Shree Renuka Sugars Ltd Management Discussions.

Economic review

Global economic scenario

Global economic growth was majorly impacted by multiple uncertainties in 2019. Global trade tensions, disruptions in the oil market, and the no deal Brexit, to name a few, negatively affected consumption, fresh business investments and investor confidence. The long-drawn US-China trade wars adversely affected manufacturing and global supply chains, impairing the growth of several economies. However, the uncertainty disappeared with defused tensions between the US and China towards the end of 2019, followed by a soft Brexit.

The most significant calamity that led to a steep decline in growth in 2020, however, was set-off by the COVID-19 pandemic, causing massive loss of life and economic disruption world-wide. The global economic shutdown has led to the worst ever recession since the Great Depression.

The damage on account of the shutdown in major economies like the US and European countries would have far reaching consequences on businesses all over the world in the short as well as long term. Among the developing economies, China and India have been hit hard, with declining growth marked by disrupted manufacturing and supply chains, a sharply curtailed energy and commodity demand, besides a slowdown in the services sector as well.

The Central Banks and governments of major economies have announced fiscal stimulus measures and policy measures to create employment, increase consumption and improve demand. This would reduce the adverse impact to some extent and provide the impetus to put these economies back on the growth track.

The COVID-19 crisis notwithstanding, there is rising optimism of a silver lining in the form of new opportunities for India in the post COVID era. Several global companies are contemplating moving their manufacturing facilities away from China and de-risking their supply chains. For India, this seems to be a good opportunity to attract such multinationals and the government is leaving no stone unturned to lay the red carpet for companies evaluating the relocation of their factories.

(Source: World Economic Outlook, June 2020 by IMF)

GDP growth rates

Projections (%)

CY2019 CY2020 CY2021
World output 2.9 -4.9 5.4
United States 2.3 -8.0 4.5
China 6.1 1.0 8.2
India 4.2 -4.5 6.0
Japan 0.7 -5.8 2.4
Euro Area (includes Germany, France, Italy, Spain) 1.3 -10.2 6.0

(Source: World Economic Outlook, June 2020 by IMF; CY denotes calendar year)

Indian economic scenario

India has shown consistent growth despite challenges, uplifting millions of people from poverty and bringing them to the economic mainstream in 2019. However, like in other economies, the COVID-19 crisis has dented the economic growth significantly. According to the Ministry of Statistics and Programme Implementation (Government of India), the economy is estimated to have grown by 4.2% in FY20 vis--vis FY19 due to a decline in domestic demand, weak rural income, poor liquidity etc. Exports and export-based industries have also suffered during the lockdown due to lowered external demand and supply chain disruptions.

To bring back the economy on a higher growth trajectory, the Government of India undertook various initiatives – lowered corporate tax rates, credit guarantee scheme for NBFCs, reduced interest rates to improve cheaper funds, the impact of which shall be seen in the coming years.

There is immense confidence in the long-term potential of the Indian economy. The government has announced a relief package of Rs 20 lakh crore and has increased funding under MNREGA to boost demand. A focus on increasing manufacturing by the ‘Aatma Nirbhar Bharat initiative is expected to stimulate production. However, the irreversible damage caused to consumption and massive labour migration during the lockdown, has impacted both supply as well as demand. While the Indian economy is resilient, bringing it back on the growth trajectory would require much more bolder steps.

The IMF has slashed Indias expected growth rate for FY21 to -4.5%. As India is largely an agrarian economy, the recovery post COVID-19, may be faster than most countries. Fortunately, a forecast of a good monsoon this year, is expected to boost agricultural production in FY21.

(Source: CSO Preliminary estimates, May 2020 and Atma Nirbhar Presentation, May 2020)

Global sugar sector

The global sugar market is expected to reach 176 million tonnes (MT)* in 2019-20. The market is further projected to reach 199.5 million tonnes by 2025, expanding at a CAGR of nearly 1% during 2020-2025. India, Brazil and China are the largest sugar producers contributing to nearly 40% of the global production, with their outputs significantly impacting global sugar prices.

