DCM Shriram Industries Ltd Management Discussions

With the coming into effect of the Scheme of Arrangement u/s 230-232 of the Companies Act, 2013, effective from 17.12.2025 and demerger of Chemical and Rayon divisions, the Companys business comprised of sugar, alcohol and co-generation of power. Its manufacturing facilities are located at Daurala (U.R). Directors Report provides overview of performance and outlook of the operations and also deals with internal financial controls, their adequacy, risks, and concerns.

The industry situation and competitive scenario of the sugar sector are given below:

The Company has an integrated sugar plant, with business operations comprising sugar, alcohol and co-generation of power.

Domestic sugar production in 2025-26 is expected at around 28.5 million MT, up from about 26.1 million MT in the previous year. The increase is due to improved cane yields resulting from favourable monsoon rains and increased acreage in major sugar producing states such as Maharashtra and Karnataka. Carryover stocks of 4-5 million tonnes are expected at the start of the next season. Integrated sugar mills are expected to report moderate revenue growth of 5-8% in FY 2026, supported by higher distillery sales volumes and stable sugar prices, ensuring supply stability.

The Indian sugar sector is transitioning from a traditional commodity market to a high- growth bio-energy industry, characterized by strong domestic production, a push towards 20% ethanol blending (E20), and stable, though challenged, financial performance for mills.

Integrated Sugar Plant - Strengths, Weaknesses, Opportunities & Threats (SWOT):

Strengths

• Integrated business model: The integrated business model is a significant strength, combining sugar production with co-generation of power and ethanol manufacturing, allowing optimisation of resources and revenue streams.

• Adequate production to meet domestic demand: India, the worlds second-largest sugar producer, is self-sufficient in meeting domestic demand despite being the largest consumer of sugar globally. Production stability is also supported by the industrys presence across various regions in India, reducing the impact of adverse weather conditions on overall production.

• Strategic Government intervention: The Government balances the interests of farmers and sugar mills and ensures supply-demand balance and price stability through timely policy interventions, including fixation of Fair and Remunerative Price (FRP) for sugarcane, regulation of monthly domestic sales quotas (release mechanism), control over imports/exports, and policies governing diversion of surplus sugar towards ethanol production.

Weaknesses

• Climatic dependence: The industry remains highly dependent on weather conditions, with adverse climatic events impacting cane availability and sugar output.

• High policy dependence: Uncertainties around export quotas, ethanol pricing and diversion norms constrain long-term planning and investment decisions.

• Margin pressure from cost-price mismatch: The mismatch between cane prices (particularly SAP-driven) and sugar realisations continues to impact profitability and liquidity.

Opportunities

• Technology adoption: Deployment of smart cane farming, automation and digitised farmer interfaces can enhance productivity, efficiency and transparency.

• ESG and green energy potential: Ethanol blending, cogeneration and circular economy initiatives such as bio-compost align the industry with sustainability and ESG objectives.

• Ethanol blending expansion (E85/E100): The Governments push towards higher ethanol blending, including discussions on E85 and E100 fuels, provides a structural opportunity for revenue diversification and production balancing.

• Second-generation ethanol development: Ongoing R&D for cost-effective production of 2G ethanol from bagasse presents significant long-term value creation potential.

Threats

• Intensifying climatic risks: Recurrent droughts and erratic rainfall patterns continue to pose risks to production stability.

• Ethanol pricing uncertainty: Unviable ethanol pricing relative to sugarcane costs may impact investments in distillery capacity.

• Competition for land and water: Urbanisation and crop diversification are increasing pressure on land and water resources in key cane-growing regions.

• Rising cane procurement costs: Upward revisions in SAP for cane procurement (including recent increases for 2025-26) may compress margins unless offset by higher realisations or policy support.

• Global market volatility: Surplus production in countries such as Brazil, along with currency fluctuations, can impact export competitiveness and inventory levels.

Considering the above SWOT analysis, the Company has, over time, undertaken the following initiatives:

• Technology upgradation: Continuous investment in modernisation to improve efficiency and product quality.

• Capability building: Focused training and skill development initiatives to enhance operational effectiveness.

• Operational and environmental efficiency: Strengthening processes to improve output, cost efficiency and environmental compliance, positioning the Unit to navigate industry cycles effectively.

The Companys production-related key focus areas and strategic priorities are outlined below:

• Driving organic growth: Expanding cane acreage through focused farmer engagement and sustainable cane development initiatives.

• Enhancing cane productivity and recovery: Strengthening cane development programmes to improve yield and recovery, thereby ensuring optimal capacity utilisation.

• Maximising value realisation: Enhancing product mix through refined sugar exports and deeper penetration into institutional and premium markets.

• Value addition to by-products: Optimising molasses utilisation through manufacture of country liquor, thereby improving realisations compared to levy sales.

• Operational excellence and energy efficiency: Continuously improving process efficiencies and reducing energy consumption to strengthen cost competitiveness.

• Building human capital: Developing a skilled, diverse and high-performance workforce to support long-term growth.

• Integrated and sustainable growth: Strengthening backward and forward integration while embedding sustainability, innovation and new technologies across operations.

Financial Ratios

Following are ratios for the current financial year and their comparison with preceding financial year:

SI. No.	Ratio Description	Unit	2024-25	2025-26	Change %
1	Debtors turnover	No. of times	39.62	36.39	-8.15
2	Inventory turnover	No. of times	1.35	1.50	11.11
3	Interest coverage ratio	No. of times	3.27	4.15	26.91
4	Current ratio	No. of times	1.09	1.12	2.75
5	Debt equity ratio	No. of times	1.31	1.16	-11.45
6	Operating profit margin	%	8.39	9.01	7.38
7	Net profit margin	%	2.77	3.57	28.88
8	Return on Net worth	%	9.00	10.67	18.55

Note: The previous years ratios are based on restated accounts giving effect to the Scheme of Arrangement.

Material Development in human resources/ industrial relations front

The Companys HR philosophy centers on the belief that a dedicated, enlightened, and contented workforce is essential for achieving business goals. We recognize that our employees are our greatest strength. Our HR focus is consistently on developing a skilled workforce capable of meeting present and future challenges. We actively recruit fresh and youthful talent across various disciplines with a long-term vision, and we are committed to addressing the needs of our employees as a cornerstone of our organization.

Throughout the year, industrial relations remained positive. As on 31.03.2026, the total number of employees on the companys payroll was 843.

Corporate Social Responsibility is an integral part of our business policy. We undertake and support various activities in the communities where we operate to maximize the benefit of our CSR initiatives. These programs align with Schedule VII of the Companies Act, 2013. In the fiscal year 2025-26, the Company spent Rs.79.53 lakh.

Environment protection

The Company is committed to our motto: "Green, breathe clean, stop polluting the environment, and save our planet." This aligns with the global call to address climate change. We prioritize environmental protection in all areas of our operations. Alongside installing state-of-the-art effluent treatment and waste disposal plants, we focus on tree plantation around our Factories to improve air quality and reduce greenhouse gas emissions. Our emphasis remains on using environmental friendly agrofuels for power generation instead of fossil fuels. Our plants presently operate fully on agrofuels.

	For and on behalf of the Board
	(Uday Shriram)	(Madhav B. Shriram)
	DIN:11407307	DIN: 00203521
	Dy. Managing Director	Managing Director & CEO
Place: New Delhi
Date: 20th May, 2026