Dalmia Bharat Sugar & Industries Ltd Management Discussions

Management Discussion & Analysis

Global Economy Overview

The global economy entered 2025 facing heightened uncertainty after relative a period of stabilisation in 2024. According to the April 2025 IMF World Economic Outlook, global GDP growth is projected at 2.8% for 2025, down from 5.5% in the January 2025 forecast. This downward revision stems mainly from the sharp escalation of trade tensions, triggered by the United States near-universal tariff announcements in April 2025. While tariff hikes have since been temporarily paused for 90 days for most U.S. trading partners, the lack of clarity on post-pause trade dynamics continues to weigh on global sentiment, investment planning, and supply chain resilience.

Under these looming uncertainties, advanced economies are projected to grow by 1.4% in 2025, with the United States slowing to 1.8% due to trade-driven uncertainty and weakened domestic demand. In contrast, emerging market and developing economies (EMDEs) are xpected to grow by 5.7%, down from prior estimates, with countries more exposed to global trade disruptions seeing steeper slowdowns.¹

Global currency markets have experienced increased volatility in 2025, with the U.S. dollar strengthening due to risk aversion and elevated U.S. yields. This has increased depreciation pressure on several emerging market currencies, including the Indian rupee.

Inflation and Interest Rate Movements

Global headline inflation is projected to ease to 4.5% in 2025 and further to 5.6% in 2026, though the pace of disinflation varies across regions. Advanced economies are expected to reach their inflation targets earlier, with price growth moderating to 2.2% by 2026, while Emerging Market and Developing Economies (EMDEs) are likely to see inflation decline to 4.6%. Since January, the 2025 inflation forecast has been revised slightly upward, driven by notable U.S. and UK increases. In the U.S., a 1.0 percentage point upward revision reflects persistent services inflation and recent tariff-induced supply shocks. The UKs 0.7 percentage point revision is attributed to temporary regulated price changes. Inflation expectations in the euro area remain stable. These dynamics are expected to shape monetary policy decisions as central banks across the globe will try to balance inflation control with growth risks.²

Global Trade Disruptions and Recovery

The optimism surrounding post-pandemic trade recovery has been overshadowed by escalating protectionism. The World Trade Organisation (WTO) has sharply downgraded its 2025 global merchandise trade forecast from a 5.0% increase to a 0.2% decline, citing the resurgence of U.S. tariffs and broader economic spillovers as key factors. WTO expressed concern about the contraction and its

Crude Oil Prices and Implications for Ethanol Economics

While off their 2022 highs, crude oil prices remain under pressure, driven by supply and demand uncertainties in the current global economic climate. Within a week, the benchmark Brent crude price dropped sharply from nearly $75 per barrel to below $60—a four-year low— following the announcement of sweeping global tariffs by the United States, including steep duties on Chinese goods. Prices have since stabilised but continue to hover below the $70 mark. potential impact on global GDP, financial markets, and particularly on developing economies. This shift has weakened global trade momentum. Although headline trade volumes increased in Q4 2024 due to frontloading of imports, underlying indicators—particularly in Asia and Europe—point to a slowing trajectory. Further, the policy unpredictability has increased market volatility and constrained investment planning across regions.⁵

According to the U.S. Energy Information Administration (EIA), global oil inventories are expected to rise from mid- 2025 as OPEC+ members gradually unwind production cuts, non-OPEC output increases, and international oil demand growth decelerates. As a result, the average Brent crude price is forecast at $68 per barrel in 2025, declining further to $61 per barrel in 2026.⁴

Indian Economy Overview

Despite facing spillover effects from global headwinds, India continues to exhibit remarkable economic resilience. The country is growing at nearly twice the pace of the worldwide economy, reflecting the strength of its domestic demand, policy support, and structural reforms. According to the April 2025 IMF World Economic Outlook, Indias real GDP is projected to grow at 6.2% in FY25 and 6.5% in FY26, significantly outpacing the global growth forecasts of 2.4% and 5.0% for the same periods, respectively.

This robust momentum underscores Indias growing role as a key driver of global growth, even amid heightened global economic uncertainty.⁵

Inflation and Interest Rate Movements

According to government statistics, headline inflation eased to a 67-month low of 5.5% in March 2025, primarily due to a decline in food prices.⁶ The Reserve Bank of India (RBI] projects CPI inflation to moderate to 4.0% in FY26, indicating a continued disinflationary trend. Inflation is expected at 5.6% in Ql, 5.9% in Q2, 5.8% in Q5, and 4.4% in Q4.⁷ Meanwhile, the RBI has pegged Indias GDP growth rate at 6.5% for FY26, reflecting continued economic momentum amidst easing price pressures.⁸

In response to moderating inflation and global economic uncertainties, the Reserve Bank of India (RBI) implemented two consecutive 25 basis point cuts to the policy repo rate in February and April 2025, bringing it down to 6.0%. The April meeting also marked a shift in the monetary policy stance from neutral to accommodative, signalling the central banks intent to support economic growth amid external challenges such as global trade tensions and subdued private investment.⁹

Monsoon Performance and Sowing Patterns

The India Meteorological Department (IMD) has forecasted an above-normal southwest monsoon for 2025, with expected rainfall at 105% of the Long Period Average (LPA) of 87 cm, with a model error of ?5%.

This prediction is based on neutral El Nino-Southern Oscillation (ENSO) conditions and below-normal Eurasian snow cover, both conducive to enhanced monsoon activity.¹⁰ The anticipated robust monsoon is expected to positively impact kharif crop sowing, particularly in central and eastern India, which rely heavily on monsoon rains. However, northwest, northeast, and southern peninsular India regions may experience below-average rainfall, potentially affecting localised sowing patterns. A favourable monsoon will likely boost agricultural output, stabilise food prices, and support rural incomes, contributing to overall economic growth. It also provides an opportunity to enhance exports of farm commodities like rice, onions, and sugar, while reducing dependence on imports of edible oils.

Fiscal Measures Related to the Agri-Economy

In the Union Budget for FY2025-26, the Government of India reaffirmed its commitment to the agricultural sector by allocating substantial funds to enhance farmer welfare and ensure food security.

