Dalmia Bharat Sugar & Industries Ltd Management Discussions.

Economic overview


The global economy contracted 3.3% in 2020, largely due to the outbreak of the novel coronavirus and suspension of economic activities across most countries.

Regional growth % FY 2020-21 FY 2019-20
World output (3.3) 2.9
Advanced economies (4.9) 1.7
Emerging and developing economies (2.4) 3.7

(Source: IMF)

Performance of some major economies

United States:_The country witnessed a GDP de-growth of 3.4% in 2020 compared to a growth of 2.3% in 2019.

China:_The country’s GDP grew 2.3% in 2020 compared to 6.1% vgt in 2019 despite being the epicentre of the outbreak of the novel coronavirus.

United Kingdom: Britain’s GDP shrank 9.9% in 2020 compared to 1.4% growth in 2019, 2x the annual contraction recorded in the aftermath of the global meltdown in 2009.

(Source: CNN, IMF, Economic Times, trading economics, Statista, CNBC)

The global economy is projected to grow by 5.5% in 2021 largely due to the successful roll-out of vaccines across the globe, coupled with policy support in large economies. (Source: IMF)


The Indian economy passed through one of the volatile periods in living memory in FY 2020-21.

At the start of 2020, India was among five largest global economies; its economic growth rate was the fastest among major economies (save China); its market size at 1.39 bn was the second largest in the world; its rural population of the under-consumed was the largest in the world.

The Indian government announced a complete lockdown in public movement and economic activity from the fourth week of March 2020. As economic activity came to a grinding halt, the lockdown had a devastating impact on an already-slowing economy as 1.39 billion Indians were required to stay indoors - one of the most stringent lockdowns enforced in the world.

The outbreak of the novel coronavirus and the consequent suspension of economic activities due to the pandemic-induced lockdown, coupled with muted consumer sentiment and investments, had a severe impact on the Indian economy during the first quarter of the year under review. The Indian economy de-grew 23.9% in the first quarter of FY 2020-21, the sharpest de-growth experienced by the country since the index was prepared. The Indian and state governments selectively lifted controls on movement, public gatherings and events from June 2020 onwards, each stage of lockdown relaxation linked to corresponding economic recovery. Interestingly, as controls relaxed what the country observed was a new normal: individuals were encouraged to work from home; inter-city business travel was replaced by virtual engagement; a greater premium was placed on the ownership of personal mobility modes (cars and two-wheelers); there was a sharp increase in home purchase following the need to accommodate an additional room for home working.

The result is that India’s relief consumption, following the lifting of social distancing controls, translated into a full-blown economic recovery. A number of sectors in India – real estate, steel, cement, home building products and consumer durables, among others - reported unprecedented growth. India de-grew at a relatively improved 7.5% in the July-September quarter and reported 0.4% growth in the October-December quarter and a 1.6% growth in the last quarter of the year under review.

The result is that India’s GDP contracted 7.3% during FY 2020-21, largely on account of the sharp depreciation of the first two quarters. This sharp Indian recovery – one of the most decisive among major economies – validated India’s robust long-term consumption potential.

Y-o-Y growth of the Indian economy_

FY18 FY19 FY20 FY21
Real GDP growth (%) 7 6.1 4.2 (7.3)

Growth of the Indian economy, FY 2020-21

Q1, FY21 Q2, FY21 Q3 FY21 Q4, FY21
Real GDP growth (%) (23.9) (7.5) 0.4 1.6

(Source: Economic Times, IMF,_EIU, Business Standard, McKinsey)__

Industry overview

Global sugar sector overview

Almost 80% of global sugar output is generated from sugarcane. Global sugar production for FY 2020-21 was at 182 million tonnes due to higher production in US, India and Brazil as against 153 million tonnes in FY 2019-20 sugar season. Global sugar trade surplus in FY 2020-21 sugar season was 8.1 million tonnes. Global consumption for sugar season for FY 2020-21 stood at 174.1 million tonnes as against 171.58 million tonnes in the sugar season FY 2019-20.

