Davangere Sugar Company Ltd Management Discussions

Management Discussion & Analysis Report

Global Economic Overview:

Global sugar production is forecast down 1.2 million tons to 184.9 million with lower production in Brazil, the European Union the United States and Thailand expected to more than offset higher India production. Exports are forecast down slightly to 62.3 million tons with reduced exports from Brazil, the European Union, Morocco, and Pakistan more than offsetting higher shipments from Australia. Ending stocks are forecast to rise slightly, primarily in China and India.

Sugar is produced dominantly from sugarcane, while about a fifth is from beet. Though beet has recorded robust rise in yield, crop area has steeply risen for sugarcane essentially from tropical countries. Ethanol production consumes about 15% of the world sugarcane harvest but consistently constitutes over one-half in Brazil. India is fast catching up in its bid to absorb surplus sugarcane into ethanol production that helps in concomitant cut in sugar production to achieve desired demand-supply parity and sugar price stability.

World sugar prices are highly volatile wherein the price volatility for raw sugar is generally higher compared to white sugar. World prices for white and raw sugar are strongly co-related. There is clear statistical inverse relationship between prices and stocks, expressed by the ratio of stock to consumption. There exists a small positive co-relation between the price of sugar and oil.

Status update

As per ISO, world production in 2025-26 would rebound, thanks to steep rise in India followed by Thailand. At 181.3 MMT, it would be a new record. Consumption would increase marginally, yet below the record 2023-24 level. Slack in consumption growth could be attributable to increased use of corn based and high intensity sweeteners, use of GLP-1 drugs in US that reduces food craving and impact of geopolitical turmoil. Notably 2025- 26 would record a surplus of 1.2 MMT as opposed to successive deficits in the last six years. Year-end stock at 93.3 MMT is near flat, while stock/consumption ratio at 51.81% would be a new low in a decade.

Raw sugar prices deeply decelerated between Oct 24 and Sep 25 in NY#11 Futures, losing about 30% value. Average price for 2025 was indeed a five-year low. The Iranian war that fired up crude oil prices triggered a temporary surge in sugar prices that however turned ephemeral. Raw sugar prices currently trade sub 14 c/lb, which is below cost of production for most countries, including India.

Performance of Major Sugar Producing Countries:

U.S. production is forecast down slightly to 8.0 million tons. Imports are forecast nearly 600,000 tons higher to 3.0 million based on projected quota programs consistent with World Trade Organization and free-trade agreement obligations, and on projected imports from Mexico, re exports, and high-tier tariff imports. Consumption is unchanged while stocks are reduced mostly due to lower output.

Brazil production is forecast down 1.3 million tons to 42.5 million on the expectation that the ethanol/sugar mix will favor ethanol at 52 percent versus 48 percent for sugar. Strong domestic ethanol demand drives the shift in the ethanol/sugar mix following the August 2025 policy change to increase the anhydrous ethanol blend in gasoline from 27 percent to 30 percent. With lower sugar output, consumption and exports are forecast to decline.

sugar production is forecast down 1.2 million tons to 184.9 million with lower production in Brazil, the European Union the United States and Thailand expected to more than offset higher India production. Exports are forecast down slightly to 62.3 million tons with reduced exports from Brazil, the European Union, Morocco, and Pakistan more than offsetting higher shipments from Australia. Ending stocks are forecast to rise slightly, primarily in China and India.

European

Union production is forecast to fall 1.2 million tons to 14.4 million on lower sugarbeet area amid weak prices and high input costs, leading some growers to switch to alternative crops. Imports are up with lower production while exports are forecast down and consumption flat.

China production is forecast nearly unchanged at 12.7 million tons on normal growing conditions and stable sugarcane and sugarbeet area. The central government continues to prioritize sugar production, with local governments in Guangxi and Yunnan provinces supporting this goal through subsidies and programs that promote improved planting techniques and mechanization. Imports and consumption are expected flat.

Thailand production is forecast down 1.8 million tons to 9.5 million due primarily to reduced area following last years announcement by the Office of the Cane and Sugar Board to set the farm-gate price below the cost of production to reduce inflation. Consumption and exports are expected to remain unchanged.

