Dharani Sugars & Chemicals Ltd Management Discussions

Cautionary Statement:

Statements made in this report describing industry outlook as well as Company s 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:

In 2025/26, global sugar production rises to 189-190 million tonnes, up from around 182 million tonnes in the previous season. Global consumption is estimated at 177-178 million tonnes, an increase of 1-1.5% year-on-year, clearly slower than the rate of supply growth. As a result, the global balance sheet shows a production surplus of 11-12 million tonnes.

The effect of this surplus is to rebuild ending stocks to around 44-45 million tonnes, a significant change from the 2022/23 and 2023/24 seasons, when global stocks declined steadily, increasing the markets vulnerability to weather and logistics shocks. The current level of stocks improves the physical security of the market, but does not imply full neutralisation of price risk.

The majority of 80% of sugar production is derived from Sugar Cane and remaining 20% from Sugar beets. In developed countries, sugar consumption remains stable or slightly declining, influenced by changes in consumer preferences and health regulations. Demand growth is concentrated in Asia and Africa, but its scale is not sufficient to absorb the global oversupply in a single season.

Indian Sugar Scenario:

India s annual sugar consumption is estimated at around 280 lakhs tonnes, while production generally ranges between 300 lakhs and 325 lakhs tonnes, resulting in surplus supplies that have kept prices under pressure in recent years.

The industry s biggest cost component is sugarcane procurement. The Fair and Remunerative Price (FRP) of sugarcane has increased steadily from Rs 2,850 per ton in the 2020-21 season to Rs 3,650 per ton for the 2026-27 season. In contrast, the MSP for sugar has remained unchanged at Rs 3,100 per quintal since February 2019.

The Government Allowed 1.5 Million Tonnes of Sugar Exports for The 2025 26 Season this decision helps prevent a domestic price collapse amid a bumper crop.

However, that international sugar prices remain weak and that exports may not be profitable immediately. Industry need for a hike in MSP and ethanol prices to ensure the industry s long-term health.

Industry bodies, including the National Federation of Cooperative Sugar Factories (NFCSF) and the Indian Sugar & Bio-energy Manufacturers Association (ISMA), have repeatedly urged the central government to raise the MSP to Rs 4,100-4,200 per quintal, arguing that higher cane and production costs have eroded mill.

Mills are required to pay farmers within a fixed window. But mills themselves often wait longer to collect money from sugar and ethanol sales. Sugarcane alone eats up early 70% of what it costs to sugar then we have labour cost, maintenance cost and finance cost.

The industry maintains that an increase in the MSP is necessary to improve the financial viability of sugar mills, ensure timely payments to sugarcane farmers and support investment in the sector. Industry officials said the Centre s decision on the long-pending demand will be crucial as mills prepare for the 2026-27 crushing season.

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. 2.41 Crores as against the total income of Rs.0.72 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. 21.69 Crores as against the loss of Rs.20.89 Crores in the previous year. During the year, the company has charged interest Rs 64.04 crores towards banks and financial institutions loans as against Rs 41.92 crores in the previous year. The cash loss works out to Rs 82.73 Crores as against the cash loss of Rs.62.81 Crores in the previous year. The net loss after depreciation and exceptional items works out to Rs.99.56 Crores as against the profit of Rs.95.82 crores in the previous year.

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

Rs. in Crores

Particulars	Year Ended 31.03.2026	Year Ended 31.03.2025
Total Revenue	2.41	0.72
Profit/(Loss) before Interest, Depreciation and Tax	(21.69)	(20.89)
Interest and Finance charges	39.09	41.92
Cash Profit/(Loss)	(60.78)	(62.81)
Depreciation	21.99	22.10
Profit/ (Loss) before Tax	(82.77)	(84.91)
Deferred Tax- Asset / (Liability) / Exceptional Items	(16.79)	(10.91)
Profit/(Loss) after Tax	(99.56)	(95.82)
Profit/(Loss) Brought forward from last year	(204.80)	(108.98)
Profit/(Loss) carried forward to Balance Sheet	(304.36)	(204.80)

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:

Private distilleries ethanol supply to OMCs rose over 2.4 times in five years. Ethanol supplied by private distilleries to public sector Oil Marketing Companies (OMCs) rose from 418.73 crore litres in ethanol Supply Year (ESY) 2021-22 to a peak of 1,040.09 crore litres in ESY 2024-25.

According to the data shared, supply stood at 506.42 crore litres in ESY 2022-23 and 679.01 crore litres in ESY 2023-24, before climbing sharply in ESY 2024-25. For the ongoing ESY 2025-26, supply totalled 717.29 crore litres up to June 30, 2026, a figure that covers only part of the year and is not directly comparable with the full-year totals of previous years. Government says over 23 crore vehicles running on E20 blends without verified engine failures.

The EBP Program has already delivered benefit of more than Rs 1.97 lakh crore in foreign exchange savings, Substitution of over 316 lakhs metric tonnes of crude oil imports, Reduction of more than 950 lakhs metric tonnes of CO 2 emissions; and Over Rs 1.66 lakh crore in payments to farmers and distillers, creating a stable domestic market for agricultural produce.

The purpose of ethanol blending is to reduce Indias dependence on imported crude oil, which still meets nearly 88% of our oil requirement. It is an insurance policy against global oil shocks and not a day-to-day price competition.

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 salientamong them. The investors are advised to exercise their due diligence in assessing the various risk factorsassociated with industry and your Company. The sugarindustry is still highly regulated with the Governmentexercising control over pricing of sugar cane, allocation ofarea for sugar units, movement of molasses, Alcohol andpricing of Power. Some of the inherent business risks andthe mitigation measures initiated by your Company aregiven 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 theavailability of adequate cane and molasses. Sugar industry beingcyclical 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 hasresulted in the farmers switching to other crops whichare 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 neighbouring 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/ Whitesugar 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 the 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 controlledby 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 2026-27

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 2026-27.

Mills are required to pay farmers within a fixed window. But mills themselves often wait longer to collect money from sugar and ethanol sales.

Financial Performance:

Please refer disclosures in the Director s Report and the financial statements.

Human Resources: The Industrial relations at your Company continue to be cordial. There are about 415 employees as on 31.03.2026 and are working on the overhaul of the machineries.