Shree Renuka Sugars Ltd Management Discussions.

Global Economy

The deadly Pandemic which has been furiously raging for the past year has the capacity to seriously alter the Economic landscape not only of India but of the whole world. The global economic output witnessed a contraction of 4.3% in 2020 and has wreaked havoc on the global economic activity and is likely to result in long-term socio-economic consequences.

The developed economies have been hit the hardest with the output decline of 5.6% due to the stringent lockdown measures that were imposed during the outbreak1. On the other hand, the impact was comparatively milder in the developing countries and least developed countries (LDCs) with output decline of 2.5 per cent and 1.3 per cent respectively in 20201. Moreover, the pandemic has resulted in huge job losses because of absolute or partial lockdown measures impacting communities across the globe.

In response to the crisis, economies have resorted to fiscal as well as monetary interventions. To increase liquidity and maintain financial stability, many central banks undertook additional monetary and prudential measures. To neutralize financial market pressures caused by covid-19 pandemic, central banks in the Emerging Markets and Developing Economies (EMDEs) are considering purchasing assets including government bonds to support economic activity. Fostering education, sectoral reallocation, effective public investment, and improved governance can compensate the covid-19 pandemics traumatizing effects and set the foundation for advanced long-term growth. Investment in green infrastructure plans can provide additional aid to sustainable growth in addition to promoting climate change alleviation. We hope all these measures should help in Economic recovery in the world going forward.

Indian Economy

The Covid 19 outbreak impacted lives and livelihoods across the globe and India was no exception as GDP is expected to contract by over 8% in FY21.2 The nationwide lockdown post the pandemic coupled with voluntary social distancing norms led to a prolonged pause in economic activities barring those declared as essential. The economy witnessed a phase wise unlocking post Q1 while the threat of the virus still looming large. The mobility restrictions and safety and hygiene concerns led to unparalleled disruptions in supply chain and production networks along with consumer demand fallout.

The economy emerged out of pandemic induced recession during the second half of the fiscal year led by good monsoons and pent-up demand due to the festive season. The trend in high frequency indicators including GST collections, automobile and tractor sales, freight traffic, power demand and PMI indexes among others reinstall the confidence in the revival of the economy. The contact-based services sector, however, such as airline and travel continue to lag. The Agriculture sector remained comparatively unaffected by the pandemic induced economic crisis.

Despite the inflation breaching the 6% mark, the central bank continued to adopt accommodative monetary policy to keep the interest rates low and provide extra bandwidth for fiscal expansion by the Government besides.

The government resorted to increased consumption to propel the private investment, overall demand and consumer sentiments through the multiplier effect of fiscal stimulus and incentives. The economy is gearing towards a USD 5 trillion economy by 2025 under the overarching theme of Aatmanirbhar Bharat and vocal for local. Along with a slew of incentives such as PLI schemes for exports manufacturing and high capex for infrastructure creation, structural reforms in the agriculture sector such as new farm laws, amendments in Essential Commodities Act as well as INR 1 trillion Agri fund bodes well for the rural economy.[1]

With the rollout of a large-scale vaccination programme and normalisation in economic activities, the IMF expects a 12.5% growth rate of the Indian economy in FY22[2]. The inflation projection depends on the southwest monsoon season of CY2021, the incidence of domestic taxes of petroleum products and the high international commodity prices along with logistics costs that can build upward pressure on cost of input materials. The success of the rebound depends on strategy adopted against the second wave of infections along with shielding of discretionary spending from the cost pressures especially petrol and diesel..

However, the impact of the COVID-19 pandemic has not been severe on the domestic sugar prices. Since April 2019 till February 2021, Indias average wholesale sugar prices have remained almost unchanged, hovering in the Rs.33-Rs.34 per kg range. Domestic sugar prices have remained stable in the range of Rs.33-Rs.34 per kg owing to the hike in the sugar Minimum Support Price (MSP) to Rs.31 per kg from Rs.29 per kg in 2019.

