Dwarikesh Sugar Industries Ltd Management Discussions

G L O B A L E C O N O M I C O V E R V I E W

Global economic growth declined from 3.5% in 2022 to an estimated 3.1% in 2023. A disproportionate share of global growth in 2023-24 is expected to come from Asia, despite the weaker-than-expected recovery in China, sustained weakness in USA, higher energy costs in Europe, weak global consumer sentiment on account of the Ukraine-Russia war, and the Red Sea crisis resulting in higher logistics costs. A tightening monetary policy translated into increased policy rates and interest rates for new loans.

Growth in advanced economies is expected to slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024 as policy tightening takes effect. Emerging market and developing economies are projected to report a modest growth decline from 4.1% in 2022 to 4.0% in 2023 and 2024. Global inflation is expected to decline steadily from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024, due to a tighter monetary policy aided by relatively lower international commodity prices. Core inflation decline is expected to be more gradual; inflation is not expected to return to target until 2025 in most cases. The US Federal Reserve approved a much-anticipated interest rate hike that took the benchmark borrowing costs to their highest in more than 22 years.

Global trade in goods was expected to have declined nearly US$ 2 trillion in 2023; trade in services was expected to have expanded US$ 500 billion. The cost of Brent crude oil averaged US$ 83 per barrel in 2023, down from US$ 101 per barrel in 2022, with crude oil from Russia finding destinations outside the European Union and global crude oil demand falling short of expectations.

Global equity markets ended 2023 on a high note, with major global equity benchmarks delivering double-digit returns. This outperformance was led by a decline in global inflation, slide in the dollar index, declining crude and higher expectations of rate cuts by the US Fed and other Central banks.

Regional growth (%)	FY 2024	FY 2023
World output	3.1	3.5
Advanced economies	1.69	2.5
Emerging and developing economies	4.1	3.8
(Source: UNCTAD, IMF)

(Source: PWC report, EY report, IMF data, OECD data, Livemint)

Outlook

Asia is expected to continue to account for the bulk of global growth in 2024-25. Inflation is expected to ease gradually as cost pressures moderate; headline inflation in G20 countries is expected to decline. The global economy has demonstrated resilience amid high inflation and monetary tightening, growth around previous levels for the next two years (Source: World Bank).

I N D I A N E C O N O M I C O V E R V I E W

The Indian economy was estimated to grow 7.8% in the 2023-24 fiscal against 7.2% in 2022-23 mainly on account of the improved performance in the mining and quarrying, manufacturing and certain segments of the services sector. India retained its position as the fifth largest economy. The Indian rupee displayed relative resilience compared to the previous year; the rupee opened at H82.66 against the US dollar on the first trading day of 2023 and on December

27 was H83.35 versus the greenback, a depreciation of 0.8%.

In the 11 months of FY 2023-24, the CPI inflation averaged 5.4% with rural inflation exceeding urban inflation. Lower production and erratic weather led to a spike in food inflation. In contrast, core inflation averaged at 4.5%, a sharp decline from 6.2% in FY 20222-23. The softening of global commodity prices led to a moderation in core inflation.

The nations foreign exchange reserves achieved a historic milestone, reaching US$ 645.6 billion. The credit quality of Indian companies remained strong between October 2023 and March 2024 following deleveraged Balance Sheets, sustained domestic demand and government-led capital expenditure. Rating upgrades continued to surpass rating downgrades in H2 FY 2023-24. UPI transactions in India posted a record 56% rise in volume and 43% rise in value in FY 2023-24.

Growth of the Indian economy
	FY 21	FY 22	FY23	FY24
Real GDP growth (%)	-6.6%	8.7	7.2	7.8 E
E: Estimated
Growth of the Indian economy quarter by quarter, FY 2023-24
	Q1FY24	Q2FY24	Q3FY24	Q4FY24E
Real GDP growth (%)	8.2	8.1	8.4	8 E

(Source: Budget FY 2023-24; Economy Projections, RBI projections, Deccan Herald)

