DCM Shriram Industries Ltd Management Discussions

2024-2025

The Companys business comprises of sugar, alcohol, co-generation of power, fine chemicals, industrial fibre and defence-related products. Its manufacturing facilities are located at Daurala (U.P.) and Kota (Rajasthan). Directors Report gives segment-wise/ product-wise performance and outlook of these operations and also deals with internal financial controls, their adequacy, risks, and concerns.

The industry situation and competitive scenario of different segments of operations of the Company are given below:

Sugar production for Sugar Season (SS) 24-25 is estimated to be around 26.4 million MT (net of ethanol diversion) against 31.96 million MT in SS 23-24, which is approx. 17% lower. The factors contributing to this decline includes lower cane yields, increased diversion of sugar for ethanol production, and reduced sugar recovery.

Indias domestic sugar outlook for 2025 is projected to be positive, since domestic sugar prices in India are expected to remain stable in 2025. The government export permissions have provided the much needed support to Domestic sugar prices. The sugar price strength is expected to provide a boost to sectors operating margins. The Country is expected to have ample stocks to meet domestic demand through the start of sugar season 2025-26.

• Diverse Geographical Presence: The sugar industry is spread across various regions in India, reducing the impact of adverse weather conditions on production.

• Skilled Labor Force: India possesses a skilled labor force with expertise in sugarcane cultivation, harvesting, and processing, contributing to the efficiency of the industry.

• Integrated Value Chain: Many sugar mills in India have integrated operations, including sugar production, ethanol distillation, and power generation, allowing for optimization of resources and revenue streams.

• Government Support: The Indian government provides various subsidies, incentives, and price support mechanisms to the sugar industry, promoting its growth and stability.

• Cyclical Nature: The sugar industry is prone to cyclical fluctuations in prices and production due to factors like weather conditions, government policies, and global market trends.

• Aging Infrastructure: Much of the sugar processing infrastructure in India is outdated and in need of modernization, leading to inefficiencies and higher production costs.

• Price Volatility: Sugar prices in India are subject to significant volatility, influenced by factors such as global market trends, domestic demand-supply dynamics, and government intervention.

• Dependency on Monsoons: The Indian sugar industry heavily relies on monsoon rains for irrigation, making it vulnerable to fluctuations in rainfall patterns and droughts, affecting crop yields.

• Diversification: The industry can explore opportunities for diversification by expanding into related sectors such as ethanol production, cogeneration of power, and value-added products like confectionery and beverages.

• Export Potential: With increasing global demand for sugar and related products, there is an opportunity for Indian sugar producers to explore export markets and capitalize on their competitive advantage in terms of cost and quality.

• Technological Advancements: Adoption of advanced technologies and modern farming practices can enhance productivity, reduce costs, and improve the overall efficiency of the sugar industry.

• Government Initiatives for Ethanol Blending: With the government promoting ethanol blending with petrol, there is a significant opportunity for the sugar industry to expand ethanol production, diversify revenue streams, and reduce dependence on sugar prices.

• Government Policies: Changes in government policies related to pricing, subsidies, and import-export regulations can significantly impact the profitability and stability of the sugar industry.

• Environmental Regulations: Increasing environmental regulations and concerns about sustainability could pose challenges for the sugar industry, particularly in terms of water usage, land management, and waste disposal.

• Disease Outbreaks: Outbreaks of diseases affecting sugarcane, such as red rot or sugarcane mosaic virus, can significantly impact production and quality, leading to financial losses for the industry.

• Weather Phenomena: Weather phenomena, particularly El Nino, pose a significant threat to the sugar industry.

Considering the above SWOT analysis of sugar Industry over time, the Unit has strengthened its manufacturing capabilities through upgradation of technology, providing training, and specialization, thereby improving quality, output, efficiency, and environmental compliance.

Daurala Sugar Works key areas of focus & strategy are highlighted below:

• Organic growth by increasing cane acreage.

• Cane development for the Company to increase yield and recovery thereby ensuring optimum capacity utilization.

• Value addition by exporting refined sugar and tapping institutional markets.

• Manufacturing country liquor instead of selling levy molasses.

• Continuously optimizing operations and reducing energy consumption.

• Development of a talented diverse team.

• Ensuring backward and forward integration backed by sustainable practices. Introducing innovation and new technology.