Sugar production in Brazil, which had plummeted to around 26 million tonnes in 2019, is expected to rebound to 36 million tons in 2020. This is largely on account of the collapse in crude prices, which in turn affected ethanol realisation. This year, the diversion of sugar cane juice to ethanol is slated to be much less and Brazil will produce more sugar, keeping world sugar prices in check.

In FY 2020-21, Indian sugar production is expected to rebound from the 28 million tonnes during FY 2019-20 to 33 million tonnes. The monsoon seems to be timely and forecast is for a normal monsoon. Production in Thailand is also expected to improve.

In a nutshell, the supply is expected to exceed consumption, which may not allow sugar prices to move exponentially. While raw sugar prices are likely to remain range-bound, refined sugar values are expected to move up. This is good news for our refinery business, and we expect margins to improve in 2020-21.



Thailand is the worlds fourth-largest sugar producer and the second-largest exporter, trailing only after Brazil. The Office of the Cane and Sugar Board, Thailand (OCSB) expects sugar-cane output in the crop year FY 2019-20, stood at approximately 8.4 MT*, down from 14.6 MT* in the last crop year. The country has 57 sugar mill factories with a capacity of 983,587 tonnes a day. The drought crisis has reduced sugar-cane output and sugar mill exports, but pushed up global sugar prices.

As per initial surveyors, another drought can cut into output for FY 2020-21 crop year. Consumption is expected to continue increasing, albeit at a slower pace due to sugar tax and COVID-19 impact.

(Source: 1917156/sugar-mills-sound-alarm-over-drought



With an increased area under cultivation during FY 2019-20, beet and cane crop harvesting began early in China. However, frosty conditions potentially reduced sucrose yields from cane. Total sugar production for FY 2019-20 stood at 11.4 MT*, as compared to 11.7 MT in 2018-19. For FY 2020-21, production is forecast to recover from the previous years drought, up by 0.5 MT to 10.7 MT, primarily due to a rebound in cane sugar production in southern China.

(Source:; USDA report, May 2020


European Union (EU)

European Union sugar production for the 2019 season reduced to 17.4 MT of sugar because of heavy rainfall since September 2019. However, production in the European Union is forecasted to increase to 17.7 MT despite a 2% decrease in area. Consumption is expected to remain unchanged while exports are projected to increase whereas imports are forecasted to remain unchanged at 1.5 MT.

(Source:; USDA Report, May 2020)

Indias sugar sector

During FY 2019-20, sugar production in the country was expected to touch 27 MT, approximately 6 MT less than FY 2018-19. The sugar production reduced in Maharashtra and Karnataka due to droughts followed by floods. Indian sugar production is expected to bounce back to 33 million tons in FY 2020-21.

Incentives provided by the government over the last 2 years helped the industry stabilise and achieve higher sugar production in the country as India is expected to export 5.5 million MT in FY 2019-20 against the target of 6 million tonnes. The Government mandated minimum selling price for domestic market, buffer stock and export subsidy improved the conditions of the mills and it helped to make timely payment of sugarcane. It is expected that the government shall continue with the policy of minimum sale prices, buffer stock and export subsidy for survival of the sugar sector.

With the new ethanol programme in place, sugarcane is being diverted towards ethanol production and about 1.1 MT of sugar is being used for production of ethanol. This diversion of cane juice directly to ethanol is helping industry reduce sugar production. Production of ethanol from juice will not only help reduce sugar production but would also help in reducing our crude petroleum imports.

The ongoing COVID-19 pandemic is expected to put pressure on the sugar consumption patterns as there are curbs on social gatherings and outings. The industry is also facing reduced off-take from beverage and other FMCG companies, amid the lockdown. Domestic consumption of sugar is expected to drop by around 2.0 million tonnes.