• Fertiliser Subsidy:

A total of Rs.1.67 lakh crore has been earmarked for fertiliser subsidies, encompassing both urea and phosphatic & potassic (P&K) fertilisers. This allocation constitutes approximately 5.3% of the total Union Budget expenditure, reflecting the governments focus on making fertilisers affordable for farmers.¹¹

• PM-KISAN Scheme: The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme continues to provide direct income support of Rs.6,000 annually to eligible farmer families. As of February 2025, the 19^th instalment had been disbursed, benefiting over 9.8 crore farmers, including 2.41 crore female farmers, with a total disbursement exceeding Rs.22,000 crore through Direct Benefit Transfer (DBT)scheme.¹²

• Crop Insurance and Credit: The Pradhan Mantri Fasal Bima Yojana (PMFBY) has extended crop insurance coverage to 4 crore farmers to mitigate risks associated with crop failures. Additionally, the agricultural credit target has been increased to Rs.20 lakh crore, focusing on sectors like dairy, fisheries, and animal husbandry.

Overview of the Global Sugar Sector

As per the latest Quarterly Market Outlook report published in May25, ISO presented its third revision of the global 2024/25 sugar balance. ISOs fundamental view of the global supply/demand situation sees a large global deficit (the difference between forecast world consumption and production) of 5.466 min tonnes, up 0.585 min tonnes since February. A global deficit of this magnitude has not been seen for nine years. World production in 2024/25 was revised to 174.795 min tonnes, down 6.469 min tonnes from last season. Drivers include lower than expected production in India and Pakistan. World consumption is projected to reach a record 180.261 min tonnes in 2024/25, down 0.160 min tonnes on our previous estimate, while the 2023/24 estimate is revised to 179.225 min tonnes, down 0.747 min tonnes.¹⁵

Global sugar prices had surged by 55%, with global deficit increasing, reaching their highest levels since 2011. This sharp increase is primarily attributed to severe droughts in India and Thailand, two of the worlds top sugar exporters, exacerbated by the El Nino weather pattern. These climatic conditions have significantly reduced sugarcane yields, leading to a global shortage. Although Brazil, the leading sugar producer, has experienced a robust harvest, it has not been sufficient to offset the deficits caused by the droughts in Asia. Consequently, countries heavily reliant on sugar imports, particularly in sub-Saharan Africa, face heightened food insecurity as the supply-demand imbalance drives up prices.¹⁴ Prices have recently declined due to anticipated increase in global supplies.

On the trade front, the re-imposition of tariffs by the U.S. administration in 2025 has introduced uncertainties in global sugar trade. These tariffs have led to retaliatory measures from trading partners, affecting global supply chains and pricing dynamics. Trade barriers continue to influence the international sugar market. The U.S. maintains tariff-rate quotas (TRQs) for sugar imports, with specific allocations for countries like Brazil, Mexico, and the Philippines. While providing market access, these quotas also limit the volume of duty-free imports, affecting global trade flows. Countries like South Africa also have increased import duties to protect domestic industries. In August 2024, South Africa doubled its sugar import duty to shield local producers from lower global sugar prices.¹⁵

Brazils biofuel policies significantly impact sugar production. The countrys RenovaBio program mandates a ethanol blend of 27%. This policy encourages the diversion of sugarcane to ethanol production, potentially reducing sugar availability for export. However, in the 2025/26 season, Brazil is expected to produce 56.8 billion litres of ethanol, a 1% drop from the previous season. This decline is attributed to a higher share of sugarcane being directed towards sugar production instead of ethanol, influenced by favourable sugar prices.

Overview of the Indian Sugar Sector

The Indian sugar industry, a cornerstone of the nations agro-based economy, is experiencing a significant transition in 2025. As the worlds second-largest sugar producer and consumer, India plays a pivotal role in the global sugar market. The sector supports approximately 50 million farmers and contributes substantially to rural employment and income.

In the 2024-25 sugar season, the industry faced challenges due to adverse weather conditions, including droughts and excessive rainfall. This reduced sugarcane yields in key producing states like Maharashtra, Karnataka, and Uttar Pradesh. As a result, the Indian Sugar and Bio-Energy Manufacturers Association (ISMA) revised its sugar production estimates downward to 26.2 million metric tons (MMT), an 18% decline from the previous year. Furthermore, approximately 5.5 AAMT of sugar is expected to be diverted for ethanol production, aligning the governments biofuel blending targets. Despite the production shortfall, ISAAA assures that domestic sugar availability remains sufficient to meet the countrys consumption needs, projected at 28 MMT for the season. This confidence is bolstered by an opening stock of 8 AAMT and a closing stock forecast of 5.4 AAMT by September 2025, ensuring more than two months of domestic demand coverage.¹⁶

The governments export policy has also helped stabilise the market. In January 2025, the government permitted the export of 1 MMT of sugar, a decision based on the initial higher production estimates. Subsequent downward revisions in production forecasts have raised concerns about the adequacy of domestic supplies. Nevertheless, the government maintains that the existing stock levels are sufficient to meet both domestic consumption and ethanol production requirements.

In a significant move to support sugarcane farmers, the Indian government has increased the Fair and Remunerative Price (FRP) of sugarcane by 4.41%, setting it at Rs.355 per quintal for the 2025-26 season, up from Rs.340. Based on a 10.25% sugar recovery rate, this adjustment includes a premium of Rs.3.46 for every 0.1% increase in recovery and ensures a minimum payment of Rs.329.05 per quintal for recoveries below 9.5%. The decision is expected to benefit approximately 50 million sugarcane farmers and 500,000 workers in the sugar industry. This increase in FRP will likely elevate raw material costs for sugar mills, potentially impacting their margins, especially in a year already marked by lower sugarcane yields and restricted export opportunities.¹⁷

India is poised to significantly enhance its ethanol production capacity, targeting an annual output of approximately 1050 crore litres by the Ethanol Supply Year (ESY) 2025. This ambitious goal is part of a dual strategy that leverages grain and sugarcane feedstocks. Grain-based ethanol production is expected to rise substantially, from 380 crore litres to around 700 crore litres by the following season. Sugarcane will complement this supply, with its substantial processing capacity contributing to the remaining demand. This approach aims to achieve the 20% ethanol blending target in petrol. It helps manage sugar inventories effectively, especially considering the high carry-over stocks anticipated at the end of the current season due to regulatory limits on ethanol production and sugar exports. The governments careful regulation of sugarcane allocation for ethanol production, based on projected sugar demand-supply balances, plays a critical role in balancing market dynamics and ensuring timely payments to cane farmers.¹⁸