Indias monsoon for 2023 hit a five-year low. August was the driest month in a century. From June to September, the country received only 94% of its long-term average rainfall. Despite this reality, wheat production was expected to touch a record 114 million tonnes in the 2023-24 crop year on account of higher coverage. Rice production was expected to decline to reach 106 million metric tonnes (MMT) compared with 132 million metric tonnes in the previous year. Total kharif pulses production for 2023-24 was estimated at 71.18 lakh metric tonnes, lower than the previous year due to climatic conditions. As per the first advance estimates of national income released by the National Statistical Office (NSO), the manufacturing sector output was estimated to grow 6.5% in 2023-24 compared to 1.3% in 2022-23. The Indian mining sector growth was estimated at 8.1% in 2023-24 compared to 4.1% in 2022-23. Financial services, real estate and professional services were estimated to record a growth of 8.9% in 2023-24 compared to 7.1% in FY 2022-23. Real GDP or GDP at constant prices in 2023-24 was estimated at H171.79 lakh crore as against the provisional GDP estimate of 2022-23 of H160.06 lakh crore (released on May 31, 2023). Growth in real GDP during 2023-24 was estimated at 7.3% compared to 7.2% in 2022-23. Nominal GDP or GDP at current prices in 2023-24 was estimated at H296.58 lakh crore against the provisional 2022-23 GDP estimate of H272.41 lakh crore. The gross non-performing asset ratio for scheduled commercial banks dropped to 3.2% as of September 2023, following a decline from 3.9% at the end of March 2023.

Indias exports of goods and services were expected touch US$ 900 billion in 2023-24 compared to US$ 770 billion in the previous year despite global headwinds. Merchandise exports were expected to expand between US$ 495 billion and US$ 500 billion, while services exports were expected to touch US$ 400 billion during the year. Indias net direct tax collection increased 19% to H14.71 lakh crore by January 2024. The gross collection was 24.58% higher than the gross collection for the corresponding period of the previous year. Gross GST collection of H20.2 lakh crore represented an 11.7% increase; average monthly collection was H1,68,000 crore, surpassing the previous years average of H1,50,000 crore.

The agriculture sector was expected to see a growth of 1.8% in 2023-24, lower than the 4% expansion recorded in 2022-23. Trade, hotel, transport, communication and services related to broadcasting segment are estimated to grow at 6.3% in 2023-24, a contraction from 14% in 2022-23. The Indian automobile segment was expected to close FY 2023-24 with a growth of 6-9%, despite global supply chain disruptions and rising ownership costs.

The construction sector was expected to grow 10.7% year-on-year from 10% in

2023-23. Public administration, defense and other services were estimated to grow by 7.7% in 2023-24 compared to 7.2% in FY 2022-23. The growth in gross value added (GVA) at basic prices was pegged at 6.9%, down from 7% in 2022-23.

India reached a pivotal phase in its S-curve, characterised by acceleration in urbanisation, industrialisation, household incomes and energy consumption. India emerged as the fifth largest economy with a GDP of US$ 3.6 trillion and nominal per capita income of INR 1,23,945 in 2023-24. Indias Nifty 50 index grew 30% in FY 2023-24 and Indias stock market emerged as the worlds fourth largest with a market capitalisation of US$ 4 trillion. Foreign investment in Indian government bonds jumped in the last three months of 2023. India was ranked 63 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. Indias unemployment declined to a low of 3.2% in 2023 from 6.1% in 2018.

Outlook

India withstood global headwinds in 2023 and is likely to remain the worlds fastest-growing major economy on the back of growing demand, moderate inflation, stable interest rates and robust foreign exchange reserves. The Indian economy is anticipated to surpass US$ 4 trillion in 2024-25.

U N I O N I N T E R I M B U D G E T , F Y 2 0 2 4 - 2 5

The Interim Union Budget 2024-25 retained its focus on capital expenditure spending, comprising investments in infrastructure, solar energy, tourism, medical ecosystem and technology. In 2024-25, the top 13 ministries in terms of allocations accounted for 54% of the estimated total expenditure. Of these, the Ministry of Defence reported the highest allocation at H6,21,541 crore, accounting for 13% of the total budgeted expenditure of the central government. Other ministries with high allocation included Road transport and highways (5.8%), Railways (5.4%) and Consumer Affairs, food and public distribution (4.5%).

(Source: Times News Network, Economic Times, Business Standard, Times of India)

G L O B A L S U G A R S E C T O R R E V I E W

Global production is estimated to increase by 8.2 million metric tonnes year-over-year to 183.5 million metric tonnes with higher production from Brazil and India expected to make up for the decline in Thailand and Pakistan. Global sugar consumption may increase to 176.96 million metric tonnes compared to 176.53 million metric tonnes in SS 22-23, on account of population growth.

