Ponni Sugars Erode Ltd Management Discussions

Industry structure and development

World Sugar

Industry Structure

Sugar is produced dominantly from sugarcane, while about a fifthis 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 desired demand-supply parity and sugar price stability.

Brazil barring occasional blip 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 emanating from concentrated pockets. China has been the world s largest importer followed by Indonesia; that ranking however changed in 2025-26.

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 interrupted by 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 levies and red-labelling mandate. Institutional consumption, on the other hand, has been growing in emerging economies almost in tandem with the growth in national income. Specialty sugars are evolving to meet end-user specific dictates but in snail s pace.

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 ratio of stock to consumption. There exists a small positive co-relation between the price of sugar and oil.

Status update

As per ISO, world production in 2025-26 would rebound, thanks to steep rise in India followed by Thailand. At

181.3 MMT, it would be a new record. Consumption would increase marginally, yet below the record 2023-24 level. Slack in consumption growth could be attributable to increased use of corn based and high intensity sweeteners, use of GLP-1 drugs in US that reduces food craving and impact of geopolitical turmoil. Notably 2025-26 would record a surplus of 1.2 MMT as opposed to successive deficits in the last six years. Year-end stock at 93.3 MMT is near flat, while stock / consumption ratio at

51.81% would be a new low in a decade.

Raw sugar prices deeply decelerated between Oct 24 and Sep 25 in NY#11 Futures, losing about 30% value. Average price for 2025 was indeed a five-year low. The Iranian war that fired up crude oil prices triggered a temporary surge in sugar prices that however turned ephemeral. Raw sugar prices currently trade sub 14 c / lb, which is below cost of production for most countries, including India.

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 GOI. It is rural centric and hence a key driver and emphatic enabler for village level wealth creation. Sugar is India s second largest agro-based industry after Textiles. It has tremendous transformational opportunities to meet the country s food, fuel and power needs in an eco-friendly manner and on a sustainable basis.

Sugarcane and sugar production are seasonal with more than 90% happening in the winter months of November to March. Share of sugarcane use in the 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 about 85% of country s production, suffice domestic consumption. SW monsoon plays a pivotal role impacting area, productivity and quality of cane crop in Maharashtra and Karnataka; but the State of UP is largely insular, thanks to perennial river sources for irrigation.

Household sugar consumption is about 35% with per capita consumption below 20 kg that is far lower than

Brazil, US and Europe.

Sugar is mostly sold as a commodity in India with branded sugar at its nascent stage, though growing at a CAGR of 8%. It is a niche market with a small but growing number of consumers embracing it on grounds of hygiene and better quality. 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 being able to penetrate pan India market yet. Variants of white sugar are also slowly emerging to capture select market segments.

Sugar is a tightly controlled and rigorously regulated business, both by the Centre & State. Sugar industry reforms remain overdue despite growing consensus on the economic imperative for same. In particular, the detestable disconnect between sugar and sugarcane price demands at once a decisive and lasting solution.

NITI Aayog too came out with a report of its Task Force on Sugarcane and Sugar in Apr 20 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 ad .

Paradigm shift to ethanol

India has since become a structurally surplus sugar producer. Sugar exports to de-clog the supply overhang is inexorably impeded by our skewed cost structure on account of high cost of cane. Exports are hence feasible only when world prices are bullish or buttressed through

Government sops, the latter facing the wrath of WTO to meetentire norms.

Realizing this, GOI firingon all cylinders has painstakingly promoted the ethanol blending programme that amidst altruistic advantages accommodates subsuming surplus sugar in the system. This paradigm shift in ethanol focus has propelled the industry to a higher trajectory, commanding concomitant re-rating in its valuation. During periods of drought and consequent dip in sugarcane production, GOI prioritizes domestic need first, followed by ethanol over export of sugar.

