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Bannari Amman Sugars Ltd Management Discussions

3,388.85
(1.57%)
Jul 16, 2024|10:59:52 AM

Bannari Amman Sugars Ltd Share Price Management Discussions

STRUCTURE AND DEVELOPMENTS

Sugar is one of the major agro based commodities produced around the world. The Indian sugar industry is a critical part of the global landscape as the nation is the largest consumer and the second largest producer of sugar.

The sugarcane and sugar sector in India ranks second among the countrys agro-based industries. Indias largest integrated sugar business engaged in the manufacturing of sugar ethanol and power. The slew of structural reforms undertaken by the GOI in recent years has positively changed the fortune of the sugar industry from its erstwhile morass.

In the Sugar season, 21 /22 India produced 35.8 million metric tons of sugar and exported 11 million metric tons of sugar to the world market, after considering a diversion of 3.2 million metric tons of sugar equivalent into ethanol for the ambitious blending programme by Govt. In the current

22/23 season, pan India sugar production is estimated to be around 32.8 million metric tons after considering a diversion of 4.2 million metric tons of sugar equivalent into ethanol. Thus, with an opening inventory of 7 million tons & estimated production of 32.8 million tone, consumption and exports at 27.5 million tones and 6.2 million tons respectively, closing inventory on September 2023 will be at 6 million tons. This is close to 3 months stock to use ratio so shall be supportive domestic sugar prices. Increasing Ethanol production and reducing Sugar exports has been the key agenda on the industry desk. Subsidized exports were objected by several other sugar exporting origins at WTO, hence local value addition into Ethanol is great initiative. Currently, the blending achieved is 12% as per the target. This Ethanol demand is new to the sector and has created tightness in other alcohol segments driving the value for other alcoholic products as Extra Neutral Alcohol, Rectified Spirit, etc.

Particulars 2018-19 2019-20 2020-21 2021-22 2022-23

(P)

Opening Stock as on 1 st Oct. 107.16 145.79 107.40 82.00 70.00
Production during the Season 331.62 274.11 311.92 358.00 328.00
Imports - - - - -
Total Availability 438.79 419.90 419.32 439.00 398.00
Off-take
i) Internal Consumption 255.00 253.00 265.55 273.00 275.00
ii) Exports 38.00 59.50 71.91 111.00 62.00
Total off-take 293.00 312.50 337.46 384.00 337.00
Closing Stock as on 30th Sep 145.79 107.40 81.86 55.00 61.50
Stock as % of off-take 57.2% 42.5% 30.8% 20% 22%

(Source: Indian Sugar Mills Association (ISMA)

Performance of the Company

Particulars Year Ended 31.03.2023 Year Ended 31.03.2022
Sugar
Installed Capacity (TCD) 23700 23700
Sugarcane Crushed (Lakh Tonnes) 56.57 49.01
Recovery (%) 9.53 9.33
Sugar bagged (Lakh Quintals) 53.76 45.48
Power
Installed Capacity
Co-gen Power (MW) 129.80 129.80
Wind Mills (MW) 8.75 8.75
Units Generated (Million Units) 667.35 585.13
Distillery
Installed Capacity (KLPD) 217.50 217.50
Alcohol Produced (Million B. Ltrs) 54.22 12.44
Polished Granite Products (Sq mtrs) 125001 184518

Financial Performance of the Company

Particulars Year Ended 31.03.2023 Year Ended 31.03.2022
Revenue from operations
Sugar 196138.84 168247.22
Power 22622.26 19892.10
Distillery 31337.54 7843.75
Granite Products 2458.95 3825.92
Total Expenses (Excluding interest)
Sugar 189364.77 166486.70
Power 9427.18 6664.22
Distillery 22999.54 6999.56
Granite Products 3812.33 4343.69
Profit Before Interest and Tax (PBIT)
Sugar 6774.07 1760.52
Power 13195.08 13227.88
Distillery 8338.00 844.19
Granite Products (1353.38) (517.77)
Profit After Tax (PAT) 14339.14 7998.39
Earnings per Share (Basic and Diluted) 114.35 T>63.78

Key Profitability Ratios

Particulars Year Ended 31.03.2023 Year Ended 31.03.2022
Profitability Ratios
Operating Profit Margin (EBIDTA / SALES %) 13.60 11.08
Net Profit Margin (PAT / SALES %) 5.68 4.00
Return on net Worth (PAT / Net Worth %) 9.38 5.72
Balance Sheet Ratios
Debt Equity Ratio (times) 0.38 0.69
Current Ratio (times) 2.04 1.46
Debtors Turnover (days) 39 46
Inventory Turnover (days) 143 183
Interest Coverage Ratios (times) 5.46 4.87

Due to increased profit, profitability ratios has improved. Better collections, improved sales and profit has improved the Balance Sheet Ratios.