(Source: fas.usda.gov)

Ten largest sugar producing countries
Country Production (mn mt)
Brazil 42
India 30.8
EU 16.1
China 8.2
USA 7.83
Thailand 7.9
Mexico 5.73
Pakistan 5.57
Russia 5.33
Australia 4.02
(Source: fas.usda.gov)
Ten largest sugar consuming countries
Country Consumption (mn mt)
India 25.97
EU 15.40
China 14.38
US 10.20
Brazil 9.42
Indonesia 6.91
Russia 5.58
Pakistan 5.33
Mexico 3.90
Egypt 3.10
(Source: fas.usda.gov)

Overview of key sugar manufacturing geographies

Brazil: Sugar production in Brazil got to 42 million tonnes during MY 2020-21 (April-March) as against 30 million tonnes during MY 2019-20 due to favorable weather and increasing returns for sugar manufacture over ethanol. Around 46% of the sugarcane crop was to be diverted for sugar and 54% for ethanol production compared to 34.3% and 65.7% respectively in the previous year. China: China’s sugar production is likely to remain relatively steady and slightly up to 9.74 million tonnes in MY 2020-21 owing to a rise in beet sugar production. China’s sugar consumption in MY 2020-21 was at 14.38 million tonnes.

USA: Owing to a larger harvested area and yields for sugar beets and sugar cane, sugar production in USA was at 8.2 million tonnes, growing at a rate of 14% in the MY20-21.

Thailand: Sugar production in Thailand declined by 5% to 7.9 million tonnes in MY 2020-21 as a drought influenced lower area yields and extraction. Owing to a higher demand for direct sugar consumption and food services, sugar consumption in Thailand increased. (Source: fas.usda.gov)

Country MY 2020-21 MY 2019-20
Brazil 42 30
China 9.74 9.65
USA 8.2 9.68
Thailand 7.9 7.69

Global sugar price trend

Owing to major concerns about smaller global supplies continuing to fuel fund buying of sugar futures, global sugar prices reported a rally from a low of 10.4 cents/pound in April 2020 to 15.0 cents/pound in March 2021. According to the International Sugar Organisation (ISO), the ISO white sugar price index stood at US$ 418.50 per tonne as on 31st March 2021 compared to US$ 375 at the beginning of October 2020. (Source: ISO)

Indian sugar sector overview

India’s sugar production increased from 26.79 million tonnes in FY19-20 to 30.8 million tonnes in FY20-21, growing at a CAGR of 13% year on year. On similar lines, in SY20-21 (SY = Sugar Year), India produced 30.85 million tonnes against a production of 27.4 million tonnes in SY19-20. According to ISMA, 503 sugar mills crushed sugarcane in SY 2020-21 as against 457 mills in the previous Sugar season; 282 mills stopped crushing as on 31st March 2021 while 221 mills were operating as on 31st March 2021 as against 186 operating on the same date in the previous year. Sugar production in SY20-21 as on 31st March 2021 was higher by about 4.44 million tonnes as 27.8 million tonnes of sugar was produced as on 31st March 2021 compared to 23.3 million tonnes produced during the corresponding period of the previous sugar year.

By May, unpaid cane dues for 2021-21 stood at H18,820 crore, along with pending payments from previous years worth H2,501 crore. However, by mid-August 2021, mills purchased a

record H90,872 crore worth of cane from farmers, against which H81,963 crore had been paid, leaving arrears of H8,909 crore. The minimum support price was proposed to be increased by a task force constituted by Niti Aayog from H31 per kilogram to H33 per kilogram to improve profitability for mills and facilitate quicker repayment.

Despite initial hiccups during the lockdown imposed to curb Covid-19, domestic sugar consumption for the SY19-20 stood at 25.3 million tonnes, slightly down from the previous season. The domestic consumption stood at 25.5 million tonnes during SY20-21.

Till March 2021, India had exported around 3.185 million tonnes of sugar against the targeted exports of 6 million tonnes. Current trends indicate that exports may surpass targeted levels.

(Sources: ISMA, Economic times, the hindu.com, m. daily.hunt.in, International reports and Ventura)

Sugar stock balance (in million tonnes)

Year Opening Production Imports Consumption Exports Closing Balance
011-12 5.9 26.3 - 22.6 3.0 6.6
2012-13 6.6 25.1 0.7 22.8 0.3 9.3
2013-14 9.3 24.4 0.1 24.2 2.1 7.5
2014-15 7.5 28.3 - 25.6 1.1 9.1
2015-16 9.1 25.1 - 24.8 1.7 7.8
2016-17 7.8 20.3 0.4 24.6 0.0 3.9
2017-18 3.9 32.5 0.2 25.4 0.5 10.7
2018-19 10.7 33.2 - 25.5 3.8 14.6
2019-20 14.6 27.4 - 25.3 6.0 10.7
2020-21 10.7 30.8 - 25.5 7.0 10.0

(Source: ISMA)

Indian cane cost trends

The Fair and Remunerative price (FRP) is the minimum price legally guaranteed to be paid to the sugarcane farmers by mills. The FRP was fixed at H2850 per tonne with the goal to attain a basic recovery rate of 10%. However, the CCEA also sanctioned to pay a premium of H28.5 per tonne for every 0.1% rise above 10% recovery. The government decided to make a provision for a reduction in FRP by H28.5 per tonne for every 0.1% points decrease in recovery for mills whose recovery rate was below 10% but above 9.5%. FRP was fixed at H2707.50 per tonne for mills with a recovery of 9.5% or below for SY 2019-20.