Travails of Tamil Nadu

Tamil Nadu is witness to and a victim of recurring drought, redoubtable shortage and high cost of agricultural labour, besides adverse climatic conditions abysmally lowering sugar recovery. Its production in 2024-25 nosedived to nadir at 7 lakh tonnes. Its sugar recovery too slided to an all-time low of 8.24%.

The State has been fast losing on its competitive edge in terms of size, season duration and sugar recovery juxtaposed to other major sugar producing regions.

Further, TN sugar mills are mandated to bear, in full, the transport cost for sugarcane, while in all the other States the statutory cane price is inclusive of transport cost.

Still worse, TN Government has discontinued its partial subsidy support for this from SS 2020-21. With TN sugar mills already reeling under high cost pressures due to despicable sugar recovery and dismal capacity utilization, this add on burden has become outright onerous and undeniably beyond their bearing.

Tamil Nadu sugar industry has now been pursuing for over a decade with ICAR-SBI, Coimbatore the Sweet Bloom

Project to identify and develop viable cane varieties relevant to the State. While some of the varieties showed early promise, their performance at the ratoon stage regrettably was below par. As such, TN sugar industry is struggling yet to spot a sustainable cane variety, despite long years of laudatory efforts. Sweet Bloom project

Version-2 is now being pursued in continuity that remains the industry s best bet for now. Further, the scope and efficacy of AI technology is being evaluated for suitable adoption to improve cane quality and cultivation cost efficiencies.

Status update

Gross sugar production in SS 2025-26 is set to rebound to 324 lakh tonnes. Sugar subsumed in ethanol however got subdued due to sub-optimal allocation for sugar industry. Net sugar production after diversion to ethanol would be 293 lakh tonnes, an increase of 12% over SS

2024-25. While GOI opened up sugar exports in two tranches aggregating 20 lakh tonnes, unviable world prices may cap eventual export performance at around

7 lakh tonnes. Closing stock at 53 lakh tonnes is well balanced.

Domestic sugar prices largely remained muted owing to sluggish market mood. Revision in MSP for sugar that last got fixed at 31 / Kg in Feb 19 could become the catalyst for market price up-tick, but GOI for inexplicable reasons is yet to act on same. Increasing cane price payment pressures in States like Maharashtra should hopefully trigger timely action for GOI to rise MSP commensurate with and effectively compensate for the increased cane prices over years.

Cogeneration of Power (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 lamentably lost much steam in recent years. Returns are hit by surplus power situation, tumbling tariff and pan India connectivity that are doubtless welcome from a macro perspective. This has however turned high cost investments since FY 17 in cogen projects unviable by dint of declining power tariff and steadily rising operating costs, parlously pulling down power margins. Availability and affordability of alternative fuels remain a daunting challenge.

Bagasse pricing is a critical cost constituent in the final determination of power tariff. Lack of timely and adequate revision to fuel cost has come to detestably deprive power producers the benefit of higher tariff legitimately due to them. The CERC (Terms and Conditions for Tariff Determination from Renewable Energy Sources)

Regulations, 2024 clearly admitted and conceded the need for review of bagasse price based on study that however remains un-commissioned for more than a year.

The inordinate delay and irksome uncertainty in the payment of monthly bills by the Distribution Licensees was increasingly threatening the financial viability and sustainability of power production. Ministry of Power in

June 2022 brought in the legislative mandate towards enforcing payment security for power supply. Under this, past dues are to be liquidated over prescribed monthly installments free of interest, while current dues have to be settled on time. Stringent penal consequence provided therein has ensured timely realization of both old and current dues, thereby bringing predictability and certainty to the cash flows of power producers.

Need for Policy Thrust

Bagasse based cogeneration brings to bear multitude of benefits to the economy and environment. Power production and 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 stressed sugar price. It hence calls for renewed policy thrust to revitalize renewable energy production from bagasse.

