parvati sweetners and power ltd Management discussions

Global Economy Overview

The global economy grew at an estimated 3.4% in 2023 as against 6% in 2022. The moderated growth was triggered largely by the Russian war with Ukraine, inflation, pandemic induced lockdown in China, prohibitive interest rates, global liquidity crunch and quantitative tightening by the US Federal Reserve.

Global inflation was 8.7% in 2022, among the highest in decades. Gross FDI inflows (equity, reinvested earnings and other capital) moderated by 8.4% to $55.3 billion in April-December 2022. Brent crude oil softened from USD 120 per barrel in June 2022 to USD 80 per barrel at the end of the calendar year following the increased availability of low-cost Russian oil.

Regional growth (%)	2023	2022
World output	3.4	6.1
Advanced economies	2.7	5
Emerging and developing economies	4.6	6.3

Performance of major economies

? United States Reported GDP growth of 2.1% in 2023 compared to 5.9% in 2022

? China GDP growth is expected to contract from 8% in 2022 to 3% in 2023.

? United Kingdom GDP is expected to grow 4.1% in 2023 compared to 7.6% in 2022

? Japan Reported growth of 1.7% in 2023 compared to 1.6% in 2022

? Germany Reported GDP growth of 1.8% in 2023 compared to 2.6% in 2022

Outlook

The global economy is expected to grow 2.8% in 2023, global inflation is projected to fall to 7% and interestingly, approximately 70% of the global economy demonstrates resilience. Despite high inflation, the US economy demonstrated robust consumer demand in 2022. Driven by these positive factors, global inflation is likely to be still relatively high at 4.9% in 2024.

Indian economy Overview

India reported an economic growth of 7.2% in FY 2022-23, higher than what had been estimated. India emerged as the second fastest growing G20 economy in FY 2022- 23. India overtook UK to become the fifth-largest global economy. India surpassed China to become the worlds most populous nation.

Growth of the Indian economy

Real GDP growth (%)	FY 2022	FY 2023
	8.7	7.2

Indias exports (merchandise and services) in April-February 2022- 23 grew by ~16% over the same period of the previous year. Steady domestic demand amidst global slowdown resulted in a ~20% growth in imports during April-February 2022-23 over the corresponding period of the previous year.

Till Q3, FY23, Indias current account deficit reduced to $18.2 billion, or 2.2% of GDP from $22.2 billion (2.7% of GDP) a year ago. Indias fiscal deficit was estimated in nominal terms at Rs.17.55 lakhs crore and 6.4% of GDP for the year ending March 31, 2023. Indias headline foreign direct investment (FDI) increased from US$81.97 billion in 20-21 to a record $83.6 billion in 21-22, a 1.95% Y-o-Y increase due to 100% FDI approval via automatic route in sectors such as insurance, civil aviation, coal, telecom, pharma, infrastructure.

After three consecutive years of rise, Indias foreign exchange reserves declined by around $ 70 billion in 2022 amid rising inflation and interest rates. The countrys forex reserves, which stood at $606.47 billion on 1 April 2022, declined to $578.44 billion on March 31, 2023. Indias currency weakened from Rs. 75.91 to a US dollar to 82.34 Rs. as on 31 March 2023 due to a stronger dollar and weaker current account deficit.

The countrys retail inflation, measured by the consumer price index (CPI), slipped 16-month low to 5.66% in March 2023. Inflation data on the wholesale Price Index (which calculates the overall prices of goods before selling at retail prices) eased to 4.73% during the period. In 2022, CPI hit its highest of 7.79% in April 2022; WPI reached its highest of 15.88% in May 2022.

In 2022-23, total receipts (other than borrowings) were estimated at 6.5% higher than the Budget estimates. Tax-GDP ratio was estimated to have improved by 11.1% Y-o-Y in RE 2022-23.

For 2022 23, the government collected Rs.16.61 lakhs crore in direct taxes, according to data from the Finance Ministry, around 17.6% higher than collections in the previous fiscal.

