sakuma exports ltd share price Management discussions

Indian Agri Overview:

Agriculture and allied sectors continue to remain one of the most important sectors of the Indian economy and is the main source of livelihood for 55% of Indias population (Source: India Brand Equity Foundation). India is the largest producer of milk and pulses globally and continues to be the second-largest in production of rice, wheat, sugarcane, cotton, groundnuts and fruits & vegetables. The agriculture and allied sectors have remained resilient throughout the several external disruptions and is estimated to have grown by 4.0% Annual Report 2022-23, as per third advance estimates by Central Statistical Office (CSO). The sector accounted for 18.3% of the total gross value added (GVA) during the FY 2022-23. While headline rainfall numbers for FY 2022-23 reflects above average monsoon, the season was marked by highly erratic spatial distribution, extended withdrawal of monsoon and instances of flooding & crop damages. Out of 36 subdivisions, 12 (40% of total area) received excess rainfall and 6 (17%) received deficient rainfall. Southern and Western parts of the country received excess rains while Eastern region witnessed rainfall deficit for the entire season. Uneven monthly as well as geographic spread of south-west monsoon led to lower sowing of Kharif crops, mainly paddy and foodgrains. Rabi season was also delayed due to extended withdrawal of southwest monsoon and untimely & heavy rainfall in October. Nonetheless, Indias total food grains production was estimated to reach all- time high of 330.53 Million MT in FY 2022-23, a growth of 4.7% year-on-year led mainly by rice, wheat and cereals (as per third advanced

estimates). Backed by remunerative prices globally, Indias agri export also reached all-time high of 32 billion in FY 2022-23, a growth of 11% year-on-year. In 2023, overall monsoon is expected to be normal with expected rainfall at 96% of Long-period average (LPA), despite

delayed start (Source: Indian Meteorological Department). While it is too early to predict evolving El-Nino conditions, any kind of impact is likely to be in the end-stages of monsoon.

In the Union Budget for FY 2023-24, Government of India has continued to focus on this sector and has made substantial budgetary

allocations as below:

Union Budget FY 2023-24 – Highlights for the agriculture sector

Agricultural Credit target of 20 Lakh Crore for FY 2023-24, an increase of 11% year-on-year

Rs 8,514 Crore has been allocated to the Department of Agricultural Research and Education.

Plan to set up a digital public infrastructure for agriculture as an "open source, open standard, and interoperable public good". This will enable inclusive farmer-centric solutions, market intelligence and support for the growth of agri-tech industry.

The Agriculture Accelerator Fund to be established with corpus of 500 Crore over a period of 5 years to encourage agri-startups by young entrepreneurs

Allocation of 450 Crore for Digital Agricultural Mission and 600 Crore for the promotion of Agriculture sector through technology

In view of the abovementioned, agriculture output is expected to remain robust and the sector is likely to continue a growth path.

With regards to commodity prices, FY 2022-23 witnessed a softening of key commodity prices in the latter half of the year with world adapting to geo-political tensions, opening of grain export corridor from Ukraine and bumper sowing of all the major crops in key producing nations such as Soybean in Brazil and Maize in US. As per the World Bank report on Commodity market outlook, the World Bank commodity price index fell by 32% from its historic peak in June 2022. In addition, crude oil prices fell from high of $138/barrel in March22 to Low of $70/barrel in March23 amid the apprehension of deeper global slowdown. Nevertheless, as per the World Bank, "commodity prices still remain well above their pre-pandemic (2015-2019) and Agricultural prices are projected to decline 7% in 2023 and ease further in 2024".

India possesses around 700 sugar mills in the country with a capacity to crush 340 lakhs metric tonnes of sugar with an annual turnover of H1,00000 crores. The sugar industry has provided livelihood to nearly 50 Lakh Indians. India is expected to produce 320 to 330 Lakh tonnes of sugar in 2022-23 after considering diversion of 40Lakh tonnes of sugar for ethanol production. Indias domestic sugar consumption is expected at around 275 Lakh tonnes in SS 2022-23. India had an opening balance of sugar between 80-100 Lakh tonnes in the past few years which is expected to be around 58 Lakh tonnes in SS 2022-23. The area planted under sugarcane in the country has enhanced by 6%. The government allowed sugar mills to export 60 Lakh tonnes of sugar in SS 2022-23. Sugar mills have contracted to export about 56 Lakh tonnes till January 2023; producers. Expectations of a decline in sugar production have dampened prospects of any additional exports during the 2022-23 sugar season. Going forward, the sugar sector is expected to gain traction due to the governments continuous support and growing focus on diversion towards ethanol production to promote the ethanol blending program in India. (Source: Economic Times, reuters,