Legal battle - current status

The Cogen of power from renewable energy source by the sugar industry faced multitude of operating and financial challenge forcing the industry to seek legal redress on several issues.

i) Power Tariff Revision

The power tariff for the long term supply commitment by our company to the Distribution Licensee is determined by TNERC, the State regulator. The company in June 2014 had won in its first round of fight for higher tariff before the appellate authority, namely,

APTEL. This at once brought in a directional change in the financial viability of our cogen operations - from that of loss suffering to profit making. Aggrieved, yet, on the inadequacy of the tariff in accordance with extant tariff principles, further appeal was filed before APTEL. All Tariff orders of TNERC since 2012 were in challenge before APTEL.

APTEL has since pronounced its judgement in Sep

25 that in essence effectively addressed and at once redressed all our grievances. It has directed TNERC to consider appropriate revision in capital cost, fuel cost, etc., and further upheld our entitlement for interest for the long period of delay involved in paying the revised tariff as compared to the original time of supply. In turn, TNERC has initiated necessary proceedings for tariff revision, but its order is awaited. Meantime, the company has recognized the most likely income expected to arise out of

APTEL judgment in accordance with accrual basis of accounting and applicable accounting standards. This has significantly boosted the bottom-line of the company for the year.

This has been explained in Note 30 of the financial statements. ii) Parallel Operation Charge (POC)

APTEL in its June 25 judgement held that POC is not leviable in the case of our company. Consequently, its impact has been recognized in the current year. TNPDCL has challenged the APTEL judgement before the Hon ble Supreme Court, but no interim order has been passed thereon.

Details are furnished and disclosure made for the contingent liability in Notes 31 and 32 of the financial statements.

(iii) Incentive for excess generation

Tariff applicable for power generation in excess of normative 60% PLF was favourably considered by

TNERC in Dec 23 ruling that normative PLF at 60% shall be computed not on annual but on cumulative basis. TNPDCL has challenged this before APTEL but no interim order has been passed.

Requisite disclosure is made in Notes 31 and 32 of the financial statements for the contingent liability.

(iv) Renewable Energy Certificate (REC)

REC mechanism was conceived to promote green energy and our company benefited by this from

March 2015. However, this got short circuited in Dec

22 by abruptly and abhorably altering the ongoing scheme and forfeiting REC with sale entitlement for captive generation. Further, the lowering of forbearance price alongside of removing floor price, besides ineffective enforcement of RPO, led to crash in REC prices. 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.

ISMA had challenged this before the High Court of Delhi - written submissions filed - listed for arguments.

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. For the first time, ethanol blend reached 5% only by ESY 2019-20. It then on progressively increased in the following years to hit 20% in 2024-25 5 years ahead of the original 2030 target. The rollicking rise in blend % is both swift and substantive besides being sustainable.

GOI has broad based its efforts to promote ethanol production in the country from multiple feedstocks. Grain based ethanol has rapidly expanded to challenge the dominance of sugar sector. Flex fuel engines that can run on gasoline, ethanol or any variable blend of two, are on the anvil to give customer the choice of fuel. GST on ethanol blended petrol was lowered from 18% to 5% in Jan 23. GOI is thus blazing all guns to bolster ethanol production and consumption in the country.

India is now firmly positioned as the third largest biofuel producer globally, leading in its transition to cleaner and renewable energy. Over the past decade, ethanol blending initiatives have benevolently boosted farmers income, created rural employment, enhanced oil security, cut CO2 emissions and saved precious foreign exchange. NITI Aayog is already working on preparations for ethanol blending beyond 2025 with E20 as the base blend and hydrous E100 as standard fuel.

ISMA has commissioned a study to assess the potential for the production of Sustainable Aviation Fuel (SAF) from the sugar sector. Its findings would serve as a critical input for framing the National SAF blending roadmap, as India prepares to meet its SAF blending obligations - with 1% blending by 2027, scaling up to 5% by 2030. It is a significant strategic based on the availability of aggregated feedstock, existing bio-refinery infrastructure and the globally recognized

Alcohol-to-Jet pathway.

