Dharani Sugars & Chemicals Ltd Management Discussions

Cautionary Statement:

Statements made in this report describing industry outlook as well as Companys plans, projections and expectations may constitute forward looking statements. Actual results may differ materially from those either expressed or implied. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent developments, information or events.

World Sugar Scenario:

Word Sugar production for 2024-25 season is expected to be 179.81 million tonnes. However, Global consumption is expected to remain strong, potentially leading to a deficit of 5.47 million tonnes. This will result in a reduced closing stock and may lead to pressure on the International price heading upward. The majority of 80% of sugar production is derived from Sugar Cane and remaining 20% from Sugar beets. Asia was largest Sugar producing region in the World. Brazil and India the two largest Sugar producing countries, followed by China, Thailand, United States and Russia. Global Sugar production is projected to increase by 8.60 million tonnes reaching about 189 million tonnes in the sugar year 2025-26.

Indian Sugar Scenario:

The Indian sugar industry is a major player in the global market, ranking as the worlds largest consumer and second-largest producer. The industry is characterized by a mix of traditional practices and modern initiatives like ethanol blending. While facing challenges like fluctuating production and regional disparities, the industry plays a significant role in the Indian economy and rural livelihoods. Any increase or decrease in the Indian production has direct impact on the International Sugar price. During the season 2024-25, the Sugar production is expected to come down drastically to 261 lakh tonnes as against the previous season production of 320 lakh tonnes. The export is likely to be about 9 lakh tonnes. The closing stock is expected to be about 52 lakh tonnes enough to meet the Domestic consumption.

Government Policies:

The Government of India and the State Government continue to support the Sugar Industry. The Government of India had allowed substantial quantity of exports which has brought down the level of Sugar Inventory in the Country resulting in substantial saving in inventory carrying cost. However, the long awaited revision in the minimum selling price is yet to be

announced. Hope the Government of India will announce this minimum price shortly which will help the Industry to sustain its performance which will help them to clear the cane price on time.

Financial Performance:

During the year under review the total income was Rs. 0.72 Crores as against the total income of Rs.0.18 Crores in the previous year. The company was not able start the cane crushing operation in all the three units as the company has not cleared the cane arrears relating to sugar season 2018-19. The gross operating loss works out to Rs. 20.89 Crores as against the loss of Rs.6.41 Crores in the previous year. During the year, the company has charged interest Rs 41.92 crores towards banks and financial institutions loans as against Rs 5.99 crores in the previous year. The cash loss works out to Rs62.81 Crores as against the cash loss of Rs.12.40 Crores in the previous year. The net loss after depreciation and exceptional items works out to Rs.95.82 Crores as against the profit of Rs.121.32 crores in the previous year.

Summary of the financial Performance for year ended is given below:

Particulars	Year Ended 31.03.2025	Year Ended 31.03.2024
Total Revenue	0.72	0.18
Profit/(Loss) before Interest, Depreciation and Tax	(20.89)	(6.41)
Interest and Finance charges	41.92	5.99
Cash Profit/(Loss)	(62.81)	(12.40)
Depreciation	22.10	22.18
Profit/ (Loss) before Tax	(84.91)	(34.58)
Deferred Tax- Asset / (Liability) / Exceptional Items	(10.91)	155.90
Profit/(Loss) after Tax	(95.82)	121.32
Profit/(Loss) Brought forward from last year	(108.98)	(230.30)
Profit/(Loss) carried forward to Balance Sheet	(204.80)	(108.98)

Sugar. Alcohol and Power:

During this period under review, the Company was not able to start the cane crushing operations and Alcohol production as the company has not yet cleared the cane arrears relating to sugar season 2018-19.

Ethanol:

The Government of India has set a very high level of growth target in the ethanol blending program and the blending target has been fixed at a target of 20% to be achieved by 2025.The present blending level has increased to around 14% and this will be increased progressively to 20% during the next 2 years. This blending program has not only saved substantial Foreign Exchange in import of fuel, it has also helped the Sugar Industry to balance the Sugar and Ethanol Production and maximise the return.

Opportunities and Threats:

India is the largest consumer of sugar in the world. Still the average per capital consumption of sugar in India is less as compared to the developed countries. While the land availability is likely to shrink for cane cultivation, the cane production needs to be increased to meet the ever increasing demand for sugar, power and ethanol. The ethanol blending programme may also help the Sugar Industry.However, the agro climatic conditions and competition from other crops play a great role in the availability of cane.

