Kothari Sugars & Chemicals Ltd Management Discussions

Industry Structure and Development World Sugar

The global sugar production during the year 2024 - 25 SS is expected to be around 175.54 million metric tons as against 181.8 million metric tons reported in the previous year. The consumption during 2024 - 25 SS is expected to be around 180.41 million metric tons against 179.9 million metric tons in the previous year leading to a short fall of 4.88 million MT. 2025 - 26 SS is expected to be marginally surplus year. Sugar production in Brazil is expected to be around 43 million metric tons during the year 2024 - 25 SS due to the diversion of more cane juice to sugar production.

In Thailand the production is estimated at around 10.35 million metric tons against previous seasons 8.77 million metric tons, which is an increase of about 18%. EUs sugar production during 2024 - 25 is expected to be like previous years 15.6 million metric tons.

The sugar price in the international market has seen ups and downs during the 2024-25 sugar season.

Indian Sugar

Indias sugar production during the sugar year 2024 - 25 is expected to be at 25.8 million metric tons as against the previous years 31.8 million metric tons. Major sugarcane yield reduction was reported from Maharashtra and Uttar Pradesh & to a minimum level from Karnataka, resulted in lesser production compared with previous season. The sugar consumption in 2024 - 25 SS is expected to be around 28.0 million metric tons, against previous years 29 million metric tons.

During 2024 - 25 sugar season, around 3.5 million metric tons of sugar is expected to be diverted to ethanol production against previous years 2.15 million metric tons, which is excluded from the current sugar years estimated production of 25.8 million metric tons. Government of India has allowed sugar export of 1 million metric tons during 2024 - 25 season.

In the beginning of the year 2024 - 25, the opening stock of sugar was 8.0 million metric tons and the expected closing stock at the end of the sugar year 2024 - 25 would be around 5.4 million metric tons.

GOI has announced FRP for the sugar season 2024 - 25 as Rs. 3,400 / ton linked to 10.25% recovery. A premium / rebate @ Rs. 33.20 / ton of sugarcane is applicable for the increase / decrease in recovery of every 0.1% from 10.25% recovery. However, for sugar factories having recovery of 9.5% or less, the FRP is fixed at Rs. 3,151 / ton.

For the sugar season 2025 - 26 FRP is fixed as Rs. 3,550 / ton linked to 10.25% recovery. A premium / rebate @ Rs. 34.60 / ton of sugarcane is applicable for the increase / decrease in recovery of every 0.1% from 10.25% recovery. However, for sugar factories having recovery of 9.5% or less, the FRP is fixed at Rs. 3,290.50 / ton.

Though, the sugarcane procurement price has increased year on year, the Minimum Selling Price (MSP) of Sugar, which was fixed at Rs. 31/Kg in February 2019 has not been increased. However, the actual selling price is market driven. On the Ethanol front, India has achieved 20% ethanol blending with petrol during March 2025, which is about 7 months ahead of earlier target. With this significant achievement, the GOI is seriously considering availability of various possibilities / options to increase ethanol blending to higher levels further.

This progress is significant for a country that imports around 90% of its energy needs. Ethanol blending has not only reduced Indias crude oil dependency but also delivered over Rs. 1.2 trillion in foreign exchange savings over the last decade, substituting around 19.3 million metric tonnes of oil. Indias early achievement of its 20% blending target is a commendable milestone, but the journey beyond 20% will require deeper systemic reforms. A forward-looking policy framework must integrate energy goals with environmental safeguards, promote technological adoption across sectors, and ensure the economics work for producers and consumers alike.

Government Policies

Government of India (GOI) has taken the following measures:

(a) GOI is continuing the monthly release mechanism for sugar which was re-introduced from Jan 2019.

(b) 1 million metric ton of sugar is allowed for export during 2024 - 25 season.

(c) For the marketing year 2024 - 25, the Ethanol procurement price has been increased to Rs. 57.97 per litre for the Ethanol produced from C-molasses & the other prices remains unchanged at Rs. 60.73 per litre for the Ethanol produced from BH-molasses and Rs. 65.61 per litre for the Ethanol produced from 100% sugarcane juice / syrup.

(d) GOI notified that the GST on ENA will be 18% till 31.10.24 and after that it is open to the state govt to fix tax if any. Based on this TN govt.has fixed VAT on ENA sale at 14.5%.

Tamil Nadu Government has taken the following measures:

The Government of Tamilnadu has disbursed a production incentive at the rate of Rs. 215 / ton directly to the farmers for the sugarcane supplied during crushing season 2023 - 24. For the crushing season 2024 - 25, Government has revised and increased this incentive amount to Rs. 349 /ton of sugarcane.