Sugar industry has been the backbone of the country s ethanol blending programme since its reactivation in 2017-18. Sugar sector has collectively invested over

40,000 crores to create 900 crore liters of ethanol production capacity. The decline in ethanol allocation for sugar sector in the ESY 2025-26 is hence causing grave concern. The industry looks to continued government support in enabling the bio fuel eco system through initiatives such as increasing blend percentage, adoption of flex-fuel and strong hybrid vehicles, GST rationalization for flex-fuel vehicles and introduction of super credits under Carbon Credit Protocol.

Tax Litigation

Purchase Tax Incentive

Government of Tamil Nadu when the Erode Sugar Mills was first established in 1984 offered Purchase Tax Incentive for the first five years. It however was curtailed and foreclosed leading to legal challenge at various stages up to the Hon ble Supreme Court of India. After inordinate time delay, the company has succeeded in securing ruling from the Hon ble High Court of Madras in Aug 25. Incentive entitlement of 150 lakhs has been recognized as Exceptional Income .

Tax Holiday under Income Tax Law

The company is entitled to 10-year tax holiday in respect of its profits from Cogen under Section 80 IA of the

Income Tax Act 1961. The company opted to avail this benefit from FY 2017-18. The company however had to pay Minimum Alternate Tax (MAT), but could carry forward same to the extent eligible for set off in later years.

In computing eligible profits of Cogen business, the company has adopted the price for captive consumption of bagasse at rates fixed by TNERC that in turn is used by TNERC in fixing price for power export up to State grid.

During the current year, the tax authorities invoking the opportunity for the sugar sector transfer pricing provisions sought to significantly increase the price for bagasse based on market data collected by them. While notices have been received in respect of certain years, it is more likely to be followed for other permissible years as well.

The company has taken effective steps to defend its provisions before appropriate legal forum. Meantime, it has chosen to reassess tax liability for the period beginning FY 2017-18, basis the transfer price norm used by Tax Department, In view of this, MAT credit receivable has been reversed and additional tax provision made - details disclosed in Note 29 (f) of the financial statements.

Regulatory Framework

(i) Sugar

Stock holding norms and MSQ for sugar, imposed by GOI in June 2018, continues to remain in vogue.

MSP for sugar at 31/kg fixed by GOI in Feb 2019 remains static despite significant hike in FRP for sugarcane and repeated plea of industry for revision. GST reduced w.e.f. 22.09.2025 for all forms of sugar, syrups, confectionary products, farm implements and pesticides from 12% to 5%.

GOI approved sugar export for SS 2025-26 in phased manner:

- In Nov 2025, export of 15 lakh tonnes of sugar for SS 2025-26 allowed and 50% export duty on molasses removed - Mill-wise quota fixed and made tradable.

- In Feb 2026, additional export quota of 5 lakh tonnes allowed but mill-wise quota not tradable.

Mandatory jute packing:

- Mandate continues - Ministry of Textiles, by Notification dated 16.02.2026, extended mandatory jute packing for sugar at 20% up to

30th June 2026.

- SAC recommended 15% norms for packing of sugar in jute bags with certain exemptions.

- Legal battle continues with sugar industry highlighting serious health concerns arising from use of carcinogenic jute batching oils.

Levy sugar price case before Supreme Court - arguments concluded - judgment reserved.

(ii) Cane Price

GOI in Apr 2025 announced increase in FRP by

15/qtl to 355/qtl for SS 2025-26 linked to base recovery of 10.25%.

Draft Sugarcane (Control) Order 2026 released in

Apr 2026.

GOTN discontinued the transport subsidy of 100/t for sugar mills since SS 2020-21. Industry continues to bear full transport cost only in Tamil Nadu. GOTN announced an incentive of 349 per tonne for sugarcane supplied in SS 2024-25 - Incentive for SS

2025-26 awaited.

(iii) Cogeneration

CERC issued draft proposal on 03.06.2025 on a suo motu petition in the matter of determination of levelized tariff for the second year of Control Period - order issued SISMA-TNfiled its representation final on 09.07.2025 for second year of control period, i.e. from 01.07.2025 to 31.03.2026 and is further extended upto 31.07.2026.