In May 2025, the Government of India introduced the Sugar (Control) Order, 2025, aiming to modernise and streamline the regulatory framework of the sugar sector. Key provisions include integrating sugar mills enterprise systems with the Department of Food and Public Distributions digital portal to enhance data transparency and operational efficiency. The order also brings raw sugar and khandsari units with capacities over 500 TCD, ensuring accurate stock assessments and fair remuneration to farmers. Additionally, it encompasses various by-products like ethanol, enabling better regulation of sugar diversion to maintain domestic availability. These measures are poised to foster a more efficient, transparent, and accountable sugar ecosystem, bolstering domestic stability and global competitiveness.¹⁹

Looking ahead, the industry is optimistic about the 2025-26 season. Favourable monsoon forecasts and improved water availability have encouraged increased sugarcane planting, particularly in Maharashtra and Karnataka. This anticipated rebound in production could enable India to resume sugar exports, potentially ranging from 3 to 5 MMT, depending on weather conditions and global market dynamics.

SWOT Analysis - Indian Suqar Industry

Strenqths

1. Robust Cane Availability in Key Regions: Despite weather disruptions, India remains among the largest sugarcane producers globally. Steady output in states like Uttar Pradesh sustains the raw material base.

2. Integrated Value Chain Operations: A growing number of mills have diversified into ethanol distillation and bagasse-based cogeneration, offering multiple revenue streams and enhanced resilience.

3. Policy Backing for Ethanol Blending: Strong government focus on ethanol blending targets (20% by 2025) has driven incentives and capacity expansions, bolstering sectoral confidence.

4. Large Domestic Consumption Base: With an annual consumption of nearly 29 MMT, Indias vast and growing population ensures a stable core demand for sugar.

5. Strategic Government Intervention: Timely policies such as minimum selling price (MSP), fair remunerative price (FRP) hikes, and regulated exports have helped manage supply-demand imbalances.

6. Improved Crop Pricing Mechanism: The recent FRP hike to Rs.355/quintal, while raising costs, reflects fairer compensation mechanisms and improved farmer confidence.

Weaknesses

1. Dependence on Climate: Adverse climatic conditions lead to an 18% drop in sugar output to about 26.2 MMT, revealing the sectors climatic vulnerability.

2. Excessive Policy Dependence: The absence of robust policies around Export quotas, ethanol prices, and diversion limits creates planning uncertainty for millers.

3. Ageing Infrastructure in Select Clusters:

Many mills still operate with older processing systems, impacting operational efficiency and cost structure.

4. Monsoon Dependency Continues: With limited irrigation facilities and limited outreach of dams and canals, the sector relies heavily on rainfall, with limited outreach in drought-prone states like Maharashtra and Karnataka.

5. Ethanol Feedstock Constraints: Policies like Dedicated Ethanol Plants and the non-linkage of Ethanol prices with FRP (under ESY24) have caused lesser allocations to sugar- based distilleries, resulting in under-utilisation of distillery capacity.

Opportunities

1. Ethanol Expansion Through Dual-Feed Ethanol Model Using Molasses and Grains:

The Governments 1050 crore litre ethanol target by ESY25, leveraging grain and cane, opens new diversification paths.

2. Technology Adoption: Smart cane farming, automated weighing, and digitised farmer payment systems can improve productivity and transparency.

3. Green Energy and ESG Compliance:

The sugar sectors inherent potential for bioenergy and circular economy models (bio-compost, green power) aligns with ESG goals and investor interest.

4. Export Resumption Outlook: If production recovers in 2025-26 as expected, India could export 2- 5 mmt, tapping into global demand.

5. PLA and SAF: Biodegradable Plastics and Sustainable Aviation Fuel create an alternate market for the use of Surplus sugar and Ethanol with far-fetched results. These sectors create opportunities for strategic investments.

Overview of the Indian Biofuel Sector

India has pledged to achieve net-zero greenhouse gas emissions by 2070, supported by a comprehensive strategy to decarbonise its economy. Interim goals include reducing the carbon intensity of GDP by 45% from 2005 levels and meeting 50% of energy needs from renewables by 2050. As of late 2024, renewable capacity surpassed 200 GW, complemented by the National Green Flydrogen Mission and increased nuclear investments. Legislative backing through the Energy Conservation (Amendment) Act and a long-term low- carbon development strategy demonstrates Indias commitment. These efforts provide a strong foundation for expanding the biofuel sector as a key pillar in Indias energy transition.

Threats

1. Climatic Risks Intensifying: Recurrent droughts and erratic rainfall patterns, amplified by El Nino, remain a critical production risk.

2. Policy Stagnation in Ethanol: Unviable ethanol prices compared to Sugarcane prices can disrupt the investment cycles of the Sugar Industry in ethanol infrastructure.

3. Tariff-Induced Global Trade Imbalance: Recent U.S. tariff hikes have triggered supply chain concerns, affecting sentiment and future production planning.

4. Cost Inflation from FRP: The 4.4% hike in FRP for 2025-26 could compress mill margins further unless compensated by higher realisations or support mechanisms.

5. Competition for Land and Water: Urbanisation and diversification into horticulture increasingly compete with sugarcane for land and water in high- yield belts.

6. International Market Volatility: Falling global prices due to surpluses from Brazil and other sugar- producing countries, along with weakening currency parity, could hurt Indias export competitiveness.

Indias biofuel sector is emerging as a cornerstone of the nations energy transformation, where sustainability, rural empowerment, and economic resilience converge. At the heart of this shift is ethanol, the green molecule helping reduce carbon emissions, cut crude oil imports, and provide alternative revenue streams to farmers.

Driven by the ambitious Ethanol Blending Program (EBP), which targets 20% blending by 2025-26, India is rapidly scaling up its distillation infrastructure. Sugarcane- derived ethanol and growing emphasis on grain- based feedstocks like maise and broken rice transform agricultural surplus into strategic energy assets. The commissioning of dual-feedstock distilleries across the country reflects a maturing sector ready to adapt to market and environmental demands.

