ANNEXURE IV
GLOBAL SUGAR OVERVIEW 2023/24:
Global sugar production has been forecast upwards by 10.6 million tons to 187.9 million
with higher production in Brazil and India expected to more than offset a decline in
Russia. Consumption is anticipated to rise to a new record due to growth in markets such
as India. Stocks are forecast lower in markets including China, to help meet domestic
demand.
Brazil production is forecast up 4.0 million tons to a near-record 42.0 million as
favorable weather and increased area are expected to result in additional sugarcane
available for crushing. Favorable sugar prices encouraged farmers to use their land for
growing sugarcane instead of grains. The sugar/ethanol production mix is expected to favor
sugar relative to the previous season going from 45 percent sugar to 48 percent and from
55 percent ethanol to 52 percent. Consumption is flat while stocks and record exports are
projected to rise with higher supplies.
India production is estimated up 4.0 million tons to 36.0 million on higher sugarcane
area and yields. Consumption is anticipated to be up on increased demand from bulk buyers
and processed food manufacturers. Stocks are estimated down as a result of lower beginning
stocks and higher consumption.
(Source:https://apps.fas.usda.gov/psdonline/circulars/sugar.pdf )
COVID-19 ON THE GLOBAL SUGAR INDUSTRY:
The sugar business, which is a significant contributor to national economies worldwide,
has experienced numerous obstacles throughout its history. The most recent threat has been
modelled by the increasing pandemic coronavirus (COVID-19), which affected sugar sector
stakeholders and their integrated businesses worldwide. The spill over effects harmed the
entire value chain of the global sugar sector, including sugarcane, sugar, molasses,
ethanol, and their subsequent marketing and export relating to the slow growth of the
market in 2020. However, with the normalization of the COVID-19 situation, the slight
setbacks of COVID-19 on the sugar business around the world are reversing. Global Sugar
Market is expected to expand at a CAGR of 2.1% during 2021-2027.
(Source:https://www.researchandmarkets.com/reports/5562693/global-sugar-market-size-share-forecast-2022
)
INDIAN SUGAR INDUSTRY (SUGAR SEASON 2022-23):
The sugar production for the country up to 15th April 2023 was around 311
lac tons as against 328.7 lakh tonnes in the same period of the last sugar season. As per
Indian Sugar Mills Association, in the current season, which began on October 1 last year,
532 sugar mills started production and 132 of them continued to operate. In the last
season 305 mills were operating as of April 15, 2022.
Crushing season in Maharashtra have ended at around 105 lac tons, lower than our
earlier estimate, due to unexpectedly lower cane yields owing to higher ratoon crop share
and uneven distribution of rainfall. Main season in Karnataka is on the verge of closure
and have produced around 55 lac tons so far. However, special season will operate in
Karnataka from June / July2023. Cane yield in Uttar Pradesh is slightly better than
expected and therefore, the state is expected to produce around 105 lac tons of sugar
after diversion towards production of ethanol. Indian Sugar Mills Association (ISMA) has
estimated all-India sugar production for 2022-23 SS (after diversion into ethanol) as 328
lac tons, after considering diversion of about 40 lac tons of sugar equivalent into
ethanol.
State-wise estimates from ISMA are as follows:
Sr. No States |
2022-23 (April2023) |
|
Estimated sugar production |
Estimated Sugar diversion |
Actual sugar production |
|
BEFORE DIVERSION |
|
AFTER DIVERSION |
|
Lac tons |
Lac tons |
Lac tons |
| 1 Uttar Pradesh |
119 |
14 |
105 |
| 2 Maharashtra |
118 |
13 |
105 |
| 3 Karnataka |
67 |
10 |
57 |
| 4 Tamil Nadu |
16 |
|
16 |
| 5 Gujarat |
10 |
3 |
10 |
| 6 Others |
38 |
|
35 |
Total |
368 |
40 |
328 |
(Source:http://www.indiansugar.com/EventDetails.aspx?Nid=10335 )
(Source:http://www.indiansugar.com/IsmaBulletinDetails.aspx?Nid=1056 )
As per the estimate of Government, the Country is likely to achieve 20% blending of
ethanol with petrol by 2025. The blending of ethanol with petrol has increased to 10 per
cent in 2021-22 marketing year from just 1.53 per cent in 2013-14 on the back of efforts
made by farmers and industry, aided by favourable government policies. Supply of ethanol
to oil marketing companies (OMCs) has increased to 408 crore litre in 2021-22 from 38
crore litre in 2013-14. The target is to reach 12 per cent blending in 2022-23, 15 per
cent in 2023-24 and 20 per cent in 2024-25. The requirement of ethanol is estimated at
1,300 crore litre, of which 650 litres should come from sugarcane and the rest from other
sources including grains. Higher blending of ethanol with petrol will be beneficial for
farmers, environment and the overall Indias economy.
(Source:http://www.indiansugar.com/NewsDetails.aspx?nid=55796 )
Sugar demand rises as consumption of cold drinks and ice cream climbs in India during
the summer months that run roughly from April to June. Demand also gets a boost in summer
from the wedding season. Demand has rebounded after being disrupted last year by the
COVID-19 pandemic and could rise to a record 28 million tonnes this marketing year.