Particulars (Lakh tonnes) SS 2022-23 (E)

Opening balance (as on 1st Oct, 2022) 58

Estimated sugar production 328

Estimated sugar consumption


Estimated export


Closing balance (as on 30th Sept, 2023)


Stock to use ratio 22.5%

As for the Sugar Sector, the Indian Sugar Mills Association (ISMA), estimates that the total acreage under sugarcane in the country is

estimated to be around 58.28 lakh hectares in 2022-23 SS; a 4 % increase vis a vis 2021-22 SS.

As per the latest estimates of Indian Sugar Mills Association (ISMA), India is estimated to produce about 355-360 Lakh MT of sugar & 450 Crore Liters of Ethanol from sugarcane with sugar consumption pegged at about 275 Lakh MT.

Indian sugar exports and imports India remains the second biggest exporter of sugar globally. India is expected to export around 61 Lakh tonnes plus of sugar in the 2022-23 sugar season. According to the Indian Sugar Mill North America is the largest ethanol market with an ethanol market share of more than 18.6% worldwide. Supportive government regulations of the countries in North America towards ethanol production, deployment of ethanol as a biofuel and growing awareness of the necessity to moderate environmental pollution were the major factors contributing to the dominance of the region. United States remains the primary contributor in the North American region. Europe contributes around 16.3% of the global ethanol market. Ethanol prices enhanced during the second quarter of 2022 in line with the expansion of the European market. The Asia Pacific region is expected to record the quickest CAGR growth between 2022 and 2032 on account of growing fuel consumption and increased industrial activity. India and China are significantly employing ethanol in the pharmaceutical ethanol market in the Asia Pacific region. The developing countries in the region have embarked into a brand new renewable energy programme that is cleaner and better suited to lower high crude oil and petrochemical imports. (Source: Future market

Global Business Environment

Global economies were impacted over the last 2 years by uncertainties and volatility on account of Covid-19 fallout, prolonged Russian- Ukraine conflict and monetary tightening by central banks amidst inflationary trends. The global economy bounced back strongly in 2021 despite the COVID-19 pandemic, but in 2022, it faced new challenges such as rising fuel and input costs, geopolitical tensions in Europe, and increasing interest rates worldwide to combat inflation. These issues led to higher production costs, which resulted in higher prices for goods and services, causing global inflation to peak at 8.80%. This led to concerns among central banks worldwide, resulting in a tightening of monetary policy, higher interest rates, and increased volatility in financial markets.

Leading agencies have predicted a decrease in world trade growth in 2023, with a subsequent recovery in 2024, in line with global demand. These predictions are based on various assumptions, such as the lower costs of fuel and non-fuel goods since October 2022, as well as increased tightening of policies by major central banks. According to the World Economic Outlook, January 2023, by the International Monetary Fund (IMF), According to the World Economic Outlook, July 2023 published by the International Monetary Fund, global growth is projected to fall from an estimated 3.5 % in 2022 to 3.0 % in both 2023 and 2024. Upside inflation surprises have been most widespread among advanced economies, with greater variability in emerging markets and developing economies. As a result, advanced developed economies are expected to account for nearly three-quarters of global GDP growth in 2023.

Source: World Economic Outlook January 2023, IMF

The global sugar market size is pegged at 180431Lakh Tons in 2022/23. According to the IMARC Group, the market is expected to reach 2172.0 Lakh Tons by 2028, registering a growth rate of 1.20% during 2023-2028. Global sugar production is expected to have decrease by 17.11Lakh tons to 1804.31 Lakh tons. A poor finish to the EU harvest and an unprecedented truncation of the UK beet harvest, due to freezing temperatures and snow fall mid-December, is added to by a lower Indian Sugar production. Meanwhile, Brazil and Thai sugar production figures were revised higher, tempering the aggregate downward revision in Global production, but also increasing the export market origin concentration still further. Sugar consumption is expected to create new records on account of growth in markets like China, Indonesia and Russia. 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. (Source:, apps. fas.