Policy support has played a pivotal role. From interest subvention schemes to assured offtake pricing by oil marketing companies (OMCs), the government has created a stable and forward-looking environment for investment and innovation. These measures have reduced cane arrears to farmers and insulated sugar mills from the cyclical volatility of global sugar prices.

Beyond economics, the sector carries a strong climate narrative. Biofuels significantly lower greenhouse gas emissions than fossil fuels, support cleaner air in urban centres, and promote energy self-reliance. As the world seeks scalable solutions for decarbonisation, Indias biofuel journey is a compelling model of how agri-energy can drive inclusive, sustainable growth.

In a move to bolster its global leadership in sustainable energy, India launched the Global Biofuel Alliance (GBA) during the G20 Summit in 2023. The alliance, comprising 22 countries and 12 international organisations, aims to promote the development and adoption of sustainable biofuels worldwide. Indias active participation positions it as a central hub for biofuel innovation, standardsetting, and trade facilitation.

The Indian government has also implemented various subsidies and incentives to encourage biofuel production. These measures are designed to attract investment, enhance energy security, and reduce reliance on fossil fuels.

Despite these advancements, challenges persist, including feedstock availability, infrastructure development, and the need for technological innovation. Addressing these issues is crucial for India to realise its biofuel potential and contribute significantly to global sustainability goals.

Indias Cogeneration Sector Overview

Indias cogeneration sector, based on simultaneous electricity and heat production, is vital in enhancing energy efficiency and supporting decarbonisation efforts. With industries like sugar mills leading the way through biomass-based cogeneration, the country has developed over 10 GW of capacity. Encouraged by favourable policies such as Renewable Energy Certificates (RECs], concessional financing, and long-term Power Purchase Agreements (PPAs), many mills have transitioned into integrated energy producers. Cogeneration systems, especially when powered by renewable fuels such as biogas or biomass, can deliver 35-40% energy savings over traditional methods. Government initiatives, including financial support under the National Bioenergy Programme, accelerate deployment, though high upfront costs and fuel sourcing remain key challenges.

Building on cogeneration, trigeneration adds a cooling function^using waste heat to produce chilled water for air conditioning or refrigeration, reaching efficiencies up to 90%. This makes trigeneration ideal for hospital applications, commercial buildings, and data centres.

The expansion of city gas networks and policy backing are encouraging its growth. As India transitions to a low- carbon future, trigeneration represents the next logical step in optimising energy use across sectors, provided infrastructure gaps and cost barriers are addressed.

The true strength of cogeneration lies in its decentralised nature. It is often located in rural areas, where it enhances grid stability, reduces transmission losses, and promotes regional development. As India intensifies its focus on energy diversification and carbon reduction, cogeneration, rooted in agricultural residues, stands out as a resilient, scalable, and sustainable solution.

Business Overview

Dalmia Bharat Sugar and Industries Limited (DBSIL) is a prominent entity in Indias sugar sector, seamlessly integrating traditional practices with modern innovations. Since mid-1990s, the Company has expanded its footprint across Uttar Pradesh and Maharashtra, boasting a cane crushing capacity of approximately 43,200 tonnes of cane per day (TCD), a distillery capacity of 850 kilolitres per day (KLPD), and a cogeneration capacity of 138 megawatts (MW).

DBSIL strongly emphasises sustainability. The companys initiatives, such as achieving Zero Liquid Discharge in its plants and recycling water for irrigation, underscore its

Sugarcane processing byproducts

commitment to environmental responsibility. These efforts not only contribute to ecological well-being but also resonate with stakeholders who prioritise sustainable practices.

The Companys operations are built on the Cane-* Sugar-*- Molasses-*Ethanol & Power model, ensuring optimal utilisation of by-products and sustained profitability across business cycles. Bagasse, a residue from sugar production, is used to generate renewable power, while molasses is converted into ethanol, supporting Indias ethanol blending programme (EBP). This integrated model also aligns with national priorities on green energy and sustainability.

Segmental Contribution to Revenue and EBIT

In FY2025, the Companys integrated approach continued to deliver diversified earnings across its three key segments:

• Sugar: The sugar segment remained the core revenue generator, contributing approximately 71% of total revenue and 82% of segmental EBIT. Despite regulatory constraints on exports, strong domestic demand and stable realisations supported performance.

• Distillery: The distillery business showed resilient performance, accounting for approximately 28% of total revenue and 17% of EBIT, driven by enhanced capacity utilisation, higher ethanol volumes, and strategic focus on grain-based feedstock.

• Others: This segment includes the Companys activities in Magnesite and Travel collectively contributing approximately 1% of total revenue and 1% of EBIT.

Capacity Footprint - Strategic & Scalable

As of 31^st March 2025, DBSILs capacities across its operational locations were as follows:

Plant	Sugar (TCD)	Distillery	Cogeneration (MW)
Ramgarh, Uttar Pradesh	7700	140	28
Jawaharpur, Uttar Pradesh	9000	470	36
Nigohi, Uttar Pradesh	10500	120	30
Baghauli, Uttar Pradesh	3500	100 (CWiP)	12
Kolhapur, Maharashtra	8500	120	28
Sangli, Maharashtra	4000	0	4
Total	43200	850+100 (CWIP)	138

These capacities reflect a significant scale-up, particularly in the distillery segment, which positions the Company to benefit from growing ethanol demand.

Subsidiary Integration: Baghauli Sugar and Distillery Limited (BSDL)

DBSIL acquired 100% equity in Baghauli Sugar and Distillery Limited (BSDL). Commercial production at the Baghauli unit commenced in March 2024, within record implementation timelines. The plant contributes 3,500 TCD to sugarcane crushing capacity and houses a planned 100 KLPD grain-based distillery expected to become operational in early next financial year. BSDL has been consolidated into the Companys financial and operational framework post-integration, strengthening DBSILs footprint in Uttar Pradesh and supporting its longterm ethanol strategy.

During FY2025, the Company successfully expanded the crushing capacity of its Nigohi plant in Uttar Pradesh from 9,250 TCD to 10,500 TCD. This enhancement is expected to boost operational throughput and strengthen the Companys regional supply reliability.

DBSILs Sugar Business

DBSIL maintains its position as one of Indias most efficient and forward-integrated sugar manufacturers. In FY2025, while the industry faced weather variability, stock accumulation, and policy constraints, DBSIL strategically maintained operational stability by deepening its ethanol diversion policy. This approach supported margin protection and reduced the Companys exposure to cyclicality in the conventional sugar business.

