Gayatri Sugars Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

GLOBAL ECONOMIC OUTLOOK

The growth of Global Economy is expected to continue grow at 3.2% during 2024 and 2025. The advanced economies, the growth is expected from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8percent in 2025 as reported by World Economic Outlook of International Monetary Fund. The global economy appears poised for a gradual recovering. China is rebounding strongly following the reopening of its economy. IMF forecasts Global inflation will decline steadily from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent 2025 as the advanced economies returning to their inflation targets sooner than emerging market and developing economies.

IMF estimates Indias growth at 6.5% in both 2024 and 2025 with an upgrade of 0.23% points for both years, reflecting growth in domestic market.

INDIAN ECONOMY OUTLOOK

World Economic Forum of IMF estimates Indias growth at 6.9% in Financial Year 2023-24. Against the growth of 7.2% in the year 2022-23. FICCIs latest Economic Outlook Survey puts forth an annual median GDP growth forecast for 2022-23 at 6.9 percent. The median growth forecast for agriculture and allied activities has been put at 4.0 percent for 2022-23; while industry and services sector are anticipated to grow by 4.4 percent and 8.7 percent respectively. CPI based inflation has a median forecast of 6.7 percent for 2022-23, with a minimum and maximum range of 6.4 percent and 6.9 percent respectively.

The Reserve Bank of India revised upwards the GDP growth projection for the current fiscal to 7.2 per cent from 7 per cent on rising private consumption and revival of demand in rural areas. The estimates released by the National Statistical Office (NSO) placed Indias real gross domestic product (GDP) growth at 8.2 per cent in 2023-24 and the manufacturing activity continues to gain ground on the back of strengthening domestic demand.

GLOBAL SUGAR SCENARIO

Currently, about 110 countries produce sugar from either cane or beet, and eight countries produce sugar from both cane and beet. Sugarcane, on average, accounts for nearly 80% of global sugar production.

Global sugar production remains in the middle of a decade-long 160-190m tonne range, reaching 180.5 tonnes in 2023-24.

This increase in production for this season is mainly due to weather conditions in Centre-South Brazil, allowing mills to continue crushing cane. However, despite Central South Brazils record sugar output, the sugar market remains stressed and highly vulnerable to any adverse events. Relying on a single source of supply is unhealthy, and Central South Brazil cannot save the market alone – other regions must also play a role. Without growth in India, global sugar production in 2024-25 is likely to fall.

INDIAN SUGAR INDUSTRY SCENARIO Sugar Production and Consumption :

India is the second largest sugar producer next to Brazil. In India Uttar Pradesh is the major producer of Sugar followed by Maharashtra, Karnataka, Punjab. Bihar, Andhra Pradesh and Telangana. Sugar industry is the most important Agro based industry and impact on the lively hood of Rural India.

Indian Sugar Mills & Bio-Energy Manufacturers Association (ISMA) estimates of sugar production for 2024-25 marketing year (October-September), as pegged the countrys gross sugar production (without diversion for ethanol) at 33.310 mn tonnes for 2024-25, from an estimated 33.995 mn tonnes in the current 2023-24 marketing year. Net sugar production is estimated at 31.965 mn tonnes for the current marketing year, taking into account 2.030 mn tonnes diversion for ethanol making. ISMA has projected an opening stock of 9.05 mn tonnes as on October 1, 2024, while the gross production during 2024-25 (without diversion for ethanol) has been pegged at 33.3 mn tonnes. So, the total availability of sugar would be 42.35 mn tonnes in 2024-25. The domestic consumption is likely to be 29 mn tonnes in the next marketing year, leading the closing stock to 13.35 mn tones as on September 30, 2025.

The normative stock for two and half months has been kept at 5.5 mn tonnes. Therefore, the excess stock over and above normative stock is 7.85 mn tonnes.

ISMA said the excess stock of sugar will be sufficient to support both the unhindered Ethanol Blending Program in 2024-25 season and also exports in the current season leading to a balanced sugar market.

Price - Sugarcane :

For the Sugar Crushing Season 2024-25, the Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution, increased the FRP for sugarcane at Rs.340/- per quintal with higher of 8% from Rs 315 of previous year, for a basic recovery of 10.25% and a premium of Rs.3.32Ps for every 0.1% increase in the recovery rate, as recommended by the Commission of Agricultural Costs and Prices (CACP).

