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Rajshree Sugars & Chemicals Ltd Management Discussions

41.28
(-2.13%)
Aug 8, 2025|12:00:00 AM

Rajshree Sugars & Chemicals Ltd Share Price Management Discussions

Industry Scenario and Development Global Sugar Outlook

The estimated Global sugar production as per the International Sugar Organization (ISO) is 175.5 million tons with a decrease of 7.1 million tons over the previous season. The consumption is expected to grow by 3.4 million tons over the previous season; it is now estimated at 180.4 million tons. The overall global deficit is anticipated to be 4.9 million tons.

World Sugar Balance (Million Tons) October to September
2024 - 25 2023 - 24 Changes %
Production 175.5 182.60 -7.1 -3.89
Consumption 180.4 177.00 3.4 1.92
Surplus / Deficit -4.9 5.60 - -
End stocks 64 78.10 -14.1 -18
Stocks to Consumption Ratio 35.47 44.12 - -

Sugar Sector in India

The estimated sugar production for the sugar season 2024-25 is around 26.20 million tons, down by 5.9 million tons from the previous year. Domestic consumption is estimated at 29.2 million tons compared to 29.1 million tons of the previous year. With the exports of around 1 million tons, the closing stock is expected to be around 4 million tons as compared to the opening stock of 8 million tons.

Particulars 2024 - 25 2023 - 24 Changes %
Opening Stock 8.0 5.2 - -
Production 26.2 32.1 -5.9 18%
Imports 0.0 0.0 - -
Total Available 34.2 37.3 - -
Consumption :
a) Internal 28.0 29.1 - -
b) Exports 1.0 0.2 - -
Total Consumption 29.0 29.3 -0.3 1%
Closing Stock 5.2 8.0 -2.8 35%

Sugar Sector in Tamil Nadu

Though the Rainfall in Tamil Nadu (TN) was higher, the intensity of that rainfall was concentrated for a shorter period which had

an adverse effect on the crushing and recovery.

Sugar season Cane Crushed Sugar Production Capacity Utilisation %
(in lakh tons) (in lakh tons)
2011-12 254.55 23.79 99
2012-13 214.57 19.07 84
2013-14 157.60 14.13 61
2014-15 140.50 12.18 55
2015-16 155.86 13.61 61
2016-17 119.04 10.65 47
2017-18 81.42 7.00 31
2018-19 108.54 9.55 39
2019-20 92.20 7.89 32
2020-21 97.85 8.78 38
2021-22 139.15 12.39 54
2022-23 160.54 14.80 63
2023-24 123.08 10.73 48

l Cane Crushing of the State in SY (Sugar Year) 2023-24 was lower by 37 Lakh Tonnes and the average recovery was lower by 0.5% compared to SY 2022-23.

l During the period January 2024 to March 2024, a warm winter led to a drastic reduction of recovery in the standing cane followed by an abnormal increase of average summer temperature by 3 degree Centigrade, had an adverse effect on the yield, leading to a double whammy.

l Average Market price for Financial Year (FY) 2024-25 was around Rs.3,770 per quintal at 8.29% average sugar recovery, the Revenue Sharing Formula (RSF) value (@ 75% of realization from sugar sales), and works out to Rs.2,827 per ton of cane. But average Fair and Remunerative Price (FRP) payable is Rs.3,057 per ton of cane pegged to a minimum 9.50% recovery. The gap between FRP payable and RSF value is Rs.230 per ton of cane which mills are unable to recover.

l The capacity utilization is around 48% which has resulted in the sub-optimal production of sugar, power and alcohol.

Accordingly, the incidence of fixed cost has more than doubled compared to normal times, leaving correspondingly lower amount in the hands of mills for cane payment. TN sugar mills will have to pay FRP at 9.50% irrespective of the actual sugar recovery even if lower than 9.50%.TN sugar mills will have to pay for 95 Kgs of sugar equivalent whereas actually they recover only 83 Kgs.

l The loss works out to Rs.442 per ton of cane crushed.