National Stock Exchange (NSE) and Multi Commodity Exchange (MCX) launched electricity derivatives in June 2025.

REC sale entitlement for captive generating plants got curbed under CERC (REC) Regulations, 2022.

ISMA s challenge pending before High Court of Delhi - written submission filed- listed for arguments.

APTEL vide order dated 16.06.2025 set aside TNERC order dated 04.01.2019 on levy of Parallel Operation

Charges (POC). TNPDCL has challenged same in the Supreme Court.

APTEL delivered judgment on 03.09.2025 in the batch of appeals on tariff orders issued by TNERC since 2012. All issues agitated held in our favour -

TNERC in turn initiated Remand Application (R.A.

No.4) to revise tariff since 2012 in accordance with

APTEL ruling - Hearing in progress.

Review Petition (RP No.10 of 2025) seeking review of Tariff Order No.9 of 2025 filed with TNERC by SISMA-

TN - Hearing in progress.

TNERC by order dated 23.12.2025 clarified that effective date of revised tariff under Tariff Order No.9 of 2025 is prospective from 22.09.2025 and not from 01.04.2025. Same challenged by SISMA-TN in Writ Petition (WP 2873 of 2026) before Madras High

Court.

GOI in Jan 26 released draft National Electricity

Policy (NEP) 2026. It comprehensively addresses emerging challenges and outlines corresponding strategies.

(iv) Ethanol

Sugar mills and distilleries allowed by MCAF&PD communication dated 01.09.2025 to produce ethanol from sugarcane juice/sugar syrup, B-Heavy

Molasses as well as C-Heavy molasses without any restriction during ESY 2025-26. Ethanol blending has averaged 19.98% for ESY 2025-26.

PIL challenging E20 rollout dismissed by Supreme Court on 01.09.2025.

Sugar industry share in EBP declining and ethanol prices remain unrevised for 3 years Industry seeks next level promotion of ethanol for other uses besides increasing the blend percentage.

(v) Others

The company is a registered Medium Enterprise effective 12.04.2025 under the revised criteria in Ministry of MSME Notification dated 21.03.2025.

The company besides ISO 9001/14001:2015 and

45001: 2018 obtained ISO 50001:2018 certification for Energy Management Systems in October 2025, valid for three years.

Government of India has enacted four Labour Codes in November 2025, consolidating and streamlining numerous legislations.

Opportunities & Threats

India has a low per capita consumption of sugar with growing income. Its large domestic market provides a strong platform to leverage local production for capturing global market. This however demands cane cost optimization through improved farm productivity and high sucrose cane variety, besides effectively tapping the byproducts for greater value addition. Ethanol presents an elegant value chain for sugar industry.

Government policies are directed towards increasing the ethanol blend in petrol and concurrently cutting sugar surplus through premium pricing for ethanol produced by way of sugar substitution.

Domestic sugar consumption is softening of late. A recent

ISMA study indicated expected demand growth at a mere

1.5 2.0% CAGR over the next 5 years. Absorption of surplus cane through alternative route of direct ethanol production thus assumes added significance.

Sugar business is intrinsically cyclical, but India has emerged structurally surplus over the last decade. Markets tend to over react to demand-supply disequilibrium, causing volatile change in product pricing. Cogeneration and Ethanol have turned significant soften the adverse fall out of sugar surplus. Sugar exports and ethanol production from diverted sucrose now play a stellar role to de-clog the glut and correct closing sugar inventory to desirable level.

Sugar industry is taking initiatives to convert waste to energy. Products such as CBG, Pottash, Green Hydrogen,

Methanol besides SAF are gaining significant in the clean energy landscape.