Segmental Strengths

DBSILs sugar division is underpinned by geographical diversification, varietal innovation, and strategic capital discipline. Key strengths include:

• Strategic Location & Scale: DBSIL remains one of the few integrated sugar manufacturers with a footprint in Uttar Pradesh (UP) and Maharashtra, covering major cane-producing regions. The Companys six sugar mills offer a combined crushing capacity of 43,200 TCD, offering scale and redundancy against regional climatic volatility.

• Pioneer in Private Sector in UP: It continues to be the only major private-sector player from UP with legacy strengths and deep farmer engagement, ensuring cane availability and quality.

• Operational Efficiency & Recovery Rates: The

Company has consistently achieved above-industry recovery rates, supported by superior varietal mix, effective agronomy practices, and a high adoption of early-maturing cane. In UP, 95% of the cane crushed comes from early harvesting varieties, enhancing throughput and sugar quality.

• Assertive Diversion Policy: FY2025, aligned with Indias biofuel roadmap, saw the most aggressive sugar-to-ethanol diversion policy. This shift optimised revenue and helped mitigate the impact of export restrictions and oversupply.

• Sustainable Expansion Strategy: With selective investments, such as the expansion at Nigohi from 9,250 TCD to 10,500 TCD, the Company has focused on efficient scaling, maintaining a lean balance sheet while preparing for growth in high-margin downstream segments.

Challenges & Mitigation

The sugar business remains exposed to agro-climatic risks, rising cane costs, and policy-led constraints such as export bans and domestic quota limitations, leading to inventory build-up and working capital pressure. DBSIL mitigates these risks through high varietal efficiency, early harvesting, and assertive diversion of cane juice and B-heavy molasses to ethanol. The Companys strong farmer engagement and strategic use of integrated capacities allow it to balance supply-demand cycles, stabilise margins, and protect return on capital employed despite systemic headwinds.

Operational Performance - FY2025

During the year, DBSIL operated all six sugar mills across UP and Maharashtra, achieving substantial utilisation despite headwinds.

Particulars	FY 2025	FY 2024	Remarks
Cane Crushed	55.6 lakh tonnes	60.1 lakh tonnes	Cane crush impacted mainly due to lower yield on account of agro-climatic condition
Sugar Produced	5.6 lakh tonnes	6.4 lakh tonnes	Adjusted for ethanol diversion
POL	15.76%	15.95%	Impacted due to varietal changes and agro- climatic conditions
Net Recovery Rate	10.0%	10.6%	Impacted by B-heavy and juice diversion

DBSILs Distillery Business

The distillery segment remains a cornerstone of DBSILs strategic shift toward a more integrated, value-accretive, and less cyclical business model. FY2025 marked a year of consolidation and groundwork for future scalability, particularly in the grain-based ethanol vertical.

Despite regulatory challenges in the form of temporary restrictions on sugar diversion for ethanol, the Company remained resilient, optimising feedstock flexibility and ramping up capacities.

With Indias ethanol blending programme (EBP) gaining further momentum and blending targets advancing toward E20, DBSILs distillery operations are well- positioned to be a long-term growth driver.

Segmental Strengths

DBSILs distillery business has evolved into a high- efficiency, strategically diversified segment with the following competitive advantages:

• Feedstock Versatility: The Company has successfully diversified its distillation feedstock to include B-heavy molasses, direct sugarcane juice, and grain, enhancing operational flexibility in response to policy and market conditions.

• Rapid Capacity Scaling: From just 600 KLPD two years ago, DBSILs distillery capacity expanded to 850 KLPD by FY2025, with an additional 100 KLPD grain-based unit at BSDL under implementation.

These expansions are aligned with the governments emphasis on grain-based ethanol to meet blending targets without straining sugar availability.

• Integrated Value Chain: As part of a fully integrated complex, distillery units benefit from captive feedstock (molasses/juice), utilities (steam from cogeneration), and seamless logistics, ensuring cost leadership.

• Policy Alignment: The Company has proactively aligned with EBP targets and participated in Oil Marketing Company (OMC) tenders, ensuring consistent offtake and price visibility.

• Resilient Despite Constraints: When ethanol production from sugar juice and B-heavy molasses was capped, DBSILs ability to pivot to grain- based production ensured minimal disruption and sustained profitability.

Challenges & Mitigation

While margin-accretive, the distillery segment faces volatility in raw material pricing, especially for grains, and dependency on government pricing and procurement through OMCs. Temporary restrictions on molasses-based ethanol production during ESY24 impacted output.

DBSIL countered this through feedstock flexibility, scaling up grain-based capacity, and operational agility. The Companys balanced feedstock mix and diversified distillery footprint reduce overdependence on any one input source or policy, ensuring consistent volumes and predictable earnings in a highly regulated environment.

Operational Performance - FY2025

Despite the ethanol production cap imposed in H1FY2025, DBSIL managed to operate at healthy utilisation levels by adjusting its feedstock mix. Key operational indicators are as follows:

Metric	FY2025	FY2024	Remarks
Installed Capacity	850 KLPD + 100 CWIP	710 KLPD	Reflects expansion across Jawaharpur grain distillery from 110 KLPD to 250 KLPD & Baghauli grain distillery 100 KLPD (in CWIP)
Ethanol Production Volume	17.94 crore litres	17.64 crore litres	Includes molasses and grain-based output
Average Realisation ( Rs./litre)	X62.2	X59.7	Varies by feedstock; price reset in ESY2025
Feedstock Mix (Molasses: Grain)	66%: 34%	80%: 20% approx.	Higher grain usage due to expanded grain distillery capacity.
Capacity Utilisation	66%	85%	Impacted due to lower sugar diversion
EBITDA Contribution (Segmental)	19%	35%	The highest margin business across segments

The distillery business has not only become more substantial in scale but also more critical in driving earnings quality. The addition of a 100 KLPD grain-based distillery at Baghauli is set to commence operation by July 2025, further enhancing volume potential and margin stability in FY2026.