(Source - USDA)

Domestic and International Price:

While 2025/26 production volumes are largely finalized, the comparative economics of ethanol versus sugar production remain critical for 2026/27 planning. Recent geopolitical tensions have elevated global oil prices to approximately $100 per barrel-the first time in nearly four years. According to industry sources, the government was already evaluating increased ethanol blending mandates to reduce petroleum import dependence and support domestic producer capacity.

However, strong domestic sugar prices currently provide limited incentives for mills to redirect production toward ethanol. Additionally, regional variations complicate production decisions. In Northern India, where sugar prices exceed Maharashtra levels, diverting production to ethanol is even less economically viable.

Substantial improvements in ethanol-to-sugar price ratios would be necessary to incentivize such shifts. Any ethanol policy modifications could materially affect Indias sugar output and global market equilibrium in 2026/27.

Domestic sugar prices remained firm during October-November 2025 due to festive season demand. Since January 2026 prices have remained near $456 per MT. With subdued global prices reflecting strong production expectations from Brazil, Thailand, and India, mills prioritized domestic sales over exports through much of the past month. However, raw sugar futures declined after Indian authorities reaffirmed on April 7, 2026, their commitment to maintaining the 2 MMT export quota

Source: Department of Food and Public Distribution and FAS New Delhi Research

Overview of the Indian Sugar Sector:

Key Highlights:

• The sugar industry is the second-largest agro-based industry in India, next only to the cotton industry, and is one of the most significant contributors to the countrys agricultural economy.

• India is the second-largest sugar producer in the world after Brazil and continues to maintain a prominent position in the global sugar market.

• As per industry estimates, sugar production during Sugar Season (SS) 2026-27 is expected to recover by 3.6 million metric tonnes (raw value) to approximately 33.6 million metric tonnes, driven by consecutive favourable monsoon seasons, improved groundwater reserves, higher sugarcane yields and increased acreage under cultivation.

• The area under sugarcane cultivation and harvesting is projected to reach nearly 6.0 million hectares, representing an increase of approximately 2% over the previous season.

• Uttar Pradesh, Maharashtra and Karnataka remain the leading sugarcane-producing States and together contribute nearly 60% of the countrys total sugar production.

• The sugar industry plays a vital role in Indias rural economy and directly or indirectly supports the livelihoods of more than 5 crore sugarcane farmers and their dependents, cultivating sugarcane over approximately 55-60 lakh hectares across the country.

• In addition to the farming community, the industry provides direct employment to approximately 5 lakh workers in sugar mills and supports the livelihoods of another 10 lakh persons through allied and ancillary activities.

• The Indian sugar industry operates under a comprehensive regulatory framework comprising various laws, policies and Government interventions aimed at balancing the interests of sugarcane growers, sugar mills and consumers.

• The regulatory framework focuses on ensuring fair remuneration to farmers, maintaining adequate domestic sugar availability, stabilising sugar prices, promoting sustainable industry growth and strengthening the long-term viability of the sector, while prioritising domestic requirements over global market fluctuations.

• The industry continues to evolve through improved agricultural practices, technological advancements and integrated operations involving sugar, ethanol and co-generation, thereby contributing to renewable energy, resource optimisation and sustainable economic development.

On April 2, 2026, the Indian Sugar and BioEnergy Manufacturers Association (ISMA) published its production estimate for MY 2025/26 at 27.2 MMT (crystal value basis), representing a 12 percent decrease from the initial forecast of 31 MMT. By the first week of March 2026, 465 out of 541 sugar mills had concluded crushing operations, according to industry sources. Despite higher production volumes compared to the previous year, excessive rainfall led to lower cane availability, and thereby to earlier mill closures.

Additionally, the yearon-year increase in operating mills meant that even with higher than previous years cane availability, expanded crushing capacity enabled mills to complete operations sooner. This contrasts with the previous year when only 420 mills had closed by late March, allowing crushing activities to continue throughout that month (see Table 3).

Table 3: India: Sugar Mill Status and Recovery Rate as of March 31, 2026

Particulars	October to March 2024	October to March 2025	October to March 2026
Total mills	358	493	541
Sugar production (MMT)	28	30	33.6
Sugar recovery rate	10	8.3	9.2

Source: FAS New Delhi Research

Government Assistance to Uplift the Sugar Industry:

Over the past several years, the Government of India has taken numerous measures to help the sugarcane producers and sugar industry. These include the following:

• Aided sugar mills at Rs 5.50/quintal of cane crushed for sugar season 2017-18 to offset the cost of cane amounting to about Rs 1540 crore. In 2018-19 SS further assistance to sugar mills was provided at Rs 13.88/quintal amounting to a total of Rs 4163 crore.

