Oswal Overseas Management Discussions


MANAGEMENTS DISCUSSION & ANALYSIS REPORT

1. INDUSTRY STRUCTURE AND DEVELOPMENT WORLD SUGAR

Industry Structure

Sugar is produced dominantly from sugarcane, while about a fifth is from beet. Though beet has recorded robust rise in yield, crop area has steeply risen for sugarcane essentially from tropical countries. Ethanol production consumes about 15% of the world sugarcane harvest but consistently constitutes over one-half in Brazil. India is fast catching up in its bid to absorb surplus sugarcane into ethanol production that helps in concomitant cut in sugar production to achieve sustainable demand- supply parity.

Brazil barring few years of exception has been the top world sugar producer and exporter while Thailand is normally the second largest exporter. India occasionally challenges this pecking order to emerge as top producer and second largest exporter. World trade volume represents about one-third of production, the rest being used for captive consumption in the country of origin. Import demand is well geographically distributed as opposed to exports essentially coming from concentrated pockets. China is the worlds largest importer followed by Indonesia.

India remains unchallenged as the top consumer of sugar despite low and near static per capita consumption. It has become a structurally surplus sugar producer in the past decade and a regular exporter in the world market, albeit interfered with periodical export quota fixation by the Government.

Consumption growth has decelerated from the average of 2.4% since 1960s to around 1.8% in the last decade. Consumption has steadily shifted from the western hemisphere towards east. Demand growth is decidedly driven by increasing population and improved per capita income of such growing population. However, direct demand has dampened of late due to heightening health concerns and sterner State intervention through sin-tax levy and red-labeling mandate. Institutional consumption, on the other hand, has been growing in emerging economies almost in tandem with the growth in national income.

World sugar prices are highly volatile wherein the price volatility for raw sugar is generally higher compared to white sugar. World prices for white and raw sugar are strongly co-related. There is clear statistical inverse relationship between prices and stocks, expressed by the relationship of stock to consumption. There exists a small positive correlation between the price of sugar and oil.

Status Update

World production that remained near flat for three years is well poised to record a robust rise in 202223 crossing 180 mln. tonnes to mark a new record. This rise is essentially contributed by a significant surge in Brazils production followed by Thailand. India and EU suffered a reversal. Year-end stock would also mark a new high in absolute volume, though not so as a percentage to consumption.

Trade facilitation remains crucial to the health of the global economy. The impact of the Russia- Ukraine conflict, lockdown in China and container capacity issues have discernibly declined in recent months. This has allowed sugar to be transacted using longer sea voyages, aided by fall in freight rates and helped the Brazilian sugar to be sourced for most distant destinations without compromising competitiveness.

World raw prices showed strident volatility at the start. After touching a 5-year high in May ‘22, it plummeted to a 4-year low in the next couple of months. Buoyed by the shrinkage in shipment from India, world prices strikingly started strengthening since Nov ‘22. After crossing a 20 c/ lb mark in Feb ‘23, the strong undertone of the market led to lightning rise to cross 24 c/lb by mid Apr 23 that is an 11-year high! The futures market has for three years been in a contango structure. As a corollary, the backward dated structure in the futures market between spreads has got corrected.

Indian sugar Industry structure

Indian sugar industry is characterized by the coexistence of private, cooperative and public sector. It is inherently inclusive, supports over 50 million farmers and their families and finely fits into the Aatma Nirbhar Bharat mission of the Government. It is rural centric and hence a key driver and enabler for village level wealth creation. Sugar is Indias second largest agro-based industry after Textiles. It has tremendous transformational opportunities to meet the countrys food, fuel and power needs in an eco-friendly manner.

Sugarcane and sugar production are seasonal with more than 90% happening in the winter months of November to March. Sugarcane use for production of sugar has steadily increased over time in preference to alternative sweeteners. UP, Maharashtra and Karnataka are the dominant sugar producing States accounting for 85% of countrys production that would meet more than entire domestic consumption. Household sugar consumption is about 35% with per capita consumption below 20 kg that is far lower than Brazil, US and Europe.

