Sugar Industry- Global
Over the years, India has become an efficient and consistent supplier
of Sugar to global market. During the year 2021-22, India surprised the global Sugar
community by exporting a record 11.1 million MT of Sugar as against last highest export at
level of 7.2 million MT during previous year. During Sugar season 2022-23, India is
estimated to export a quantity of 6.2 million MT and quantities have dwindled this year
because of lower production as against last year.
Initially trade was expecting export of 8.0 – 9.0 million MT from
India during 2022-23 and now since quantities have been curtailed to around 6.0 million
MT, reflection of same can be seen in International Sugar prices.
International Sugar prices for both raw and white sugar have touched
high of last 11 years due to lower than estimated crop not only in India but also in other
major sugar producing countries.
Sugar Industry- Scenario in India
Sugar season 2022-23 started with opening stock at 70 Lac Tons. All
India Production is estimated at 328 Lac Tons and the closing stock is estimated to be
around 61.5 Lac Tons. Sugar sale price during the period April 2022 till March 2023 moved
in the range of Rs.3400-3550/qtl. Since the production estimate has been cast lower at
325-330 Lac Tons, sugar sale price is expected to remain firm during April 2023 to March
2024.
Government Policies for Sugar Industry
- Fixation of Fair and Remunerative Price (FRP)
The government has recently announced the Fair and Remunerative Price
(FRP) of 315/quintal for sugarcane for Sugar Season 2023-24 with more than 100% margin
over Paid out cost + imputed value of family labour. This is amongst the highest margin in
crops thereby assuring high returns for farmers. This decision will benefit about 5 crore
sugarcane farmers, including their dependents. The new FRP aims to address the aspirations
of the farmers while ensuring competitiveness of the indian sugar industry. The FRP is the
benchmark price below which no sugar factory can purchase sugarcane. Therefore, it is like
Minimum Support Price but here procurement is carried out by the sugar factories and not
by the government.
- Green energy
The Ministry of Power (MOP) issued Electricity (Promoting Renewable
Energy Through Green Energy Open Access) Rules, 2022 vide Notification
No. GSR 418(E) dated 6th June, 2022 whereby the consumers will be
eligible for green energy open access if they have contract demand or sanctioned load of
100 KW or more and for captive consumers, there will be no load limitation. The rules will
be applicable for the generation, purchase and consumption of green energy including the
energy from the waste-to-energy projects. Further, as per the regulations from the date of
commencement of these rules, there will be a uniform renewable purchase obligation on all
obligated entities in the area of a distribution licensee.
- Use of Jute Packaging Material
The Jute Packaging Materials (Compulsory use in Packing Commodities)
Act, 1987 specifiesthe percentage of commodities to be packed mandatorily in the jute
packaging material. As per notification No. INSP.F-1(3)/2007/VOL.I dated 24th April, 2023,
the Central Government prescribed that 20% of the total production of sugar is to be
mandatorily packed in the Jute packaging material. However, certain category of sugar is
excluded from the purview of the said reservation viz., (a) sugar fortified with vitamins,
(b) packaging for export of commodities (c) small consumer packs of 25
Kgs and below for sugar (d) bulk packing of more than 100 Kgs. and (e)
sugar packed for export.
- Production of Ethanol
The Department of Revenue Central Excise has issued Notification No.
12/2022 - GSR 510(E) dated 04.07.2022 blend of 12% ethanol and 88% petrol as also for the
blend consisting of 15% ethanol and 85% petrol. Further, in supersession of earlier
guidelines, the Ministry of Consumer Affairs, Food and Public Distribution, New Delhi vide
notification No.F No.4/1/2018-(BP & E) (Part) dated 11.11.2022 devised detailed
mechanism for production of ethanol from B-Heavy, C-Heavy molasses, sugarcane juice, sugar
& sugar syrup and food grains and also to identify the quantity of ethanol produced
from feed stocks.
The Cabinet Committee on Economic Affairs on 02.11.2022 approved higher
prices for ethanol derived from different sugarcane based raw materials under the Ethanol
Blending Programme for the sugar season 2022-23 commencing from 1st December, 2022 to 31st
October, 2023.
