Oswal Overseas Ltd Management Discussions

Industry Structure and Global Trends

The global sugar market saw tighter balances in 2024 25 amid adverse weather. Brazils 2024/25 output fell ~3.4% (44.1 MMT) due to drought, and the International Sugar Organization (ISO) raised its forecast of a 2024/25 sugar deficit to 5.47 million tonnes (9-year high). Rising Chinese and Pakistani import demand also supported prices. By contrast, abundant rains in India suggest a large 2025/26 crop: USDA projects Indias sugar production at ~35.3 MMT raw ( 33 MMT refined) in 2025/26, up ~25% year-on-year, helping ease world supplies. Global sugar output is expected to reach a record ~189.3 MMT in 2025/26, implying ample global stocks. For context, India and Brazil together account for nearly half the worlds sugarcane. Thus international prices have been volatile: raw sugar futures hit multi-year lows in mid-2025 as a global surplus was anticipated, but have also spiked on tighter-than-expected regional supplies.

Domestic Sugar Industry in India

India is the worlds second-largest sugar producer, with a cyclical industry. Domestic sugar production for 2024 25 was forecast by USDA at 34.5 MMT raw ( 33 MMT refined). This estimate was revised down from ~37 MMT in 2023 24 due to delayed monsoon and pest pressures (e.g. red rot). Industry estimates (ISMA) suggested an even lower output (~26 30 MMT) due to El Nino effects, reflecting weather variability. Nevertheless, Indias substantial carryover stocks (from a 2023 surplus) and the diversion of cane to ethanol kept supply tight. Consumption is steady at ~30 32 MMT ( 32 MMT forecast for 2024/25) driven by stable per-capita demand and growing confectionery and industrial use. As a result, domestic sugar prices have remained firm around 37 39 per kg ex-factory in late 2024, despite global fluctuations.

Sugarcane Cultivation and Supply Dynamics

Sugarcane is Indias highest-irrigated crop, and Uttar Pradesh (UP) leads production. In 2024 25 UP crushed a record ~937 lakh tonnes of cane. Though UPs cane output fell (~3% vs prior year) from 959 LMT to 937 LMT due to dry spells, its sugar output (91.5 LMT) declined only ~11.7%, allowing UP to surpass Maharashtra as the top sugar-producing state. By contrast, Maharashtras sugar output plunged ~27% to ~80.7 LMT in 2024 25. Overall, Indias sugar output fell ~19% to ~299 LMT (raw basis) in 2024 25. Good rainfall in mid-2024 and expanded acreage are expected to boost cane availability in 2025 26: some forecasts project Indias cane production up ~20% and sugar output to 35 36 MM. Government supports remained critical: the central Fair and Remunerative Price (FRP) for cane was raised 8% to 340/quintal for 2024 25 (at 10.25% recovery), and UPs State Advised Price (SAP) was 360 (higher than FRP) from early 2024. As a result, farmers cane dues were largely cleared on time, aided by lower arrears. Technology adoption (high-yielding varieties, drip irrigation, mechanization) is being promoted to raise yields: e.g. UPs average cane yield (~81.5 t/ha) is already near tropical sugarcane yields.

Sugar Refining and Production Patterns

Indias sugar processing network remained fully utilized in 2024 25. Some 3,648 sugar mills operate nationally (120 active in UP in Dec 2024), with crushing seasons running Oct Apr/May. Refining (centrifugal) outputs in 2024 25 are estimated at ~280 MMT (raw basis) through December and expected ~299 MMT by seasons end. Production is concentrated: UP, Maharashtra and Karnataka together account for ~83% of output. Recovery rates averaged 8.5 9.0%, lower than prior years (9.3% in UP last year, 9.5% Maharashtra) due to cane quality and variety issues. Refinery expansions have been modest; focus is on operational efficiency. Press-mud and molasses remain key by-products. Press-mud continues to be used widely as organic fertilizer (co-generated as “bio-compost”), and molasses is channeled partly into ethanol (see below). The industry also produces khandsari (gur) in small quantities, but modern mills produce mainly crystalline white sugar.