Sugar is largely sold as a commodity with branded sugar at its nascent stage in India, though growing at a CAGR of 8%. It is a niche market with more people opting for it on the fear that loose commodity may contain dust, foreign particles and touched by multiple people. Out of the household sugar consumption of 11-12 mln tonnes a year, hardly 3% is branded as compared to the share of branded product in edible oil segment at 50-55%. Also there are just few players in every geographical area with no single brand penetrating all India market.

Sugar industry reforms remain overdue despite growing consensus on the economic imperative to not delay same. In particular, the desolate disconnect between sugar and sugarcane price demands a decisive and lasting solution. NITI Aayog too came out with a report of its Task Force on Sugarcane and Sugar in April 2020 besides CACP religiously reinforcing its recommendations on this in its annual cane pricing policy reports. Food Ministry in turn constituted a working committee in Apr ‘21 to engage with stakeholders and evolve a mechanism for implementation of these recommendations. It remains regretfully a work in progress for a little too long.

Paradigm shift to ethanol

India has since become a structurally surplus sugar producer. Sugar exports to deal with this surplus are impeded by our skewed cost structure on account of high cost of cane. Exports are hence feasible only when world prices are bullish or subsidized through Government sops, the latter facing the wrath of WTO norms.

Realizing this, the Government firing all cylinders has painstakingly promoted the ethanol blending that amidst altruistic advantages helps subsume the surplus sugar in the system. This paradigm shift in ethanol focus has propelled the industry to a higher trajectory and concomitant re-rating in its valuation.

Having achieved the 10% blend in quick time, India is well poised to hit 20% blend by 2024-25 that should push the country to the top slot after only Brazil in achieving such a high mix.

Status update

Sugar production during SS 2021-22 touched a new peak at 358 lakh tonnes. Notably this came after subsuming 32 lakh tonne of sugar by diversion to ethanol. Maharashtra re-emerged as the top producer after five years.

India achieved steady and startling rise in sugar exports since 2016-17 that peaked to 11.2 mln tonnes in 2021-22. The Government however in a policy reversal in May ‘22 shifted sugar exports from OGL to restricted list. It capped SS 2021/ 22 exports to 100 lakh tonnes that later was relaxed to 112 lakh tonnes.

Sugar production during 2022-23 seasons is slated to slide to below 330 lakh tonnes, a decline of 8 % YoY. This is due to late rains impacting cane yields in both Maharashtra and Karnataka. Indeed, Maharashtra would swiftly slip to the second slot behind UP after regaining its top rank hardly one season before. While the Government in Nov ‘22 fixed an export quota of 60 lakh tonnes, no additional quota may be forthcoming by reason of lower production over initial estimates. At a time when global prices are ruling at about 18% premium to domestic prices, Indian sugar industry has been shut out of the opportunity to make optimum use of this window.

Cogen

Cogeneration of power was conceived three decades ago to diversify the revenue stream and counter the cyclicality in sugar business. After the advent of Electricity Act, 2003, the promotional measures pursued under Government initiative by way of preferential tariff, assured off-take and long term power purchase agreement helped attract huge investment in bagasse based cogeneration of power.

Cogen however has lamentably lost much steam in recent years. Returns are hit by surplus power situation, falling tariff and improved connectivity that are no doubt welcome from a macro perspective. This has however turned high cost investments since FY 17 in cogen unviable by dint of declining power tariff and steadily rising maintenance cost, parlously pulling down power margins. Availability and price of alternative fuels remains a challenge.

Having failed in its earlier attempts to bail out State Discoms and discipline the power market, GoI brought in new set of Rules and Regulations in 2022. The Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 that came into effect from 3rd June 2022 brought in sterner measures to deal with liquidation of old outstanding dues as well as clearance of current dues with punitive measures for default. The new Rules however are like the typical curates egg. In particular, the Rules provide for liquidation of old outstandings over an inordinately long duration of 48 EMIs. Adding fuel to fire, it mandates zero interest compensation during such long period of delay. It is pretty paradoxical that the prodigal Discoms get rewarded at the cost of a performing and non-defaulting power producer in the bargain! On the positive side, the EMIs to clear past dues are getting paid scrupulously adhering to the timeline, while current dues are also honoured with only marginal delay.