• Extended soft loans of Rs 6,139 crore in 2017-18 SS through banks to the mills for settng up new distilleries and installation of incineration boilers to augment ethanol production capacity for which the Government will bear interest subvention of Rs.1332 crore. A further extension of soft loans in 2018-19 SS of about Rs 10,540 crore was provided for which interest subvention was at 7% for one year, amounting to Rs 738 crore.

• To prevent cash loss and to facilitate sugar mills to clear cane dues of farmers in time, the Government has fixed a minimum selling price of sugar at Rs 29/kg for sale at factory gate in domestic market in June 2018, - below which no sugar mill can sell sugar. The same was later revised to Rs. 31 per kg in Feb2019.

• Notified the new National Policy on Biofuels, 2018, under which sugarcane juice has been allowed for the production of ethanol. Further, the Government has fixed the remunerative price of ethanol produced from C-Heavy molasses and B- Heavy molasses/sugarcane juice separately for supply under EBP during ensuing ethanol season 2018-19.

• The Central Government provided a lump sum assistance for expenses on export of sugar limited to MAEQ of sugar mills for the sugar season 2020-21, in the following Manner:

(a) For marketing including handling, quality up-gradation, debagging & re- bagging and other processing costs etc.

@ Rs. 1600 per MT.

(b) For internal transport and freight charges including loading, unloading, and fobbing etc.

@ Rs. 2400 per MT.

(c) For ocean freight against shipment from Indian ports to the ports of destination countries etc.

@ Rs. 2000 per MT. TOTAL = RS. 6000 PER TON (LATER REDUCED TO RS 4000 PER TON w.e.f. MAY2021.

Source- ISMA

Industry Developments and Regulatory Updates:

(i) Sugar

During the year under review, the sugar industry continued to operate under a regulated environment with significant policy interventions by the Government of India ("GOI"):

• The stock holding norms and Monthly Stock Quantity (MSQ) mechanism for sugar, introduced by the GOI in June 2018, continued to remain in force during the year.

• The Minimum Selling Price (MSP) of sugar, fixed at Rs.31 per kg by the GOI in February 2019, remained unchanged despite a substantial increase in the Fair and Remunerative Price (FRP) of sugarcane and repeated representations from the industry seeking an upward revision.

• With effect from 22 September 2025, the GST rate applicable to all forms of sugar, syrups, confectionery products, farm implements and pesticides was reduced from 12% to 5%.

• The GOI permitted phased exports of sugar during Sugar Season (SS) 2025-26:

o In November 2025, export of 15 lakh tonnes of sugar was permitted, the 50% export duty on molasses was removed, and mill-wise export quotas were made tradable.

o In February 2026, an additional export quota of 5 lakh tonnes was permitted; however, the mill-wise quota was not made tradable.

• The mandatory jute packaging requirement continued during the year. The Ministry of Textiles, vide Notification dated 16 February 2026, extended mandatory jute packing for sugar at 20% up to 30 June 2026. The Sugar Advisory Committee (SAC) recommended reducing the requirement to 15%, subject to certain exemptions. The industry continues to pursue legal remedies highlighting health concerns associated with the use of carcinogenic jute batching oils.

• Proceedings relating to the levy sugar price matter before the Honble Supreme Court have concluded, and the judgment is awaited.

(ii) Sugarcane Pricing

• The GOI, in April 2025, increased the Fair and Remunerative Price (FRP) for sugarcane by Rs.15 per quintal to Rs.355 per quintal, linked to a base recovery rate of 10.25%, for Sugar Season 2025-26.

• The Draft Sugarcane (Control) Order, 2026 was released by the GOI in April 2026.

• The Government of Tamil Nadu (GOTN) continued to withhold the transport subsidy of Rs.100 per tonne for sugar mills, discontinued since Sugar Season 2020-21, resulting in the industry bearing the full transportation cost in the State.

• GOTN announced an incentive of Rs.349 per tonne for sugarcane supplied during Sugar Season 2024-25. The incentive for Sugar Season 2025-26 is awaited.