Opportunities and Threats

Presently, the sugar industry is recovering from its recent troughs, through timely and game-changing policy intervention related to sugar MSP, higher ethanol pricing, blending mandates, favorable export policy, etc., thereby, moderating sector cyclicality and improving profitability, leading to structural re-rating of the sector.

We have greater participation in the export campaign and the ethanol blending program will incentivize farmers and will result in an increase in the sugarcane acreage in the country. We have a great opportunity for the expansion of Milling and distillation capacity for the betterment sugar Industry and those who are directly or indirectly associated with the industry.

India is a tropical country with varied agro-climatic regions leading to diverse cropping pattern. Heavy dependence on Monsoon for the crop continues. Any below normal performance of monsoon is the only major threat to the industry. Rest of the usual threats wittness during cyclic nature of the industry are not much prevalent due to timely preventive decisions made by the Govt.

Risk and Concern

Government policies on sugar and sugarcane prices will continue to influence and render volatility to the overall

profitability of sugar manufacturers. The non-linkage of sugarcane cost to sugar realization is the key negative for the industry and would continue to result in huge volatility. Being an agro-based industry, performance of the Company is dependent on the availability of sugarcane for crushing which may get adversely affected due to adverse weather conditions resulting in lower availability and diversion of cultivable lands to alternate crops. Govt, should link the revision of sugarcane price to the revision in sugar floor price, as this shall help mills operate at a good spread where the margins shall not be under pressure.

Currently, no linkage for revision of sugar prices but only revision of sugarcane prices, is a concern and is eroding margins in sugarcane milling business. Sugar floor price was announced at INR 31 per kg ex-mill and is unchanged for last 5 years in a row while Sugarcane prices are revised higher every year.

Internal Control Systems and their Adequacy

The company has adequate internal control systems in place and also has reasonable assurance on authorizing, recording and reporting transactions of its operations. Proper and adequate internal controls are being adopted by the company commensurate with its size, scale and complexities of operations.

Details of Adequacy of Internal Financial Controls

The Companys internal control system is aimed at proper utilization and safeguarding of the Companys resources and promoting operational efficiency. The internal audit process reviews the in-system checks, covering significant operational areas regularly.

The Companys Audit Committee is responsible for reviewing the Report submitted by the Internal Auditors. Suggestions for improvements are considered and the Audit Committee follows up on the implementation of corrective actions. The Audit Committee also invites the Statutory and Internal Auditors for regular meetings to ascertain their views on the adequacy of internal control systems and keeps the Board of Directors informed of its observations from time to time.

Human Resources and Industrial Relations

The Company employs 1922 permanent employees and the company maintains excellent relationship with its employees during the year under review. No case was filed under Sexual Harassment of women at workplace (Prevention Prohibition and Redressal) Act 2013.

The company has created an excellent relationship with the farmers as well as other stakeholders including bankers.

CSR Activities

Most of the CSR Activities are carried out directly by the company. We are working tirelessly to enrich the lives of people in the rural community by providing them with a host of amenities that not just make their lives a whole lot easier but also ensures agricultural, educational and economic independence. More details are furnished in the Annual Report on CSR Activities.

Outlook

In FY23 and FY24, Sugar crops growth is projected to decrease sharply due to agroclimatic concerns in northern hemisphere driven by El Nino. World is already in deficit of 1.5 million metric tons sugar for crop year 2022-23. Mounting weather concerns and early indications of El Nino pose threat to upcoming crush in India which could keep Govt, concerned. Exports could be allowed at a later window than normal for crop 2023-24, probably in Q2 2024. Export/World market prices are almost 30% higher than domestic prices, so any delay or non-allowance for exports shall be a big dent to the profitability of sugar companies. It is a very sweet spot where world market is in deficit and India is in a position to export. Federal elections in 2024 shall push policy makers to regulate the domestic price environment to keep the inflation in check. Geopolitical tensions across Ukraine and Russia shall ensure that food prices are high enough for rest of the 2023 and first half of 2024.

Cautionary Statement

Statements made in this Management Discussion and Analysis Report may contain certain forward-looking statements based on various assumptions on the Companys present and future business strategies and the environment in which it operates. Actual results may differ substantially or materially from those expressed or implied due to risk and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India and abroad, volatility in interest rates and in the securities market, new regulations and Government policies that may impact the Companys businesses as well as the ability to implement its strategies. The information contained herein is as of the date referenced and the Company does not undertake any obligation to update these statements. The Company has obtained all market data and other information from sources believed to be reliable or its internal estimates, although its accuracy or completeness cannot be guaranteed.

DECLARATION ON COMPANYS CODE OF CONDUCT

This is to confirm that for the financial year ended March 31,2023, all members of the Board and the Senior Management Personnel have affirmed in writing their compliance with the Code of Conduct adopted by the Company.

S V BALASUBRAMANIAM
Place : Coimbatore Chairman
Date : 24.05.2023 DIN 00002405

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