The adverse effect of the climate variations in Tamil Nadu brought down the Cane availability from 160 Lakh tons to 123 Lakh

tons, a reduction of 37 Lakh tons and the Recovery from 9.27% to 8.75%.

Our company also recorded a lower crushing of 12.29 Lakh tons in FY 2024-25 as against 18.09 Lakh tons in FY 2023-24 with a recovery of 8.16% as against 8.53% in the previous year.

Government measures in the Sugar Industry

The Government had announced a slew of measures to revive the sugar industry last year:

a) Ethanol

During Ethanol Year (EY) 2023-24 (November 2023 to October 2024), Central Government, vide order dated

7 December 2023, had directed all sugar mills/distilleries not to use Sugarcane Juice/Sugar Syrup for Ethanol, while permitting the existing offers received for B Heavy Molasses. This order was issued to ensure sufficient availability of Sugar and to keep the Sugar prices stable. In EY 2023-24 ended 31 October 2024, Oil Marketing Companies (OMCs) have blended a total of 707.40 Crore Litres of Ethanol achieving a national average of 14.60%.

In the current Ethanol Year 2024-25 (November 2024 to October 2025), OMCs have blended 391 Crore Litres achieving a national average of 18.36% till 31 March 2025.

b) Tamil Nadu State Sugarcane Policy

During the year, the TN Government continued the transitional production subsidy introduced in 2020-21 to benefit all registered farmers who had supplied sugarcane during 2024-25 sugar season with an increase of Rs.134 over the previous year subsidy of Rs.215 per ton amounting to Rs.349 per ton of sugarcane.

Opportunities :

The increase in domestic prices due to lower production and firm World sugar prices, continues to be an opportunity for the industry to sustain and increase margins.

Threats

The unpredictable climate variations, rainfall pattern & low recovery are threats to the sustainable operation of the Industry.

The risk of the Government continuing to restrict export of sugar and production of Ethanol from Juice/B-heavy molasses.

Sugarcane Price

The Central Government has increased the 2024-25 seasons FRP to Rs.340/- per quintal for a basic recovery rate of 10.25% providing a premium of Rs.3.40 per quintal for each 0.1 % increase in recovery over and above 10.25% and reduction in FRP at the same rate for each 0.1% decrease in the recovery rate till 9.50%. However, in case of the mill with a recovery of lower than 9.50%, the price remains pegged to this minimum recovery at Rs.315.10 per quintal for the 2024-25 season.

Power

The company continues to export power to third party customers from the power plant at Mundiyampakkam. This has ensured receipt of timely payment and support the working capital requirement.

The company continues to export power to State Grid from the power plant at Gingee under the power purchase agreement. The applicable power tariff rate is approved by State Regulatory Commission from time to time during the year, the Tamil Nadu Electricity Regulatory Commission (TNERC) has issued its tariff order on 28.12.2023 for the control period from the date of the order to 31.3.2025, according to which the revised rate for the power plant at Gingee is at Rs.5.72 per unit as against the previous rate of Rs.5.30 per unit.

Outlook

The country is set to produce 26.2 million tons in the current season 2024-25. With an export possibility of 1 million tons and a consumption figure at 28 million tons, it would leave the industry with a closing stock at 5.2 million tons.

Risk Analysis

The major risks faced by the industry include sugarcane availability, sugar recovery, price realization, regulatory control by Government and financial liquidity amongst others.

For managing such risks emanating from such a volatile environment, the company has put in place a dynamic and robust management process for review at periodic intervals.

Sugar Price Realization Risk

The perceived risk on sugar price realization is lower given the outlook of lower stock available.