(iii) Co-generation

The co-generation sector witnessed several regulatory and judicial developments during the year:

• The Central Electricity Regulatory Commission (CERC) issued a draft proposal on 3 June 2025 for determination of the levelized tariff for the second year of the Control Period. Following representations made by SISMA-TN, the final order was issued on 9 July 2025, covering the period from 1 July 2025 to 31 March 2026, subsequently extended up to 31 July 2026.

• The National Stock Exchange (NSE) and Multi Commodity Exchange (MCX) launched electricity derivatives in June 2025.

• Entitlement for Renewable Energy Certificate (REC) sales by captive generating plants was restricted under the CERC (REC) Regulations, 2022. ISMAs challenge before the Honble High Court of Delhi remains pending.

• The Appellate Tribunal for Electricity (APTEL), vide order dated 16 June 2025, set aside the TNERC Order dated 4 January 2019 relating to Parallel Operation Charges (POC). The matter has since been challenged before the Honble Supreme Court by TNPDCL.

• APTEL, through its judgment dated 3 September 2025, allowed the batch of appeals challenging tariff orders issued by TNERC since 2012. Consequent thereto, TNERC initiated remand proceedings for revision of tariff, which are presently under consideration.

• The Review Petition (RP No. 10 of 2025) filed by SISMA-TN seeking review of Tariff Order No. 9 of 2025 remains pending before TNERC.

• TNERC, vide order dated 23 December 2025, clarified that the revised tariff under Tariff Order No. 9 of 2025 would apply prospectively from 22 September 2025. The said order has been challenged by SISMA-TN through a Writ Petition.

• The Government of India released the draft National Electricity Policy, 2026 in January 2026, addressing emerging developments and future strategies for the power sector.

(iv) Ethanol

• Pursuant to the communication dated 1 September 2025 issued by the Ministry of Consumer Affairs, Food and Public Distribution (MCAF&PD), sugar mills and distilleries were permitted to produce ethanol from sugarcane juice, sugar syrup, B-Heavy Molasses and C-Heavy Molasses without restriction during Ethanol Supply Year (ESY) 2025-26.

• The ethanol blending percentage averaged 19.98% during ESY 2025-26, reflecting continued progress under the Ethanol Blended Petrol (EBP) Programme.

• The Public Interest Litigation challenging the rollout of E20 fuel was dismissed by the Honble Supreme Court on 1 September 2025.

• The sugar industrys contribution to the EBP Programme continues to face challenges due to the absence of revision in ethanol procurement prices for the last three years. The industry has continued to advocate for wider applications of ethanol beyond fuel blending and further enhancement of blending targets.

Outlook:

World sugar balance for 2025-26 would be turning to a surplus after six deficit years. Accordingly, world prices may be expected to remain range bound, barring unforeseen weather challenges in major producing centers. Southwest monsoon forecast for 2026 is below par compared to long period average, both by IMD and a private agency. El-Nino challenge could be a major threat to cane crop in lead producing States like Maharashtra and Karnataka. Sugar production should still be more than adequate to take care of domestic demand, while GOIs decision on sugar exports and diversion for ethanol would hinge on crop assessment, post monsoon.

TN sugar industry continues to suffer in successive years in solitude. Water storage in State reservoirs are much below capacity and last year levels. Multitude of problems plaguing TN sugar industry are now too well known as these have been persisting for pretty long. It is no exaggeration that it is facing an imminent survival challenge that cries for instant State intervention with imaginative and comprehensive package support measures for its resurrection.

Amidst macro-level challenges outlined above, our company has all along fared reasonably well and relatively far better than most peers. It should be able to combat current headwinds on the strength of its strong liquidity, sustained improvement in operational efficiencies and overall financial standing.

Opportunities and Threats:

The Indian sugar industry continues to offer significant growth opportunities, supported by a large domestic market, favourable Government initiatives and the increasing focus on renewable energy. At the same time, the industry remains exposed to cyclical market conditions, climatic uncertainties and regulatory changes.

Opportunities: -

> Strong Domestic Market: India has a relatively low per capita sugar consumption compared to several other countries. Rising income levels, population growth and urbanisation are expected to support sustained domestic demand over the long term.

> Scope for Productivity Enhancement: Significant opportunities exist for improving sugarcane productivity through optimisation of cane costs, adoption of high-sucrose sugarcane varieties, modern agricultural practices and enhanced farm productivity.