(Source: economy/agri-business/sugar-production-down-22-to-233-lakh-tonnes-till-march-31-says-isma/ article31225715.ece; ISMA; USDA report, May 2020;

Fig in MMT 2017-18 2018-19 2019-20 2020-21(P)
Op Stocks 3.9 10.7 14.1 11.3
Sucrose Production 32.5 33.5 28.2 33.2
Less : Sucrose Diversion to Ethanol 0.3 1.1 1
Sugar Production 33.2 27.1 32.2
Imports 0.2 0 0 0
SUPPLY 36.6 43.9 41 43
Dom Demand 25.4 26 24.5 26
Exports 0.5 3.8 5.4 5.5
OFFTAKE 25.9 29.8 29.9 31.1
Cl Stocks 10.7 14.1 11.3 12
Stocks as % of Dom Dem 42% 54% 46% 46%
Stocks use in Months 5.1 6.5 5.5 5.5

Source: Trade Estimates


The government has set a target of lowering oil import by 20% by 2030, by boosting the production of biofuels. Ethanol would be a major contributor towards achieving this target. Also, given that the country is the worlds top oil importer, increasing ethanol production will help India save valuable forex reserves.

However, so far, a blending ratio of 5% has been achieved, which is the highest so far, but it is much lower than the target. We believe that if ethanol prices move in tandem with cane and sugar price, the Indian sugar industry will keep investing in ethanol production capacity and in the next 3 to 4 years, may achieve 10% blending. Speeding of processes like environmental clearance, state level approvals and support from oil companies will help in achieving the target timely.

The government has already announced financial support, however, the constraint of actual borrowing process should be removed by helping the industry to secure loans, particularly the factories having deep balance sheets, on which banks are hesitant to extend loans. This may be done either by making tri-partite agreement with oil companies, banks and sugar producers. Alternatively, the sugar companies may be allowed to make SPV to raise loans from the banks. The OMCs should also give the sugar industry some clarity in terms of its long-term requirements to enable the industry to plan its production accordingly.

(Source:;https://www.;https://www.thehindubusinessline. com/economy/agri-business/sugar-production-down-22-to-233-lakh-tonnes-till-march-31-says-isma/ article31225715.ece)

Government policies aiding domestic sugar industry

The Government has been supporting the sugar sector by retaining the minimum selling price (MSP) of sugar at Rs 31 per kg and encouraging exports. Also, the Government has allowed upto six million tonnes of export, which attracts Rs 10.5 per kg subsidy. The Government also created a buffer stock of 4 million tonne where the carrying cost is being borne by the Government. As a result of this, sugar prices have rallied from lows of Rs 25-26 per kg in Sugar Year 2019 to Rs 32-33 kg in Sugar Year 2020. Besides, ethanol production is being encouraged, directly from sugar along with molasses. This is a long-term solution for the country, however, Government shall have to further bring investment in ethanol distillation by declaring a minimum price of ethanol and linking it to FRP and sugar price in the country.

(Source: commodities/news/nature-government-policies-set-to-brighten-life-for-sugar-companies/articleshow/73508650.cms;https://www.businesstoday. in/bt-buzz/news/bt-buzz-bailed-out-for-now-sugar-sector-needs-structural-reforms/story/378528.html)


Indias sugar production may touch 31-33 MMT in FY2020-21. The monsoon is forecasted to be normal and the ground water table as well as reservoir levels are favouring a bumper sugar production.

Hence, what is currently global deficit because of lower production in India can become a global surplus by the end of FY 2020-21. Indian production is forecasted to remain above consumption and an exportable surplus is expected to replace supplies from Thailand to meet global import demand.

The sugar sector in India is driven by 5 million farmers. While the sector suffers from the higher sugarcane prices mandated by the government, yet due to favorable policies and incentive from the government, it is expanding year on year. In the year 2020-21, sugar production is expected to be 31-33 million tonnes, against a demand of 26 million tonnes, creating surplus of another 7 million tonnes.