Ethanol Blending and Distillery Sector

The ethanol sector remains a major outlet for cane sugar. India has rapidly expanded distilleries: by June 2025, 499 distilleries (molasses- and grain-based) had a combined capacity of ~1,822 crore liters/year, with Uttar Pradesh leading (331 crore L capacity). The governments Ethanol Blended Petrol (EBP) program achieved ~19.1% blending by July 2025 (nearly meeting the 20% by 2025-26 target). In ESY 2023-24, ~545 crore liters were contracted for blending (13.8% blending); for ESY 2024-25, contracted volumes jumped (~837 1,016 cr L forecast) to target 20%. Government policy has actively supported this: in August 2024 it lifted the ban on sugarcane juice/syrup for ethanol, and sanctioned 23 lakh tonnes of FCI rice for ethanol production. Sugar mills have responded by diverting more B-heavy and C-heavy molasses (and even cane juice) to ethanol. This helped mills utilize idle capacity: for example, Dalmia Bharat reported doubling of ethanol output (6.2 cr L in FY25) after expanding a grain distillery. However, some policy restrictions (e.g. a temporary ethanol export duty) have been cited by industry as limiting domestic supply. Overall, the distillery segment is growing (backed by OMC contracts, administered prices, interest subvention schemes) and providing a valuable income stream alongside sugar.

Co-generation and By-product Utilization

Bagasse-based power generation is now a cornerstone of sugar mill economics. Indias installed bagasse cogeneration capacity reached 9,806 MW by Dec 2024 (with a further 922 MW of non-bagasse biomass). Mills use bagasse for in-plant steam and electricity, often exporting surplus to the grid. Uttar Pradesh accounted for ~1,986 MW of bagasse-based capacity. In-season, mills typically self-generate all needed power, and in the off-season about 1,500 2,000 MW runs (depending on tariff) are exported nationwide. Government feed-in tariffs and renewable energy policies shape mill economics: uneven state tariffs have led some mills to idle off-season boilers (as noted by industry). Beyond power, bagasse is also being used for higher-value products (e.g. paper, bio-plastics in pilot projects), and biogas/compost plants (from press-mud) are increasingly common. Such diversification helps mills remain viable while addressing sustainability goals.

Export-Import Dynamics and Trade Agreements

Historically a major exporter, India imposed export controls in 2023-24 to guard domestic supplies. In 2024-25 the government gradually eased restrictions: it capped exports at 1.0 1.5 million tonnes (MT) for the season. By August 2025 about 0.644 MMT had shipped; India signed contracts to export ~0.8 1.0 MMT in 2024-25. Exports are primarily to African and Asian markets. The export quota system (proportional allocation to mills) has been criticized for inefficiency and led associations to request reforms. On imports, the government maintains high tariffs (up to 40%) and duty exemptions are revoked to discourage cheap sugar entering during surplus years. Trade pacts (e.g. with ASEAN or EU) allow some concessional sugar entry, but volumes remain small. Overall, Indias trade policy aims to balance farmer interests (by restricting exports in shortfalls) with miller liquidity (by permitting exports in excess years).

Government Policies and Regulatory Framework

Sugar production is highly regulated. The central government sets the FRP; for 2024-25 it was fixed at 340/qtl of cane (at 10.25% recovery), up from 315. Most states supplement this with a higher State Advised Price (SAP); Uttar Pradeshs SAP in early 2024 was 360/qtl. The Sugar (Control) Order mandates monthly release quotas and maintains buffer stock; despite lower output, monthly quota releases in late 2024 remained steady at ~2.2 2.3 million tonnes to meet retail demand. The government also sets sugarcane payment rules: by law mills must clear cane payments within 14 days of crushing; compliance has improved in recent seasons, aided by liquidity measures (bank credit lines, central subsidies). Support schemes include subsidies/loans for plant modernization, ethanol interest subvention, and offtake guarantees (long-term contracts between mills and OMCs). Recent actions include raising the ethanol supply mandate to 20% by 2025, allocating surplus foodgrain (rice, maize) for ethanol, and revising sugar export quotas. Regulatory challenges remain (e.g. aligning MSP of sugar with FRP), but overall policy has been geared to stabilize prices and encourage biofuel production.