> Growth in Ethanol: Ethanol continues to provide a significant value addition opportunity for the sugar industry. The Governments Ethanol Blended Petrol (EBP) Programme, coupled with supportive policy measures and remunerative pricing for ethanol produced through sugar diversion, has strengthened the industrys long-term growth prospects while helping reduce surplus sugar inventories.

> Integrated Business Model: The integrated operations of sugar, ethanol and cogeneration have enabled sugar companies to diversify revenue streams, improve resource utilisation and reduce dependence on sugar price cycles.

> Expansion into Green Energy: The industry is increasingly focusing on converting waste into value-added products. Emerging opportunities in Compressed Biogas (CBG), Potash, Green Hydrogen, Methanol, Sustainable Aviation Fuel (SAF) and other renewable energy products are expected to contribute to long-term sustainability and profitability.

> Research and Technological Advancements: The Indian Sugar & Bio-energy Manufacturers Association (ISMA) continues to promote sugarcane research through nationwide varietal trials and international collaborations. Recent initiatives, including the Memorandum of Understanding (MoU) with the Sugarcane Research Institute (SRI), China, aim to strengthen breeding programmes, genomics research, seed-system innovation and technological advancement in sugarcane agriculture.

Threats:

> Moderating Domestic Sugar Demand: According to industry studies, domestic sugar consumption is expected to grow at a modest 1.5%-2.0% CAGR over the next five years. This underscores the importance of expanding ethanol production and other value-added businesses to absorb surplus sugarcane production.

> Cyclical Nature of the Sugar Industry: The sugar business remains inherently cyclical and is influenced by fluctuations in sugar production, inventory levels and market demand. Minor imbalances between demand and supply often result in significant volatility in sugar prices.

> Dependence on Government Policies: The industrys performance continues to be influenced by Government policies relating to sugarcane pricing, export regulations, ethanol procurement prices and other regulatory measures.

> Climatic and Water Availability Risks: Sugarcane cultivation is highly dependent on favourable climatic conditions and adequate water availability. Irregular monsoons, reduced river flows, depletion of groundwater resources and low storage levels in reservoirs can adversely impact sugarcane acreage, crop yield and sugar recovery.

> Challenges in Adoption of Modern Irrigation: Although drip irrigation has gained acceptance as an efficient irrigation method, its wider adoption continues to be constrained by high capital investment, delays in Government subsidy schemes and inadequate water availability during drought years.

> Emerging Technology Adoption: Artificial Intelligence (AI) and precision agriculture technologies are gradually being introduced in sugarcane farming. However, widespread adoption is expected to take time due to technological, infrastructural and implementation challenges.

Despite these challenges, the increasing contribution of ethanol, co-generation and other renewable energy initiatives is expected to enhance the resilience of the sugar industry and support sustainable long-term growth.

Company Overview:

Established in 1970, Davangere Sugar Company Limited (DSCL) has evolved into a leading player in the sugar industry. With a legacy spanning over five decades, DSCL has diversified operations encompassing sugar manufacturing, ethanol production, and co-generation of power. Located in the fertile region of Kukkuwada, Karnataka, the company thrives on innovation, operational excellence, and a commitment to community development. Our integrated approach, combined with cutting-edge technology, allows us to maintain industry leadership while contributing to sustainable growth.

Davangere Sugar Company Limited (DSCL) is one of the leading integrated sugar manufacturing companies in Karnataka, strategically located in the prime sugarcane-growing region of the State. The Company is engaged in the manufacture of sugar, ethanol and co-generation of power, with a strong focus on integrated operations that enable optimum utilisation of resources, operational efficiency and diversified revenue streams. Over the years, DSCL has established itself as a trusted and reputed player in the Indian sugar industry through its modern manufacturing facilities, commitment to quality and adoption of sustainable business practices.

The Company operates a state-of-the-art sugar manufacturing facility with substantial sugarcane crushing capacity, supported by an efficient co-generation power plant that utilises bagasse, a by-product of sugar manufacturing, for the generation of renewable energy. In addition, the Companys distillery converts molasses into high-quality ethanol, thereby creating additional value from by-products and strengthening its integrated business model.

The Government of Indias continued emphasis on the Ethanol Blended Petrol (EBP) Programme, renewable energy and sustainable biofuels presents significant growth opportunities for integrated sugar companies. With its established manufacturing infrastructure and diversified operations, DSCL is well positioned to leverage these policy initiatives and strengthen its longterm growth prospects.