Further, bagasse based cogeneration units suffer undue delay and ultimate loss of revenue by dint of Regulators dragging their feet from timely revision of tariff. The two-part regulatory tariff under the cost plus template unequivocally warrants annual revision in the variable cost component essentially to cover the fuel cost escalation. But the time lag due to dithering and eventual denial of higher tariff for long periods lead to gross under recovery in the cost of producing power and in turn denude the guaranteed ROI. The ‘control period under the tariff regulations would need strict conformance.

REC mechanism was conceived to devise a tradeable instrument to incentivize renewable energy production. With lackadaisical enforcement, its intended objectives get hardly realized. Further the Regulator was periodically lowering the floor and forbearance price and indeed the floor price has since been scrapped. To top it all, CERC-REC Regulations, 2022 now disqualify captive consumption from saleable REC entitlement. This strikes a lethal blow to renewable energy projects like that of our company that came to be established on the strength of stated policy incentives to promote renewable energy capacity in the country.

Bagasse based cogeneration brings to bear multitude of benefits to the economy and environment. Power supply is closer to the destination rural markets, while fuel efficiency gets optimized in the factory. Above all, the incremental revenue from power supports sugarcane price payment particularly during times of distressed sugar price. It hence calls for renewed policy thrust to revitalize renewable energy production from bagasse.

Ethanol

The Ethanol Blending Program (EBP) with petrol in the country has had a chequered progress. Introduced first in 2003 and reinforced again in 2007 with a 5% blend target, the actual mix remained tardy low. For the first time, ethanol blend reached 5% during Ethanol Supply Year 2019-20 that rose to 8.5% in 2020-21 and recorded 10% in 2021-22. The rollicking rise in blend % is thus both swift and substantive.

GoI has doubled-down its efforts to promote ethanol production in the country from multiple feedstocks, while sugarcane would in all probability remain the principal source. Flex fuel engines would be rolled out to give customer the choice of fuel. Studies are on for developing a technology to blend ethanol with diesel. GST on ethanol blended petrol has been lowered from 18% to 5% from 1st January 2023. GoI is thus blazing all guns to bolster ethanol production and consumption.

Brazil, the pioneer in EBP which started it way back in 1975 took 25 years to raise the blend mandate from 10 to 20%. Viewed so, Indias resolve to double the blend in just about 3 years would seem audacious, but with committed pursuit achievable.

Government Policies

A. Sugar

> GoI imposed stock holding norms and introduced MSQ for sugar from June 2018 that continues to remain in vogue.

> GoI raised the MSP for sugar from Rs. 29 to Rs. 31/kg in Feb., 2019 that remains unrevised till date.

> GoI has discontinued the export subsidy from SS 2021-22.

> GoI in May 2022 shifted sugar exports from OGL to restricted category and capped total exports at 100 lakh tonnes for SS 2021-22 - Additional 12 lakh tonnes allowed in August 2022.

> GoI notified MAEQ for SS 2022/ 23 at 60 lakh tonnes, allocated same mill-wise and made it tradable.

> Compulsory jute packing for sugar continues at 20% for Jute Year 2022-23.

B. Cane price

> GoI in August 2022 announced increase in FRP by Rs. 15/qtl to Rs. 305/qtl for SS 2022-23 that is linked to base recovery of 10.25% (increased from 10% of previous season).

C. Co-generation

> MoP in June 2022 notified the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022. It allows Discoms to pay the legacy dues over EMI enuring up to 48 months, free of interest.

> MoP in July 2022 notified the RPO trajectory till 2029-30.

> CERC in May 2022 notified REC Regulations 2022. It curtails sale entitlement of REC available to captive generating stations.

> CERC lowered the cap from Rs. 12 to Rs. 10 per unit for power sold in all market segments.