Opportunities and Threats

The Central Governments push to produce more ethanol, by granting subsidies to build more ethanol plants and increasing procurement prices of ethanol produced from B-Heavy molasses is helping the industry in a big way by absorbing a significant portion of surplus sugar production. In the long run, India will have the option of balancing both sugar and ethanol production based on market requirements. The Govt. Policies like MSP and the monthly sugar release mechanism would help in stabilisation of the sugar price.

The reduction in the availability Agricultural labour force in Tamilnadu and the sharp increase in labour cost have serious impact on the sugarcane cultivation. Most of the factories could not get adequate cane supply to its rated crushing capacity. Therefore, mechanisation of sugarcane cultivation is to be expedited.

Vagaries in the monsoon pattern & continuation of pest and disease incidence in the central and coastal zones of Tamilnadu will have an impact on the availability of sugar cane which is the major raw material. Compared with 2023

- 24 crushing season, sugarcane availability for the 2024

- 25 crushing season is lower by around 25% and sugar recovery is lower because of lesser monsoon rain in few parts & wider spread of pest and disease incidence in more than 11 districts. This will have a cascading effect during 2025 - 26 crushing season too.

Segment-wise or product-wise performance of the Company

Sugar:

In 2024 - 25 financial year, 2,61,780 tons of sugarcane were crushed, as compared to the previous years 8,35,208 tons. Due to steep reduction in the sugarcane availability, we have operated Kattur unit alone and not operated Sathamangalam unit based on the viability. This decrease of 68.66% in crushing volume is mainly due to the withdrawal of temporarily allocated area from two neighbouring units, a decrease in cane planting acreage in the own command area due to pest and disease and as well as yield.

Power :

Power generation in the financial year 2024 - 25 was 186.34 lakh units against the previous years 714.25 lakh units. This decrease in power generation is due to less cane crushing compared to the previous season. The Long term PPA with TANGEDCO continues for Sathamangalam unit with a tariff of Rs. 5.189/Kw-hr. From Kattur unit, power is being sold to open access consumers and IEX.

Alcohol:

During the financial year 2024 - 25, the total alcohol production was 16,895 KL against previous years total production of 19,853 KL. As the availability of own molasses was inadequate, the company had procured 28,000 metric tons of molasses from other factories in the state as well from other state mills and operated distillery for the maximum possible number of days.

Quantitative Performance details:

The Company is engaged in three major segments, namely Sugar, Cogeneration of power (Cogen) and Distillery. The segment wise performance for the year is as under:

Particulars	Sugar (Tonnes)	Power & Other (Lakh Units)	Distillery (Lakh litre)
Production	23,997	186	169
Sales	44,337	54	153
(Rs. in Lakhs)
Sales	17,016	3,222	10,324
Operating Profit	(1,811)	217	4,303

Outlook:

Indias Sugar production for the sugar season 2024 - 25 is estimated to be around 25.8 million metric tons after considering the diversion of sugarcane juice / syrup / B-Heavy molasses. This will result in closing stock of around 2.5 months sugar availability in the market and hence the price of sugar is likely to be stable. Global sugar production is expected to be around 175.54 million metric tons and consumption is estimated tobe around 180.40 million metric tons. The predictions of normal southwest monsoon in India during 2025 is expected to contribute to increase the cane planting acreage from the current downfall trend.

Risk and Concerns Industry Risk

Whenever there is surplus sugar production in the country the selling price falls below the cost of production. Most of the times when India produces surplus sugar, the Global sugar production also becomes surplus. Hence, exports also become unviable.

Risk Mitigation

Ethanol production capacity should be increased to absorb surplus sugar available in the market for stabilisation of the sugar price in the long run. The development of alternate usage of sugar and positive and proactive policies by the Government are the key drivers. The monthly sugar release mechanism and minimum selling price for sugar introduced by the Central Government help in stabilisation of sugar price.

Risk specific to the Company

Withdrawal of temporarily allocated command area and the continuation of pest and disease incidence at your factorys command area will adversely affect raw material availability for the company and in turn the overall capacity utilization. Compared with 2023 - 24 crushing season, sugarcane availability for the 2024 - 25 crushing season is lower by around 68% and sugar recovery is also lower than our target but maintains at around same level of previous year. Further, pest and disease incidence in sugarcane crops in the central part of Tamilnadu and in your companys command area forced the farmers to go for alternative crops as a crop rotation measure. Also, competitive crops like

Paddy, tapioca, banana, gingelly etc., fetch better revenue compared to sugarcane. All these will have a cascading effect during 2025 - 26 crushing season too.

Risk Management

Your company gives top priority to the development of sugar cane in the command area by optimizing utilisation of all resources.

A few major initiatives taken by the company are given below.

(i) Working on the development of new sugar cane clones having characteristics like higher yield, high sugar recovery, early maturing, drought tolerant, pest & disease resistant etc., in association with SISMA, TNAU and Sugar cane Breeding Institute, Coimbatore.