Shriram Rayons is engaged in manufacturing and marketing of rayon tyre yarn, greige and treated fabric. The products are mainly used as reinforcement material in high performance tyres. The Unit is exporting the products to major international tyre manufacturers in various countries.

During the year, dispatched quantities were lower than initially projected based on customer response, due to a downturn in the automotive industry world-over coupled with prevailing geopolitical situation. However, the Unit was able to maintain healthy operating margin, though lower than the previous year.

The Unit continues to pursue growth in market share by securing additional approvals from both existing and prospective customers.

The Unit has the capability to supply treated fabric, a ready-to-use product that is widely preferred by tyre manufacturers. This capability has been further enhanced through the upgradation of the dipping facility, improving both efficiency and product quality. As a result, the share of treated fabric in total exports has seen significant growth, accounting for around 80% of the exported volume during the year.

Prices of some raw materials viz. caustic soda, sulphur and sulphuric acid etc. increased during the year. Further increase is expected in the coming period. The logistic cost had gone up due to increase in ocean freight arising out of red sea crisis and demand supply mismatch created for containers on imposition of custom duty by USA on import from China.

The rising price of agro-fuel is adding to increased energy costs, which are expected to remain a persistent challenge. To manage this, the Unit is actively exploring and adopting additional energy conservation measures.

Anticipating these developments, the Unit commissioned a 2.11 MW solar power plant, which is operating satisfactorily and supplementing both grid and captive power. In addition, steps have been initiated for the installation of a new 40 TPH boiler. This upgrade is expected to significantly enhance power generation and fuel efficiency, while also reducing reliance on grid power and effectively mitigating risks associated with supply interruptions. The new boiler is scheduled to become operational in 2026-27. To further support sustainable energy practices, the Unit has also taken steps to install a husk pellet machine for converting mustard husk into husk pellets. Key benefits include the separation of dust and stones during the manufacturing process, the ability to store pellets in bunkers, eliminating the need for continuous conveyor belt operation and reduced manpower requirements for fuel feeding compared to loose husk. Additionally, pellet manufacturing results in lower Suspended Particulate Matter (SPM) emissions, making it a more environmentally friendly fuel source for boiler operations.

Shriram Rayons continued its efforts to reduce, recycle and reuse water and achieved reduction in water consumption.

The Unit is continuously upgrading its monitoring and control systems for both effluent discharge and gas emissions. Effluent monitoring data is transmitted online in real time to the State and Central Pollution Control Boards, ensuring transparency and regulatory compliance.

Effluent treatment and pollution control remain priority areas for the Unit, reflecting its commitment to sustainable and environmentally responsible operations. The Unit has initiated steps for implementation of advanced treatment processes, including nanofiltration through membrane separation and indigenously developed chemical process to effectively manage and treat effluents streams.

The project pursued by the Engineering Project Section are evolving slowly by steadily. The Section has in the meantime, taken up fabrication of Fuel tanks for global customers and also assembling of IP phones for Tadiran of Israel. The LBPV and UAV projects are in progress and some of the products are undergoing No Cost - No commitment (NCNC) trails with prospective customers.

Cost optimization measures continued with effective raw material procurement strategies, inventory management.

Plans are being formulated for debottlenecking and capacity expansion for next year, as well as Research & Development and Market Studies to reduce future pressures on existing products.

Prevailing Geo-political scenarios since Q4 have necessitated a more active approach to short and medium term strategic reviews and planning to optimize results and minimize risks.

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

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. The implementation of SAP has significantly improved data flow and accuracy, enhancing efficiency, particularly in the accounts and finance departments.

Throughout the year, industrial relations remained positive across all operations. As on 31.03.2025, the total number of employees on the companys payroll was 2371.

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 2024-25, the Company has spent Rs. 236.62 lakh.

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 in Daurala and Kota to improve air quality and reduce greenhouse gas emissions. Our emphasis remains on using environmentally friendly agrofuels for power generation instead of fossil fuels. We have progressively shifted from fossil fuels to agrofuels.

Notably, DSW has entirely discontinued the use of coal, and Shriram Rayons continues to significantly utilize agro-waste fuels in place of fossil fuels. We actively pursue research and innovation to find solutions that minimize emissions and maintain our environmental responsibility.