Per capita income almost doubled in nine years to Rs. 1,72,000 during the year under review, a rise of 15.8% over the previous year. Indias GDP per capita was 2,320 USD (March 2023), close to the magic figure of $2500 when consumption spikes across countries.

Outlook: India is expected to grow 6.8% in FY 2024, catalysed by 35% capital expenditure growth by the government.

Global sugar scenario

The global sugar market size reached 177.3 million tonnes in 2022 and is anticipated to reach ~196 million tonnes by 2028, exhibiting a growth rate (CAGR) of 1.64% during 2023-2028. Global production of sugar reached 177.3 million tonnes against 173.5 million tonnes in the previous season. Exports are projected higher as the drop in India is more than offset by higher exports from Brazil and Thailand.

During the year under review, the global sugar consumption was estimated at 175.7 million tonnes, as compared to 173.8 million tonnes in 2021- 22 on account of growth in markets like China, Indonesia and Russia. Stocks are estimated lower as growth in global consumption exceeds the rise in production.

Higher exports from Brazil and Thailand are expected to offset the decline in India. Stocks are expected to remain at a low level as growth in global consumption surpasses production growth.

This would lead to a global surplus of ~1.6 million tonnes as compared to deficit of ~0.3 million tonnes last year.

India sugar industry overview

Sugar production in India is expected to decline ~10.1% from the initial estimates of 36.5 million tonnes to 32.8 million tonnes, mainly on account of yield impact in Maharashtra and Karnataka. Sugar consumption is expected at 28.0 million tonnes in 2022-23 as compared to 27.4 million tonnes in the previous season. Indias sugar inventory is expected to decrease from 7.0 million tonnes in 21-22 to 5.7 million tonnes in 22-23 after considering the sugar exports of 6.1 million tonnes and diversion of 4.0 million tonnes equivalent of sugar for ethanol production.

The domestic sugar prices remained stable with sufficient availability. Indian sugar millers received attractive realizations (Rs. 37-41 per Kg for export compared to domestic realisations of Rs. 33-36 per Kg). The top three states (Uttar Pradesh, Maharashtra and Karnataka) contributed 85% of Indias total sugar production.

Sugar production in Uttar Pradesh was expected to increase slightly to 10.5 million tonnes in the 2022-23 season compared to 10.2 million tonnes in the previous season.

Indian sugar Balance Sheet (million tonnes)

	2017-18	2018-19	2019-20	2020-21	2021-22	2022-23
Opening stock as on 1st October	3.9	10.7	14.6	10.7	8.2	7.0
Production during the season	32.5	33.2	27.4	31.2	35.8	32.8
Imports	0.2	-	-	-	-	-
Total availability	36.6	43.9	42.0	41.9	44.0	39.8
Consumption / sales	25.4	25.5	25.3	26.6	27.4	28.0
Exports	0.5	3.8	6.0	7.2	11.1	6.1
Closing stock as on 30th September	10.7	14.6	10.7	8.2	5.5	5.7
Stock to use ratio	42%	57%	42%	31%	20%	20%

Note : Opening inventory for sugar season 2022-23 has been recently re-stated by Government of India from 5.5 million tonnes to 7.0 million tonnes.

Sugar exports and imports

India is the second largest exporter of sugar in the world. Indian sugar exports touched an all-time high of around 11.1 million tonnes in the 2021-22 sugar seasons.

The country is expected to export around 6.1 million tonnes of sugar in the 2022- 23 sugar season. On 5th November, 2022, the sugar export policy of 2022-23 was announced which allowed exports of 60 lakhs tonnes of the sweetener on a quota-basis till 31st May, 2023.

Sugar exports (in million tonnes)

Sugar Season	Export
2018-19	3.8
2019-20	6.0
2020-21	7.2
2021-22	11.1
2022-23 (estimated)	6.1

Market dynamics

The government hiked the fair and remunerative price (FRP) of sugarcane for the 2022-23 sugar season by 15 Rs. per quintal to 305 Rs. For every 0.1% rise in recovery over 10.25%, a premium of 3.05 Rs. per quintal will have to be paid to the farmer, while for every 0.1% reduction in recovery below 10.25%, fair and remunerative price paid will be reduced by 3.05 Rs. per quintal. The government decided to fix a price of 282.12 Rs. per quintal in 2022-23 compared to 275.50 Rs. per quintal in 2021-22 in case of 9.5% recovery for the farmers who dont have very high yielding varieties.