Key highlights in the Indian sugar industry in Sugar Season (SS) 2020-21

In Maharashtra, sugar production is likely to increase significantly from 61.6 lac tons to around 100.5 lac tons, while in Karnataka, sugar production increased from 34.9 lac tons to 41.3 lac tons, an increase of 63% and 18% respectively. Sugar production in Uttar Pradesh is expected to be similar as compared to previous year.

Ethanol supplies to OMCs is likely to be approximately 325 Mn litres which translates to 8% of fuel blending.

Sugar exports are likely to reach 6.0 million tons during the current crop year. Firm international prices are helping India export aggressively. We feel if international prices continue to remain firm our export may happen even without sops from the Government.

Indian Ethanol Industry overview

For a growing nation like India, achieving energy security and the transitioning to a thriving low carbon economy is critical. To strengthen Indias energy security, blending locally produced ethanol with petrol will help which will also enable local enterprises and farmers to participate in the energy economy and reduce vehicular emissions. Ethanol continues to be main focus of Government of India. The Government has increased the price of ethanol extracted from sugarcane juice from H 59.48 per litre to H 62.65 per litre. The rate for ethanol from C-heavy molasses has been increased from H 43.75 per litre to H 45.69 per litre and that of ethanol from B-heavy from H 54.27 per litre to H 57.61 per litre. The Centre has also set a target of 10% ethanol blending by 2022 and 20% ethanol blending by 2025 and is providing incentives to sugar mills to help achieve this goal9.

Against LOI quantity of 3,465 Mn litres4, the total contracted quantity stands at 3,212 Mn litres4. India expects to achieve a blending percentage of 8.5%, with states like Uttar Pradesh, Maharashtra, Karnataka, Uttarakhand, and Bihar achieving even higher blending percentages of up to 10%4. This policy of encouraging ethanol, which is a zero-emission fuel, is not only environment friendly, but is also friendly for the farmers and the industry.

The ethanol demand has been estimated around 10,160 Mn litres by 2025, based on expected growth in vehicle population. The current ethanol production capacity in India is of 4,500 Mn litres derived from molasses-based distilleries, and 2,600 Mn litres from grain based distilleries. The same is proposed to be increased to 7,600 Mn litres from molasses-based distilleries and 7,400 Mn litres from grain based distilleries. This will help to produce 10,160 Mn litres of ethanol which is required for EBP and rest for other uses2.

With the improvement in sugarcane production in SS 2020-21 and the increase in ethanol production capacity, the government has set a target of achieving 3,250 Mn litres of ethanol production in ESY 2020-213.

Furthermore, the Department of Food and Public Distribution (DoFPD) has stated that it will offer financial assistance to project proponents to help them increase their ethanol distillation capability. This move is in line with the countrys goal of increasing ethanol production capacity in India to reach 20% crude oil blending by 20254. Financial assistance will be offered for setting up distilleries to manufacture 1st Generation (1G) ethanol from feedstocks such as cereals (rice, wheat, barley, corn, and sorghum); sugarcane; and sugar beet. Conversion of molasses-based distilleries to dual feedstock distilleries would also be supported.

The Government has approved a modified scheme to enhance ethanol distillation capacity in India. Under the new scheme, the government would bear interest subvention for five years which will include a one-year moratorium against the loan availed by project proponents from banks at a rate of 6% per year or 50% interest, whichever is lower5. This new scheme is projected to bring about Rs 400 billion investments11 Further, OMCs have reduced security deposit and penalty amounts from 5% to 1%. With the increased blending rate, reliance on imported fossil fuel is expected to reduce, thereby resulting in lesser air pollution. Further, new job opportunities are anticipated in rural areas as a result of upcoming investment in capacity addition/new distilleries, to fulfil the vision of Atmanirbhar Bharat.

For the ethanol blending program a very strong foundation had been laid out by the following initiatives:

Interest subvention scheme for molasses and grain- based distilleries (DFPD).

Setting of standards for E5 (Ethanol 5%, Petrol 95%), E10, E20 and E100 blends of Ethanol blended petrol (Bureau of India Standards, BIS).

MoRT&H has notified for adoption of E20 fuel as automotive fuel and issued mass emission standards for it. MoRT&H has also notified Safety standards for ethanol blended fuels. It lays down safety requirements for type approval of pure ethanol, flex- fuel & ethanol-gasoline blended vehicles in India.