Over and above the FRP announced by Central Government, some State Governments fixed the State Advised Price (SAP). Though from last three years there was no change in SAP by Uttar Pradesh state, it was still higher than the FRP announced by the Central Government. (Source: Economic Times)

Sugar year (SY) FRP (K/MT) SAP - U.P. – General Variety (K/MT)
2010-11 1390 2050
2011-12 1450 2400
2012-13 1700 2800
2013-14 2100 2800
2014-15 2200 2800
2015-16 2300 2800
2016-17 2300 3050
2017-18 2550 3150
2018-19 2750 3150
2019-20 2750 3150
2020-21 2850 3150

State-wise analyses

India’s sugarcane acreage stood at around 5.228 million Ha in the SY20-21 compared to 4.841 million Ha in SY 2019-20, a growth of 8%. Maharashtra and Karnataka were the major contributors to the increase as these States had suffered adverse weather conditions in the previous season years.

For the SY20-21, cane acreage in Maharashtra state was reported at 1.066 million Ha, up by approximately 30% from previous season with a plant-ratoon ratio of 55/45 (Source: Cane Commissioner Office, MH). Further to a rise in acreage, basis normal monsoon & replenished dams water storage level, a rise in agricultural yield was observed. A likewise trend was observed in Karnataka, wherein the area went up by almost 9%.

As per the Uttar Pradesh Cane Commissioner’s official, cane crop acreage in Uttar Pradesh went up by 1.40% Y-O-Y to 2.72 million Ha for SY20-21. Though it was the highest acreage in years, crop health was impacted in parts of eastern & central regions wherein early rains checked tillering of crop and also led to an infestation of the Red Rot disease. Gur Kholus started operating early this year compared to the normal operational period. On the overall, the State to produced around 11.0 million tonnes of sugar, down by 13% Y-o-Y. This drop also includes a loss of sugar due to B-Heavy diversion.

In Uttar Pradesh, 120 sugar mills were involved in crushing sugarcane and produced 9.37 million tonnes of sugar till 31st March 2021. Uttar Pradesh is still the largest producer of sugar, molasses and ethanol in the country for consecutive years. The UP Uttar Pradesh government increased the levy quota for molasses from 17% to 18% for the SY 2020-21. The molasses allocated for the levy quota was sold at H120-125 per 100 kg as against the open market price of nearly H 500 per 100 kg.

Sugar production in Maharashtra stood at 10.6 million tonnes in SY20-21 compared to 6.168 million tonnes produced in SY19-20, an increase of 4.432 million tonnes.

In Karnataka, 66 sugar mills produced 4.139 million tonnes of sugar in SY20-21 till 31st March as against 63 sugar mills that produced 3.350 million tonnes in the corresponding period of the previous year.

In Tamil Nadu, 26 sugar mills were engaged in crushing operations in SY20-21 and the total sugar output stood at 0.508 million tonnes as against 0.470 million tonnes produced by 24 sugar mills in the previous year till 31st March.

Gujarat produced 0.915 million tonnes of sugar from 15 sugar mills that are in operations compared to 0.850 million tonnes of sugar in the previous year as on 31st of March. The remaining states of Andhra Pradesh & Telangana, Bihar, Uttarakhand, Punjab, Haryana, Madhya Pradesh & Chhattisgarh, Rajasthan and Odisha collectively produced 2.722 million tonnes of sugar as on 31st March 2021.

Nearly 5 crore farmers and their families generate a livelihood from sugar in India. The business generates an entire ecosystem of rural economic activities. The business has an assured future on account of sugar-sweetened products being used for celebrations, successes and festivals.

(Source: ISMA, m.dailyhunt.in, informist media.com)

Sectorial demand drivers

Population growth: India’s population increased to 1.38 billion in 2020 from 555.2 million in 1970 and is projected to reach 1.52 billion by 2036, catalyzing sugar consumption.