> CERC has extended the applicability of its RE Tariff Regulations by six months up to 30.09.2023.

D. Ethanol

> GoI in Nov., 2022 notified higher ex-mill price of ethanol for supply to public sector OMCs during ethanol supply year 2022-23.

> ESY redefined as 1 st Nov of a year to 31st Oct of the following year effective 1 st Nov 2023.

> GST reduction on Ethyl Alcohol supplied to OMCs for blending with petrol from 18% to 5% effective 1st January 2023.

Fair and remunerative price (FRP)

Keeping in view interest of sugarcane farmers (Ganna Kisan), the Cabinet Committee on Economic Affairs chaired by Honble Prime Minister Shri Narendra Modi has approved Fair and Remunerative Price (FRP) of sugarcane for sugar season 2022-23 (October - September) at Rs. 305/qtl for a basic recovery rate of 10.25%, providing a premium of Rs. 3.05/qtl for each 0.1% increase in recovery over and above 10.25%, & reduction in FRP by Rs. 3.05/qtl for every 0.1% decrease in recovery. However, the Government with a view to protect interest of sugarcane farmers has also decided that there shall not be any deduction in case of sugar mills where recovery is below 9.5%. Such farmers will get Rs. 282.125/qtl for sugarcane in ensuing sugar season 2022-23 in place of Rs. 275.50/qtl in current sugar season 2021 -22. The FRP for sugar season 2022-23 is 2.6% higher than current sugar season 2021-22.

Further the Cabinet Committee on Economic Affairs chaired by the Prime Minister Shri Narendra Modi has approved Fair and Remunerative Price (FRP) of sugarcane for sugar season 2023-24 (October - September) at Rs.315/qtl for a basic recovery rate of 10.25%. It has also been approved to provide a premium of Rs.3.07/qtl for each 0.1% increase in recovery over and above 10.25%, & reduction in FRP by Rs.3.07/qtl for every 0.1% decrease in recovery.

In the current sugar season 2022-23, about 3,353 lakh tons of sugarcane of worth Rs.1,11,366 crore purchased by sugar mills, which is the second highest next to the procurement of paddy crop at Minimum Support Price. The Government through its pro-farmer measures will ensure that sugarcane farmers get their dues in time.

Proactive and farmer friendly policies of the Government has led to promotion of interest of farmers, consumers as well as workers in sugar sector improving livelihood of more than 5 crore persons directly and all the consumers by making sugar affordable. As a result of proactive policies of Government the sugar sector has now become self-sustainable.

India is now playing a crucial role in the global sugar economy as it is the second largest exporter of sugar in the world. In sugar season 2021-22, India has also become largest producer of sugar. It is expected that India would become third largest ethanol producing country in the world by 2025-26.

Minimum support prices

Government has also introduced the concept of Minimum Selling Price (MSP) of sugar to prevent fall in ex-mill prices of sugar & accumulation of cane arrears (MSP was fixed initially at Rs. 29/ kg w.e.f 07-06-2018; revised to Rs. 31/kg w.e.f. 14-02-2019).

The government is considering a proposal to increase the minimum selling price of sugar from Rs. 31 per Kg to Rs. 33 per Kg to help millers clear cane dues of about Rs. 22,000 Crore to farmers. The MSP is fixed, taking into account the components of FRP and minimum conversion cost of the most productive mills. Moreover, it is proposed by the government to link the FRP of sugarcane with the revised MSP, which, in turn, will help the sugarcane farmers pay off their debts without bottlenecks.

2. SWOT ANALYSIS:

Strength:

• It is an established player in the sugar industry with an installed capacity of 3500 TCD at its plant situated at Aurangabad, Nawabganj, Bareilly.

• The Company possesses an experience of more than 2 decades in sugar manufacturing.

• The unit is strategically situated in cane rich belt of central Uttar Pradesh.

• Abundant Land at the existing plant site which may be used for the Companys future expansion and diversification programmes

• The unit is empowered with experienced, skilled and young Human Assets

• Presence of temporary labor force during peak period ensures maximum profits.