BS-VI Emission norms in effect since 1st April 2020 are applicable for E-20 Vehicles.

Opportunities and Threats in the Indian Sugar Industry


Exports: Low sugar production in the European Union and Thailand has created massive opportunities for Indian sugar export. Moreover, export subsidy from the government has also encouraged Indian sugar mills to increase export. Indias sugar exports are likely to achieve the target 6 million tonnes.

Ethanol Blending: The increasing use of sugarcane for the production of ethanol opens up better avenues of growth for the sugar industry. India is currently aiming to achieve 20% ethanol blending targets by 2025.

Power generation: Sugarcane primarily produces two types of biomass, sugarcane trash and bagasse. Bagasse is typically burned in furnaces to produce steam for generation of power. In addition to supplying steamand electricity to the sugar mills, the power generated from bagasse is now being supplied to the state grids in India.

Government support: Government measures including export subsidies and Minimum Sales Prices (MSP) for industry continue to augur well for the industry..


Seasonal issues: Sugar production is seasonal in nature and is susceptible to vulnerabilities related to changes in weather conditions and other logistical hassles. India usually has a short crushing season, between 4 to 7 months in a year leaving the workers and the mills to remain idle for the remaining part of the year.

Low yield of sugarcane: Even though India has the largest area under cultivation of sugarcane, the yield per hectare is relatively low which results in low overall production.


In the last few years, India has hit a new production threshold. Sugar production in India is expected to remain above 30 MMT, unless it is impacted by extreme weather conditions6. In the days ahead, demand for ethanol is anticipated to rise on account of its importance to oil companies that require ethanol for blending purposes. Uttar Pradesh, Maharashtra and Karnataka are estimated to produce a major proportion of ethanol in India. The Government has also proposed to offer financial aid for production of first-generation ethanol from sources such as sugarcane and sugar beet to meet the ethanol blending target of 20% by 20257.

Company Overview

Shree Renuka Sugars is a leading agribusiness and bio-energy company in India. The Company is one of the largest sugar producers and sugar refiners in the world. The company started operations in 1998 with one sugar mill in Karnataka. At present, it operates six sugar mills in India and two world class port-based refineries with total refining capacity of 1.7 million tons per annum (MTPA).

Shree Renuka Sugars Limited is one of the biggest producers of ethanol in India, and also produces power from bagasse for consumption and sale to the state grid. The Company constantly strives to meet market demands by developing better infrastructure and introducing advanced technology. In order to cater to new markets, the company aims to strategically enhance its operational capacities and improve its reach in growing sugar markets of Asia.

The Company is a market leader in the packaged sugar segment in India, marketing its products under the Madhur brand.

Operational Overview


The refinery business of Renuka Sugars is an export-oriented business. The company imports raw sugar and exports white sugar to different parts of the world. In the year 2020-21, the company relied on procuring raw sugar from the domestic market to substitute its imports. During FY 2020-21, the Kandla refinery continued to perform well and Haldia refinery restarted operations after being shut for about 2.5 years. The operational performance of the plants were commendable despite the sluggish business environment and they attained remarkable raw sugar processing capacity and export levels during the year.


The company produces 3 grades of Ethanol - 1) Rectified Spirit (RS) 2) Extra Neutral Alcohol (ENA) & 3) Absolute Alcohol (AA) Or Ethanol (used for fuel blending). With focus on production of fuel ethanol, the company is gradually moving towards becoming an energy company rather than purely being a sugar company. The initiatives taken by the government to increase ethanol blending resulted in more Ethanol production than the previous years. During the year under review it achieved record high production of ethanol, amounting to about 135.8 Mn liters which was 23% more than the previous year.

The favourable Government policies also provides vast opportunities for the company to expand its footprints in the segment. Better prices and increased demand for ethanol will ensure the long-term growth of the company. Keeping this in mind, the Board of Directors of the Company have approved capacity expansion of ethanol production from 720 Kilo Litre Per Day (KLPD) to 1400 KLPD, requiring an investment of around Rs. 6500 Mn. The additional capacity is expected to be added by October 2022.