Confectionary and bakery products consumption growth: Indian revenues from the confectionary segment was US$ 72.3 million in 2021 and the market is projected to grow annually by 6.35% (CAGR 2021-25). The bakery industry in India is moving ahead with a growth rate of 9.0%. Sugar accounts of 20-30% as raw material for these industries. (Source: statista.com)

Robust soft drink consumption: India’s per capita soft drink consumption in 2021 stood at around 84 bottles by 2021, almost double compared to the per capita consumption of 44 bottles in 2016, a trend likely to sustain sugar consumption growth. (Source: Business Today, Economic Times)

Government initiatives

In SY20-21, the government allocated H3,500 crores to reduce the domestic sugar surplus and help cash-strapped mills clear dues to cane farmers through export and other incentives. In the last marketing year, H5,361 crore was provided to millers as export subsidy i.e. H10,448 per ton in SY19-20. The government aimed to cover the marketing costs of sugar mills, including handling, upgrading and other operational costs, international and domestic transportation costs. In November 2020, the government announced interest subvention schemes for the enhancement & augmentation of ethanol production capacity extended to molasses and grain-based distilleries and allocated funds for 422 new projects.

SWOT analysis


India is self-reliant for sugar as it is the second largest sugar producing country after Brazil

Millions are employed directly in the sugar industry including ancillary activities

Co-generation plants can utilise bagasse from sugarcane crushing

India is blessed with rich arable land for cane cultivation

Cane generates a superior income per hectare over competing cash crops

There is an ethanol capacity increase in line with government policies towards ethanol blending programme targets.


Many sugar factories have been operational for more than 40 years, but still using legacy technologies

Plantation white sugar is produced by mills, which is priced at a significant discount to white refined sugar, which generally gets traded in the global market.

Sugar cane crop has a high reliance on reservoirs and ground water availability, which are directly dependent on monsoon rains.


Consistently growing domestic energy demand with expanding economy, growing population and urbanization.

Diversification into profitable ethanol production

Investment in state-of-the-art technologies for by-product utilization

The government is keen on increasing blending to 20% which shall provide a perfect balance to the industry between sugar and ethanol.

Sugar export opportunities and freight advantages for countries like Sri Lanka, Bangladesh, Indonesia and Iran.


Sluggishness in demand owing to the pandemic

Exposure to variables like rainfall, soil, temperature, transportation expenses and competing crop yields

Sugar-based products face negative publicity on account of obesity

Indian ethanol sector overview

India hold the fifth position in the world in terms of ethanol production capacities and ethanol prices in the country varies in the range of $ 0.63 to $0.87 per litre, which is comparatively better than in US & Brazil ($0.61 per litre). The prices of ethanol produced in India are higher in comparison to global players, since the FRP of sugarcane is fixed by the government to support the farming community.

As of now, 85% of oil requirements in India is fulfilled through imports. During FY20-21, Indian net import expense on petroleum was $55 billion and with an ethanol blending target of 20% by 2025, India is expected to save at least $4 Billion per annum. This will also ensure earnings predictability of the Indian sugar Industry and stability in sugar prices, which will ensure timely payments to sugarcane farmers.

The average ethanol blending rate in India stood at ~5% in FY 2020-21 as against 4.5% in FY 2019-20. In the first four months of the EY21 (Ethanol Year = EY), ethanol blending reached a record of more than 7.2%, putting the country on course to achieve 10% ethanol blending rate by 2022. For the FY21, OMC requirements were 3.465 billion litres of ethanol – out of which contracts had been finalized for 2.996 billion litres till 31st March, 2021, against which 1.009 billion litres already lifted by OMCs. As per industrial sources, by May 2021 end, 1.46 billion litres will get lifted by OMCs and EBP target of 7.6 % will get achieved by May 2021.

Sugar mills in Uttar Pradesh diverted 0.73 million tonnes of sugar through B-heavy molasses and sugarcane juice for ethanol production in SY 2020-21 as against 0.44 million tonnes in SY19-20. Uttar Pradesh, with an annual ethanol production capacity of 1.4 billion liters, emerged as India’s largest ethanol producer. In Maharashtra, mills diverted 0.75 million tonnes of sugar for ethanol production in SY20-21 as against 0.080 million tonnes in SY19-20. Mills in Karnataka diverted 0.58 million tonnes compared to 0.040 million tonnes in the previous year.