Sugarcane is a robust crop but its availability is critically dependent upon nature. Repeated monsoon failure, frail flow in river Cauvery and dead storage level in Mettur reservoir that caters to the companys command area of cane together throw up a tantalizing challenge to agriculture in its neighbourhood, thwarting cane cultivation in the process. Drip irrigation is catching up but the high capital outlay, glitches in Government subsidy schemes and deficiency in water resources not enough to meet even the minimal drip requirement for cultivation during deficit years impede its pace of adoption. AI tech is just evolving that would take time to hit the ground.

ISMA is advancing sugarcane research through nationwide varietal trials. International collaborations are being facilitated to develop roadmap for genome editing, breeding programmes and technological advancement in sugar cane agriculture. Recently ISMA has signed an MOU with the Sugarcane Research Institute (SRI), China for joint breeding, genomics training and seed-system innovation.

Harvest labour shortage increasingly poses an intimidating challenge to both the cane farmers and mills in the State. In particular, harvest charges in TN are twice or thrice compared to other major sugar producing regions. Frequent and excessive absenteeism ineluctably interrupts daily crushing schedule. Mechanization, though not a panacea with several imponderables associated with it, is no longer a matter of choice but is fast emerging as a dire necessity for sugarcane harvest in TN. Proto-types of smaller capacity mechanical harvesters compatible with fragmented land sizes have just taken off that may not fully replace but meaningfully reduce manual labour.

The disconnect between sugar and sugarcane prices in the absence of Price Stabilisation Fund advocated by

CACP creates periodical pressures, more particularly during industry downturn. Sugarcane pricing reform is overdue.

Sugar industry is criticized on two counts. While its end product, viz. sugar is sledge-hammered as a health hazard, the raw material i.e., sugarcane is condemned as water guzzler. Much of these are over-blown but the underlying message should merit and meaningfully warrant dispassionate introspection. Accordingly, ISMA has taken the lead to spread right awareness, while simultaneously underpinning the need for a holistic and pragmatic approach. Its water use efficiency study conducted through IISR - Lucknow across six States in

India confirms sugarcane s superior biomass and ethanol yield compared to alternative crops.

Artificialsweeteners were perceived a superior alternative to sugar. This myth was broken by WHO, highlighting long term health effects associated with the consumption of such sweeteners. ISMA is engaging with FSSAI to develop regulations governing artificial sweeteners in food products for the consumers to be well informed.

Segment-wise or product-wise performance

The Company is engaged in two segments, namely

Sugar and Cogeneration of power (Cogen).

Outlook

World sugar balance for 2025-26 would be turning to a surplus after six deficit years. Accordingly, world prices may be expected to remain range bound, barring unforeseen weather challenges in major producing centers.

Southwest monsoon forecast for 2026 is below par compared to long period average, both by IMD and a private agency. El-Nino challenge could be a major threat to cane crop in lead producing States like Maharashtra and Karnataka. Sugar production should still be more than adequate to take care of domestic demand, while GOI s decision on sugar exports and diversion for ethanol would hinge on crop assessment, post monsoon.

TN sugar industry continues to suffer in successive years in solitude. Water storage in State reservoirs are much below capacity and last year levels. Multitude of problems plaguing TN sugar industry are now too well known as these have been persisting for pretty long. It is no exaggeration that it is facing an imminent survival challenge that cries for instant State intervention with imaginative and comprehensive package support measures for its resurrection.

Amidst macro-level challenges outlined above, our company has all along fared reasonably well and relatively far better than most peers. It should be able to combat current headwinds on the strength of its strong liquidity, sustained improvement in operational efficiencies and overall financial standing.

Particulars	Sugar (tonnes)	Cogen (lakh units)
Production	68780	1189
Sales	67004	893
Sales	31928	9571
f
exceptional income	1200	2549

Segment-wise performance for the year

Risks and concerns

The management cautions that the risks outlined below are not exhaustive and are for information purposes only.

Investors are requested to exercise their own judgment in assessing various risks associated with the industry and the company.

Industry risk

Sugar industry being agro based and in commodity business is fraught with seminal climatic and cyclical risks. It has to source sugarcane from its neighbourhood and out of command area where growth and availability hinges upon monsoon and water table. Despite recent liberalization by Centre, there are continuing controls on cane area, cane pricing and periodic market intervention measures.