Demand-Supply Balance and Price Trends

Domestic sugar demand is relatively inelastic and growing slowly (~1 2% p.a.). In sugar year 2023-24, consumption was ~28.5 MMT. For 2024-25, consumption was projected near 32 MMT (reflecting steady per capita use of ~25 26 kg/year plus modest food industry growth). Higher 2023-24 output left large beginning stocks (5.3 MMT in Oct 2023), and with 2024-25 production around 33 34 MMT, stocks swelled by Sept 2024 to ~9.1 MMT ( 3.8 months of consumption). This heavy supply has kept domestic prices relatively stable. Factory (ex-mill) sugar prices in key markets ranged around 37 39/kg in mid and late 2024. Retail sugar prices were tightly controlled via central limits (capped at 31/kg for non-BIS sugar until Oct 2023, then raised to 36/kg in 2024). International raw sugar prices (ICE #11) slid from ~$0.27/lb early 2024 to ~$0.17 0.20/lb by mid-2025, reflecting the predicted global surplus, but domestic prices have been underpinned by the limited export window and steady domestic demand.

Technological and Sustainability Trends

The sugar industry is adopting modern and sustainable practices. Precision agriculture (GPS-based planting, drones for crop health) and water-efficient irrigation (drip/sprinkler systems) are increasingly common to boost yields and save water. New cane varieties with higher sucrose content and disease resistance are in trials; R&D centers in UP are working on red-rot tolerant strains. Digitalization (field sensors, mobile apps for farmers) is being piloted to improve input use. On the processing side, mills are upgrading to energy-efficient boilers and high-pressure turbines: raising steam conditions from 400?C/33 bar to 485?C/65 bar, for example, can boost power output per tonne cane. Many mills have installed bagasse waste-heat recovery systems to dry bagasse (improving fuel quality). Sustainability initiatives extend to carbon footprint reduction: bagasse cogeneration is classified as renewable, and use of CO -emitting coal is being minimized (some multi-fuel boilers co-fire cane trash pellets up to 20%). Furthermore, “green” fuels are being pursued: beyond conventional ethanol, several sugar companies are investing in bio-CNG plants (using press-mud and spent wash) and trialing 2G ethanol from bagasse and crop residues under the JI-VAN scheme. In UP, support schemes encourage mills and cooperatives to adopt co-generation and ethanol conversion (e.g. notified subvention for converting distilleries to multi-feedstock ethanol plants). Overall, the sector is aligning with Indias climate and renewable energy goals, improving efficiency while diversifying revenue.

Outlook FY2025-26

Looking ahead, industry analysts expect a strong rebound in 2025-26 production. A robust 2024 monsoon (projected ~105% of normal) and expanded cane acreage should boost yields. The National Federation of Cooperative Sugar Factories forecasts Indias 2025-26 sugar output around 35 36 MMT (raw), 20 30% above 2024-25. This increase will relieve tight supplies and enable a fuller ethanol diversion (the government permits up to 40 LMT sugar for ethanol in 2025-26). The export outlook is cautiously optimistic: with domestic carryover declining, authorities may liberalize exports (industry has asked for ~2 MMT export quota). Global sugar markets may remain weak on anticipated surplus, keeping domestic prices subdued. However, rising fuel costs and renewables policy could enhance the value of ethanol and co-generation. On the demand side, the 20% blending target is expected to be met or exceeded in 2025-26, anchoring ethanol demand. In UP and nationally, government support for the sugar and ethanol sector appears set to continue (with blending mandates, subsidy schemes, and farmer price supports). Productivity improvements (through technology) and sustainable practices are likely to gain further emphasis. In summary, the industry outlook for FY2025-26 is one of higher output and continued diversification, but with watchful eye on global price pressures and maintaining farmer-miller balance.