- Scheme for extending financial assistance to set up distilleries
The Central Government with a view to increase production of ethanol
and its supply under Ethanol Blending Programme have been extending financialassistance to
sugar mills & molasses based standalone distilleries for enhancement and augmentation
of ethanol production capacity. During the year, vide Notification No.1 (10)/2018-SP-I
dated 22.04.2022 the Government opened a window for six months w.e.f. 22nd April, 2022
under modified scheme dated 14.01.2021 for inviting fresh applications from project
proponents who have acquired land for ethanol project and obtained Environmental Clearance
(EC) for enhancement of their existing ethanol distillation capacity or to set up new
distillery for producing 1st Generation (1G) ethanol from feed stocks such as cereals
(rice, wheat, barley, corn & sorghum), sugarcane (including sugar, sugar syrup,
sugarcane juice, B-heavy molasses, C-heavy molasses), sugar beet etc.
- Sugar exports
Vide Notification No.10/2015-20 dated 24.05.2022 of the Director
General of Foreign Trade (DGFT), export of sugar (raw, refined and white sugar) was placed
under ‘restricted category from 1st June 2022 onwards (except fixed quantity of
sugar being exported under CXL and Tariff Rate Quota (TRQ) to EU and USA). Pursuant to the
aforesaid notification of DGFT, the Department of Food & Public Distribution, New
Delhi in Notification No.1-
1/(2022)-SP-I dated 24.05.2022, in order to maintain the domestic
availability and price stability of sugar, commenced monitoring and regulating export of
sugar for a maximum quantity of 100 Lakh MT during sugar season i.e., 2021-22.
Consequently, the Central Government set up Export Release Order mechanism to sugar mills
through National Single Window System (NSWS) Portal.
Further, with a
viewtopreventuncontrolledexportofsugartherebyensuringsufficientavailability of sugar for
domestic consumption at reasonable price, the Central Government allowed export of all
grades of sugar i.e., raw, white & refined sugar upto 60 LMT pro-rated to all sugar
mills @ 18.23% of their last 3 years average sugar production vide DFPD notification No.
F. No. 1(1)/2022-Trade dated 05.11.2022 read with DGFT Notification No. 40/2015-20 dated
28.10.2022.
Overview- Sugarcane
Despite the target of 12% (approx) ethanol blending was achieved, sugar
diversion towards production of ethanol is estimated at around 45 lakh tonnes in the
current season as against 34 lakhs tonnes during previous season. It is no help to the
scenario of liquidity crisis for sugar mills as the same will remain unchanged, which in
turn resulted in the accumulation of huge cane dues. In order to support the industry and
cane farmers, various measures were taken both by the Central Government in the form of
soft loans, cane production subsidy, transport subsidy on sugar exports, fixing of minimum
sugar price (MSP) and interest subvention for setting up of ethanol capacities and the
State governments in the form of soft loans and cane subsidies which provided some respite
to the sugar industry.
Despite the various policies and incentives by the Government, unless
the surplus stock is cleared from the country, the scenario may not undergo any
significant change. It is expected that the pressure on the sugar price would continue to
remain given the the Central Government also allowed export of some sugar and blending of
ethanol has been allowed to be increased to 20% by the year 2025.
COMPANY STRUCTURE AND DEVELOPMENT
The Company is located at Village Malakpur, District Baghpat, Uttar
Pradesh. The plant started with an initial crushing capacity of 3500 tons of cane crushed
per day (TCD), which has been gradually increased to 9,000 TCD. The Company has one of the
most modern and efficient sugar factories in the country.
The company is considering augmenting its production capacity in due
course to 10,000 TCD. The first phase to increase the plant capacity upto 9,000 TCD was
completed and which has been operative from SS 2022-23. The Company is considering on
second phase to increase its capacity upto 10,000 TCD.