With a view to protect the interest of Sugar Cane farmers, with sugar mills having recoveries lower than 10.25%, the Government decided that there shall not be any deduction in case where recovery is below 10.25%; such farmers will get Rs.315.10 per quintal for sugarcane in the current sugar Season.

Fair and Remunerative Pricing (FRP) fixed by Central Government over the last four years and for the ensuing 2024-25 season as under:

Basic details of Cane Price			Crushing Year
	2020-21	2021-22	2022-23	2023-24	2024-25
Basic Price Linked to Recovery	10%	10%	10%	10.25%	10.25%
Cane Price per Quintal	Rs 285	Rs 290	Rs. 305	Rs. 315	Rs. 340/-
Premium: for every 0.1	Rs	Rs	Rs	Rs	Rs
percentage point increase	Rs. 2.85	Rs. 2.90	Rs. 3.05	Rs. 3.15	Rs. 3.32
in recovery above 10/10.25%	Quintal	Quintal	Quintal	Quintal	Quintal

Price – Sugar:

For the first time, the Ministry of Consumer Affairs, Food and Public Distribution, Govt of India, fixed the Minimum Selling Price (MSP) of Sugar at Rs 2900/- per quintal in June, 2018 and increased to Rs 3100/-per quintal in Feb 2019. However, since, the MSP is not matching with cost of production, the Indian Sugar Mills & Bio-Energy Manufacturers Association represented the Ministry of Consumer Affairs, Food and Public Distribution for increase of MSP. The Central Government yet to take a decision.

Government Policies towards Sugar Industry:

1. Increase of FRP of Sugar Cane.

2. Increase of Ethanol price produced from C Heavy Molasses

3. Encourage Sugar Mills to establish integrated Potash Derived from Molasses granulation Units

4. Compulsory use of jute bags for packing of Sugar under the Jute Packaging Act 1987

5. Amendment to Energy Conservation Act, 2001, designating Sugar as an Energy Intensive Industry

6. Central Procurement of Sugar by Army Purchase Organisation for 2024-25

Indian Bio Fuel Sector Overview:

Molasses is one of the by-product obtained from raw sugar during the manufacturing process. The ethanol can be produced in three different ways i.e. from Juice/ Syrup, B- heavy Molasses and C- Heavy Molasses.

The Government of India is keen on encouraging low carbon and environment friendly vehicles and imposed compulsory blending of Ethanol. Ethanol which is a bio fuel and blending with petrol will curb on vehicular pollution and on other hand also saves foreign exchange required for import of crude oil by reducing country dependence on import of crude oil.

The Central Government targeted for blending of Ethanol with Petrol by advancing the targets from from 10% to 20% by 2025-26 (which was earlier targeted by 2030), along with improved pricing for Ethanol Supply to Oil Marketing Companies (OMCs). To achieve the targets, Government of India encouraging by giving directions to Commercial Banks to advance Term Loans and Soft loans on interest subvention for establishment of new ethanol produce units and for expansion of capacity of existing units.

The OMCs fixed the price of Ethanol from C Molasses fixed at Rs 56.28 per Lt with an increase of Rs 6.87 paisa per litre from previous price of 49.41 Per Lt and a price of ?71.86 a litre for maize and ?64 per litre for ethanol made from damaged foodgrains.

The OMCs released an indicative allocation list for the two quarters-November 2023-April 2024 period, which earmarked 42.56 crore liters to be produced from Sugar Cane Juice for which 7 lakh tones of sugar will be diverted, For B- heavy Molasses a quantity of 114.76 crore liters has been allocated which will lead to 10 lakh tones of sugar diversion.

On 7th December, 2023, the government banned sugar mills and distilleries from using sugarcane juice or sugar syrup for producing ethanol with immediate effect to ensure adequate availability of sugar for domestic consumption. However, the ban is a "temporary pause" due to a lack of clarity on sugar output for the current season.