Risks and Concerns:

Risks and Concerns given by the management below are not exhaustive and only highlight some of the salient among them. The investors are advised to exercise their due diligence in assessing the various risk factors associated with industry and your Company. The sugar industry is still highly regulated with the Government exercising control over pricing of sugar cane, allocation ofarea for sugar units, movement of molasses, Alcohol and pricing of Power. Some of the inherent business risks andthe mitigation measures initiated by your Company are given as under.

a) Raw Material Risk: Cane is the basic raw material for sugar industry and the efficient operation of the Sugar Plant as well as Distillery depends upon the availability of adequate cane and molasses. Sugar industry being cyclical in nature is affected by the vagaries of the monsoon. Substantial increase in the price of alternate crops as compared to sugarcane and increase in the harvesting charges for the cane has resulted in the farmers switching to other crops which are more profitable. However, various steps including incentives

are given by the Sugar Industry to retain/increase the Cane cultivation.

b) Product Risks: Sugar being the main product, its Minimum Selling Price (MSP) is fixed by Government of India. Increasing health consciousness among the general public, the average increase in the consumption of sugar is likely to be low in the coming years. Alcohol is highly regulated and the price of the same is directly/indirectly controlled by the State Government through import from neighboring states. Further there is undue delay in the realisation of power dues. To mitigate the product related risks, the Company has been taking efforts to make its operation as integrated one comprising of Sugar, Power and alcohol including fuel Ethanol.

c) Forex Risk: Import and Export of Raw Sugar/White sugar and funding of project for manufacture of sugar involves foreign exchange component. Any wide fluctuation in the value of Rupee against US Dollar may impact the profitability of the Company. The Company is closely monitoring the movement and taking appropriate action.

d) Financing Risk: The Sugar industry being capital intensive in nature requires huge capital investment, having high debt component. The Sugar Industry being seasonal in nature, the Company needs to hold substantial inventory over longer period incurring very high interest cost on working capital borrowing, besides other carrying costs. Further, the droughts during the years 2016 to 2018 had affected to availability of the cane and consequently, the performance of the Sugar Units in Tamilnadu were affected adversely.

e) Regulatory Risks: The Sugar Sector continuous to be controlled by Governments. Sugar cane prices and sugar selling price are fixed by Government of India. Alcohol and molasses are subject to inter-state movement control. The Company through its Industry Association has been representing to the Central and State Governments for new policy changes to support the Sugar Industry.

Outlook for 2025-26

Tamilnadu has received excess monsoon during the last 2 years and this has helped to improve the cane cultivation. However, your Company is yet to clear the Cane arrears and the Company hopes to clear the same and start the crushing operations from season 2025-26.

Considering the settlement arrived between the Promoter and the majority lenders of the Company, the Honble Supreme set aside the Liquidation Process vide

its order dated 28117/2023 dated 7thAugust 2023. Further the Honble Supreme Court vide its order 150612/2023 dated 18th March 2024, remanded back to The Honble National Company Law Tribunal (NCLT), Chennai Bench for consideration of withdrawal of IBC process initiated against the Company in terms of Section 12A of IBC, 2016 read with Regulation 30A of the IBBI(CIRP) Regulations., 2016.

Based on the settlement proposal submitted by the Promoter U/s 12 A of IBC 2016, the CoC and NCLT has approved the proposal and ordered the withdrawal of the CIRP process and restored the powers of the Board vide

its order No. IA (IBC)/825/ CHE/2024 in IBA/976/2019 dated 9thMay 2024.

Financial Performance:

Please refer disclosures in the Directors Report and the financial statements.

Human Resources:

The Industrial relations at your Company continue to be cordial. There are about 488 employees as on 31.03.2025 and are working on the overhaul of the machineries.

/“Villi CA U I C III LU uuai UO I :/UI l

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length

transactions under third proviso thereto.

1 Details of contracts or arrangements or transactions not at arms length basis

a	Name(s) of the related party and nature of relationship	Nil
b	Nature of contracts/ arrangements/ transactions.	NA
c	Duration of the contracts / arrangements/transactions	NA
d	Salient terms of the contracts or arrangements or transactions including the value, if any	NA
e	Justification for entering into such contracts or arrangements or transactions	NA
f	Date(s) of approval by the Board	NA
g	Amount paid as advances, if any	NA
h	Date on which the special resolution was passed in general meeting as required under first proviso to section 188	NA