In line with its strategic vision, DSCL continues to diversify its revenue streams beyond conventional sugar manufacturing through ethanol production and renewable power generation. These integrated business segments not only contribute to greater earnings stability but also support the Companys commitment towards environmental sustainability, energy security, efficient utilisation of natural resources and Indias transition towards a cleaner and greener economy.

Transforming Sugarcane Farming-Sustainability Impact of Our Sugarcane Development Programme:

The Company continues to strengthen its relationship with the farming community by implementing sustainable sugarcane development initiatives aimed at improving productivity, ensuring long-term cane availability and enhancing farmers livelihoods. The key initiatives undertaken by the Company are as follows:

Initiative	Key Focus Areas
1. Structured Varietal Substitution Programme	To ensure sustainable sugarcane availability, the Company promotes diversification of sugarcane varieties by replacing susceptible varieties with high-yielding, disease-resistant and climate-resilient alternatives. Superior varieties are evaluated and multiplied in collaboration with leading research institutions. GPS mapping, digital monitoring and real-time crop tracking are utilised to assess crop performance and guide farmers towards improved agricultural practices, resulting in higher productivity and better sugar recovery.
2. Yield Improvement through Agronomic Innovation	The Company encourages scientific agronomic practices, including trench planting, wider row spacing and improved ratoon management techniques. These initiatives enhance root development, improve crop density and increase multi-season crop viability, thereby maximising sugarcane productivity and resource efficiency.
3. Active Farmer Engagement and Model Demonstrations	The Company regularly conducts farmer awareness programmes, technical workshops, field demonstrations and Farmer Field Days to disseminate modern cultivation practices. Demonstration plots showcasing high-yield technologies have enabled yield improvements of approximately 40-50%, while peer-to- peer learning has accelerated adoption of best agricultural practices.
4. Integrated Crop Protection and Surveillance	Advanced crop monitoring systems, real-time pest and disease surveillance, drone-assisted pesticide application and Integrated Pest Management (IPM) techniques are deployed to improve crop health. These initiatives minimise excessive chemical usage, enhance operational efficiency and promote environmentally sustainable farming practices.
5. Soil Health Management and Sustainable Agriculture	The Company undertakes periodic soil health assessments and promotes balanced nutrient management through scientific fertilisation practices. Farmers are encouraged to adopt bio-fertilisers, organic soil amendments and environmentally sustainable cultivation techniques to improve soil fertility, strengthen biodiversity and ensure long-term agricultural sustainability.
6. Farm Mechanisation and Digital Agriculture	The Company promotes mechanisation by introducing advanced agricultural equipment, including harvesters and planters, alongside digital technologies such as IoT-based monitoring systems and real-time advisory services. Continuous training programmes and technical support enable farmers to adopt modern technologies, improve operational efficiency, address labour shortages and strengthen the overall sugarcane supply chain.

Awards:

The Companys commitment to operational excellence, technological advancement and quality management has been recognised through various prestigious awards and accolades.

? Industrial Excellency

Davangere Sugar Company Ltd.. has been awarded with the honor of "Industrial Excellency" in technology & management by Institute of Indian Economics Studies, New Delhi.

? Best Business Leadership, Co- Generation

Mr.S.S. Ganesh has been honored with "BEST BUSINESS LEADERSHIP, COGENERATION" awarded on 8th February, 2006.

Certifications:

The Company continues to uphold the highest standards of quality, environmental stewardship and food safety through internationally recognised certifications. These certifications reaffirm the Companys commitment to excellence, regulatory compliance and continuous improvement.

•/ ISO 9001: Quality Management System

•/ ISO 14001: Environmental Management System

•/ FSSAI: Food Safety and Standards Authority of India Compliance

Compliance and Risk Management Controls:

Davangere Sugar Company Limited (DSCL) has instituted a comprehensive compliance and risk management framework to safeguard business sustainability. The framework is designed to ensure adherence to applicable laws, statutory and regulatory requirements, environmental norms and corporate governance standards.

The Company has established a structured risk management process to identify, assess, monitor and mitigate key business risks relating to sugarcane availability, fluctuations in sugar and ethanol prices, changes in the regulatory environment, working capital requirements and environmental sustainability. Periodic risk assessments, internal audits and regular reporting to the Audit Committee of the Board strengthen oversight and facilitate timely corrective actions.