OPERATIONAL PERFORMANCE
The crushing for the season 2022-23 started on November 13, 2022 and
cane crushed during season 2022-23 was 133.44 Lac Qtls as compared to 134.08 Lac Qtls in
the last season.
| Particulars |
Unit |
|
Sugar Season |
|
|
|
|
2022-23 |
2021-22 |
2020-21 |
|
| Cane Crush |
Lac Qtl |
133.44 |
134.08 |
|
148.84 |
| Recovery |
% |
10.75 |
11.19 |
|
11.07 |
FINANCIAL PERFORMANCE (Rs. In Lacs)
| Particulars |
2022-23 |
2021-22 |
2020-21 |
| Total Income |
64,846.14 |
60,302.63 |
57,013.84 |
| EBITDA** |
2,152.63 |
2,291.11 |
1,564.31 |
** Earning before interest, tax, depreciation and amortization.
RISK AND CONCERNS-SWOT
Analysis Strengths
• Located in sugarcane rich belt of Western UP with high sucrose
varieties of cane.
• The Company has continued its focus on cane quality promotion
and is continually investing in cane variety development. The same is also visible in form
of increased availability of high yield variety of cane and higher Sugar recovery.
Weaknesses
• The State Government decides sugarcane prices in a manner that
is not linked to sugar prices. Unviable sugarcane prices may impact the profitability of
the Company.
• High Cane arrears due to low sugar prices.
• Risk of coercive measures by the State Government on account of
huge cane arrears.
Opportunities
• Higher recovery, Higher rates of by-products of Sugar.
• Government support towards production of Ethanol.
Threats
Due to domestic surplus, there could be a
softeninginthesugarpricesaffectingtheprofitability.
• Increase in State Administrative Price of Sugarcane by the State
Government.
Reduction of Co-generation tariffs.
FUTURE OUTLOOK
The sugar industry will be a major player in producing cost effective
energy and fuel from its by-products bagasse and molasses. Bagasse can be processed for
co-generation of power, ethanol produced from molasses can be used for blending with
petrol for motor fuel.
INTERNAL CONTROLS AND SYSTEMS
Your company has in place an adequate internal control system in order
to ensure that all transactions are authorized, recorded and reported correctly and that
all assets are protected against the perilsefficiency of internal controls, services of
unauthorizeduseordisposition.Towardsenhancingthe consultants are hired wherever necessary,
and their suggestions are reviewed and implemented. Your Company has in place an Internal
Audit system, whereby an independent professional firm of Internal Auditors conducts
regular audit across the Company and their scope and findings are reviewed by the
Management and Audit Committee on a regular basis.
The Audit Committee of the board also meets periodically to review the
internal controls, internal audit findings, action taken reports and to advise the
management on corrective policies, if any.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
The Company considers human capital as a critical asset and success
factor for smooth organizational work flow. Efforts are made to improve skills, knowledge
and performance of employees by timely training, job satisfaction and enrichment. The
Company has added to its fold, experienced manpower in line with future areas of growth.
DETAILS OF SIGNIFICANT CHANGES
Details of significant changes as required under SEBI (LODR)
Regulations, 2015 are as under:
| SI. NO. |
Particulars |
As on 31.03.2023 |
As on 31.03.2022 |
| 1. |
Debtors Turnover |
63.44 times |
42.75 times |
| 2. |
Inventory Turnover |
3.29 times |
3.06 times |
| 3. |
Interest Coverage Ratio |
1.34 times |
1.52 times |
| 4. |
Current Ratio |
0.36times |
0.44 times |
| 5. |
Debt Equity Ratio (Total liability/Equity) |
(12.33) times |
(17.22) times |
| 6. |
Operating Profit Margin (%) |
0.34 % times |
0.73 % times |
| 7. |
Net Profit Margin (%) |
(1.99)% times |
(1.77)% times |
| 8. |
Return on net worth |
(0.24) times |
(0.26) times |
CAUTIONARY STATEMENT
The above Management Discussion and Analysis Report contains
"forward looking statements" within the meaning of applicable laws, and
regulations and is futuristic in nature. All statements that address expectations or
projections about the future, including, but not limited to statements about the
Companys strategy for growth, market position, expenditures and
financial results are forward looking statements. The Companys actual results,
performance or achievement could thus differ materially from those projected in any such
forward looking statements. Investors are requested to make their own independent
judgments before taking any investment decisions and the Company assumes no
responsibility.
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