COMPANY FUTURE OUTLOOK he Sustainability of Sugar Industry depends upon availability of quality cane, which is a major concern. To overcome this, your Company constantly encourages the farmers by supplying quality seed, technical assistance, expert opinion and scientific methods of cultivation, ratoon management and other resources like facilitating harvesting labour, mechanised harvesting and transport facility of harvested cane to mill.

Availability of Cane:

Availability of Cane is the main concern of the Company. For the Crushing season 2024-25, the company targeted to crush 7 to 7.5 lakh tons of Cane.

Ethanol Production:

The company estimates production of 80 lakh litres of Ethanol from C-Heavy Molasses.

Power :

Another by product of sugar industry is Bagasse which is used for generation of green power. The company has signed Power Purchase Agreement with the Government of Telangana for supplying power to the grid. The Company has 25mw of power and after using 9 mw for captive consumption, exports the excess power to state Grid,

SEGMENT–WISE OR PRODUCT-WISE PERFORMANCE DURING THE FINANCIAL YEAR 2023-24: Sugar :

During the Financial Year 2023-24 under review, the crushing operations for the crushing season 2023-24 at Kamareddy unit were commenced on 17th November, 2023 and closed operations on 5th March, 2024 and total number of days operated were 110 days (previous year operations on 11th November, 2022 and closed on 26th March, 2023 and total number days operated were 136 days) .

The crushing operations for the crushing season 2023-24 at Nizamsagar unit were commenced on 6th November, 2023 and closed operations on 28th February, 2024 and total number of days operated were 114 days (previous year operations commenced on 20th November, 2022 and closed on 12h March, 2023 and total number days operated were 126 days) .

During the Crushing Season 2023-24, at both the units 6.87 Lakh Tonnes of Sugar Cane was crushed and 7.62 Lakh Quintals of sugar produced with an average recovery of 11.10% comparing to the previous season 2022-23 crushing of 8.47 Lakh Tonnes of Sugar Cane and Sugar of 9.56 Lakh Quintals with an average recovery of 11.28%. In detail, at Kamareddy Unit, 3.25 Lakh Tonnes of Sugar Cane was crushed (Previous Season 4.37 Lakh Tonnes) and produced sugar of 3.60 Lakhs Quintals (Previous Season 4.94 Lakh Quintals) with an Average Recovery of 11.10% (Previous Season 11.30%) and at Nizamsagar Unit 3.62 Lakh Tonnes (Previous Season 4.10 Lakh Tonnes) of Sugar Cane crushed and produced sugar of 4.02 Lakhs Quintals (Previous Season 4.62 Lakh Quintals) with an Average Recovery of 11.10% (Previous Season 11.27%).

Distillery:

During the Financial Year 2023-24, the Distillery unit produced Ethanol of 82.95 Lakh Litres and Impure Spirit (IS) 0.28 Lakh Litres totalling to 83.23 lakh Litres (compared to the previous year of Ethanol of 90.01 lakh Litres and Impure Spirit (IS) 0.40 Lakhs, totalling to 90.41 lakh Litres).

Power:

The Export of Power during the crushing season 2023-24 was to the extent of 277.71 Lakh kwh (Kamareddy Unit 40.94 Lakh kwh and Nizamsagar Unit 236.77 lakh kwh) as compared to the previous year season of 324.87 Lakh kwh (Kamareddy Unit 52.93 Lakh kwh and Nizamsagar Unit 271.94 lakh kwh).

Manufacturing:

The Company is continuously implementing better manufacturing methods to increase operational efficiencies and to eliminate process losses.

OPPORTUNITIES & THREATS RISK AND CONCERNS

As explained above, the major risk is availability of cane, Company is continuously focusing on implementation of various measures as discussed in company future outlook section. Company is continuously improving on operational efficiency and is best in terms of efficiency in the southern region of India.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has well-established processes and clearly-defined roles and responsibilities for people at various levels. The control mechanism also involves well documented policies, authorisation guidelines commensurate with the level of responsibility and Standard Operating procedures (SOP) specific to the respective businesses. Adherence to these processes is ensured through frequent internal audits and adequate and effective internal audit system that employs periodic checks on on-going process. The internal audits conducted are reviewed by the Audit Committee and requisite guidelines and procedures augment the internal controls. The internal control system is designed to ensure that financial and other records are reliable for preparing financial statements and other information which ensures that all transactions are properly reported and classified in the financial records.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Financial Statements of the Company for the year 2023-24 has been prepared in accordance with the Accounting Principles Generally Accepted in India, including the Indian Accounting Standards prescribed under section 133 of the Companies Act, 2013 read with Companies (Accounting Standards) Rules 2015 (as amended).