Ethanol production capacity in India was 4.26 billion liters from molasses-based distilleries and 2.58 billion liters from grain-based distilleries, rising 250% in around seven years. With interest subventions schemes to the commissioning and upgradation of standalone and grain-based plants, further ethanol production capacity is expected to be added. Besides, India will need about 10 billion litres of ethanol for doping in petrol by 2030 to cut a dependence on imports for meeting oil needs. India has 330 distilleries, which can generate over 4.8 billion litres of rectified spirits (alcohol) each year. Nearly 166 distilleries possess a production capacity to distil 2.6 billion litres of ethanol (denatured and undenatured) harnessed in fuel, industrial chemicals and beverages.

The government plans to double ethanol production and enhance blending of ethanol with petrol to reduce oil imports, increasing ethanol production capacity from 4.26 billion litres to 6.60 billion litres from sugarcane and 5.4 billion litres from grains by 2025 to meet the demand of 12 billion litres. The price of ethanol from sugarcane juice was pegged at H62.65 per litre while ethanol extracted from C-grade molasses was pegged at H45.69 a litre and that from B-grade molasses at H57.61 a litre.

Fuel ethanol in India is the fastest growing ethanol program in the world. The relative success of the programme encouraged the government to announce 20% ethanol blending target by 2025. To achieve this target, the government approved a scheme allocating H8,460crores to increasee than old is tillation capacity.The government will bear interest subvention for five years, including a one-year moratorium against the loan availed by project proponents from banks at 6% per annum or 50% of the rate of interest charged by banks, whichever is lower. Interest subvention would be available to only those distilleries that supply at least 75% of ethanol produced from the added distillation capacity to oil marketing companies (OMCs) for blending with petrol. Investment valued H40,120 Crores in the ethanol value chain will be generate due to the increased interest subvention scheme which will encourage farmers to produce with more energy due to high income realization, subscribing to the comprehensive vision of Atmanirbhar Bharat. The government approved 422 ethanol projects which could add annual production capacity by 16.75 billion liters and is anticipated to attract investments worth H41,000 crore.

(Source: ISMA, Economic Times, Business Standard, The Hindu, Mint, International sugar journal.com)

Indian co-generation sector overview

Bagasse cogeneration stood at 10,000 MW in FY 2020-21 owing to the establishment of new sugar mills and modernization of existing one. Moreover, with consideration of cane trash, binding material and high pressure and high-temperature power generation cycles, the total is 15,000+ MW. The availability of biomass in the country is projected at around 500 million metric tonnes per annum. India has an additional biomass availability of around 120-150 million metric tonnes each year. Moreover, about 7000 MW extra power could be produced through bagasse-based cogeneration in 550 sugar mills if these sugar mills were to adopt economically optimum levels of cogeneration for extracting power from the bagasse produced by them.

The fuel most preferred for captive generation is coal, which accounts for 56% of the fuel mix in the country. Since the electricity is primarily generated using residual bagasse, which is a by-product of sugar, additional expenses are not mandated to be incurred by sugar mills within their factory premises. This resulted in the smoothening of the discovery of better margins for sugar companies in the co-generation segment and modified electricity costs. The average spot power price declined from H2.92 per unit as of 31 December 2019 to H2.83 per unit as of 31 December 2020, a decline of around 3%.

The Ministry of New and Renewable Energy launched a scheme to assist biomass-based cogeneration in sugar mills and other industries. Under this scheme, 70 biomass cogeneration projects were under implementation with a surplus capacity standing at 800 MW. Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra and Uttar Pradesh were the leading states in the implementation of bagasse cogeneration projects.

(Source: MNRE, Businessworld, Ijert, Crespai)

DBSIL’s sugar business


This business segment contributed to the majority of revenues at 78% in FY 2020-21. The scale was on account of the Company’s brand, visibility and sustainability. The industry was marked by a decline in sugar output and consumption. Against this background, DBSIL witnessed a profitable year with reduced operational downtime and increased recovery.


The Company emerged among the larger sugar manufacturers in India and one of the fastest growing over the last decade.

The Company retained its position as the only Uttar Pradesh manufacturer (private sector) with operations in Maharashtra.

The Company focused on operating efficiency, reflected in consistently higher sugar recovery

To ensure better quality and efficiency, the Company worked with a 95% early varietal mix.

Challenges: Consistent pressure on sugar stock levels for the economy as a whole though fairly managed by the government’s proactive policies related to export incentivisation and the ethanol blending programme.

Highlights, FY 2020-21

Sugar sales at 6.18 LMT including the highest ever export of 1.65 LMT.

The Company enhanced the early varietal cane in its cane mix during the year under review to more than 95% from 80% (five years ago)

Highest cane crush in Maharashtra at 14.83 LMT.