Sugar exports are expected to rise with Brazil and Thailand offsetting reduced shipments from India and Pakistan. Lower stock estimates are expected to fulfil domestic demand while accommodating higher exports, particularly from Brazil and Thailand. Sugarcane production in Centre-South Brazil for SS 23-24 is projected at 42.50 million metric tonnes due to favorable conditions and increased cultivation area, achieving a record tonnes-per-hectare of 87.5 Mt/ha. In SS 23-24,

Brazil is expected to witness a record production increase of nearly 9 MMT, preventing a global sugar shortage and allowing India to exit the exporter arena without any major disruption. In 2024, India is set to assume the chairmanship of the International Sugar Organisation (ISO), highlighting the countrys increasing influence in the global sugar sector.

(Source: pib.gov.in, IMARC, USFDA, Sucden, The Hindu Business Line)

Major sugar manufacturing geographies

United States of America: The sugar output is estimated at 8.4 million metric tonnes. Imports are anticipated to decrease by 10% to 2.8 million metric tonnes, reflecting expected quota programmes aligned with World Trade Organization and free-trade agreement requirements, as well as projections from Mexico, re-exports and high-tier tariff imports. There will be a marginal increase in consumption, while stocks decrease due to reduced imports, modest consumption growth and production decline. Ethanol production is expected to stabilise around 16 billion gallons between 2025 and 2034, increasing slightly from the 15.9 billion gallons recorded in 2024-25.

Brazil: Sugarcane production in Centre-South Brazil is estimated to reach around 42.50 million metric tonnes for SS 23-24, as favourable weather conditions and increased area are expected to result in additional sugarcane available for crushing. Brazil witnessed an exceptional increase in sugarcane yield owing to favourable weather patterns, coupled with low cane age and meticulous crop practices, helped reach an all-time high tonnes-per-hectare (TCH) of 87.5 Mt/ha. Catalysed by new investments and enhanced crystallisation capacities, the target sugar in sugar-ethanol mix is expected to increase to 52%. Brazils Centre-South region is expected to witness reduction in production estimate to 41.68 million metric tonnes for SS 24-25 due to prolonged dry weather, while cane crushing is expected to drop under 600 MMT due to below-average rainfall, further hampering soil moisture levels and plant growth. For North-Northeast (NNE) Brazil, sugar production was estimated at 3.47 million metric tonne, increasing the sugar mix to 48.8% partially setting off losses. For 2024-25, cane crush estimates are 61.13 million metric tonnes, decreasing by 2.27 million metric tonnes with sugar production estimate increasing slightly to 3.53 million metric tonnes.

India: The insufficient monsoon is expected to result in a decline in sugar cane yield. Consumption is anticipated to increase due to growing demand from bulk buyers and processed food manufacturers. Sugar exports are expected to remain muted due to the governments export restrictions to address inflationary concerns and domestic demand.

China: Sugar production is anticipated at 10 million metric tonnes, owing to favourable weather conditions. Beet sugar production was 1.14 million metric tonnes, marginally higher than last years 1.08 million metric tonne. Consumption is expected to remain unchanged. Imports are expected to rise to help fill the gap between supply and demand. Sugar stocks are pegged to reduce by 50% due to lower beginning stocks and domestic consumption support.

Thailand: Sugarcane yield is pegged at 80 million metric tonnes in SS 23-24, with favorable performance in the North-East region, though Central and Northern regions are expected to face challenges due to low rainfall. Sugar production is estimated around 8.5 million metric tonnes, decreasing by 2.5 million metric tonnes year-on-year. This decrease in production is expected to reduce raw sugar exports by half.

Pakistan: Sugar production is estimated to drop by 600,000 metric tonnes to 6.3 million on account of lower sugarcane harvested area as competing crops replace sugarcane. Sugar consumption is estimated to increase with population growth. Due to the expected decline in output, imports may increase to 500,000 metric tonnes, while exports are expected to reduce strong domestic metric demand.

Mexico: According to S&P Global, the estimated global sugar production for SS 23-24 is expected to be 4.746 million metric tonnes, reducing by 9.16% y-o-y and the lowest in 17 years with 70% of the country witnessing drought conditions. And wholesale prices surged to MXN 1,222/50kg (US$ 75/50kg), marking a 21.11% increase. Low industrial yields and smaller harvested area have largely contributed to poor production. During 2023-24, Mexico is expected to import 435,000 metric tonnes and export 615,335 metric tonnes. Mexico is expected to have marginally better production estimates for SS 24-25 to 5.72 million mtrv, recovering by 17% y-o-y, well below the historic average of nearly 6 million mttq.