Risk mitigation

To de-risk the challenges of cyclicality in the sugar business, the downstream plants installed for producing alcohol and cogeneration of power by using byproducts of sugar production viz., molasses and bagasse continue to complement the profitability of the company. Further the company has also added flexibility to produce Ethanol from Sugar Cane Juice/Syrup. The Company is also focusing on selling sugar regularly at every price point thereby improving average realization. In order to stabilize the domestic sugar prices, and to enable the sugar mills across the country to clear the cane price arrears, the government had taken the following measures during the year: a. The Government of India had continued the monthly sugar release mechanism to control sugar supply to the domestic market for the 2024-25 season. b. The Government of India has also maintained the Minimum Selling Price (MSP) of Rs.31/- per kg, below which the mills cannot sell sugar. c. Export of sugar to the extent of 1 million tons has been approved by the Central Government. d. The Central Government has lifted the ban on production of ethanol from cane juice and B heavy molasses.

Sugarcane Availability and Sugar Recovery

Sugarcane is the main raw material in sugar mills which is monsoon dependent and it becomes unpredictable in adverse climatic conditions. Similarly other factors like scarcity of harvest labor, sugarcane price, and availability of attractive competitive/ alternate crops will have a direct impact on cane availability, sugar recovery and our business. The sugar industry continues to be regulated by State Governments by other controls viz., reservation of cane area and fixation of sugarcane price.

Risk Mitigation

The Company has a robust sugar cane extension department to support crop management practices on the field. Further, Research and Development wing ensures new technology and high yielding varieties are made available at the right time to the farmers.

Measures taken by the Company to mitigate the risks l Micro level continuous yield improvement activities to obtain a higher yield per acre focusing on Low yielding farmers and villages. l Promoting high sucrose yielding varieties for better sugar recovery. l Maintaining above 90% of the area with high yield and high sugar varieties for better cane and sugar productivity l Implementing activities like trash shredding, trash mulching and organic manure application to improve soil fertility

l Close monitoring of nursery development, supply of good quality seeds, fertilizers, micro nutrients and growth promoting inputs, among others as a part of cane development activities.

l More Focus on areas with better ground water availability.

l Promoting wider row planting, timely mechanized inter cultural operation and mechanical harvesting which includes entrepreneur development.

l Implementation of good agronomical and pest management practices.

l Promoting drip irrigation.

l Testing new improved varieties of cane with the support of Sugarcane Breeding Institute and Tamil Nadu Agricultural University.

l Continuous monitoring of cane planting, clean cane management and harvesting schedule. l Implementation of better Ratoon management practices. l Developing local and outside cane harvest work force for timely harvest and supply

l Support farmers with timely updated information on technical and entrepreneurial subjects for yield and quality improvement of sugarcane.

l Increasing the quantum of registered cane and the gradual reduction of outside cane

l Focusing on factory efficiency parameters to recover maximum sugar.

Financial liquidity risk

l The sugarcane availability and sugar price risk continue to have significant impact on the financial liquidity of the

Company.

l Sugar industry is highly working capital intensive. Raising adequate and rightly-priced working capital to support peak

period operation of the company might pose a challenge.

l Since the Company has been under monitoring period after implementing the debt restructuring by lenders with retrospective effect from 30.06.2020, it is operating without working capital facilities, and has to continuously sell inventory to maintain cash flows. This situation will continue till the companys account is upgraded as standard with the lenders.

l The Company had challenged the monthly sugar release mechanism, before the court of law and the Madras High Court has dismissed our Writ Petition. Hence, the company has filed a writ appeal before Madras High Court on 24.10.2024 for setting aside the order of single judge. The case is pending disposal.

Risk mitigation:

The continuation of the approved debt restructuring proposal of the company by all the lenders with the beneficial terms which

includes reduction in interest rate and the deferred repayment schedule to mitigate the liquidity crunch faced by the company.

Restructuring of Sugar Development Fund (SDF) Loan .

After the closure of restructuring approval of SDF Loans, the Government has issued guidelines for One Time Settlement (OTS) and pursuant to our application for the same, the Government has approved the companys application for settling the outstanding through OTS vide Administrative Approval (AA) dated 26.09.2024 with underlying terms and conditions. The company has settled the dues with internal funds by 20.03.2025. The closure formalities of the loan with the Government are in progress.