The Kolhapur plant stood at number one in Maharashtra in terms of sugar recovery (normative) and Ninaidevi at number two in the state.

Ramgarh unit recorded the highest normative sugar recovery in the Company’s history at 12.25%

The Company enhanced normative sugar recovery to 12.42% from 11% (in 14-15) across all five plants. This improved due to a robust cane development programme by thecompany and soil improvement activities to improve yield and recovery.

Outlook FY 2021-22

The outlook for the next year appears stable on the back of an increase in the diversion of sugar towards ethanol. This will not only result in lower pressure on stock levels but also better realizations and profitability.

Particulars FY 2020-21 FY 2019-20 Increase/ (decrease)
Sales volumes (Lakh tonnes) 6.18 4.85 1.33
Normative sugar recovery for the season (in %) 12.42 12.38 0.04
Contribution to revenues (%) 78 78 -
Contribution to EBITDA margin (%) 40 40 -

DBSIL’s distillery business


In line with the ethanol blending programme of the government, wherein the target was to reach a 20% blending target in about five years, DBSIL has an operating capacity of around 8 Crore litres of distillery production and expanding it to 15 Crore litres in the next year. This will add stability through assured offtake at defined prices and reduce dependence on the relatively less stable sugar segment.


The Company possessed the capacity to produce different grades of alcohol (ethanol, rectified spirit and extra-neutral alcohol).

The Company equipped all plants with modern technologies to increase operating efficiencies and ensure zero liquid discharge.

The availability of quality molasses helped improve ethanol recovery

The distilleries were run nearly at full capacity utilisation.

Challenges: Though there are not many challenges to this sector as it is regulated, global COVID disruptions affected the offtake to some extent due to reduced fuel consumption in a lockdown scenario.

Highlights, FY 2020-21

Highest distillery production at 8.43 Crore litres.

Highest distillery sales at 8.60 Crore litres.

Enhanced the proportion of revenues contributed by the ethanol segment to 16% in FY 2020-21.

Outlook, FY 2021-22

Headed towards diverting around 1.5 LMT sugar.

Increase distillation capacities to produce more B-Heavy ethanol and producing it directly from juice.

Attractive realisations from juice ethanol and B-heavy ethanol.

Distillery turned into a full-fledged segment instead of being a by-product processing unit.

Particulars FY 2020-21 FY 2019-20 Increase/ (decrease) in (H )
Sales volumes (Kilolitres) 85350 63607 21743
Contribution to revenues (%) 16 14 2
Contribution to EBITDA margin (%) 34 29 5

DBSIL’s cogeneration business


The Company entered the business of power cogeneration in 2007-08 following the commissioning of a 79 MW capacity attached to its Jawaharpur, Nigohi and Ramgarh plants to efficiently utilize bagasse (byproduct of sugar). DBSIL’s cogeneration capacity stands at 119 megawatts, spanning five units. Of this capacity, nearly 29% of the total power generated was consumed captively in FY 2020-21 and the rest exported to the state electricity grid. Revenues were secured through long-term power purchase agreements with the State Government (with periodic escalation clauses).


The Company possesses adequate capacity to cater to 100% of its power requirement, insources its entire power requirement from its co-generation plant.

The Kolhapur co-generation plant is equipped with cutting-edge high-pressure boilers, enhancing power generation per metric tonne of cane.

Challenges: Reduced power tariffs in UP are still not good enough to operate during the off season, as a result of which excess bagasse is required to be sold outside UP. A threat to Maharashtra’s power tariff is a key challenge for the co-generation segment.

Highlights, FY 2020-21

The co-generation segment performed well during the last year despite the Company’s plan to not operate in Uttar Pradesh during the off-season due to the low power tariff.

Outlook, FY 2021-22

The outlook for the next year appears largely unchanged except for a clarity on the Maharashtra power tariff.

Particulars FY 2020-21 FY 2019-20 Increase/ (decrease) in (H )
Revenue from power exports (H crore) 141 156 (15)
Contribution to revenues (%) 5 7 (2)
Contribution to EBITDA margin (%) 24 29 (5)

Financial overview

Key performance metrics

Parameters FY 2020-21 FY 2019-20
Total revenue (H crore) 2,739 2,172
EBITDA (H crore) 525 398
PBT (H crore) 367 252
PAT (H crore) 270 198
Earnings per share (H) 33.3 24.46

Analysis of the Profit & Loss statement


Total revenues of the Company stood at H2739 crore as against H2,172 crore in the preceding year on account of higher sugar sales volume due to higher exports at very lucrative prices (after adding export subsidies) and higher distillery sales volume due to expanded capacity and higher sugar diversion into ethanol.


