H83.63 crore in FY23-24 owing to higher borrowings availed in FY22-23 for funding the capex and due to impact of interest rates hike, especially to fund working capital. The Company?s gross debt (including working capital) / equity ratio was comfortable 0.61 at the close of FY23-24 (0.65 at the close of FY22-23).

Applications of funds

Fixed assets (net block) of the Company increased by 2.36% from H2622.88 crore as on 31^st March, 2023 to H2684.89 crore as on 31^st March, 2024 on account of capex of H268.77 crore incurred in FY23-

24. Depreciation on assets increased by 28.46% from H129.50 crore in FY22-23 to H166.36 crore in FY23-24 owing to an increase in capex of H856.09 crore in FY22-23 and H268.77 crore in FY23-24.

Investments

Non-current investments of the Company increased from H175.00 crore as on 31^st March, 2023 to H181.12 crore as on 31^st March, 2024 owing to H6.12 crore investment made by the Company during FY23-24 in unlisted equity shares of Konkan Speciality Polyproducts Private Limited in connection with our upcoming PLA project.

Working capital management

Current assets of the Company increased by 17.74% from H2,577.74 crore as on

31^st March, 2023 to H3034.91 crore as on 31^st March, 2024. Increase was mainly attributable to increase in inventories. The current and quick ratios of the Company stood at 1.43 and 0.08, respectively at the close of FY23-24 compared to 1.31 and 0.13, respectively at the close of FY22-23. Inventories including raw materials, work-in-progress and finished goods among others increased by 23.72% from H2,318.68 crore as on 31^st March, 2023 to H2868.77 crore as on 31^st March, 2024. The inventory turnover ratio stood at 2.16 in FY23-24 as compared to 2.06 in FY22-23.

Trade receivables increased marginally by 0.60% from H124.82 crore as on 31^st March, 2023 to H125.57 crore as on 31^st

March, 2024. Trade receivable turnover ratio stood at 44.55 as on 31^st March, 2024 as compared to 37.38 as on 31^st March, 2023.

Margins

Higher level of operations and higher sugar recovery led to better cost absorption inspite of increase in cane price during the year. This was also aided by higher volumes and realisations in both the sugar and distillery segment. The EBITDA margin of the Company increased by 307 basis points from 10.98% in FY22-23 to 14.05% in FY23-24 while the net profit margin of the Company increased by 183 basis points to 7.74% as compared to 5.91% in FY22-23.

Key ratios

Particulars	2023-24	2022-23
Operating profit margin (%)	14.05	10.98
Net profit margin (%)	7.74	5.91
Debt-equity ratio	0.14	0.21
Return on equity (%)	14.08	9.78
Return on capital employed (%)	17.22	12.55
Book value per share (H)	162.56	142.53
Earnings per share (H)	21.47	13.51
Debtors? turnover ratio	44.55	37.38
Inventory turnover ratio	2.16	2.06
Interest coverage ratio	9.40	10.53
Current ratio	1.43	1.31
Debt service coverage ratio	3.13	1.93
Return on net worth (%)	14.32	9.97

Internal control systems and their adequacy

The Company?s internal audit system has been continuously monitoring and updating 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 effectively

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 different areas such as technical skills, behavioural skills, business excellence, general management, advanced management, leadership skills, safety, values and code of conduct. The Company?s employee strength stood at 6,056 as on 31^st March, 2024.