2. Details of material contracts or arrangement or transactions at arms length basis

Name(s) of the related party	PGP Educational & Welfare Society	Appu Hotels Ltd
Nature of relationship	Associates	Associates
Nature of contracts/ arrangements / transactions	Leasing of Land for School	NA
Duration of the contracts / arrangements/ transactions	29 years (up to 31.10.2051)	NA
Salient terms of the contracts or arrangements or transactions including the value, if any	Rs.0.42 lakhs	NA
Date(s) of approval by the Board, if any:	16.05.2024	Nil
Amount paid as advances, if any	Nil	Nil

 

Nature of relationship party	Dr. Palani G Periasamy		Mrs. Visalakshi Periasamy	M Ramalingam	A Sennimalai
Nature of relationship	Executive Chairman		Director	Managing Director	Director
Nature of Contracts / arrangements / transactions	Rent	Salary	Sitting Fees	Salary	Sitting Fees
Duration of the contracts / arrangements/transactions	3 years w.e.f 16.05.2024	5 years w.e.f 25.06.2024	-	5 years w.e.f 01.04.2023	-
Salient terms of the contracts or arrangements or transactions including the value, if any	Rs. 4.53 lakhs per month	Rs.36.08 lakhs per annum	Rs.0.20 lakhs	Rs.24.00 lakhs per annum	Rs.0.75 lakhs
Date(s) of approval by the Board, if any:	16.05.2024	16.05.2024	NA	16.05.2024	NA
Amount paid as advances, if any	Nil	NA	Nil	Nil	Nil

Information as required under Section 134(3) (m) of the Companies Act, 2013 and with rule 8(3) of the Companies (Accounts) Rules 2014.

A.	Energy Conservation Measures	Nil
B.	Technology absorption and Innovation	Nil

 

Foreign Exchange / Earnings & Outgo	2024-25	2023-24
Foreign Exchange Earned	Nil	Nil
Foreign Exchange Outgo	Nil	Nil

Statement on impact of Audit Qualifications (for Audit Report with modified opinion submitted) along with Audited Financial Results - (Standalone)Statement on Impact of Audit Qualifications for the

Financial year ended March 31, 2025

(See Regulation 33/52 of the SEBI (LODR) (Amendment) Regulation, 2016)

SI.No		Particulars	Audited Figures (as reported before adjusting for qualifications)	Audited Figures (audited figures after adjusting for qualifications)
i	a	Turnover/ Total Income	71.52	71.52
	b	Total Expenditure	9653.54	9653.54
	c	Net Profit/ (Loss)	-9582.02	-9582.02
	d	Earnings Per share	-24.60	-24.60
	e	Total Assets	47110.60	47110.60
	f	Total Liabilities	47110.60	47110.60
	g	Net Worth	-16328.14	-16328.14
	h	Any other financial item(s) as felt
		appropriate by the Management)