Indian ethanol sector overview

India is the worlds fifth largest producer of ethanol after the US, Brazil, European Union and China. Ethanol is largely used for blending with petrol. India is expected to save an estimated $ 4 billion annually due to the blending of petrol with 20% ethanol. This increased blending is expected to enhance the use of renewable energy in the worlds third-biggest oil importer and consumer Oil marketing companies announced a proposed allocation of around 512 crore litres at different OMCs location across the country. Sugar mills are expected to divert about 40 lakhs tonnes of sugar towards ethanol production. The government has increased the purchase price of ethanol across all categories by up to Rs. 2 per litre for the 2022-23 Ethanol supply year.

The purchase rate for ethanol produced from C-heavy molasses was increased to Rs. 49.41 per litre from Rs. 46.66 litre and for B-heavy molasses was increased to Rs. 60.73 per litre from Rs. 59.08 per litre. India achieved the target of supplying petrol mixed with 10% ethanol ahead of schedule in June 2022. The country has advanced the target of making petrol with 20% ethanol by five years to 2025. Reduced greenhouse gas emissions of 27 lakhs tonnes and also led to farmers being paid in time.

Ethanol capacity requirement to achieve 20%

Year	Capacity requirement (in million litres)
	Grain	Molasses	Total
2019-20	2580	4260	6480
2020-21	2600	4500	7100
2021-22	3000	5190	8190
2022-23	3500	6250	9750
2023-24	4500	7250	11750
2024-25	7000	7300	14300
2025-26	7400	7600	15000

(Source : Niti Ayog)

Co-generation

Sugar cane crushing generates bagasse, which is used in power co-generation. The prudent use of bagasse marked by reduced transmission and distribution losses, no carbon emissions, low fuel cost, fuel diversity and energy security represents a cleaner alternative energy source.

Government initiatives

The government announced the sugar export policy with the focus to ensure price stability in the sugar sector in the interest of domestic consumers. By restricting sugar exports, domestic prices will remain under control and no major inflationary trends will arise in the domestic market. The policy will also ensure the availability of sufficient sugarcane/ sugar/ molasses for ethanol production. By facilitating the diversion of sugar to ethanol production and export of surplus sugar as per availability, the government has taken care of about 5 crore sugarcane farmer families as well as 5 lakhs sugar mill workers along with a whole ecosystem of sugar sector, including ethanol distilleries, taking them to a new growth trajectory.

More than 3,600 lakhs tonnes of sugarcane is expected to be purchased by sugar mills in 22-23 for which the total remittance to the sugarcane farmers is expected to be more than H1,20,000 crore. The Government, through its pro-farmer measures, will ensure that sugarcane farmers get their dues on time. The industry cleared more than 90% cane dues in the 21-22 sugar season, which is higher than the earlier seasons.

Company overview

Parvati Sweetners & Power Limited ("PSPL"), is a part of the LNCT Group, Bhopal (M.P.) Established in 2011, the Group is in the sugar business for over 12 years and consequent upon various schemes of merger and demerger, this Company was incorporated on 13.12.2011 PSPL Sugars core business includes sugar and sugar products. Sugar mills have crushing capacity of 2500 TCD. PSPL Sugar plant is located in Gwalior (M.P.).

Financial Performance with respect to operational performance

We had a record year with our good annual revenues. It was driven by repeat and referral business signifying a high level of customer satisfaction.