Total expenses of the Company increased from H1,920 crore in FY 2019-20 to H2372 crore in FY 2020-21 mainly on account of higher liquidation of inventory, higher depreciation due to a change in the method and comparatively higher fixed costs. Employees’ expenses, comprising 5.25 % of the total revenues, increased 7.5% from H134 crore in FY 2019-20 to H144 crore in FY 2020-21 due to higher season days and annual increment impact.

Analysis of the Balance Sheet

Sources of funds

Net worth: The net worth of the Company increased 30% from H1,609 crore as on 31st March 2020 to H2090 crore as on 31st March 2021. The Company’s equity share capital, comprising 8.09 crore equity shares of H2 each, remained unchanged during the year under review.

Long-term debt: Long-term debt of the Company decreased 47% from H521 crores as on 31st March 2020 to 276 crores as at 31st March 2021 due to aggressive repayments. Long-term debt-equity ratio of the Company stood at 0.13 in FY 2020-21 compared to 0.32 in FY 2019-20.

Finance cost: Finance costs of the Company decreased 30% from H88 crores in FY 2019-20 to H62 crores in FY 2019-20. The Company’s interest cover stood at a comfortable 11.64 times in FY 2020-21 (7.6 times in FY 2019-20), reflecting a comfort in servicing interest.

Application of funds

Fixed assets (gross) of the Company increased from H2,238 crores as on 31st March 2020 to H2288 crore as on 31st March 2021 mainly due to the expansion of Nigohi distillery, Nigohi ion exchange refinery and specialty sugar packing unit. Depreciation on assets increased 67% from H57.23 crore in 2019 - 20 to H95.55 crore in FY 2020-21 due to a change in the depreciation method from SLV to WDV for sugar and distillery segments.


Non-current investments of the Company increased from H252.55 crore as on 31st March 2020 to H462.09 crore as on 31st March 2021 mainly due to an increase in the marked-to-market gain on long-term equity investments.

Working capital management

Current assets of the Company decreased from H1,868 crores as on 31st March 2020 to H1,828 crore as on 31st March 2021. Current Ratio stood at 1.56 in FY 2020-21 compared to 1.50 in FY 2019-20.

Inventories, including raw materials, work-in-progress and finished goods, among others, increased from H1,329 crores as on 31st March 2020 to H1375 crore as on 31st March 2021, a rise of 3.44 %. Cash and bank balances of the Company increased from H67.03 crore as on 31st March 2020 to H79.49 crore as on 31st March 2021.


A strong cost control helped the Company in reporting better margins during the year under review. The EBITDA margin of the Company improved from 18% in FY 2019-20 to 19% in FY 2020-21 while net profit margin improved as well.

Key financial ratios

Ratio FY 2020-21 FY 2019-20 Remarks
PAT to turnover ratio % 10% 9% There was no significant change in this ratio
EBIDTA to turnover ratio % 19% 18% There was no significant change in this ratio
Interest Service Coverage ratio (Times) 12 8 ISCR improved significantly due to a significant reduction in interest costs and increase in profits.
Debt Equity ratio (Times) 0.13 0.32 It improved significantly due to a reduction in a long-term loan on account of aggressive debt prepayment by the Company.
Current ratio (Times) 1.56 1.39 There was no significant change in this ratio
ROCE % 17% 16% There was no significant change in this ratio

Disclosure of accounting treatment

DBSIL has followed accounting standards in the preparation of its financial statements and there has been no deviation.

Internal control systems and their adequacy

The internal control systems are structured and commensurate with the size of operations of the Company. It is an integral part of the general organizational structure of the Company. The policies and procedures adopted by the Company ensures the orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, adequacy and completeness of the accounting records and timely preparation of reliable financial information.

The internal auditors conduct regular internal audits as per approved plans; the Audit Committee reviews periodically the adequacy and effectiveness of internal control systems and takes steps for corrective measures whenever required. There are established Cause-Effect-Action (CEA) systems and escalation matrices to ensure that all critical aspects are addressed well in time.

Human resource and industrial relations

The Company believes that human capital is the most critical asset of an organisation for achieving sustainable growth. The Company provides good quality of life to employees through an open environment which is supportive of their personal and professional development. Inducing a joyful working environment increases productivity and efficiency of employees. DBSIL undertakes various employee engagement activities such as workshops, events, festival celebrations, outbounds, etc. to boost Company’s cultural philosophy. The Company takes utmost care to keep the employees engaged and upgrade their skills while provide learning opportunities. Bottom-up approach is adopted in training, under which, unit specific training and skill development needs are identified. ‘Nalanda’, a team at Dalmia Group level, identifies learning needs of employees and helps in designing learning programs. Training and awareness programs are conducted frequently so that employees are aware of Policies, Code of Conduct, Whistle Blower Mechanism, safety approach etc.