Cogeneration of power from renewable sources got a fillip under the Electricity Act, 2003 and regulations thereunder, including preferential tariff and REC mechanism. It however was faced with plethora of challenges involving tariff disputes, payment problems, delayed and diminished tariff revision and dilution of REC mechanism. With active intervention of Ministry of Power and effective relief secured from APTEL, Cogen operations have since regained much of the lost sheen.

Risk mitigation

The Company has built enviable relationship over the years with the local farming community. It has judiciously used surplus cash generated during industry upturn to pare debts and stay lean and financially diversified into Cogen. It has agro-climatic risks, regulatory interventions and market risks.

Risk specific to the Company

Erode Sugar Mill is squeezed for land in its factory area that impedes scope for major expansion or diversification plans. Prospects for cane area expansion is listless. Of late, its command area for cane has become increasingly susceptible to water stress.

GOI policy push to help sugar industry of late is centered on ethanol. The companys plan to set up ethanol unit as an integral part of its sugar complex has failed to receive State environment clearance for producing co-related products such as ENA and RS.

Risk Management

The Board being responsible for framing, implementing and monitoring the risk management plan for the company has laid down the framework for risk assessment and mitigation procedures. It has set out detailed framework to deal with key areas of risks encompassing raw material risk, product price risk, regulatory risk, finance risk and risk specific to the company. It has put in place adequate system to keep its key operating team aware and beware of the likely risk factors. Internal control systems and internal audit checks help the company continuously monitor emerging risks and take timely corrective action. The company has embraced e-compliance tool covering legislations viz. Labour, Environment, Health & Safety, Fiscal & Corporate, besides core industry specific compliances. Periodical task trigger alerts, dashboards to users and functional heads via mail have been configured for ensuring effective compliance.

There is no element of risk in the opinion of the Board which may threaten the existence of the company.

Disclosure of strategy

SEBI circular dated 10.05.2018 requires listed entities to consider disclosure of medium-term and long-term strategy within the limits set by its competitive position based on a timeframe as determined by its Board of fit.It has ofcourselittle control over Directors. It further requires articulation of a clear set of long-term metrics specific to the company s long-term strategy to allow for appropriate measurement of progress.

Pursuant to the above, the Board of Directors in Oct 18 considered and approved the long-term strategy and medium-term strategy for the company. For this, the Board has set 3-5 years tenure for medium-term and more than 5 years for long-term in deciding appropriate strategy.

The long-term and medium-term strategies are disclosed in the company website - www.ponnisugars.com.

Internal Control Systems and their adequacy

The Company has proper and effective internal control systems commensurate with its nature of business and size of operations to ensure that all controls and procedures function satisfactorily at all times and all policies are duly complied with as required. These are considered adequate to reasonably safeguard its assets against loss or misappropriation through unauthorized or unintended use.

There is adequate and effective internal audit system that employs periodic checks on on-going process. The Audit

Committee of the Board of Directors regularly reviews the effectiveness of internal control system in order to ensure due and proper implementation and due compliance with applicable laws, accounting standards and regulatory guidelines.

Human Resources

The Company employs 169 seasonal and 174 non-seasonal employees. Industry-wide wage settlement was reached in May 2023 to be in force for 4-years till 30/09/2026. Industrial relations remained cordial throughout the year.

Labour code

The Government of India enacted and notified the four

Labour Codes - the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security,

Name of the Award	Awarded by
Best Cogeneration Power Plant	Cogeneration
National Energy Efficient Unit -	Association of India CII - Hyderabad
General Sector 2
Gold Award for Best	SISSTA
Cogeneration
Quality Assurance and	SISSTA
Sustainable Sugar Production
ZED Gold Certificate	Ministry of MSME

2020, and the Occupational Safety, Health and Working

Conditions Code, 2020- consolidating 29 existing labour laws. This legislative reform represents a comprehensive overhaul of India s wage and employment framework. These have become operational from 21st November

2025.