(ii) Bulk planting of high yield and high sugar varieties like Co-86032, Co-18009 etc., in both the units command areas.

(iii) Educating farmers on modern cultivation practices by organising technical seminars, providing technical support, demonstrating modern practices in Demo plots, etc.

(iv) Providing technical and financial support to the farmers on the development of irrigation infrastructure such as well deepening, lift irrigation, installation of new bore / pumps etc.

(v) Promoting water conservation systems like micro irrigation systems in association with the State Agriculture Department.

(vi) Mechanization of cane cultivation, right from ploughing to harvest to the possible extent to reduce the cultivation cost to the farmers and the dependency on labour.

Discussion on Financial Performance with respect to

Operational Performance

Operational Review and State of Affairs

Sl. No.	Production Performance	2024 - 2025	2023 - 2024
(i)	No of crushing days: Kattur Unit	100	151
	Sathamangalam Unit	12	165
(ii)	Cane Crushed (tons)	2,61,780	8,35,208
(iii)	Sugar Recovery (%)	8.94	8.88
(iv)	Sugar Produced from cane (Quintals)	2,39,970	7,46,880
(v)	Alcohol Produced (KL)	16,895	19,854
(vi)	Power Produced (lakh kwh)	186	714

Due to decrease in cane availability, the sugarcane crushing has decreased by over 69% compared to the previous year and sugar production is down by over 68% due to pest infection and scanty rainfall, leading to a lower recovery. The FRP (Fair and Remunerative Price) has risen by 4.50%. Despite the said impact the sugar segment posted marginally a lower loss compared to the previous year. This was made possible due to suspension of operation at our Sathanmangalam unit resulting in reduction of expenditure substantially.

In the distillery segment, profitability decreased significantly due to lower production by 15% and sales by 14% with the average selling price / litre increasing by around 8%. This is directly attributable to shortage of molasses owing to lower sugarcane crushing.

In the power segment, the export of power to the grid has declined by over 85% consequent to lower crushing and lower sales volumes of bagasse.

The finance cost marginally decreased by around 10% compared to the previous year due to the repayment of term loans, despite higher interest cost reset and higher usage of short-term borrowings.

Internal Control Systems and their adequacy

The Company has established a system of internal control across all its business operations and for safeguarding the Assets. The functions of Internal Audit are carried out by an independent firm of Chartered Accountants, who submit their Reports on a quarterly basis to the Management. These Reports are placed before the Audit Committee at its meetings for review.

The Board, Audit Committee and the Management ensure that the internal financial control system operates effectively, and they periodically review the effectiveness of internal control system in order to ensure due and proper implementation and due compliance with applicable laws, accounting standards and regulatory norms.

The Internal Auditors review the adequacy of internal control systems and suggest necessary checks and balances to ensure and increase the effectiveness of the system and that the policies are in place for approval and control of expenditure.

Human Resources / Industrial Relations

Human resources are the most important resources in an organization and need to be used efficiently, because the success, stability and growth of an organization depend on its ability in acquiring, utilizing and developing human resources for the benefit of the Organization. Employees attend a series of training sessions on Technical and soft skills as part of the Employee Development Program. Special Onsite Program and In-house Training program were conducted on safety. During the year, industrial relations have continued to be cordial, conducive, and mutually productive.

The Human Resources Department created an Internal Complaint Committee for the prevention and redressal of sexual harassment of women at workplace as per the requirement of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013. There were no incidents of sexual harassment reported during the year under review, in terms of the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The total number of employees as on 31st March 2025 was 472 in respect of sugar and allied operations.

Key Financial Ratios

Description	u/m	2024-25	2023-24	Remarks
Debtors Turnover	Days	30	27	Barring EB dues rest of the sales are on cash and carry basis.
Inventory Turnover	Days	155	117	Lower Sales due to Quota mechanism implemented by Govt. of India.
Interest coverage ratio	Times	5.69	12.89	Lower earnings and Higher interest due to lower sales realisation
Current ratio	Times	2.18	1.76	Higher Investment and lower liabilities due to lower crushing.
Debt Equity ratio	Times	0.17	0.25	Decrease in borrowings (cash credit)/cane dues due to lower crushing.
Operating Profit Margin	%	-0.78	5.98	Higher cane cost, Lower crushing and lower yields
Net Profit Margin	%	3.36	5.87	Lower due to product volume and margin mix. Higher tax provision.
Return on Networth	%	3.67	11.00	Lower retained earnings due to product volume and margin mix.

 

	On behalf of the Board
	for Kothari Sugars and Chemicals Limited
Place : Chennai	Nina B. Kothari
Date : May 29, 2025	Chairperson
	DIN : 00020119