SBEC Sugar Ltd Management Discussions.

Sugar Industry- Scenario in India

As per ISMA report, sugar mills across the country produced 321.19 LMT of sugar between October 1, 2018 and April 30, 2019 about 9.36 LMT more than 311.83 LMT produced at the same time last year. Even though the quantum of sugarcane crushing is less than that in the last season, the sugar production in SY 2018-19 is expected to be around 330 LMT, about 5 LMT more than last year.

Indias exports of 4.64 LMT last year is a small portion of the global trade estimated at 450 LMT. In India, high cane price raises the cost of production, making the countrys high sugar prices uncompetitive in the International market. Australia and Brazil dragged India to the WTO for its market-distorting policies on sugar.

Due to excessive carryover stocks, liquidity problems will be faced by the sugar mills and cane price arrears to sugarcane farmers will burgeon.

Government Policies for Sugar Industry Minimum Sugar Price

The Central Government on June 7, 2018, notified "Sugar Price Control Order 2018". Under Clause 3 of the above order, Central Government directed that no producer of sugar shall sell or agree to sell white/refined sugar in the domestic market at a rate below Rs. 29/kg till further orders. On February 14, 2019, the Government increased the minimum selling price of white/refined sugar in the domestic market to Rs. 31 per Kg from the earlier level of Rs. 29 per Kg.

Also, the Government came out with quota system for sale of sugar which restricted the sugar mills in terms of sales volumes in order to ensure that the price did not go below the MSP levels

Soft Loan by Central Government

With a view to facilitate payment of cane dues of the farmers for the current sugar season 2018-19, the Central Government notified a scheme for extending soft loan to sugar mills. The quantum of soft loan has been determined at 85% of reported production of white sugar by mills in sugar season 2017-18, valued at Rs. 31000/Mt. The financial assistance extended is interest subvention for the soft loan amount for a period of one year, calculated at 7% simple interest or actual rate of interest charged by the bank, whichever is lower. As per the scheme, only those mills which had cleared at least 25% of FRP dues of Sugar Season 2018-19 by 26.3.2019 were eligible for interest subvention.


In order to achieve financial liquidity, the Government of India, on September 28, 2018, notified Minimum Indicative Export Quota (MIEQ) for sugar year 2018-19, mandating mills to export raw, plantation white and refined sugar to the tune of 50 LMT. Central Government asked sugar mills to set their quarterly export targets and intimate the same to the Department of Food & Public Distribution (DFPD) for monitoring. It further said that in case a sugar mill fails to achieve its quarterly sugar export target, the equivalent quantity of un-exported sugar during the said quarter shall be deducted in three equal instalments from the quantity of sugar to be allocated for each month in the subsequent quarter.

Scheme of Assistance for payment of cane price dues of farmers for the season 2018-19

The Central Government notified a scheme of assistance for sugar mills to offset the cost of cane and facilitate timely payment of cane price dues to farmers. The scheme provides for payment of an assistance of 13.88/quintal of sugarcane crushed during the 2018-19 sugar season or the quantity allocated by the Sugar directorate for the sugar season 2018-19, whichever is lower.

In addition to the above, the Central Government notified a scheme for defraying expenditure towards internal transport, freight handling & other charges on export as under

• For mills located within 100 KM from ports -Rs. 1000/Mt of sugar

• For distance more than 100 KM and mills located in coastal States- Rs.2500/Mt of sugar

• For distance more than 100 KM and mills located in other than coastal States -Rs.3500/Mt of sugar

Soft Loan by State Government

With a view to improve the liquidity position of private sector sugar mills of the state enabling them to clear the cane price arrears of the crushing seasons 2016-17 and 2017-18 and timely settlement of cane price as per State Advised Price (SAP) fixed by the State Government, to the sugarcane farmers, hereby notified the following scheme, namely "Scheme for Extending Financial Assistance to Sugar Undertakings-2018".Under the said scheme, the maximum loan amount shall be Rs.4,000 crores. The interest on sanctioned loan shall be applicable at the rate of 5% simple interest per annum, which will be calculated from the date of disbursement of loan. The maximum duration for repayment of loan shall be 5 years, payable in monthly instalments, starting from the month of July, 2019.

Overview- Sugarcane

The sugar season 2017-18 started with record opening stocks of 10.7 MMT. The production during the season broke all the previous year record. This led to crash in sugar prices leading to a liquidity crisis for sugar mills 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 State and 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 over-supply scenario.


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 had been gradually increased to 8000 TCD over time. The Company has one of the most modern and efficient sugar factories in the country.


The crushing for the season 2018-19 started on 10th November, 2018 and cane crushed during season 2018-19 was 129.78 Lac Qtls as compared to 146.27 Lac Qtls in the last season.

Particulars Unit

Sugar Season

2018-19 2017-18 2016-17
Cane Crush Lac Qtls 129.78 146.27 106.52
Recovery % 11.10 9.73 9.37
Sugar Production Lac Qtls 14.43 14.24 10


(In Lacs)
Particulars 2018-19 2017-18
Revenue 40129.98 46954.75
EBITDA** (2428.04) 11044.15

** Earning before interest, tax, depreciation and amortization.


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 are also visible in form of increased availability of high yield variety of cane and higher Sugar recovery.


• The Central and State Governments decide 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.


• Higher recovery, Higher rates of by-products of Sugar.

• Government support towards production of Ethanol.


• Due to domestic surplus, there could be a softening in the sugar prices affecting the profitability.

• Increase in State Administrative Price of Sugarcane by the State Government.

• Reduction of Co-generation tariffs.


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.


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 perils of unauthorized use or disposition. Towards enhancing the efficiency of internal controls, services of consultants are hired wherever necessary, and their suggestions are reviewed and implemented. Your Company has in place an Internal Audit system, whereby an independent professionals 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.


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 as required under SEBI (LODR) Regulations, 2015 are as under;

SI. NO. Particulars As on 31.03.2019 As on 31.3.2018
1. Debtors Turnover 45.30 times 39.46 times
2. Inventory Turnover 4.75 times 5.26 times
3. Interest Coverage Ratio (8.37) times (9.48) times
4. Current Ratio 0.44 times 0.51 times
5. Debt Equity Ratio (44.59) times 14.18 times
6. Operating Profit Margin (%) (10.57%) (16.29%)
7. Net Profit Margin (%) (11.84%) (17.99%)
8. Return on net worth (3.71) times (2.43) times


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.