Internal control systems and their adequacy

The Company has well-established internal control systems in the form of well-documented policies, authorization guidelines commensurate with the level of responsibility standard operating procedures and effective internal audit system to ensure smooth functioning of the company. The Board, Audit Committee and the Key Management review the findings and recommendations of the Internal Auditors and take corrective action, wherever necessary. Moreover the Audit Committee periodically interacts with Statutory Auditors and makes continuous assessments of the adequacy and effectiveness of the internal control systems.

Human Resources / Employee Wellbeing

st

The Management Staff Strength as on 31 March 2025 is 211 and the Non-Management Staff strength is 781. Industrial Relations have been cordial and there is no significant development. For the year, there has been 100% retention of Key Management Talent and staff attrition is at 13.93% as against 9.23% in the previous year. The employees were imparted 1486 man-days of learning through the year.

Financial performance with respect to operational performance

a) Operational Performance

Particulars

Year ended

% Increase (Decrease)
31.3.2025 31.3.2024
Cane Crushed (MT) 12,28,905 18,08,669 (32.05)
Recovery % 8.14 8.53 (0.39)*
Sugar Produced (MT) 1,00,053 1,54,369 (35.18)
Sugar Sold (MT) 1,17,347 1,49,155 (21.33)
Power Produced (Lakh Kwh) 1,488 2,233 (33.36)
Power Exported to Grid (Lakh Kwh) 886 1,414 (37.34)
Alcohol Produced (Lakh Litres) 187 240 (22.08)

* Absolute change

b) Financial Performance- Segment Wise

The company is engaged in three segments, namely Sugar, Cogeneration and Distillery;

Particulars 31.3.2025 31.3.2024
Sales / Turnover
Sugar 49,679.19 60,695.41
Co-generation 11,096.88 11,302.37
Distillery 12,995.06 14,763.42
Less: Inter Segment revenue 9,589.45 10,396.06
Net Sales / Income from Operations 64,181.68 76,365.14
Profit / (Loss) before tax
Sugar (3,230.74) (5,928.87)
Co-generation 4,557.74 6,478.07
Distillery 2,591.66 4,807.46
Less: I. Interest 1,597.12 2,372.79
ii. Other un-allocable expenditure 1,213.97 877.82
Add : Exceptional Income - -
Profit /(Loss) before tax 1,107.57 2,106.05

c) Ratios where there has been significant change for FY 2023-24 to FY 2024 - 25 :

S. No. Key Profitability Ratios FY 2024-25 FY 2023-24 Remarks
1. EBITDA/Sales % (Operating Profit Margin) 7.87% 8.99% Operating Profit Margin has marginally decreased due to decrease in sugar recovery caused by climate variation which had affected the standing crop.
2. Net Profit Margin (%) 1.73% 2.77% As explained in point no. 1 above
3. Return on Net Worth 4.19% 7.95% As explained in point no. 1 above

 

S. No. Key Liquidity Ratios FY 2024-25 FY 2023-24 Remarks
1. Current Ratio 1.04 0.97 Marginal increase
2. Debtors Turnover Ratio 26.30 24.85 The value of Debtors as on 31st March 2025 has been lower by 20% as compare to the same as on 31st March 2024 while the decrease in sales during the year 2024-25 is by 16% as compare to the same during the year 2023-24. This has led to an improvement in the Debtors turnover ratio.
3. Inventory Turnover 5.49 4.44 The Company has focused on selling sugar regularly on every price point which led to better inventory turnover ratio.

 

S. No. Key Capital Structure Ratios FY 2024-25 FY 2023-24 Remarks
1. Debt Equity Ratio 1.03 1.48 Reduction in Debt Equity Ratio is due to reduction in debt arising out of repayment of the principal as per repayment schedule of approved debt restructuring scheme & one time settlement of SDF Loans.
2. Interest Coverage Ratio 3.16 2.88 Interest coverage ratio is due to reduction in interest cost.

Cautionary statement

Statements in this Report describing the Companys objectives, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

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