The Minimum Support Price (MSP) for sugar and the moratorium allowed by RBI for the debt repayments is certainly giving cushion to the mill owners. With support from the government, more sugar exports can be executed. A continuous thrust by the government towards eco-friendly fuel is further going to increase demand for ethanol, especially with the rise in demand from oil marketing companies to meet blending requirements. Moreover, with discussions around increasing the Ethanol Blended Petrol (EBP) programme to 15%, so that the states which have already touched 10% EBP may increase blending to 15%, is only going to increase the demand further.

(Source: covid-19-to-put-pressure-on-sugar-industry-as-domestic-consumption-exports-to-take-a-hit/1929481/; agricultural-commodities/mar-2020/sugar)

About Shree Renuka Sugars Limited

Shree Renuka Sugars Limited (SRSL) is a part of the Wilmar Group, which is the largest sugar company in the world. SRSL operates about 10 manufacturing sites across India, mainly situated in Karnataka, Maharashtra, Gujarat and West Bengal. The plants have an integrated approach where sugarcane is converted into various products like sugar, power, ethanol and manure to maximise the value chain.

SRSLs sugar business model has a uniqueness as it has a portfolio of large ethanol producing plants, the biggest sugar refineries in the country, sugar mills having refining capacities, where superior quality sugar for branded sugar is produced. The refineries of the Company are port based, which gives an edge to the Company in export and import of sugar, helping it encash on any opportunities arising out of the global sugar dynamics.

SRSLs strong refining business and export portfolio differentiates it from its competitors. The companys distinct branding strategy has played an important role in creating a niche value proposition. It realises the importance that product packaging has in this business segment, both in terms of protecting the product as well as becoming a point of attraction, and thus, has consistently maintained a strong focus towards this. With a growing interest towards the green fuel business, SRSL commands a 25% share in Indias 4 million tonne ethanol export market.

SRSL is poised to take advantage of various agriculture friendly policies of the government. With better raw material availability, the Company expects to create better value through all its product lines. With MSP and the Quota Release mechanism in place, sugar continues to show a steady performance. With better ethanol realisation and expanded ethanol capacity, the ethanol division will create more value for the Company. Due to higher sugar production in the country, sugar export will be the top priority for the country. SRSL, with the strategic locations of its refineries, will be able to readily export sugar and help the country earn valuable foreign exchange.

As the world sugar deficit was observed last year, we expect white premium and white sugar price will remain strong, which will give better value to the refinery business of the Company.

Besides the above, we have observed that consumer behaviour in sugar is also changing in a big way and the consumers are looking for a quality product and also are moving from loose to packed sugar, due to better hygiene awareness and change in the marketing structure, which has largely been promoted by e-commerce and modern retail. The Company is already in a position to capitalise these opportunities and is creating infrastructure, technology and supply chain to cater to the new markets.

Business highlights


In FY 2019-20, we crushed 30,81,677 MT of sugarcane, a 35.95% decrease from 41,89,590 MT crushed during the previous year.

Total recoverable sugar (yield) per MT of sugarcane improved from 11.34% in FY 2018-19 to 11.66% in FY 2019-20.

The total sugar produced (mills and refinery) decreased by 13.77% from 1,582,104 MT in FY2018-19 to 13,90,617 MT in FY 2019-20.

Total power generation (mills and refinery) and ethanol production decreased by 18.67% and 9.99%, respectively to 478 million Kwh and 110,127 kilo litres respectively in FY2019-20.

Financial Review

Profit and loss statement

The Companys operating revenue stood at Rs 4,567.94 crore vis--vis Rs 4,296.86 crore in FY 2018-19. This was on account of increase in Sugar sales by Rs 271.08 crores with growth rate of 2% by volumes over last year.

Operating expenses for the year stood at Rs 519.46 crore as against Rs 464.93 crore in FY 2018-19 majorly due to loss on commodity derivatives contracts and impairment provision on certain receivables.

Our Company generated EBITDA of Rs 207.67 crore vis--vis Rs 399.32 crore last year. The decrease is largely due to loss on commodity derivatives contracts and impairment provision on certain receivables and assets.