Turkiye: Sugar production is estimated to grow to 3.1 million metric tonnes due to favorable growing conditions which is expected to boost yields. Consumption is pegged to remain flat and imports may be down, owing to the increase in production. South Africa: Sugar production is expected to increase by 178,000 metric tonnes to 2.2 million metric tonnes due to favorable weather and higher sugarcane yields. Consumption may increase due to high population growth and higher demand from the local food processing industry. Exports are expected to increase due to higher supplies and strong global demand. Philippines: Sugar production is pegged to remain flat for a second year in a row at 1.8 million metric tonnes. Exports are estimated to remain at zero following the Philippine Sugar Regulatory Administration allocating all production to domestic consumption. Stocks are down on higher consumption and stable production.

The European Union and United Kingdom: The European Commissions white sugar production for SS 23-24 is estimated to be 16.31 million metric tonnes, reflecting a 242,000 MT increase from earlier estimates. This boost is attributed to higher yields, expanded sugar beet plantings, and a potential uptick in sugar content. The Commission revised its forecast for EU sugar exports to 750,000 metric tonnes, marking a 40% surge compared to the prior season. Despite this, ending stocks are anticipated to remain low, while EU consumption is expected to remain steady.

(Source: isma.org, USFDA, pib.gov.in, Sucden Sugar Market Report, Times of India, isma.org)

World sugar balance sheet

Regional growth	2023-24	2022-23	Change
			In million tonnes	%
Production	179.749	178.165	1.584	0.89
Consumption	180.438	177.857	2.581	1.45
Surplus/deficit	-0.689	0.308
Import demand	67.359	66.518	0.841	1.26
Export availability	67.077	66.639	0.438	0.66
End stocks	98.581	98.988	-0.407	-0.41
Stocks/consumption ratio in %	54.63	55.66

(Source: isma.org) As per ISO report of February, 2024, subject to revision every month

Global sugar realisations

The SS 23-24 is expected to witness a global sugar surplus of 5 million metric tonnes. Despite this estimation providing support to global sugar prices, the SS 23-24 is expected to witness a number of challenges such as El Ni?o-related production shortfalls in major exporting countries in South and Southeast Asia and logistical challenges in Brazil, the worlds largest sugar producing nation.

Apart from this, domestic biofuel policies in key exporting countries diverting sugar for biofuel production are further limiting exports. Global sugar production is further expected to be impacted by a decrease in production, especially in major sugar-producing countries like India and Thailand. This has further contributed to exerting upward pressure on sugar prices. As a result, raw sugar prices are expected to post an annual gain of nearly 20% in 2024 as the global market shifts into a deficit of 7 million metric tonnes in SS 24-25.

(Source: Reuters)

I N D I A N S U G A R I N D U S T R Y O V E R V I E W

The lower than average monsoon is expected to result in a sugarcane yield of nearly 32 million metric tonnes in SS 23-24, indicating a decrease of nearly 1 million metric tonnes year-on-year. With sugar being an essential commodity, this decline in yield contributed to increase in inflation. As a measure, the government imposed restrictions on the export of sugar.

The depletion of reservoir levels had a significant impact on cane plantings in Southern India, particularly in the Marathwada region. As a result, even with expectations of normal rainfall during 2024, production is estimated to further decline to 28 million metric tonnes in Sugar Year 24-25, with no diversion to ethanol. After hitting a record low at the end of the previous year, it is anticipated that sugar stocks will rebound in the SS 23-24 season to approximately 9 million metric tonnes. This ensures a more comfortable level of supply for SS 24-25.

By the end of the SS 24-25, stocks could potentially reach 6 million metric tonnes, a level considered acceptable by Indian authorities, especially if the 2024 monsoon outcome proves favorable.