Ratio

Ratios	FY22-23	FY21-22
Debtor Turnover Ratio	17.73 times	8.83 times
Inventory Turnover Ratio	1.28 times	1.13 times
Interest Coverage Ratio	0.67 times	1.60 times
Current Asset Ratio	1.87 times	1.55 times
Debt to Equity Ratio	0.00	1.06 times
Operating Profit Margin Ratio	5.59%	6.13 %
Net Profit Margin Ratio	1.51%	1.75 %
Return on Equity Ratio	6.69%	9.74 %

Financial Review

Total revenue:- 8919.00 Lakhs Total Expenditure:- 8786.13 Lakhs Profit after Tax:- 135.07 Lakhs

Risk, Concern and Threats

The Company recognizes that risk is inherent to any business activity and that managing risk effectively is critical to the immediate and future success of the Company. The Company having many risk, concern like:-

1. The distance between the mills and cane fields are expected to pose a risk to the Companys business.

2. The Company could get affected by a situation of excess of supply over demand.

3. The Company may face risks involved in the procurement of sugarcane.

4. The Company may face the risk of low-quality sugarcane

5. The Company may face risks due to increasing debts.

6. Climatic vagaries could impact cane availability, quality and recovery

7. A change in the regulatory environment could impact operations

Risk management at our organization,

At PSPL, the corporate policy (and in effect our ability to manage organisational risk) is framed by our Board of Directors, comprising esteemed professionals with vast industry experience. Our governance principles, including overall risk tolerance, are directed by the Board of Directors. Our Board is assisted by various committees with specific functions like Risk Management Committee, Audit Committee, Stakeholders Relationship Committee, Nomination and Remuneration Committee and Corporate Social Responsibility Committee, which also includes Board member(s) who report their findings to the Board of Directors. As a governance initiative, we ensure that members within our risk management structure are acquainted with our risk strategy and processes, ensuring complete transparency as well as improved ability to manage everyday risks. Our risk governance boosts the development and maintenance of an effective risk and control culture.

We have the following procedure for mitigation the risk:-

1. Risk identification

2. Risk assessment

3. Development, implementation and follow up of risk management activities

4. Monitoring

Internal Control systems and their adequacy

The Companys internal audit system is being continuously monitored and updated to ensure that assets are safeguarded, established regulations are complied with and pending issues are addressed promptly. The audit committee reviews reports presented by the independent internal auditors on a routine basis. The committee makes note of the audit observations and takes corrective actions, if necessary. It maintains constant dialogue with statutory and internal auditors to ensure that internal control systems are operating effectively

Human Resource Management

The Company believes that the quality of the employees is the key to its success and is committed to equip them with skills, enabling them to seamlessly evolve with ongoing technological advancements. During the year, the Company organised training programmes in different areas such as technical skills, behavioural skills, business excellence, general management, advanced management, leadership skills, safety, values and code of conduct. The Companys employee strength stood at 469 as on 31 March, 2023.

Cautionary Statement

Statements in the Management Discussion and Analysis relating to the Companys objectives, predictions, and outlook may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties.

These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates and in the security market, new regulations and Government policies that may impact the Companys business as well as its ability to implement the strategy. The Company does not undertake to update these statements.

Environment, Health and Safety

Environment

The Company strives to be a responsible corporate entity. The Company, therefore, recognizes the impact of its operations on the environment and hence are committed to strictly adhere to the Environment, Health and Safety (EHS) norms and compliance standards set by the Government of India.

Green Initiative

Your Company has set up a standard operating procedure (SOP) for managing hazardous waste at all units also formed an inter-unit committee with the objective of minimising freshwater consumption. It is done by enhancing the use of recycled water, which automatically reduces the use of water.

Environmental initiatives

The company continues to abide by all applicable environmental regulations for all its operations in India. From energy generation to energy consumption, water consumption to wastewater generation and its disposal, product manufacturing to waste generation and fuel consumption is reported on a monthly basis to the management. SPCC tank assessments have also been initiated at all sites to identify gaps in the system and prepare plans to take necessary steps for its implementation.

Health and safety

During the year, the Company continued its efforts to strengthen the health and safety of its employees your company also start many safety and health measurements for protection of the employees and their family, your Company has strictly adhere the guidelines stipulated by the government of India. Advanced fall protection systems were implemented in a phased manner at all sites to ensure better safety of employees.