The new code inter-alia has brought in a unified definition of wages . Excluded compensation components cannot exceed 50% of total remuneration for reckoning retirement benefits. Fixed Term Employment is formally recognized as a distinct employment category, establishing direct, time-bound contractual relationships with enhanced legal protection equivalent to permanent employees for the contract duration.

The company has recognized the financial impact arising out of these new provisions in its financial statements, that however is not material.

Awards and Recognitions

The company received the following Awards during the year:

Discussion on Financial Performance with respect to Operational Performance

Operational Performance

Particulars	Year ended
	31.03.2026	31.03.2025
Number of days	250	276
Average Crushing rate (tcd)	2822	2470
Cane Crushed (t)	705576	681706
Recovery (%)	9.79	9.17
Sugar produced (t)	68780	62729
Power production (lakh kwh)	1189	1101

Operating for lower number of days, the company could crush higher volume of cane this year, thanks to improved crushing rate. Sugar recovery recorded a strong rebound that was the best among peers. Total losses in sugar was at record low. Cogen segment turned out optimal performance. Fossil fuel use in the mix was further reduced through aggressive bio fuel procurement. Auxiliary consumption was at all-time low, while power exports reached a new peak. Amidst overwhelming sugarcane shortage in the State, the company s operating performance in the year is convincing and commendable.

Financial performance ( crores)

Particulars	Year ended
	31.03.2026	31.03.2025
Total Income	429.46	371.41
Prolfit Before Finance costs, Depreciation & Taxes	50.21	38.17
Profit Before Tax
- Before Exceptional Items	38.61	28.04
- After Exceptional Items	90.25	28.04
Profit After Tax	48.03	19.28

Turnover that fell below 400 crores last year swiftly recovered to cross that mark. Under the monthly quota system, sale volumes were constrained leading to inventory build-up - the highest level in 15 years. Sugar prices witnessed modest rise while molasses prices moved down. Cost of cane catapulted owing to acute competition and concomitant imperative to offer multitude of incentives to motivate cane farmers.

Riding on all round cost optimization, PBT for the year was higher by 40%. Satisfactory resolution of long pending electricity tariff issues was indeed the game changer for the year to considerably boost Exceptional Income . As a result, PBT for the year crossed 90 crores an all-time high for the company. In line with company s conservative policy, tax provision was higher, triggered by the transfer pricing dispute. PAT growth hence is relatively much lower; yet, it marks 2.5 times increase over last year and record high. The overall financial performance for the year is hugely satisfactory.

Key Financial Ratios

Description	U/M	2025-26	2024-25	Change %	Explanation
Operating Profit margin (PBIDT / Revenue from operations)	%	12.10	10.62	13.94	Note 1
Net profit margin (PAT/ Revenue from operations )	%	3.43	5.36	(36.01)	Increased tax provision relating to earlier years.
Interest Coverage	Times	-	-	-	-
Return on capital employed	%	10.68	8.55	24.91	Note 1
Return on Net worth	%	12.24	9.09	34.65	Note 1
Earnings per share		55.85	22.42	149.11	Note 2
Debt Equity ratio	Times	-	-	-	No debt at close of both years.
Current ratio	Times	5.66	6.28	(9.87)	Higher current tax liability
Net worth per Share		372.51	358.79	3.82	Marginal rise.
Debtors Turnover	%	3.38	1.89	78.84	Lower power dues.
Inventory Turnover	%	3.09	3.27	(5.50)	Sugar sales under Quota.

Note (1) Improved margin on higher production, better recovery and cost optimization.

Note (2) Exceptional income excluded in ratio computation excepting for EPS.

Cautionary Statement

Statements made in this Report describing industry outlook as well as Companys plans, projections and expectations may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.

Chennai
11th May 2026

For Board of Directors
N Gopala Ratnam
Chairman
DIN:00001945