(Source: Sucden Sugar Market Report)

Indian sugar industry Balance Sheet					(lakh tonnes)
Particulars	2019-20	2020-21	2021-22	2022-23	2023-24(P)
Opening Stock as on 1st Oct	146	107	82	70***	56
Gross production during Season (Without	282	332	390	366	340
diversion for ethanol)
Diversion for ethanol ( E )	8	20	32	38	20
Net Production during the Season	274	312	358	328	320
Imports *	0	0	0	0	0
Total Availability	420	419	439	398	376
Offtake
i) Internal Consumption	253	265	273	278	285
ii) Exports*	60	72	111	64	0
Total offtake	313	337	384	342	285
Closing Stock as on September 30	107	82	55	56	91

* Imports and exports are under O.G.L. and as reported by sugar mills to GoI through Proforma (i) and (ii). **(Reconciled with Government data) # Diversion towrds ethanol for 23-24 including excess stock of B Heavy / ethanol CAGR of internal consumption for last 15 years is 1.79% ***Adjusted / aligned with Government data (Source: ISMA)

C A T A L Y S T S O F S U G A R D E M A N D I N I N D I A

Growing population: After surpassing China as the most populous country in 2023, Indias population will surpass 1.5 billion people by the end of this decade and will peak at 1.7 billion people to slowly increase until 2064.

Affordable alternative: Among various alternatives, sugar stands out as the top choice across all age groups and socioeconomic backgrounds because of its affordability and widespread availability in various retail formats such as convenience stores, departmental stores, supermarkets, hypermarkets and more.

Indian consumer market: By 2027, the Indian consumer market is expected to grow to the third largest from its current rank of fifth largest, increasing by 29% in real household spending,

Demand for confectionery: The confectionery sector is expected to witness a revenue of US$ 48.87 billion in 2024, growing at 8.30% CAGR from 2024-2028.

Food and beverage demand growth: Indias food and beverage (F&B) industry is one of the largest and fastest-growing sectors, with several segments and subsegments. Industry estimates indicate the domestic food processing segment will reach US$ 470 billion by FY 2024-25, rising from US$ 263 billion in FY 2020-21.

(Source: Pew Research, CNBC, Economic Times)

SWOT ANALYSIS

Strengths Weaknesses Opportunities Threats

? As the worlds leading ? Many companies ? The demand for sugar in ? The domestic players sugar producer, India can employ outdated India is on the rise due to may be affected by fulfill both domestic and sugar manufacturing population growth. conservatively priced sugar export market demands. technologies. imports.

? There is substantial

? The sugar industry ranks ? The global demand for room to meet the growing ? The excessive among the major employers Indias plantation white demand for ethanol. dependence on rainfall and in Indias agriculture sector. sugar is comparatively low. rising transportation costs

? Significant potential could impact sugarcane

? The bagasse derived ? India heavily depends on exists for further growing. from sugarcane serves as monsoon rainfall for the diversification of products. a source for co-generated growth of sugarcane. ? Higher production power, used for both captive without exports can consumption and merchant depreciate sugar sale. realisations.

? India benefits from ? The Company is extensive and fertile arable vulnerable to changing land. government policies.

? India is recognised as one of the most cost-effective sugar producers globally.

? The industry plays a crucial role in supporting rural communities.

C A N E O P T I M I S A T I O N

Being largely produced in tropical and subtropical regions, sugarcane is widely used for the production of sugar and ethanol. Sugarcane has the potential for further product diversification through fully or partially unexploited product streams which include:

? Sugarcane trash or straw that remains on fields after mechanised harvest

? Ash from bagasse combustion in co-generation plants

? Filter cake from sugarcane juice clarification

? Vinasse - the liquid residue post-ethanol distillation ? emitted during bagasse

Biogenic CO2

combustion and ethanol fermentation

? Green power generated by sugar mills can be, in turn, used for producing green hydrogen

Through the advancement of inventive cascading methods with these leftover biomass fractions, theres potential for substantial cuts in final disposal expenses, enhanced energy yield, diminished greenhouse gas emissions, and an expansion of product offerings for sugarcane mills. Given the ongoing evolution of technologies, these prospects stand a strong chance of becoming tangible outcomes down the road.

U T T A R P R A D E S H S U G A R I N D U S T R Y O V E R V I E W

Uttar Pradesh is expected to yield around 10.5 million tonnes of sugar for SS 23-24. The Uttar Pradesh State Government has declared a SAP (State Advised Price) adjustment for the upcoming sugar season

2023-24, featuring a H20 per quintal increase. The society commission rate remains unchanged at H5.50 per quintal. The transportation rebate has been revised to H9 per quintal, a rise from the previous H8.35 per quintal. Additionally, the slab

rate within the transport rebate has been modified to H0.45 per quintal per KM, as opposed to the earlier H0.42 per quintal per KM.