During the Financial Year 2023-24, the Overall performance of the Company is as under:

Production:
Details	Financial Year 2023-24	Financial Year 2022-23
Total Cane Crushed	6,86,713 Tones	8,46,585 Tones
Sugar Production	7,62,256 Quintals	9,53,905 Quintals
Recovery	11.10 %	11.285 %
Molasses production	30,870 Tones	37,870 Tones
Power Exported	277.71 lakh Units	324.87 lakh Units
Distillery Unit:
Ethanol	82.95 lakh Litres	90.01 lakh Litres
Impure Spirit (IS) Production	0.28 lakh Litres	0.40 lakh Litres

Financial Review: Capital:

During the year 2023-24, the Share Capital of the company was increased from Rs 43,70.05 lakhs to Rs 64,79.71 lakhs with an increase of Rs 21,09.66 lakhs, by issue of 100,96,662 Equity Shares of Rs 10/-each to Equity warrant holders aggregating to Rs10,09.66 Lakhs and further by conversion of 110,00,000 – 6% Optionally Convertible Redeemable Preference Shares of Rs 10/- each aggregating to Rs 1100.00 lakhs into Equity Shares. The balance in Preference Share Capital after conversion into Equity Share Capital, has been reclassified as Borrowings (Financial Liability) as per the Indian Accounting Standards applicable to the Company from the Financial Year 2017-18.

Net Worth:

The net worth of the Company eroded due to losses incurred by the Company during the previous financial years.

Long Term Debt:

The long Term Borrowings from Banks including current maturities of the Company increased from Rs. 92,25.94 lakhs to Rs.105,70.10 lakhs with an increase of Rs13,44.16 for the Financial Year 2023-24. The increase was due to sanction of new Term Loan and consideration of accrued interest on SDF Term Loan. Further, reduction of 6% Optionally Convertible Redeemable Preference Shares into Equity shares and also the company borrowed un-secured loans.

Working Capital:

During the current financial year, the company brought down the working capital facility from sanctioned limit of Rs 6,759.00 lakhs to Rs 2,800.00 lakhs.

Gross Block of Assets:

The gross block of the Company, during the Fin Year 2023-24, was increased from Rs. 29,492.34 lakhs to Rs. 29,909.80 lakhs because of capital expenditure incurred on sugar plant. During the year, the Company provided depreciation and amortization of Rs. 666.75 lakhs as per the provisions of Schedule II of the Companies Act, 2013.

Inventories:

Value of inventories stood at Rs. 5038.90 lakhs as at 31st March, 2024.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

In a challenging and competitive environment, the Company believes that people are the key to success and continues to focus on people capabilities by leveraging technology and creating a learning environment. The Human Resources function proactively develops innovative and business focused methods to attract, develop, motivate and retain talent. Human resources strategy is closely aligned to key business and stems from the organisation purpose which is – "To build Credible, Reliable & Capable Human Capital to deliver superior Individual and Business performance". This vision is delivered by a high level of policy deployment initiatives and contemporary HR practices focusing key imperatives such as Capability Development, Talent Management, Employee Engagement, Productivity & Cost and HR excellence.

During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Details of Key Financial Ratios :

Sl. No. Details	2023-24
1. Debtors Turnover	24.59
2. Inventory Turnover	4.39
3. Interest Coverage Ratio	1.56
4. Current Ratio	0.60
5. Debt Equity Ratio (Times)	(1.43)
6. Operating Profit Margin (%)	8.31
7. Net Profit Margin (%)	1.87

CAUTIONARY STATEMENT

The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied in the statement. Your Companys operation may inter-alia be affected by the supply and demand situations, input price and the availability, changes in the government regulations, tax laws and other factors. The Company cannot guarantee the accuracy of the assumptions and perceived performance of the Company in future.