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 In India, sugar cane stands out as a profitable cash crop. India takes the lead in global sugar consumption and holds the second position in sugar production. The sugar sector not only fosters related industries growth but also enhances the well-being of the rural economy in India 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.

Cane prices in the industry are notably higher than the global average. Several companies in the sector continue to employ outdated equipment.

Financial challenges are prevalent among many mills, stemming from a shortage of funds. 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. Indias per capita sugar consumption averages around 20 kg, trailing the global average of 23 kg. Embracing enhanced farming techniques has the potential to substantially boost yields and efficiency. The governments mandatory ethanol blending policy is a key driver for ethanol demand. Technological upgrades can enhance the utilization of by-products for greater efficiency.

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.

Cropping patterns and yield levels are impacted by climate change. The sector relies significantly on the unpredictable nature of monsoon seasons.

Insufficient infrastructure often results in cane farming being highly contingent on unpredictable weather patterns. Sugar industry is very volatile as many factors including rainfall, cultivated area and transportation cost affects sugarcane prices and hence make this industry unpredictable.

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. Total no. of permanent employees of the company are 52 and seasonal employees are 58 as on 31st March, 2025.

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.

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.

In 2024-25, we crushed 1069417 Quintals of sugarcane, a 63.20% decrease from 29,06,099 Quintals crushed during the previous year. Total recoverable sugar (yield) per Quintals of sugarcane was 8.75% in FY 2024-25 as compare to 9.82% in FY 2023-24. The total sugar produced in 2024-25 was 93,700 Quintals as compared to 2,85,457 Quintals in 2023-24. Total power generation decreased to 62,22,858 Kwh units in 2024-25 from 19230651 kwh units in 2023-24. In 2024-25, your company Supplied 10,38,575 kwh units Co-Gen Energy to UPPCL as compare to 8084105 kwh units in 2023-24.

Revenue analysis

Gross revenues in financial year 2024-25 was Rs. 68,09,31,118/- as compared to Previous Year 2023-24 Rs. 1,53,37,73,126/- while the net loss after tax were at Rs. 12,38,43,141/- in F.Y. 2023-24 in comparison of Net Loss after tax was at Rs. 5,44,83,841/- in F.Y. 2023-24.

The paid-up capital of the company is Rs. 21,46,10,500/- as on 31^st March, 2025 divided into equity share capital of Rs. 6,46,10,500/- and Preference share capital of Rs.15,00,00,000/-.

Companys Free Reserves was Rs. -32,99,56,568/- in Financial Year 2024-25 in comparison to Financial Year 2023-24 Rs. -20,62,35,091/-.

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 decreases from Rs. 2,60,31,617/- in financial year 2023-24 to Rs. 1,37,13,188/- in financial year 2024-25, representing a decrease of 47.32%.

(ii) Inventories: In Financial Year 2023-24 the inventory value was at Rs. 32,08,07,302/- while in financial year 2024-25 is at Rs. 7,18,31,741/-.

(iii) Depreciation and Amortization Exp.: Depreciation and Amortization Exp. Increase from Rs.

3,60,23,831/- in financial year 2023-24 to Rs. 3,62,80,587/- in financial year 2024-25.

(iv) Property Plant & Equipment: Property Plant & Equipment in 2023-24 was of Rs. 83,30,18,830/- while in 2024-25 is Rs. 79,69,87,846/-

(v) Borrowings: In Financial Year 2024-25, Borrowings stood at Rs. 23,86,29,597/- compared to Rs. 23,54,55,410/- in Financial Year 2023-24.

10. MATERIAL 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.

11. 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:

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.