(Source: Indian Express)

I N D I A N E T H A N O L S E C T O R O V E R V I E W

Positioned as the market leader in the eastern hemisphere, India ranks as the third-largest ethanol producer globally, trailing the USA and Brazil. This underscores Indias commitment to green energy, utilising surplus sugar as a strategic solution to reduce fossil fuel imports and contribute to achieving COP26 targets. Ethanol production is expected to decline by 2.3 million metric tonnes, diverting a sugar equivalent of 1.7 million metric tonnes in SS 23-24. According to CRISIL, the ethanol blending rate in India for the ESY 2023-24 (November 2023 to October 2024) is expected to decrease under 10%, down from the previous years 12%. This reduction is linked to the governments decision to limit the use of sugarcane juice and sugar syrup for ethanol production due to diminished sugarcane production caused by unpredictable rainfall. However, the supply of ethanol from current offers received by oil marketing companies from B heavy molasses, C heavy molasses and grains will persist.

As on March 31, 2024, OMCs procured 224.46 crore litres. out of the total requirement of 825 crore litres for ESY 2023-24 (November – October). Out of this, the sugar sector contributed 126.25 crore litres, accounting for 56% of the total supplied quantity. Out of this, 51.87 crore litres have been sourced from sugarcane juice and 63.63 crore litres have been sourced from B-heavy molasses.

This represents an estimated diversion of approximately 12.87 lakh tonnes of sugar. Till March 31, 2024, contracts for 320.36 crore litres have been executed by the OMCs. As on March 31, 2024, 11.96% ethanol blending percentage was achieved. Prior to the ban, 6 lakh tonnes of sugar has been diverted for making ethanol from cane juice. The ban on making green fuel from ethanol sourced from cane juice was reversed by the food ministry. However, they introduced an overall cap on the diversion of sugar of up to 17 lakh tonnes in ESY 23-24. According to the government directive, no diversion of sugarcane juice and B-heavy molasses is allowed for the production of rectified spirit and extra-neutral alcohol. Moreover, all molasses-based distilleries were directed to make ethanol from C-heavy molasses. By ethanol year 2029-30, the government aims to achieve 30% ethanol-blended petrol.

(Source: The Economic Times, ISMA)

Ethanol blending % under EBP scheme
Year	Blending rate (%)
2015	3.0
2016	4.3
2017	2.4
2018	4.0
2019	4.5
2020	5.0
2021	8.1
2022	10.0
2023	12.0
2025 (Estimated)	20.0
(Source: Industry)

 

Ethanol tealisations per litre (H)
Ethanol type	ESY21	ESY22	ESY23	ESY24
Direct ethanol	62.65	63.45	65.61	65.61
C-heavy ethanol	45.69	46.66	49.41	56.28
B-heavy ethanol	57.61	59.08	60.73	60.73

I N D I A N C O - G E N E R A T I O N M A R K E T O V E R V I E W

In India, the current biomass availability is 750 million metric tonnes (MMT) per year, with a surplus of 230 MMT per year. Approximately 32% of the total primary energy consumption in the country is currently derived from biomass, and more than 70% of the Indian population relies on biomass across the entire energy value chain.

Till now, over 800 biomass power projects have been installed in the country, encompassing both bagasse co-generation and non-bagasse co-generation initiatives. These projects have a combined capacity of 10,632 MW for power generation and 140 TPD for Compressed Biogas (CBG) production. There are about 230 biomass pellet manufacturers and around 1,030 briquette manufacturers operating in different states, supplying these products to power plants and industries.

The implementation of new initiatives supporting biomass co-generation projects is crucial for enhancing the capacities of small biogas plants located in remote and rural areas of India. Global green energy companies are increasingly investing in the Indian biomass market, responding to a rising demand for clean and reliable power for businesses. Biomass is anticipated to play a pivotal role in meeting this growing power demand.

The Government of India introduced a new scheme specifically targeting the conversion of biomass into Compressed Bio Gas (CBG). There is a planned phased mandatory blending of CBG with natural gas for use as fuel in vehicles and domestic applications. Another forthcoming initiative includes a new scheme for bio-manufacturing and bio-foundry.

The Indian government has set a target of establishing 5,000 CBG plants by FY 2024-25. This effort is facilitated through the Sustainable Alternative Towards Affordable Transport (SATAT) scheme, which has already set up more than 46 CBG plants. According to the International Energy Agency (IEA), with the implementation of government policies, bioenergy could contribute around 130 million tonnes of oil equivalent (Mtoe) of useful energy by 2040, constituting about 15% of Indias total energy demand at that time.