During the year, the Companys Power Generation was at 529 Million Kwh, of which the Company exported 248 Million Kwh to the Grid.

Consumer Pack

The brand Madhur was launched by Renuka Sugars in 2007 and is now the leading sugar brand in the country. It has always emphasized on providing pure and hygienic sugar to consumers. During the COVID-19 pandemic, Madhur made persistent efforts to increase awareness about unhygienic and impure sugar. It has promoted the brand as a reliable and trustworthy alternative to unpackaged sugar. Madhurs ‘5S Guarantee (Shuddh, Samaan, Sulphur-free process, Safed and Surakshit) campaign intends to communicate the brands safety and quality promise to its consumers.

Madhur was predominantly present in Southern and Western India for the past few years but, in FY 2020-21, its market share expanded in the Northern and Eastern markets as well. Besides, in the aftermath of the COVID-19 pandemic, Madhur has not only been a ‘Digital First company but a ‘Digital Only brand that has constantly expanded its geographical reach through several digital initiatives.

The Madhur brand is poised to increase capacity and production and add new products in this segment. Furthermore, it aims to sustain its position as a market leader by strengthening its customer base. Madhur is also looking forward to strengthen its association with e-commerce partners to further enhance its reach across the country.

Combating COVID-19 Pandemic

The COVID-19 pandemic quickly escalated into a global crisis, prompting the Indian government to order a complete lockdown from the end of March 2020. However, being an essential commodity manufacturer, operations at the Company continued even during the nationwide lockdown. As a result, the Company avoided a significant impact on its business verticals.

The Company prioritised the safety of its employees and allowed its people to ‘Work from Home. However, the registered office continued to operate with minimum staff. The Company adhered to all government guidelines and regulations pertaining to social distancing, thermal screening, use of face mask, adequate sanitization of its offices, and sanitation of sites including factories.

The companys six sugar plants in Karnataka (4) and Maharashtra (2) completed crushing during the lockdown. The Companys 2 port based refineries in Gujarat and West Bengal and 7 power plants were also operational during the lockdown, ensuring crushing, power generation, distillery and sugar refining activities. Moreover, the 3 distilleries remained functional during the lockdown.

Despite the pandemic, Renuka Sugars increased production in refineries and expanded 2 of its distilleries by about 30%. The Company has also participated in the sugar export program organized by the Government of India, during the year.

Financial Overview

Profit and Loss Statement

The Companys operating revenue stood at H 55,434 Mn vis--vis H 45,679 Mn in FY 2019-20. This was mainly driven by increased sugar sale of H 7,157 Mn with a value growth rate of 18% and increased ethanol sales of H 2,302 mn with a value growth of 49% over last year.

Operating expenses for the year stood at H 5,814 Mn as against H 5,195 Mn in FY 2019-20 majorly due to increase in expenses in line with the increase in volumes.

Our Company generated EBITDA of H 5,606 Mn vis- -vis H 2,077 Mn last year. The increase is largely on account of improved realisation in sugar and ethanol segment.

After consecutive seven years of negative PAT, the Company recorded a positive PAT of H 556 Mn for the year, driven mainly by improved operational performance and savings in interest costs.

Balance Sheet

Net worth: Our net worth increased to H 2,156 Mn in FY 2020-21 from negative Rs. (1,201) Mn in FY 2019- 20. This was due to improved profitability and equity infusion by the promoters during the year.

Borrowings: Our borrowings comprise long-term borrowings (current and non-current) and short- term borrowings, as on 31st March 2021, and stood at H 37,859 Mn vis--vis H 21,912 Mn the previous year. The Company raised external commercial borrowings from the promoters to restructure its NPA classified financial instruments, term loans and working capital facilities, loan for ethanol expansion and fresh working capital facilities.

Working capital management

Current assets: Current assets as on 31st March 2021 stood at H 30,344 Mn. Current ratio is 0.72 as on 31st March 2021.

Inventories: Inventories increased by 42% from H 16,544 Mn in FY 2019-20 to H 23,544 Mn in FY 2020-21, mainly due to increase in refinery stocks.