Indian Economic Overview

Global economies were impacted over the last 2 years by uncertainties and volatility on account of Covid-19 fallout, prolonged Russian- Ukraine conflict and monetary tightening by central banks amidst inflationary trends. Despite this, India maintained its position of the fastest growing economy in the world for both these years. Indias Gross Domestic Product (GDP) is estimated to have expanded by 7.2% in FY 2022-23 as per the latest estimates released by Central Statistical Office (CSO). Relatively quicker recovery from pandemic and robust GDP growth in FY 2022-23 was reinforced by buoyant private consumption and strong capital formation bolstered by the governments continued capital expenditure push even during the pandemic period. Governments continued policy thrust on capital expenditure through infrastructure spending was visible in the Union budget for FY 2023-24 as well with increased capital investment outlay by ~37% to ? 10

Lakh Crore. Reserve Bank of Indias [RBI] Economic Survey released in February23 has listed number of positive factors supporting robust

growth momentum such as:

Universal vaccination coverage enabling rebound of spending on contact-based services (restaurants, hotels, shopping malls, and

cinemas) and the return of migrant workers in construction industry

Performance of high-frequency indicators such as GST collections crossing the 1.4 lakh crore benchmark for twelve successive months, increasing electronic toll collection levels, robust energy demand, robust tractor sales, auto sales and high UPI transactions

Increased credit appetite of well-capitalized public sector banks and the credit growth to the Micro, Small, and Medium Enterprises

(MSME) sector etc.

Strengthening of the corporate balance sheets

India is set for another record year of merchandise exports having registered 6% year-on-year growth to reach an estimated $447.5 billion during FY 2022-23. The sustained resilience of Indian economy amidst global uncertainties is expected to continue in FY 2023- 24 as well. As per consensus forecasts, Indias GDP growth in FY 2023-24 is expected to be in the range of 6.0% - 6.5%. The primary growth drivers include robust private consumption, Governments firm focus on infrastructure spending and enhanced credit growth supported by deleveraged corporate balance sheets coupled with improved asset quality of the banks. Strong infrastructure push under the Gati Shakti (National Master Plan for Multimodal Connectivity) initiative and logistics & industrial corridor development is expected to drive industrial competitiveness in the long term and support future growth. In FY 2022-23, the world also witnessed end of quantitative easing by all the major central banks. Major central banks in fact resorted to Quantitative Tightening to rein in the soaring inflation. Following aggressive rate hikes by US Federal bank from 0.4% in April22 to 4.9% in March23, RBI also raised the repo rates by 250 bps from 4.0% to 6.5% during the same period. Inflationary pressures have now started easing with a transmission of softening WPI inflation expected soon on CPI inflation. Forecasts by various international agencies show moderating inflation in India in FY 2023-24 in the range of 5.0%- 6.0%, within RBIs target range.

Industry Structure and Development:

The Company has 3 major business verticals namely Sugar, Edible Oil and Grain & Pulses. The Sugar business performed very well on the back of consistent exports policy of Government of India. The Company has maintained its market share in the export business in spite of tough global markets conditions. Other business verticals were not remunerative vis-?-vis sugar business due to which contributions to the top & bottom lines of other business verticals were lower during the year compare to the previous year. Other factors which affected these segments were mainly price mismatch, slow demand coupled with tight liquidity, partial recessionary conditions and withdrawal of investments. The Company is looking out for more opportunities in other commodities to keep the trajectory of growth maintained in coming year.

Opportunities and Threats:

These have the various bench marks and keep changing on the various domestic and global business outlooks.


Sugar and Ethanol policies by the government, leading healthy prices and margins in Sugar

Strong global demand of Edible Oil and Grains to continue

Capacity expansion and production efficiency

Expertise in new products development.

Good geographical reach and continued efforts to expand it.

Have positional to expand on our own, lower dependency of others.

Risks and Threats:

Increase in cost of supply chain and logistics

Increase in inflation rate and cost of products

Non availability of manpower, farm labors.

Uncertainty of monsoon rain and threat of global warming. India agrarian economy is mainly dependent on the agriculture production which largely contribute to the farmers income.

Increasing global trade war and sanction

Unstable Indian Rupee exchange rate against major foreign currencies.