Balance Sheet

Net worth: Our net worth decreased to Rs (120.08) crore in FY 2019-20 from Rs 546.45 crore in FY 2018-19. This was due to impairment provision for one of the Companys refinery.

Borrowings: Our borrowings comprise long-term borrowings (current and non-current) and short-term borrowings, as on 31st March 2020, and stood at Rs 2,191.22 crore vis--vis Rs 2,686.95 crore the previous year.

Working capital management

Current assets: Current assets as on 31st March 2020 stood at Rs 2,190.11 crore. Current ratio is 0.43 as on 31st March 2020

Inventories: Inventories increased by 0.70% from Rs 1,642.89 crore in FY 2018-19 to Rs 1,654.43 crore in FY 2019-20, due to increase in refinery stocks.

Current liabilities: Current liabilities increased by Rs 574.26 crore and stood at Rs 4,897.91 crore on 31st March 2020 vis--vis Rs 4,323.65 crore due to increase in raw sugar payable.

Risk management

SRSL considers timely identification and effective mitigation of risks as the utmost pre-requisite for maintaining stable and genuine returns, besides ensuring consistent increase in shareholder value. The major risks in this industry include:

• Impact on sugarcane production due to seasonal uncertainties

• Changes in government policies and regulations, which might indirectly have a negative impact

• Fluctuations in sugar demand and supply due to economic conditions, price fluctuations, interest rate movements, among others

• Union strikes leading to work stoppages and factory shutdowns

• Sudden increase in cost of logistics

• Increase in the attrition rate of employees

We consistently review our risk management framework which aids in easy identification of risks having potential threat to the organisation and have in place respective mitigation measures.

Besides these, our risk management policies ensure that the internal as well as external risks are minimised via a regular risk analysis.

Internal controls and adequacy

The Company has formulated a well-defined and structured internal control system, commensurate to the size and nature of its business. Stringent procedures ensure high accuracy in recording, as well as provide reliable financial and operational information, while meeting statutory compliances and safeguarding assets from unauthorised use. The Companys internal team and an independent internal audit firm monitor business operations and any deviations are immediately brought to the notice of the Management and Audit Committee for timely correction.

A comprehensive Annual Audit Plan, spanning all factories and locations of the Company, is drafted, updated and approved by the Audit Committee of the Board regularly. This is followed by an audit conducted by Independent Chartered Accountants. These audits also test the effectiveness of mitigation initiatives implemented to defend the Company from various internal and external risks. A wide spectrum of strategies are devised as a follow-up measure to protect the Company from such uncertain events. Special audits are also conducted as directed by the Management. The Companys robust IT architecture safeguards sensitive data and accelerates the audit process.

Audit Committee

The Audit Committee of the Board of Directors examine the observations made by internal auditors. Such observations relate to the adequacy of control mechanism, recommendations for corrective actions and implementation of compliance-related matters. The Companys operations and strict adherence to the laid-down guidelines are also overseen by the Committee.

The implementation of SAP at all its units has ensured effective IT security and systems, ensuring real-time availability of information at various locations.

Human resources

We consider our people to be our most valuable resource, and their well-being and growth, are of primary importance to us. We create and maintain an environment wherein people are self-driven and have a sense of ownership and commitment. Nurturing the growth of our employees as well as empowering them to grow in line with organisational goals is the most important element of the organisations culture, and hence we conducted 200 training programmes during the year. We created transparent human resource policies and continuously update our existing policies to match the needs of the everchanging business dynamics.

During FY 2019-20, we framed new strategies to attract and retain a mix of both fresh talent from renowned institutes, along with experienced personnel. As on 31st March 2020, the Company employed 1,790 people across all locations.

We have continued to improvise on several technical advancements in the human resource function that were carried out in the earlier years, including WEB MIS, updating of systematic training calendar and training of the Enablon software.