Health and safety of employees is of paramount importance and it is endeavoured to inculcate ‘Zero accident’ culture at plants. DBSIL strives to build organisational capability, for implementing a ‘safety first’ approach. Third party safety audits are conducted periodically, post which recommendations are implemented. DBSIL’s human relations and compliance department work with the units to ensure that there is no violation of human rights. Strict action is taken against the offender in case of any violation. Discrimination based on any ground is not tolerated and employees are encouraged to behave in accordance with Code of Conduct. DBSIL is committed towards promoting a diverse workforce and objects to any kind of discrimination based on gender, age, colour, religion, race or nationality. DBSIL hires and promotes employees strictly on the basis of their suitability, qualification, talent and performance with respect to the assigned role. Regular inspections of plants and offices are conducted to check that no violations of human rights occur.

DBSIL recognises employee needs to form trade unions so that they can put forward their aspirations in a better way to the senior management. DBSIL has trade unions in Maharashtra facilities in which almost 86% of the employees are covered. There are no unions in Uttar Pradesh facilities. Interactions between senior management and trade unions /employees are conducted periodically to maintain cordial relations.

While offerings on physical health have been extended, a significant focus is now on emotional health unlike earlier. DBSIL is offering systemic ways to enable employees to be in charge of their feelings and thoughts to understand how they relate to self and enable them to manage challenges better. Earlier, Dalmia’s employee wellbeing programme focused 100% on physical health, perhaps just 1-2% on other wellbeing programmes where as now over 30% cater to emotional health.

The Company’s customer-centricity helped the Company retain more than 73 employees over 25 years.

Risks and concerns

At DBSIL, we follow the mechanism of risk identification, risk mapping, assessment and control of risks, review and alignment and ultimately mitigation of the identified risks. Such a structured mechanism allows for a better vision of risks and the controls and enables us to better evaluate and be prepared for the situation. The identified risks and the corresponding mitigation methodologies are as follows:

Risk Mitigation / Plan
Political & economical risks These risks by their nature are uncontrollable; the Government has taken several positive reforms like a fixation of MSP, monthly sales quota and aggressive blending of ethanol.
*Sugar price reduction
*Cane price increase These steps have been a game changer for the industry and enabled the industry to move away from a pure cyclical commodity industry to stable revenue streams.
*Power tariff reduction
Operational risks *These have been mitigated to a great extent through an ideal varietal composition, cane development activities, reduction in process losses and real-time benchmarking with peers.
*Cane availability
*Sugar recovery%
*Breakdown of machinery *All risk insurance policy and adequate insurance spares inventory has mitigated this risk.
Risk Mitigation / Plan
Our main cane variety, which has more than 90% of the total cane, is susceptible to Red Rot infectiont. Shifting to other best varieties under Project Parivartan.
Imparting knowledge to farmers to convince them to switch.
More impetus on varietal development and other cane development activities.
Water conservation: Sugar cane is a water-intensive crop with a large dependence on ground water. Ground water recharge through ponds and recharge wells.
Prime impetus to water conservation through drip irrigation.
Treating the waste water and supplying for irrigation
Soil health: Soil management to improve/ maintain soil fertility. Soil health cards for optimum fertilizer uses.
Promoting intercropping and organic fertilizers.
Imparting knowledge to farmers.
Financial risks Strong fundamentals, coupled with high credit rating backed by strong brand equity, minimizes risk.
*Interest rate hike and loan availability
*Bad and doubtful debts Payment terms of non-institutional buyers based on cash and carry has helped reduce this risk to a large extent.
* Foreign currency exposure Policy to hedge 100% exposure has moderated this risk.
Legal risks The Company has maintained a robust tracker of all compliances, monitored through monthly reviews, which minimizes the risk of noncompliance or delayed compliance.
*Non-compliance with pollution and taxation norms is a risk.

Cautionary statement

This statement made in this section describes the Company’s objectives, projections, expectations and estimations which may be ‘forward looking statements’ within the meaning of applicable securities laws and regulations. Forward– looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized by the Company. Actual result could differ materially from those expressed in the statement or implied due to the influence of external factors which are beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent development, information or events.