Unpredictable surge in Covid19 and its impact on economic outlook.

Monsoon has a direct impact on cane farming and a weak monsoon can impact the availability of cane and hence sugar for exports.

The Company recognizes that above risks are an integral part of business and is committed to control & manages these risks in a proactive and efficient manner. The Company assesses various potential risk factors from time to time in the internal & external environment and incorporate risk mitigation in its strategy, business and operation plans using cost-effective available tools to minimize its impact on the overall businesses.

Segment –wise or product – wise performance:

Your company is primarily engaged in the exports and imports exploiting the opportunities in bringing the expertise and economies of scale into the trading operations of major bulk commodities such as Sugar, Edible Oil, Pulses, Lentils, Cotton and other Agri commodities.

Sugar Trading Business:

The Government of India imposed restriction on export of sugar during the year to balance the domestic demand & supply dynamics & to stabiles domestic prices to contain food inflation. The imposition of restriction on export impacted the sugar export business volume of the Company despite having large export business on hand which could be otherwise freely executed in full in an OGL environment but due to limited availability of export quota, your Company had to curtail export business and diverted focus on domestic markets.

In domestic markets, your company is expected to be leading large supplier of sugar between sugar surplus & deficient regions and create

value for the company.

Your company is also working with leading industrial consumers & FMCG companies to fulfill their long terms supply needs being reliable

large suppliers of commodity.

In exports- Imports segment, your company is expected to be involved as reliable re-exports partner for leading suppliers of world market

sugar by importing and re-exporting sugar to various regions.

Other strategic businesses:

Your company is working to be involved in the supply chain of various other agri and food businesses.

Your company has set up a dedicated trade desk for Diary and related products in domestic and exports market.

Your company is leveraging the world market relationships to develop imports of Pulses & lentils from Australia, Canada and other origins. India is net importer of pulses & lentils. it is anticipated that during current season, there will be a shortfall in the indigenous production vis-?-vis previous year and the country has to continue placing more dependence on import. Your Company is hopeful to sustain viability of these new business verticals in future as well


Company continued to strive not only to maintain topline but also was successful in achieving higher growth by tapping new markets. The

companys focus on exports helped attain better sales than previous years to maintain growth in this segment of business.

We expect the profitability ratios to improve in the coming years as profit margins of subsidiary companies are satisfactory in view of the global market scenario.

Risk and Concerns:

Foreign Exchange Risk

The Company is exposed to risk from market fluctuations of Foreign Exchange. We try to minimize the risk of foreign exchange fluctuation by entering into forward contracts immediately on booking the export orders.

Commodity Price Risk

To take care of commodities price risk, export orders are immediately tied up with suppliers for efficient sourcing. However, this risk cannot be eliminated in case of imports because there is a time lag between the date of placing order and receiving delivery. Further, for the sake of economy, size of import contracts is too big to achieve back-to-back tie up with local buyers.

Risk elements in business transactions

The buyers and suppliers are selected after due diligence. Advances of 10-20% from overseas buyers, irrevocable letters of credit, payment at sight documents, ECGC cover, etc. are obtained, wherever considered necessary. As regards domestic trade delivery is released on receipt of full payment.

Physical risks to cargo

All our warehouses are adequately insured. For imports on CIF basis the supplier obtains insurance cover and for import on C& F basis insurance cover is obtained by the Company. For export shipments made on C&F basis, insurance is covered by the buyer and in case of orders on CIF basis, insurance is obtained by the Company. Warehouse to Warehouse insurance cover is obtained for domestic trade.

Internal control systems and their adequacy:

The Company has well, structured internal control mechanisms and internal Audit department is headed by a senior executive which reviews all transactions independently on continuous basis. Internal audit department regularly briefs the management and necessary steps are taken wherever, necessary. Besides the Company has retained outside audit firm to conduct Internal Audit on continuous basis.

Material development in Human Resources / Industrial Relations front, including number of people employed:

The Company provides a challenging, open and professional satisfying work environment to its employees. Necessary steps are taken for boosting their motivation and active involvement in the organization. The Company also encourages its employees to continuously upgrade and improve their skills and qualifications.

For and on behalf of the Board of Directors

Of Sakuma Exports Limited

Place: Mumbai Saurabh Malhotra

Date: 25th May 2023 Chairman & Managing Director