(Source: Economic Times, Fortune India)

F I N A N C I A L A N A L Y S I S A N D O P E R A T I O N A L P E R S P E C T I V E

Sugarcane crushed and sugar produced across three units (2023-24)

Particulars	2023-24		2022-23
Crushing (lakh quintal)	366.59		382.13
Recovery % (gross - adjusted)	11.63		11.83
Recovery % (net)	9.55		8.63
Production (lakh quintal)	35.22		32.98
SS 2023-24 vis-a-vis SS 2022-23 across three units
Particulars		2023-24		2022-23
Crushing (lakh quintal)		268.08		302.71
Recovery % (gross - adjusted)		11.56		11.62
Recovery % (net)		9.79		8.00
Production (lakh quintal)		26.25		24.02

Note: For both seasons from start of season till March 31 of the respective year. SS 2023-24 represent the full season as the season concluded across all units before March 31, 2024

O P E R A T I O N A L H I G H L I G H T S , 2 0 2 3 - 2 4

Sugar

? Sugarcane crushing decreased by 4.07%.

? Gross-adjusted recovery declined 20 bps.

? Sugar production increased on account of cessation of diverting juice/syrup for ethanol production following the Central Government order. Additionally, restrictions on the supply of ethanol from B heavy molasses led to the generation of C heavy molasses at our DP unit to fulfil country liquor obligations. During FY 2023-34 sugar production of 7.62 lakh quintals was sacrificed on account of diversion of sugarcane juice for ethanol and on account of generation of B heavy molasses. This was vis-?-vis higher sugar sacrifice of 12.23 lakh quintals during FY 2022-23.

Co-generation

? Sold 1,380 lakh units valued at H4,748 lakh compared to 1,470 lakh units valued at H4,861 lakh in 2022-23.

Distillery

? Sold 944.07 lakh litres of industrial alcohol valued at H583.55 crore compared to 841.75 lakh litres worth H531.32 crore in 2022-23.

F I N A N C I A L H I G H L I G H T S , 2 0 2 3 - 2 4

Particulars	2022-23		2023-24
	H ( lakh)	(%)	( H lakh)	(%)
Income	2,10,296	100.00	1,70,957	100.00
EBITDA	22,857	10.87	21,662	12.67
EBDTA	20,272	9.64	19,649	11.49
EBT	15,251	7.25	14,399	8.42
EAT	10,475	4.98	8,352	4.89

The EBIDTA for FY 2023-24 stands at H21,662 lakh, compared to the previous fiscal years EBIDTA of H22,857 lakh, marking a decline of 5.23%. This reduction in EBIDTA can be attributed to various factors. Firstly, there was an increase in the cost of goods sold, primarily due to the rise in sugarcane prices announced by the State Government. Furthermore, the suboptimal utilisation of sugar plants due to insufficient availability of sugarcane also contributed to the lower EBIDTA. Additionally, adverse regulatory changes in the distillery segment further exacerbated the decline in EBIDTA. However, in % terms the EBIDTA is higher at 12.67% as against 10.87% last FY.

The enhanced EBITDA % was bolstered by better realisation of sugar sales and increased sales of ethanol produced from B heavy molasses, which is a more remunerative feedstock. Sugar realisation during FY 2023-24 was higher by 7% as compared to the realisation during FY 2022-23.

Earnings after tax is at H8,352 lakh, as compared to the earnings after tax of previous FY of H10,475 lakh. Earnings after tax for the year is nearly 20% less than earnings after tax of the previous year. The same is lower also because of higher provisioning of taxes.

Your company enjoys a long-term rating of (ICRA)AA- (pronounced as AA minus). The outlook assigned is ‘stable. Your company also retained the highest rating of A1+ from ICRA for its CP program of H300 crore.

Accounting policies

The financial statement of the Company was prepared in compliance with the requirements of the Companies Act, 2013 and IND AS. The accounting policies followed by the Company formed an integral part of the annual report.