The Risk Assessment & Management Policy of the Company is available on the Companys website and can be accessed through the following link:

Risk Assessment & Management Policy:

https://davangeresugar.com/wp-content/uploads/2023/06/Risk-Management-Policy.pdf

Through proactive compliance practices, technology-driven monitoring systems and a strong culture of accountability, the Company strives to minimise business disruptions, enhance operational resilience and create sustainable long-term value for all its stakeholders.

Internal Control Systems and Their Adequacy

Davangere Sugar Company Limited (DSCL) 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

DSCL 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 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

DSCL has a well-structured internal control framework to ensure efficient operations, protection of assets, accuracy of financial reporting, and compliance with statutory requirements. The Company follows defined policies and procedures supported by ERP systems for monitoring cane procurement, crushing, production, and inventory. An independent internal audit function periodically reviews key processes, and its findings are placed before the Audit Committee for corrective action. Financial controls, including budgetary discipline, variance analysis, and approval mechanisms, strengthen transparency and accountability. Compliance with regulatory requirements and risk management practices are integrated into day-to-day operations.

The Board and Audit Committee regularly evaluate the adequacy of these controls and are of the view that the internal control systems are robust, effective, and commensurate with the size and nature of the business.

Discussion on financial performance with respect to operational performance and Revenue Performance:

The Companys financial performance for the year ended March 31, 2026 is summarized below: Financial Performance Highlights:

Particulars	FY 2025-26 ( Rs. in Lakhs)	FY 2024-25 ( Rs. in Lakhs)	Remarks
Total Income	24,109.89	21,675.60	Increased by Rs.2,434.29 Lakhs (11.23%) over the previous year, reflecting improved business performance.
EBITDA	5,068.74	5,375.15	Marginal decrease of Rs.306.41 Lakhs (5.70%) compared to the previous year.
Net Profit	740.60	1,083.71	Decreased by Rs.343.11 Lakhs (31.66%) as compared to the previous financial year.

During the Financial Year 2025-26, the Company recorded Total Income of Rs.24,109.89 Lakhs, as against Rs.21,675.60 Lakhs in the previous financial year, registering a growth of 11.23%. The Company reported an EBITDA of Rs.5,068.74 Lakhs as compared to Rs.5,375.15 Lakhs in the previous year. The Net Profit for the year stood at Rs.740.60 Lakhs, as against Rs.1,083.71 Lakhs in FY 2024-25.

During the Financial Year 2025-26, Davangere Sugar Company Limited delivered a stable performance despite industry-wide challenges arising from lower sugar realizations and climatic pressures. The Companys integrated business model-encompassing sugar, ethanol, and cogeneration-helped mitigate the impact of cyclicality in the sugar segment and reinforced its position as a diversified energy and agro-based enterprise.

Details of significant changes

In accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the details of significant changes (i.e., 25% or more as compared to the immediately previous financial year) in key financial ratios of Davangere Sugar Company Limited are provided below:

Particulars	FY 202526	FY 202425	% Change	Remarks/Explanation
Debtors Turnover Ratio (Times)	7.49X	7.46X	0.46	Increase in the Trade Receivable during FY 2025-2026
Inventory Turnover Ratio (Times)	1.35X	1.61X	-16.64	Increase in inventory during FY 20252026
Interest Coverage Ratio (Times)	1.42X	1.48X	-4.05	Decrease in PAT and Increase in Inventory during FY 2025-2026
Current Ratio (Times)	1.96X	1.43X	37.61	Increase in Inventory and Current Assets during FY 2025-2026
Debt-Equity Ratio (Times)	0.61X	1.42X	-57.59	Increase in Share Capital and Reserves during FY 2025-2026
Operating Profit Margin (%)	15.35%	18.94%	-18.95	PAT Decrease due to increase in cost of Production during FY 2025-2026
Net Profit Margin (%)	3.56%	5.04%	-29.29	Decrease in Net working capital during FY 2025-2026
Return on Net Worth (RoNW) (%)	6.26%	13.24%	-52.71	Decrease in EBITA and Increase in Equity during FY 2025-2026

 

For and on behalf of the Board
For Davangere Sugar Company Limited
Sd/-	Sd/-
Shamanur Shivashankarappa Ganesh	Abhijith Ganesh Shamanur
(Managing Director)	(Director)
DIN: 00451383	DIN :03451918
Date: 14 August 2026