DBSILs Cogeneration Business

DBSILs cogeneration business complements its integrated operations by efficiently converting bagasse, a by-product of sugarcane crushing, into renewable energy. This ensures captive power for the Companys sugar and distillery units and contributes to the revenue stream through surplus energy sales to the grid. In a year marked by ethanol-related policy headwinds and elevated input costs, the cogeneration business stabilised by containing operating costs and supporting margin resilience.

The Company operates cogeneration units across all six sugar plants, with a total installed capacity of 138 MW. A significant portion is exported to state electricity boards, particularly in Uttar Pradesh and Maharashtra.

Segmental Strengths

The following key strengths characterise DBSILs cogeneration business:

• Operational Efficiency: Cogeneration units are embedded within sugar plants, ensuring efficient thermal energy utilisation and reducing dependence on external power.

• Revenue Diversification: The ability to export surplus power provides an additional and steady revenue stream, partially offsetting the sugar segments seasonality.

• Tariff Advantage in Maharashtra: DBSILs plants in Kolhapur and Sangli benefit from relatively favourable feed-in tariffs under the states renewable energy purchase obligations.

• Sustainability and Compliance: Power generated from bagasse is classified as renewable, contributing positively to the Companys ESG profile and carbon reduction targets.

Challenges & Mitigation

Cogeneration operates seasonally, constrained by bagasse availability and subject to regulatory tariff changes across states. This limits scalability and makes revenue partially dependent on state utilities. DBSIL addresses these limitations by maximising internal energy efficiency, reducing reliance on grid power, and optimising export volumes during peak season. With plants in UP and Maharashtra, the Company benefits from geographic diversification in tariff realisations, ensuring that the cogeneration business continues adding steady, cost-efficient value across cycles.

Operational Performance - FY2025

Metric	FY2025	FY2024	Remarks
Installed Capacity	138 MW	138 MW	Spread across six locations
Units Exported to Grid	20.7 crore kWh	22.4 crore kWh	Surplus power sold under PPA or merchant basis
Export Tariff Realisation	U.96/ kWh	Rs.4.65/ kWh	Varies between UP and Maharashtra

Financial Overview

Key Performance Metrics

	(Consolidated)
Particulars	FY25	FY24	Change %
Total Income ( Rs. crore)	3820	3028	26%
Operating EBITDA ( Rs. crore)	469	412	13.85%
EBITDA Margin (%)	12.52%	14.21%	-169 bps
PBT ( Rs. crore)	350	363	-3.58%
PAT ( Rs. crore)	387	272	41.95%
PAT Margin (%)	10.33%	9.38%	95 bps
EPS ( Rs.)	47.78	33.66	41.95%

Analysis of P&L Statement

DBSIL reported a 26% year-on-year increase in total income, reaching Rs.5,820 crore in FY2025 compared to Rs.3,028 crore in FY2024. This growth was primarily driven by higher sugar volumes sold, increased ethanol capacity utilisation, and improved realisations. Flowever, this topline growth did not translate into proportional bottom-line performance due fo input cost pressures and regulatory headwinds.

Operating EBITDA increased by 15.83% to Rs.469 crore from Rs.412 crore in the previous year. EBITDA margin compressed by 169 basis points, from 14.21% in FY2024 to 12.52% in FY2025. The contraction in margins was mainly attributable to lower grain ethanol profitability, higher cane costs and limited distillery operations during the off season on account of limited sugar diversion in ESY 24.

As a result, profit before tax (PBT) also declined by 3.58% to Rs.350 crore. However Profit after tax (PAT) stood at Rs.387 crore, significantly improving from Rs.272 crore in the previous year. The PAT margin was modestly enhanced to 10.33% from 9.38%. Earnings per share (EPS) also showcased exceptional growth by 41.95%, reaching Rs.47.78 per share compared to Rs.33.66 in FY2024, indicating consistency in net earnings despite sector- specific headwinds.

Analysis of Balance Sheet

Sources of Funds

Net Worth: As of 31^st March 2024, the companys net worth stood at Rs.2,932.16 crore and increased to Rs.3234.51 crore as of 31^st March 2025, reflecting an absolute rise of Rs.302.35 crore, or 10.31%. This growth was driven by internal accruals, as the equity share capital remained unchanged at Rs.16.19 crore, comprising 8.09 crore equity shares of Rs.2 each.

Long-term Debt: The Companys long-term borrowings increased from Rs.337.78 crore in FY24 to Rs.513.71 crore as on 31^st March 2025, resulting in an increase of TI75.93 crore. The long-term debt-to-equity ratio stood at 0.18x in FY25 indicating strength of the balance sheet.

Finance Cost: The Company experienced an increased finance cost during the year. However, its interest coverage remained healthy, standing at 8.62 times in FY25 against 10.79 times in FY4, reflecting continued comfort in debt servicing despite a higher interest outgo.

Application of Funds

Fixed Assets: Gross fixed assets rose from Rs.3,251 crore in FY24 to Rs.3,326 crore in FY25, primarily due to ongoing capacity enhancement initiatives, including Baghauli Acquistion and Expansion of Nigohi sugarcane crushing capacity from 9250 TCD to 10500 TCD.

Investments: Non-current investments decreased from Rs.629 crore on March 31, 2024, to Rs.583 crore on 31^st March, 2025. The decline was mainly attributable to decrease in the marked-to-market value of long-term equity holdings.

Working Capital Management Current Assets: Current assets declined from Rs.2,488 crore in FY24 to Rs.2228 crore at the end of FY25. The current ratio moved from 1.55 to 2.59, due to substantial reduction in working capital loans.

Inventories: Inventories, which include raw materials, work-in-progress, and finished goods, declined from Rs.1,773 crore in FY24 to Rs.1657 crore in FY25, representing a decline of Rs.116 crore or 6.56%.