Weaknesses:

• Being the Seasonal Industry, OOLs growth plan & profitability depends on various cyclic constraints.

• Cane price is administered by State Government which may affect profitability and cash flow of Company.

• Quality of raw material largely depends upon natural and seasonal factors.

Opportunities:

• Co-Generation through Bagasse /Biomass, proposed to be used for forthcoming Co-gen Power Plant will qualify for Carbon Credits Mechanism

• OOL is planning to expand its Sugar Capacities and setting-up Co-generation plant by consuming the by-product bagasse / Biomass through external resources. This will give opportunity to make use of capital resources during the off season even when sugar production remains stopped.

• Production of value added products such as refined sugar, small packs, sugar cubes etc. that shall bring in higher contribution.

• White sugar has the maximum market share in India and OOL will produce maximum white sugar in future also.

Threats:

• OOL has only one manufacturing plant which increases its risk in case of a plant failure or maintenance issues.

• OOL has to face tough competition with the existing competitors.

• Sugar & Alcohol/Ethanol Industries are always poised to threat because of continuous monitoring by Government policies in the form of Regularization or De-regularization & infrastructure changes.

• Sugar industry is very volatile as many factors including rainfall, cultivated area and transportation cost affects sugarcane prices and hence make this industry unpredictable.

3. STRATEGY :

The demand & supply gap of the Sugar across the Country may affect the small units like OOL. Hence the Companys near-term strategy is to focus on higher cane recovery and higher cane crushing by improving internal efficiencies and higher production of sugar.

4. HUMAN RESOURCES/ INDUSTRIAL RELATIONS:

The objective of your company is to create a workplace where every person can achieve his or her full potential. The employees are encouraged to put in their best. OOL recognizes that a large part of its success is attributable to the excellent human resources base created over the years. This intellectual capital reflects in the quality of our business strategy, our customers relationship, strong project management and commercialization skills and our development capabilities. As of March 31, 2023, OOL had 130 employees.

5. INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY:

The efficiency of the internal control system has been improved with implementation of high level of system-based checks and controls through core business process in materials, operations, accounting & HR. Regular internal audits and checks are carried out to ensure that responsibilities are executed effectively and that adequate systems are in place to maintain authenticity and correctness of recorded transactions.

6. FINANCIAL TRANSACTION :

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013, and The Indian Accounting Standards (Ind AS). Our management accepts the responsibility for the integrity and objectivity of these financial statements as well as for various estimates and judgment used therein. The estimates and judgments relating to the financial statements have been made on a prudent & reasonable basis, in order that the financial statements reflect in a true and fair manner the form and substance of transaction and reasonably present out state of affairs and profits of the year.

7. BUSINESS HIGHLIGHTS Operational

> In 2022-23, we crushed 41,81,726.57 Quintals of sugarcane, a 8.174% decrease from 45,53,968.88 Quintals crushed during the previous year.

> Total recoverable sugar (yield) per Quintals of sugarcane was 9.60% in FY 2022-23 as compare to 9.85% in FY 2021-22.

> The total sugar produced in 2022-23 was 4,01,224 Quintals as compared to 4,48,717 Quintals in 2021-22.

> Total power generation increased to 26623800 Kwh units in 2022-23 from 21553900 Kwh units in 2021-22.

> In 2022-23, your company Supplied 10905575 Kwh units Co-Gen Energy to UPPCL as compare to 6273513 Kwh units in 2021-22.

Revenue analysis

> Gross revenues in financial year 2022-23 has increased (24.9923%) to Rs. 2,11,98,27,337/- from Previous Year 2021-22 Rs. 1,69,59,67,010/- while the net profit after tax were at Rs.74,53,404/- in F.Y. 2022-23 in comparison of Net Profit Rs. 8,60,482/- in the F.Y. 2021-22.

8. CAPITAL STRUCTURE:

The paid-up capital of the company is Rs. 21,46,10,500/- as on 31st March, 2023 divided into equity share capital of Rs. 6,46,10,500/- and Preference share capital of Rs.15,00,00,000/-.