The government is unlikely to allow additional exports as closing stock for the season
could fall to around 5.5 million tonnes, the lowest in six years. India has allowed sugar
mills to export only 6.1 million tonnes of the sweetener in the current season, down from
the record 11 million tonnes in the previous season.
(Source:https://www.reuters.com/markets/commodities/indian-sugar-prices-climb-production-drops-amid-record-demand-2023-04-10/
)
MINIMUM SUPPORT PRICE OF SUGAR:
The Indian Sugar Mills Association (ISMA) has urged the government to increase the
minimum support price (MSP) of sugar to
Rs 38 per kg from the current level of Rs 31 per kg in line with fair and remunerative
price (FRP) of cane. MSP of sugar was last announced in February 2019. The government had
fixed MSP of sugar at Rs 31 per kg in February 2019 and it had remained unchanged since
then. However, the FRP of sugarcane had increased from Rs 2,550 per tonne in 2017-18 to Rs
3,050 per tonne for the crushing year 2022-23. As per ISMA, since 85% of the sugar mills
revenue comes from the sales of sugar, it is an important component to pay the cane price
to farmers. 85% of the revenue generated by sugar mills comes from the sale of sugar,
which presently costs Rs 38 per kg to produce. Furthermore, the MSP of Rs 31 per kg only
accounts for the per quintal sugarcane price of Rs 30.50 based on an average sugar
recovery rate of 10% per quintal of sugarcane, while mills bear expenses such as staff
salaries, labour wages, transportation costs, plant and machinery maintenance, and other
overheads. The ISMA has highlighted to the government, the sharp increase in the cost of
sugar production due to rising prices of essential chemicals like sulphur and lime, jute
and high-density polyethylene bags for packing sugar, and bank interest on term loans and
working capital, as well as increased manpower costs.
(Source:http://www.indiansugar.com/NewsDetails.aspx?nid=55798 )
OPERATIONAL HIGHLIGHTS (2022-23): Sugar Division
During the season 2022-23, the plant has crushed 115.99 lakh quintals of sugarcane as
against 115.39 lakh quintals in the previous season.
The overall sugar recovery was 10.49%, which is same to that in the previous season.
During the Season 2022-23, Molasses produced was 5.28 lakh quintals as against 5.07
lakh quintals in the previous season.
Power Division
The Plant consumed 2.82 lakh MT of bagasse and 0.39 lakh MT of alternate fuel to
generate 1.39 MW power as against 2.97 lakh MT of bagasse and 0.28 lakh MT of alternate
fuel to generate 1.33 lakh MW power in the previous Season.
The total power exported to Uttar Pradesh Power Corporation Limited (UPPCL) was 0.94
lakh MW amounting to Rs 30.70 Crores as against 0.86 lakh MW amounting to Rs 31.66 Crores
in the previous Season.
FINANCIAL REVIEW (F.Y. 2022-23):
After taking into account the effect of other Comprehensive Income based on Ind-AS
norms, there is a loss of Rs 4,484.19 lakhs for the Financial Year 2022-23 as against a
loss of Rs 2,917.14 lakhs in the previous year.
The Company generated EBIDTA of Rs 225.01 lakhs as against Rs 1,536.87 lakhs last year.
During the Financial year 2022-23, the Company did not raise any funds by issue of
equity shares or any debt securities. There was no change in Paid-up Share Capital of the
Company during the year. l During the Financial Year 2022-23, the Company did not
borrow any funds from Banks / Financial Institutions.
SEGMENT-WISE FINANCIAL PERFORMANCE:
Segment-wise reporting of performance of the Companys primary business segments
(Sugar, Power and Spirits) is provided in Note No. 37 to Financial Statements forming part
of this annual report.
OPPORTUNITIES & THREATS: Sugar
Untimely change in government policy and upward pricing in terms of Fair Remunerative
Price (FRP) and State Advised Price (SAP) can prove a threat to the Company. Excess
production also can affect the sugar prices to a great extent.
Power
The Company has set up a state of the art cogeneration plant operating at high pressure
of 115 kg/cm2. Therefore, it is very efficient when compared to majority of the
cogeneration plants having power cycle at pressures of 45, 67 and 87 kg/cm 2. This will,
therefore, translate into producing more power from same bagasse.
Spirits
Present State and Central Government policies are quite favourable for the Spirits
Division. The Government is promoting Ethanol by giving better rates, allowing to produce
from ‘B" heavy molasses and cane juice directly. The Company also plans to
restart Country Liquor and IMFL contract bottling.
RISKS AND CONCERNS: Raw Material Risk
Sugarcane is the principal raw material for manufacture of Sugar, Spirits and Power and
its shortages could be on account of pest attacks, crop diseases, diversion of land by
farmers. Shortage of the basic raw materials would severely impact the working of the
divisions of the Company. To mitigate these risks, the Company has adopted sound agronomic
practice and improvement in basic infrastructure facilities.
Price Risk
Sugar price is susceptible to fluctuations on account of international demand and
supply, government pricing for cane as well as sugar, variance in production capacities of
peers. Any change may affect the margins of the Company.