II Audit Qualifications

a Details of Audit	1. We draw attention to Note 1 in the financial statements, which indicates that the
Qualifications	Company has come out of the CIRP process during year of audit vide Honorable National Company Law Tribunal (NCLT) vide order dated 9th May 2024 and states that the Company has initiated necessary revival plan to recommence commercial operations by restoring production capabilities, ensuring the companys ability to meet its obligations and sustain its business activities in the foreseeable future. As stated in Note No.2 the Company has accumulated losses and it indicates that the Company has negative net worth as on the balance sheet date. Except for these events or conditions, along with other matters as set forth in other Notes to financial statements the standalone financials are prepared on going concern basis. Our opinion is not modified in this matter.
	2. We draw attention to Note No.3 to the standalone financial statements, which explains the Companys the investment in Appu Hotels Limited (“investee Company”). The carrying amount of investment as at 31st March 2025 is INR 1455.39 Lakhs. In the opinion of the management the carrying amount of investments is reflective of fair value of investments and is recoverable; thus, no adjustment was made in the carrying value of investments in financial statements. In our opinion the carrying value of investments is not reflective of fair value of investments as per the “IND AS 113 - Fair Value Measurements”. 3. We were not provided with balance confirmations as at 31st March 2025 for trade receivables, trade payables, advances received/ paid and for deposits received/ paid. Based on the above we are unable to report the impact on standalone financial statements due to non-receipt of confirmations. 4. We draw attention to Note No.5, where in the balance unsustainable debt of INR. 33,465 Lakhs has been disclosed as contingent liability (which is contingent upon remission of 1 iability as per the fulfilment terms of repayment as provided MRA). 5 We draw attention to Note 4 of the financial statements, which discloses borrowings from directors & Intercorporate Loans from related parties. The Company has not provided for interest expense on these borrowings as per the agreed terms. In our view, the omission of such provision has resulted in an understatement of finance costs and current liabilities. The total outstanding from Directors and Related parties stands at INR 16586.91 Lakhs as on 31 st March 2025.
b Type of Audit Qualifications: Qualified Opinion/ Disclaimer of Opinion / Adverse Opinion	Qualified Opinion
c Frequency of Qualifications: Whether appeared first time/ repetitive / since how long continuing	Mentioned below on each item.
d for Audit Qualification(s) where the impact is quantified by the auditor, Managements views:	Impact not presently quantifiable due to the various uncertainties involved.
e for Audit Qualification(s) where the impact is not quantified by the auditor
i. Managements estimation on the impact of audit qualification	1. Going Concern basis: Frequency of qualification. 2nd time, from the financial year 2023-24 Company has come out of the CIRP process during year of audit vide Honorable National Company Law Tribunal (NCLT) vide order dated 9th May 2024. Now, the Company is carrying out the maintenance works at all the Three units and it will be completed as per the schedule. Company is confident of starting the canecrushing season by November 2025. Therefore, there is a significant possibility of the company to continue as going concern.
	Opinion - Not Modified. 2. Appu Hotels Limited - Value of Investment: - Frequency of qualification. 6th time, from financial year 2019-20. Based on the settlement proposal submitted by the Promoter under section 12A of the IBC 2016, the NCLT Chennai had approved the withdrawal of the CIRP process effective from 20th Dec. 2023 and the powers of the Board have
	beenrestored. As per the settlement proposal the entire secured and un secured financial creditors have been fully settled. The companys performance has substantially improved and the company is planning to reduce the loan substantially by selling the non-core assets. Further, the Companys fixed asset values are vary as compared to the loans. As such, the management is confident of realizing the value of investment in the books as on 31st Mar 2025.
	3. Confirmation of Balance: Frequency of qualification. 6th time, from financial year 2019-20. As the company was in CIRP / Liquidation process till 8th May 2024 and there were no transactions during the year. Hence, the confirmation could not be received for the financial year 2024-25 Once the operation is started, we will get the Confirmation of balance for receivables and payables. Hence, there is no impact on the financial statements for the year 2024-25
	4. Unsustainable Debt Rs.334.65 Crs. Frequency of qualification. 2nd time, from the financial year 2023-24 The unsustainable Debt of Rs.334.65 Crores will be given remission on completion of payment of the Loan as prescribed in the Master Restructuring Agreement dated 22.05.2024 with NARCL and it has been disclosed in the contingent liability from the year 2023-24 onwards. Company is confident of making the repayment as per the schedule. Hence, there is no additional liability.
	5. Interest not provided on the borrowing from Director & Inter Corporate Loans. Frequency of qualification. 2nd time, from the financial year 2023-24 The Company has not provided for interest expense on these borrowings as specified in the terms of the Master Restructuring Agreement (MRA) with NARCL. Once we started our cane crushing operation, the Company will take efforts to get the approval from NARCL to account for the interest on the borrowing from the Directors and Inter Corporate Loans for the future years.
ii. Managements is unable to estimate the impact, reasons for the same:	Impact not presently quantifiable due to the variousuncertainties involved.
iii. Auditors comments on (i) or (ii) above;	Refer” Basis for Qualified Opinion" in audit report read with relevant notes in the financial results the same is self-explanatory

form No. Mr-3 secretarial audit report

FOR THE FINANCIAL YEAR ENDED MARCH 31,2025 [Pursuant to section 204(1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

To,

The Members,

dharani sugars and chemicals limited

(CIN: L15421TN1987PLC014454)

PGP House, 57, Sterling RD, Nungambakkam,

Chennai - 600 034.

We, M Damodaran & Associates LLP, Practicing Company Secretaries have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by M/s. DHARANI SUGARS AND CHEMICALS LIMITED (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our opinion there on.

Based on our verification of M/s. DHARANI SUGARS AND CHEMICALS LIMITED books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, We hereby report that in our opinion, the Company has, during the audit period covering the financial year ended on March 31,2025 complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made herein after:

We have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on March 31,2025 according to the provisions of:

(i) The Companies Act, 2013 (the Act) and the rules made there under;

(ii) The Securities Contracts (Regulation) Act, 1956 (SCRA) and the rules made there under;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;

(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made there under to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (SEBI Act):-

(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

(b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;

(c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018;

(d) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client

(vi) As per information and documents provided by the management of the company. We report that there is an adequate system and process to monitor and for ensuring compliance of following Labour & Industrial Laws specifically applicable to the Company, as amended from time to time;