Cash and Bank Balances

Cash and Bank Balances stood at Rs.530 crore at the end of FY24 and decreased to Rs.357 crore in FY25. This indicates the sound liquidity maintained by the organization.

s. No	Ratios	Formulae	FY25	FY24	Deviation (%)	Comments
a	Current Ratio	Current Asset/Current Liabilities	2.59	1.55	66%	The current ratio has risen significantly because of a large decrease in short-term loans.
b	Debt-Equity Ratio	Debt/Equity	0.18	0.15	36%	It has increased on account of new term loans raised during the year
c	Debt Service Coverage Ratio	(PBT + Dep + Int on TL)/(Interest + Repayment incl. Prepayments)	4.60	3.21	43%	Due to loan prepayments, the debt service coverage ratio was lower last year.
d	Return on Equity Ratio	Net Income/Average Shareholder Equity	0.13	0.10	30%	The return on equity has risen due to a 42% increase in profits this year.
e	Inventory Turnover Ratio	Revenue from Operations/Average Inventory	2.18	2.06	6%
t	Trade Receivable Turnover Ratio	Total Sales/Average Accounts Receivable	29.74	21.56	38%	Due to increased sales volumes and consequential decrease in inventory
g	Trade Payable Turnover Ratio	Net Credit Purchases/Average Accounts Payable	9.28	8.91	4%
h	Net Capital Turnover Ratio	Net Annual Sales/Shareholders Equity	1.22	1.03	18%
i	Net Profit Ratio	(Revenue - Cost)/Revenue	0.10	0.09	8%
j	Return on Capital Employed	EBIT/Capital Employed	0.11	0.13	-13%
K	Return on Investment	Net Profit/Total Assets * 100	7.98	5.30	51%	Due to a significant increase in profits resulting from higher sales volumes this year.

Risks and Concerns

Risk Category	Risk Identification	Risk Mitigation
Regulatory and Policy Risks	Changes in FRP/SAP, export bans, ethanol diversion limits, and OMC procurement policy shifts.	Active monitoring of policy changes, strong alignment with government ethanol mandates, and flexible operational planning.
Market and Economic Risks	Fluctuations in global/domestic sugar prices, grain cost volatility, inflation, and interest rate movements.	Diversified product mix (sugar, ethanol, power), use of forward contracts, prudent inventory and procurement strategy.
Agro-Climatic and Operational Risks	Irregular rainfall, drought, pest outbreaks (e.g. red rot), soil degradation, and regional agro disruptions.	Transition to disease-resistant cane varieties, farmer support programs, and geographic diversification of plants.
Sustainability and Environmental Risks	Water-intensive operations, seasonal bagasse availability, and increasing ESG compliance requirements.	Investment in water conservation, energy-efficient technologies, proactive ESG reporting and compliance.
Technology and Cybersecurity Risks	Cyber threats to ERP systems, cloud data platforms, and digital plant operations.	Implementing IT security protocols, system redundancies and employee training.
Financial and Liquidity Risks	Inventory build-up cycles, high working capital needs, interest rate volatility, and debt repayment obligations.	Maintaining healthy cash reserves, judicious capita allocation, low leverage, and strong banking relationships.

Internal Control Systems and Their Adequacy

DBSIL has established a robust and evolving internal control framework that supports its integrated operations across sugar, distillery, and cogeneration businesses.

The system ensures accuracy in financial reporting, operational efficiency, regulatory compliance, and asset safeguarding across geographically dispersed facilities.

The Companys internal control structure is aligned with the principles of accountability, risk-based control design, and continuous monitoring. It encompasses well- documented policies, standard operating procedures (SOPs), authorisation protocols, and periodic reviews conducted at functional, plant, and corporate levels.

Financial Controls

DBSIL has instituted strong financial controls over critical processes, including procurement, inventory management, revenue recognition, and capital expenditure. The Company follows a maker-checker- approver system across transactions, supported by enterprise-level SAP automation, ensuring compliance with internal policies and statutory requirements. Quarterly and annual financial statements are prepared in compliance with Indian Accounting Standards (Ind AS) and are subject to limited review or audit by statutory auditors.

Operational Controls

Each business vertical—sugar, ethanol, and power-operates under customised control matrices covering procurement, production, logistics, and quality management. The controls ensure real-time monitoring of cane procurement, blending ratios, energy output, and recovery metrics. Integrating digital platforms for cane development and farmer payments enhances process transparency and minimises leakage or duplication.

Plant-level controls are reviewed through regular internal audits, stock audits, and surprise checks to verify adherence to operational norms and resource efficiency benchmarks. Critical control points, such as ethanol dispatches, bagasse handling, and fermentation processes, are tracked through automated systems and reconciled periodically.

Compliance and Risk Management Controls

DBSIL maintains an integrated compliance tracking system that monitors regulatory filings, environmental norms, ethanol blending obligations, and industry-specific guidelines issued by state and central authorities. Legal and compliance functions are regularly updated on policy, tax, or environmental regulation changes and collaborate with functional teams to ensure alignment.

DBSIL has implemented the Compliance Management System of Teamlease Regtech at all its locations to track and ensure compliance with all applicable laws, rules and regulations.

A centralised risk management committee periodically reviews control effectiveness, incident logs, audit findings, and emerging threats, enabling prompt corrective action. Audit Committee of the Board oversees the adequacy and implementation of internal controls, drawing insights from internal and statutory audit observations.

IT and Cybersecurity Controls

With increasing digitisation of operations and financial processes, the Company has implemented multi-layered IT controls, including firewalls, encryption protocols, and secure access systems. Regular cybersecurity audits and disaster recovery drills are conducted to test the resilience of the IT infrastructure. Role-based access restrictions and audit trails are maintained to ensure data integrity and security.

Internal Audit

The Company has appointed a reputed independent internal audit firm that conducts risk-based audits per an annual plan approved by the Audit Committee.

These audits evaluate controls design effectiveness and operating efficiency, covering all business units and key functional areas. Findings and actionable recommendations are presented to management and the Audit Committee.

Human Resource

At DBSIL, our people are at the heart of our operations. We recognise that our employees are pivotal to driving innovation, ensuring operational excellence, and achieving our strategic goals. Our human resource practices are designed to foster a culture of inclusivity, continuous learning, and high performance. Total number of employees employed by the Company (directly and indirectly) during the year are 3,612 (including employees of Baghauli).

Talent Acquisition and Workforce Diversity

DBSIL is committed to attracting and retaining top talent across all levels of the organisation. Our recruitment strategies align with our business objectives, ensuring we onboard individuals who possess the requisite skills and resonate with our core values. We emphasise diversity in our hiring practices, aiming to build a workforce that reflects varied backgrounds, experiences, and perspectives.