Regulatory Risk
The policies of the Central and State Governments in terms of Fair Remunerative Price
(FRP) and State Advised Price (SAP) for sugarcane have an impact on the operations of the
Company.
INTERNAL CONTROL SYSTEM:
The Companys internal controls are commensurate with its size and the nature of its
operations. These have been designed to provide reasonable assurance with regard to
recording and providing reliable financial and operational information, complying with
applicable statutes, safeguarding assets from unauthorized use, executing transactions
with proper authorization and ensuring compliance with corporate policies. The Company has
a well-defined delegation of power with authority limits for approving contracts as well
as expenditure.
The Company has appointed independent internal auditors to oversee and carry out
internal audit of its activities on half yearly basis. The audit is based on an internal
audit plan, which is reviewed and approved by the audit committee. The audit committee
reviews audit reports submitted by internal auditors. The audit committee also discusses
with the Companys statutory auditors, their views on the adequacy of internal control
systems. Based on its evaluation (as defined in section 177 of Companies Act 2013 and 18
of SEBI (LODR) Regulations 2015), the audit committee has concluded that, as of 31st
March 2023, the companys internal financial controls were adequate and operating
effectively.
DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE
IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS AS REQUIRED TO BE DISCLOSED
UNDER SEBI (LISTING OBLIGATIONS & DISCLOSURE REQUIREMENTS) REGULATIONS, 2015:
Particulars |
Numerator |
Denominator |
March 31, 2023 |
March 31, 2022 |
Remarks/Reason for significant change |
(i) Trade Receivable Turnover Ratio (times) |
Sales |
Average Debtors |
39.24 |
17.38 |
There has been significant improvement in realisation of power dues. |
(ii) Inventory Turnover Ratio (times) |
Cost of Goods sold |
Average Stock |
5.21 |
4.73 |
- |
(iii) Interest Coverage Ratio (times) |
Earnings before Interest and Tax |
Interest Exp |
(0.61) |
(0.12) |
There has been significant change due to fall in sugar recovery from
sugar cane, reduction in sale of Power. During the year OTS sanctioned by UCO Bank
resulting into lower interest expense and hence improvement in ratio is expected in future
years. |
(iv) Current Ratio (times) |
Current Assets |
Current Liabilities |
0.27 |
0.31 |
- |
(v) Debt Equity Ratio |
Borrowings |
Equity |
2.11 |
1.48 |
During current year UCO Bank has Sanctioned OTS and 1st EMI as per
sanctioned terms paid by the Company resulting into reduction of borrowings on one side
and fall in sugar recovery from sugar cane, reduction in sale of Power resulting into huge
losses in the current year. |
Particulars |
Numerator |
Denominator |
March 31, 2023 |
March 31, 2022 |
Remarks/Reason for significant change |
(vi) Operating Profit Margin (%) |
Gross Profit |
Sales |
(2.45%) |
(1.33%) |
Due to payment of arrears of wages (arising out of retrospective
revision in wage rates) of wage board workers, in the current year |
(vii) Net Profit Margin (%) |
Net Profit |
Sales |
(7.97%) |
(6.16%) |
There has been significant change due to fall in sugar recovery from
sugar cane, reduction in sale of Power. |
(viii) Return on Equity / Net Worth |
Net Profit after Tax |
Equity |
(73.77%) |
(27.57%) |
There has been significant change due to fall in sugar recovery from
sugar cane, reduction in sale of Power. |
ix) Trade payables turnover Ratio (%) |
Average Trade payables |
Purchases & Other manufacturing expenses |
46.31% |
49.83% |
- |
x) Net capital turnover Ratio (%) |
Net Sales |
Working Capital |
(146.25%) |
(137.20%) |
- |
xi) Return on capital (%) |
Earnings before Interest and Tax |
Capital Employed |
(28.03%) |
(2.87%) |
There has been significant change due to fall in sugar recovery from
sugar cane, reduction in sale of Power. |
xii) Return on Investment (%) |
Dividend & Gain on Investments |
Average Investments |
9.00% |
5.08% |
Income on Mutual funds increased during current year. |
DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS
FINANCIAL YEAR:
Details of change in return on net worth is already provided in table given above and
hence, the same is not being repeated here.
MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT:
The Company considers human capital as a critical asset and success factor for smooth
organizational workflow. Efforts are made to improve skills, knowledge and performance of
employees by timely training, job satisfaction and enrichment. The Company has added to
its fold, experienced manpower in line with future areas of growth. As on 31st
March 2023, the Company had 238 employees on its payroll.
CAUTIONARY STATEMENT:
The above Management Discussion and Analysis Report contains "forward looking
statements" within the meaning of applicable laws, and regulations and is futuristic
in nature. All statements that address expectations or projections about the future,
including, but not limited to statements about the Companys strategy for growth, market
position, expenditures and financial results are forward looking statements. The Companys
actual results, performance or achievement could thus differ materially from those
projected in any such forward looking statements. Investors are requested to make their
own independent judgments before taking any investment decisions and the Company assumes
no responsibility.
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