Besides work related training and programmes, some other activities undertaken for the welfare of our employees included:

• Celebrating ‘International Yoga Day, wherein we conducted a one-week programme to encourage employees to take up yoga as a daily activity

• Celebrating ‘World Food Safety Day, wherein the Management and the employees took a pledge to help prevent wastage of food and contribute to food security

• Like every year, we celebrated all the major festivals at our office and factory premises, organised health check-ups, besides conducting sports events

Environment, health and safety

We are completely aware of the impact of our operations on the environment and hence are committed towards strict adherence to the Environment, Health and Safety (EHS) norms and compliance standards set by the Government of India.

Green initiatives

Sugar manufacture is a water intensive industry along with high dependence on energy. Sugar manufacturing process produces effluents and it is mandatory to treat them before releasing them into the environment.

Below are some of the initiatives that we took up in FY 2019-20:

• Formed an inter-unit committee with the objective of minimising freshwater consumption. This is done by enhancing the use of recycled water and thereby reducing the water footprint

• Set up a standard operating procedure (SOP) for managing hazardous waste at all units

• Installed incineration boilers at all our distilleries as a step towards achieving ‘zero liquid discharge. Energy would be extracted from wastewater and the potash rich fly ash generated from these incineration boilers, would be used as a source of potash nutrition in agriculture

Green belt development

To contribute towards reducing air pollution levels, we have planted a total of 10,119 trees during the year, across all our units. We have created environment related posters and banners and put them up at prominent locations across all our units, for promoting environmental awareness among all our employees. Besides these, we celebrate World Environment Day every year by planting more trees and increasing green cover.

Environment initiatives

Environmental policy: Besides abiding by the local environmental regulations, our units have been strictly following the Wilmar guidelines as well and progressively implementing the ‘Wilmar Environmental Policy.

Environmental data management: From energy generation to energy consumption, water consumption to wastewater generation and its disposal, product generation to waste generation along with fuel consumption, everything is reported on a monthly basis.

Environmental gap assessment: We have initiated SPCC assessment at all our sites to locate the gaps, so that plans can be accordingly prepared, and necessary steps can be taken.

Health and safety

During the year, we continued our efforts towards strengthening health and safety activities for our employees and took up some new initiatives. All the sites of Shree Renuka Sugars have increased the visual safety awareness by means of posters.

The organisation actively conducted training sessions at all its sites which included:

• Certified first aid training

• LOTO training

• Enablon Training

• Work at height training

• Health risk trainings

• Electrical safety trainings

Implementation of Lock Out Tag Out (LOTO): This training enables the employees to protect themselves from harmful effects of hazardous energy.

Self-contained Breathing Apparatus (SCBA) Implementation: This apparatus aids the employees in breathing while performing work in a confined space.

Implementation of Road safety measure: Several safety measures were undertaken for road safety which promoted wearing of crash helmets and car safety belts. Besides, a road safety week was also celebrated at our sites.

Safety week celebrations: This was started by taking a safety oath and promising to abide by it. We organised several competitions with respect to safety and its promotion, and prizes were distributed to the winners.

Fall protection safety: We undertook implementation of advanced fall protection systems in a phased manner at our all sites to ensure better safety of our employees.

Corporate social responsibility

As part of the society, we believe that it is very important to take active participation in the welfare of various sections of the society, where we have a presence. Shree Renuka Sugars believes in giving back to the society and honours the fact that its very existence is dependent on the existence of the society.

We have been active towards healthcare and organised polio camps for the surrounding villages. Considering clean drinking water, the utmost requirement of villagers, we donated RO plants, contributed towards drinking water pipeline layout, along with supplying drinking water from our sources. We took up the initiative of constructing 400 individual household toilets, cleaning of several ponds and towns, and tree plantation programmes. As a support to the villagers, we have also distributed cattle feed.

Besides donating school kits among the village children, we actively participated and donated funds towards various local villages social and religious ceremonies as well as the White Desert programme. With the floods badly affecting many villages in Karnataka and Maharashtra, we came forward to help out by creating temporary accommodation, providing food facility and making several other donations. Even the employees of the organisation contributed a days salary towards the CM relief fund and the organisation shared an amount equivalent to the total contribution by the employees towards the fund.