Learning and Development

Continuous learning is integral to our organisational ethos. Through our dedicated learning platform,

Nalanda, we offer a range of training programs tailored to different roles and career stages. These programs, developed in collaboration with leading educational institutions, focus on enhancing technical competencies, leadership capabilities, and soft skills. We aim to empower employees to take charge of their professional growth and adapt to the evolving business landscape.

Performance Management and Career Progression

Our performance management system is structured to provide clear objectives, regular feedback, and recognition for achievements. We have implemented a transparent appraisal process that links individual performance to organisational goals. Career progression at DBSIL is merit-based, with clear pathways for advancement, ensuring that high-performing individuals are rewarded and nurtured for future leadership roles.

Employee Engagement and Well-being

We believe engaged employees are more productive and contribute positively to the organisational culture. Regular engagement surveys, town halls, and feedback mechanisms gauge employee sentiments and address concerns proactively. Recognising the importance of work-life balance, we offer wellness programs, flexible work arrangements, and support systems to cater to the holistic well-being of our employees.

Technology-Driven HR Operations

In our pursuit of operational excellence, we have integrated advanced HR technologies to streamline processes and enhance employee experiences. The adoption of Oracle Cloud HCM has enabled us to digitise our HR functions, from recruitment to retirement, ensuring efficiency, transparency, and data-driven decision-making.

Compliance and Ethical Practices

DBSIL upholds the highest standards of ethical conduct and compliance. Our Human Rights Policy underscores our commitment to providing a safe, respectful, and inclusive workplace. We have zero tolerance for discrimination, harassment, or unethical behaviour. Mechanisms like the Whistleblower Policy are in place to allow employees to report concerns without fear of retaliation.

Sustainability & ESG Initiatives

At DBSIL, sustainability is integral to our operations and strategic vision. We are committed to fostering environmental stewardship, social responsibility, and robust governance practices across our value chain.

Environmental Stewardship

• Water Conservation: DBSIL has achieved zero liquid discharge status at its effluent treatment plants, utilising all treated water for irrigation purposes. Condensate water is reused in cooling applications, green belt development, and irrigation.

• Energy Efficiency and Renewable Energy:

Our operations emphasise using renewable energy sources. Bagasse, a by-product of sugar production, is utilised to generate eco-friendly power. This approach minimises waste and contributes to a positive environmental impact.

• Carbon Emission Reduction: DBSIL is committed to reducing its carbon footprint by benchmarking and setting targets for energy consumption and carbon emissions. To achieve these targets, investments are made in energy-efficient projects, operations, technologies, and tools.

Social Responsibility

• Community Engagement: Through Dalmia Bharat Foundation, DBSIL undertakes various CSR activities focusing on health, education, and livelihood generation. Initiatives include organising health camps, skilling through DIKSHA Centres and providing training programs and sustainable livelihood for rural youths. .

* Sustainable Agriculture: DBSIL promotes sustainable farming practices by distributing press mud filter-cake to growers for soil enrichment and producing organic manure through bio-composting.

Governance and ESG Framework

• ESG Policy: DBSIL has established an ESG policy outlining its approach to integrating environmental, social, and governance principles into business processes and operations. The policy emphasises responsible procurement, energy and carbon management, water conservation, waste management, and biodiversity protection.

• Sustainability Reporting: The Company adheres to the Global Reporting Initiative (GRI) Standards framework for its sustainability reporting, ensuring transparency and accountability in disclosing its Environmental, Social and Governance (ESG) performance.

Forward-Looking Statements &

Strategic Outlook

Management Outlook

As we look ahead to FY2026 and beyond, Dalmia Bharat Sugar and Industries Limited (DBSIL) remains confident in its ability to navigate challenges and seize emerging opportunities. While global uncertainties persist—from geopolitical shifts to evolving monetary policies—the Company is strategically poised to accelerate growth, enhance operational efficiency, and unlock new value streams.

Domestically, Indias resilient macroeconomic outlook, favourable monsoon projections, and progressive policy support for ethanol blending and rural infrastructure development provide a strong foundation for expansion. DBSIL is focused not only on steady growth across its core segments—sugar, distillery, and cogeneration—but also on scaling its renewable energy footprint, embracing digital transformation, and investing in sustainable farming practices.

The Company anticipates stronger working capital management supported by higher ethanol offtake, improved cash flows, and inventory rationalisation in the sugar segment. Looking ahead, DBSIL is committed to driving inclusive growth, fostering innovation, and contributing to Indias clean energy and food security goals.

Strategic Evolution

Over the years, Dalmia Bharat Sugar and Industries Ltd. (DBSIL) has transformed from a traditional sugar manufacturer into a future-ready, diversified bio-energy leader. This evolution reflects the Companys strategic foresight, disciplined capital allocation, and unwavering focus on operational excellence, feedstock agility, and integrated value creation.

DBSILs growth strategy is anchored in innovation, sustainability, and scale. Key priorities include:

• Rapidly scaling grain-based ethanol capacity through commissioning the Baghauli distillery and evaluating alternative, sustainable feedstocks such as damaged food grains and biomass residues.

• Enhancing sugar-to-ethanol conversion flexibility to optimise production based on government blending targets, commodity pricing trends, and evolving consumer demand for cleaner fuels.

• Deepening its ESG agenda with an integrated focus on water stewardship, energy efficiency, waste valorisation, and achieving net-zero targets across operations.

• Accelerating digitalisation and automation across the value chain—from intelligent cane procurement systems and predictive farm analytics to smart factory operations and real-time inventory monitoring—to drive transparency, efficiency, and scalability.

These forward-looking initiatives are designed to safeguard margins in a dynamic operating landscape and position DBSIL as a key enabler in Indias transition to a green economy. With a strong commitment to innovation and inclusive growth, the Company is well- equipped to lead the next phase of the biofuel and agrienergy revolution.

Cautionary Statement

This document contains forward-looking statements that reflect the Companys current expectations, beliefs, assumptions, and estimates regarding future business performance and economic conditions.

These statements are inherently subject to risks and uncertainties, many of which are beyond the Companys control. Actual results could differ materially from those projected, due to a range of factors including but not limited to global commodity price fluctuations, regulatory changes, climatic conditions, input cost pressures, and changes in consumer behaviour or government policy.

The Company undertakes no obligation to publicly revise or update any forward-looking statements, whether due to new information, future developments, or otherwise. These statements should be read with the financial and operating performance data and risk factors outlined in this Annual Report.