9. RESERVE:

Companys Free Reserves was Rs. -15,18,02,733/- in Financial Year 2022-23 in comparison to Financial Year 2021-22 Rs. -15,91,23,101/-.

10. FINANCIAL OBJECTIVITY, INITIATIVE AND ACHIEVEMENTS:

Your Company is taking proactive measures to ensure all financial costs are effectively reduced to positively impact the bottom line:

(i) Finance Cost: The outflow on account of Finance Cost charges decrease from Rs. 3,98,97,622/- in financial year 2021-22 to Rs. 3,45,42,865/- in financial year 2022-23, representing a decrease of 13.4212%.

(ii) Inventories: In Financial Year 2021-22 the inventory value was at Rs. 84,38,50,581 /- while in financial year 2022-23 is at Rs. 62,03,11,670 /-.

(iii) Depreciation and Amortization Exp.: Depreciation and Amortization Exp. Increase from Rs. 3,26,59,553/- in financial year 2021-22 to Rs. 3,52,61,663/- in financial year 2022-23.

(iv) Property Plant & Equipment: Property Plant & Equipment in 2022-23 is of Rs. 86,48,96,963/- while in 2021-22 was Rs. 86,77,09,758/-.

(v) Loans & Advances: In Financial Year 2022-23, loans & advances stood at Rs. 1,01,17,616/- compared to Rs. 1,42,02,297/- in Financial Year 2021-22.

11. SIGNIFICANT ACCOUNTING POLICIES: (As mentioned in the Auditors Report)

Revenue Recognition, Inventories Valuation, Fixed Assets, Depreciation, Research & Development, Expenditure on new projects & substantial expansions, Goods and Service Tax, Borrowing Cost, Earning Per Share, Taxes on Income, Segment Reporting Policy, Intangible Assets, Impairment of Assets, Provisions, Cash & Cash equivalent.

12. DETAILS OF SIGNIFICANT CHANGES: (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios along with detailed explanation therefore, including:

Sr. No. Key Financial Ratios F.Y. 2022-23 F.Y. 2021-22 Change % Reasons for significant change
1. Current Ratio 0.58 0.75 (21.54) -
2. Debt Equity Ratio 1.02 1.69 (39.59) Reduction of debt and increase in the net worth of the company
3. Debt Service Coverage Ratio 0.16 0.82 (80.16) Higher payment of term loan and interest
4. Return on Investment/ Equity (ROI) (%) 4.29 0.52 729.71 Higher net profit after interest and tax
5. Inventory Turnover Ratio 2.71 1.90 42.65 Low average inventory and increase in sales
6. Net Profit Margin (%) 0.35 0.05 600 Increase in profit
7. Trade Receivable Turnover Ratio 58.88 60.83 (3.20) -
8. Trade Payable Turnover Ratio 1.62 1.51 7.56 -
9. Net Capital Turnover ratio (Times) (5.09) (6.14) 16.99 -
10. ROCE (%) -4.06 9.82 (141.35) Lower EBIT and lower capital employed

13. RISK MANAGEMENT:

As a Company poised to take on the mantle of industry mainstream, OOL is exposed to various risks. The Company is engaged in the business of manufacturing Sugar. Some of these risks are external and result from the business environment we operate in, while some are internal to the Company. We have developed a risk reporting management process to manage potential risks in an informed manner.

We have a three-pronged risk management process. Our comprehensive risk governance culture ensures that business decisions taken balance risk and reward. Consequently, our earnings- generating initiatives are consistent with our risk standards. Our risk-management revolves around corporate policies that outlined standards and provide measurement guidelines for each risk category. The Company proactively evaluates and puts in place risk-mitigation initiatives, sets prudent limits on quantum of risk undertaken and does risk evaluation of major policy decisions.

We manage the variables impacting business risk with a disciplined risk management process is keeping with established standards. The risk management strategies and processes are regularly reviewed in keeping with the changing environment.