1) The Factories Act, 1948

2) The Sugar Cess Act, 1982

3) The Sugarcane Control (Order), 1966

4) The Sugar (Packing and Marking) Order, 1970

5) Sugar Development Fund Act, 1982

6) Food safety and standards Act, 2006

7) The Boiler Act, 1923

8) The Legal Metrology Act, 2009

9) Environmental Protection Act, 1986

10) Essential Commodities Act, 1955, and orders issued thereunder

11) The Tamilnadu Molasses Control and Regulation Rules, 1958

12) The Tamilnadu Sugarcane (Regulation of Purchase Price) Act, 2018

13) Tamilnadu Tax on consumption or sale of Electricity Act, 2003

14) The Contract Labour (Regulation and Abolition) Act, 1970

15) The Employees Compensation Act, 1923

16) The Employees Provident Funds & Miscellaneous Provisions Act, 1952

17) The Employees State Insurance Act, 1948

18) The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959

19) The Equal Remuneration Act, 1976 and The Equal Remuneration Rules, 1976

20) The Industrial Disputes Act, 1947

21) The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979

22) The Maternity Benefit Act, 1961

23) The Minimum Wages Act, 1948

24) The Payment of Bonus Act, 1965

25) The Payment of Gratuity Act, 1972

26) The Payment of Wages Act, 1936

27) The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

28) The Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981

29) The Tamil Nadu Labour Welfare Fund Act, 1972

30) The Tamil Nadu Payment of Subsistence Allowance Act, 1981

31) The Tamil Nadu Shops and Establishments Act, 1947

32) The Tamil Nadu Tax on Professions, Trades & Callings and Employments Act, 1992

33) The Electricity Act, 2003 and the rules made thereunder, with respect to co-generation of power.

We have also examined compliance with the applicable Regulations and Standards of the following:

(i) The Listing Agreement entered into by the Company with BSE Limited and National Stock Exchange of India Limited under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015;

(ii) The Secretarial Standards issued by the Institute of Company Secretaries of India.

During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above except the following Observations:

a. The Company has filed the quarterly statement of investor complaints for the quarter ended 31.03.2024 as required u/r 13(3) of SEBI (LODR) to the Stock Exchanges with some delay.

b. The Company has submitted the shareholding pattern for the quarter ended 31.03.2024 as required u/r 31(1) of SEBI (LODR) to the Stock Exchanges with some delay.

c. The Company has submitted the report on Corporate Governance for the quarter ended 31.03.2024 as required u/r 27(2) of SEBI (LODR) to the Stock Exchanges with some delay.

d. The Company has submitted the reconciliation of share capital audit report for the quarter ended 31.03.2024 as required u/r 76 of the Depositories Act, 1996 to the Stock Exchanges with some delay.

e. The Company has submitted the Certificate for the financial year ended 31.03.2024 as required u/r 40(9) of SEBI (LODR) to the Stock Exchanges with some delay.

f. The Company has complied the regulation 33(3)(d) of SEBI (LODR) for the financial year ended 31.03.2024 with some delay.

g. The Company has disclosed to the Stock Exchanges about the outcome of meeting of board of directors dated 22.07.2024 in which the financial results were approved for the financial year ended 31.03.2024 as required u/r 30 r/w Schedule III Part B Clause 16 of SEBI (LODR) with delay.

h. The Company has complied with the provisions of regulation 30 r/w Part A of the Schedule III of SEBI LODR with minor deviation.

i. The Company has submitted Annual Secretarial Compliance Report for the financial year ended 31.03.2024 as required u/r 24A (2) of SEBI (LODR) to the Stock Exchanges with some delay.

j. The Board of Directors was not constituted with half of the independent directors as required u/r 17(1) (b) of SEBI (LODR) for some of the period under review.

k. The Audit Committee was not constituted with at least two-thirds of the independent directors for some of the period under review as required u/r 18(1) (b) of SEBI (LODR).

l. The Nomination and remuneration Committee was not constituted with at least two-thirds of the independent directors for some of the period under review as required u/r 19(1) (c) of SEBI (LODR).

We further report that the Board of Directors of the Company was constituted with Executive Director, Non-Executive Directors and Independent Directors and there were changes in the composition of the Board of Directors during the period under review.

Notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance for meetings other than those held at shorter notice with the consent of all the Directors, and a System exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting. As per the minutes of the meetings recorded and signed by the Chairman, the decisions of the Board were unanimous and no dissenting views have been recorded.

We further report that there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

We further report that the company was under the control of IRP/RP during the CIRP period from 29.07.2021 to 09.05.2024 pursuant to provisions of Insolvency and Bankruptcy Code, 2016.