B U S I N E S S S E G M E N T

Our sugar business

O V E R V I E W

Dwarikeshs three plants comprise a cumulative capacity of 21,500 TCD (FY 2023-24) in the largest Indian sugar producing state of Uttar Pradesh. The Company made strategic investments to enhance cane yield, recovery, and cost efficiency. These efforts included the effective management of cane inventory, transitioning from manual to tractor-mounted loading, engaging with farmers through e-Kisan app, improving farmer engagement and transaction transparency. The Company automated its manufacturing processes, leading to increased efficiencies, reduced losses, and optimised recovery rates.

S T R E N G T H S

? Two plants are situated in the Bijnor district, a region focussed on cane production on fertile, irrigated lands.

? The plant in Bareilly district has large, clearly defined cane-producing areas in the region.

? All plants are near major sugar consuming markets with the Bareilly plant being located on the National Highway.

C H A L L E N G E S A N D C O U N T E R - I N I T I A T I V E S

The Companys sugar production was marginally higher y-o-y due to the governments export restrictions & tweaking of the ethanol blending program by the Government.

The Company expects the sugar prices to remain around H3,800 per quintal, which will be sufficient to protect its margins.

H I G H L I G H T S , 2 0 2 3 - 2 4

? Crushed 366.59 lakh quintals of cane in 2023-24 compared to 382.13 lakh quintals of cane in the previous year.

? Net recovery increased at 9.55% as against a net recovery of 8.63% in the previous year.

? Gross and adjusted recovery (following the diversion of sugarcane juice / syrup and generation of B-Heavy molasses) was 11.63% compared to 11.83% in the previous year.

? Following cane diversion of 25.03 lakh quintals, representing 6.83% of cane crushed towards ethanol (using cane juice) and generation of B-Heavy molasses across all units, sugar production was 35.22 lakh quintals.

? Sugar realisations during FY 2023-24 were higher by 6% on average as compared to FY 2022-23.

O U T L O O K

Dwarikesh will continue to increase its crushing capacity wherever possible, enhance efficiencies and upgrade to produce refined sugar. The Company will accelerate its varietal replacement programme to enhance sugar recovery.

B U S I N E S S S E G M E N T

Our power co-generation business

O V E R V I E W

The Company ventured into co-generation when it commissioned a 6 MW power plant in 1995 using the bagasse byproduct. The Company has grown co-generation capacities to three units (Dwarikesh Nagar: 20 MW, Dwarikesh Puram: 33 MW, Dwarikesh Dham: 41 MW) with a cumulative co-generation capacity of 94 MW.

H I G H L I G H T S , F Y 2 0 2 3 - 2 4

During the year under review, the Company saved steam consumption, making additional bagasse available. However, given the fact that bagasse prices declined, the Company realigned on optimising power generation.

O U T L O O K

The Company will continue to provide green power to the state electricity grid, generating an annuity revenue.

B U S I N E S S S E G M E N T

Our distillery business

O V E R V I E W

Dwarikesh commenced distillery operations in its Dwarikesh Nagar plant in Bijnor in 2005. Initially established for the production of industrial alcohol/rectified spirit, the distillery transitioned to produce ethanol for onward supply to oil marketing companies.

The Central governments ethanol blending programme is a strategic long-term measure intended to mitigate the cyclical nature of the sugar industry and moderate the countrys reliance on imported fuel. Over the years, the Company expanded its distillery capacities to support the countrys green energy goals.

The Company possesses two state-of-the-art distillery units one in Dwarikesh Nagar (162.5 KLPD) and the other in Dwarikesh Dham (175 KLPD), which was commissioned in FY 2022-23.

S T R E N G T H S

? Proximity to the sugar plant has helped save costs of raw material, transportation, fuel etc.

? Optimum asset utilisation allowing 190 KLPD production against 166 KLPD installed capacity, taking plant utilisation over 110%

H I G H L I G H T S , 2 0 2 3 - 2 4

? The overall efficiency of both distilleries was 91.88%, in line with industry norms.

? Average distillation reached the highest efficiency of 98.80%.

? Average fermentation efficiency was 93%.

C H A L L E N G E S A N D C O U N T E R - I N I T I A T I V E S

The government banned the procurement of ethanol from sugarcane juice and B-heavy molasses.

The Company had already produced considerable amount of ethanol from sugarcane and B-heavy molasses. However, this production was affected during the rest of the financial year, moderating the revenue proportion of ethanol within the Companys revenues.

O U T L O O K

The Company intends to optimise plant utilisation and improve efficiencies while awaiting a switch to the erstwhile spirit of the Ethanol Blended Policy that could make it possible to maximise ethanol from cane juice.