14. RISK ENVIRONMENT:

A number of potential risks in the current environment might make the Sugar Industry mixed prospects over the coming years. These risks may stem from Central/ State Government Policies, Cane availability, State administered Cane Price, Customer Concentration Risk and Geographical Risks amongst others. OOL is, however, well poised to manage and mitigate these risks.

15. STEPS TAKEN TO MITIGATE RISKS

The Company has built enviable relationship over the years with the local farming community. It has diversified into Co-gen. OOL is planning to upgrade its existing plant through expansion and diversification on the basis of latest technology and human expertise.

16. OTHER RISKS AND KEY MANAGEMENT INITIATIVES :

a) Industry risk management:

Indian Sugar Companies are prone to induced cyclicality, with higher cane prices which are adversely affecting the profitability. OOL operates in an industry where demand & supply is restricted due to seasonality of operations & Government Policies, Administered Cane Prices which may jeopardize future growth of the medium and small sized group like ours.

b) Regulatory Risk:

The policies of the Government may not be conducive to the growth and development of the Indian Sugar Industry, particularly for a short span of time.

There are various favourable policies expected from the Government in the near future.

c) Working Capital Risk:

The sugar sector is working-capital intensive. The continued slump in the Industry may affect the Companys profitability to manage its working capital requirements.

The Company will manage the enhanced requirement of working capital by means of working capital limits by the banks, short-term loan or unsecured loan from the promoters and issue of share capital to the promoters & others.

d) Business Model Risk:

The Companys business model may not be effective in a year of sugar down turn.

To mitigate the risk our Company has adopted a diversified model comprising Sugar and Power to minimize the inherent risk of cyclicality of the sugar business.

e) People risk management:

High quality human resources are vital to the success of our business.

In order to retain talent, the Company promotes a sense of ownership and pride in association with strong HR initiatives, which have helped us keep attrition rates well in control.

f) Cash flow risk:

The Company operates in a cyclic growth oriented industry, especially on account of changing Government Policies of administered prices, control/decontrol and cane availability. Hence, it is imperative to efficiently estimate and manage cash flows in this volatile environment. The Companys working capital arrangement is comparatively low against any uneven or seasonal factors. Hence the Company is trying to tie-up additional alternative financing or cost optimization/ funding the operations. Besides the Company monitors liquidity on a regular basis.

g) Security risk management:

Operations could be disrupted due to natural, political and economic disturbances.

As a part of its ‘Disaster Recovery plan, all related risks have been mapped by the Company and are monitored regularly.

17. DISCLOSURE:

During the year under review, the Company has not entered into any transaction of the material nature with its Promoters, the Directors or the management, their subsidiaries or relatives, etc. that may have potential conflict with the interest of the Company at large.

18. MANAGEMENTS RESPONSIBILITY STATEMENT:

The management is responsible for preparing the Companys financial statements and related information that appears in this annual report. The management believes that these financial statements fairly reflect the form and substance of transactions and reasonably represent the Companys financial condition and results of operations in conformity with Indian Generally Accepted Accounting Principles.

19. CAUTIONARY STATEMENT:

Some of the statements in this report that are not historical facts are forward-looking statements. The forward-looking statements include our financial growth projections as well as statements concerning our plans strategies, intentions and beliefs concerning our business and the markets in which we operate. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. These risks include uncertainties that could cause actual events to differ materially from these forward-looking statements. These risk include, but are not limited to, the level of market demand for our services, the highly-competitive market for the types of services that we offer, market conditions that could cause our customers to reduce their spending for our services, our ability to create, acquire and build new businesses and to grow our existing businesses, our ability to attract and retain qualified personnel, currency fluctuations and market conditions in India and elsewhere around the world and other risks not specifically mentioned.

For and on behalf of the Board of Directors

OSWAL OVERSEAS LIMITED

Sd/- Sd/-
Anoop Kumar Srivastava Paramjeet Singh
Place: New Delhi Director Managing Director
Dated: 22/08/2023 DIN: 07052640 DIN:00313352