Risk Management

The Company continues to strategically expand its business in growing sugar markets of Asia. To ensure seamless operations and minimize risks, the Company relies on an effective risk management framework that enables it to mitigate threats and protect stakeholder interests. It continues to measure and evaluate risks at regular intervals to enhance productivity and improve business operations.

Some of the risks identified for Shree Renuka Sugars include:

Strategic Risks: Flawed business strategy may affect the profitability of the business and financial health. Climate risks: Sugarcane production in most parts of India is largely dependent on monsoon. Factors like excessive or deficient rain or untimely rain impacts the quality and quantity of sugarcane crop, availability of sugarcane, which in turn affects the sugar production and profitability of the Company. Market Competition risks: Profitability can be severely impacted if market competition for Bulk Sugar & Consumer Pack (CP) is not properly managed.

Business Cyclicality Risks: Revenue / Profitability may be dented as a result of subdued sugar prices in domestic and global markets due to cyclical trends resulting in supply overshooting demand.

Technological Obsolescence Risks: Inefficient/ Outdated processes can lead to cost overruns and sub-optimum quality of finished product.

Government Intervention Risk: Prices of sugar and cane are under the control and monitoring of government agencies which impacts the profitability of sugar segment.

Credit Risks: Financial health of the Company can adversely be impacted due to leveraged balance sheet, lower debt service coverage ratio and/or diversion of working capital funds towards capex expansions.

Interest Rate Risks: Sugar is produced over a period of 4/5 months and is required to be stored for sale over a period of 6 to 8 months, thereby resulting in very high requirement of Working Capital. Cost of funding depends on the overall fiscal environment in the country as well as the Companys credit worthiness /credit ratings. Failure to maintain credit rating can adversely affect the cost of funds.

Receivables Risks: Receivables Risk arises on account of credit sales made to customers. It deals with management of payment terms with the customers. Non-payment by the customer will result in bad debts thus resulting in a financial loss to the Company.

Commodity Price Risks: Agricultural commodity prices are very volatile and are affected by factors such as weather, government policies, availability and global volume of transactions etc., which eventually decides the pricing.

Currency Risks: Currency risk is a financial risk that arises when a financial transaction is denominated in a currency other than the domestic currency of the company.

Information and Cyber Security Risks: System incapability

Hardware vulnerability

Network security risks

Endpoint security risks

Data Integrity risks

Business disruption

Coordinating and interfacing risks

The Company has a strong governance framework and well-defined norms to minimize the impact of such risks. The Company conducts periodical risk analysis for timely identification of potential threats and adopts suitable measures to mitigate risks.

Internal Controls and Adequacy

The Company has formulated a well-defined and structured internal control systems and processes, 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 auditor monitors business operations and any deviations are immediately brought to the notice of the Management and Audit Committee for timely correction.

A comprehensive internal audit and control testing plan, spanning all factories and locations of the Company, is drafted, updated, approved and reviewed by the Audit Committee 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

The Company strives to create conducive working environment for its employees and continues to offer support despite the challenges posed by the pandemic. The Companys HR ensured implementation of safety protocols within the factories and offices to ensure business continuity. While office staff were allowed to ‘work from home to contain the spread of COVID-19, essential staff were called to the office and were provided necessary safety training to keep the workplace safe.

At manufacturing units, safety measures were followed and masks and sanitisers were made available for the staff. Sanitization tunnels were also installed at all entry and exit points to curb the risk of infection.

During the pandemic, our people developed a sanitiser, as per WHO guidelines. It acted as a blessing for the employees as well as the local community.

Certain innovative ideas were also implemented during the crisis and the staff helped to develop the following:

1. Non-touch sanitiser dispensers

2. Touch-free water dispenser in handwashing areas

3. Contactless light switches.

4. Fully covered thermal testing cabins for security.

Awareness programmes were also carried out during the pandemic to educate people about safety protocols and the need to contain Covid infections. COVID insurance policies were also offered to employees for managing medical expenses.

At the start of the season, the Company had implemented SOPs to ensure the safety of its people. A vaccination programme was also arranged for employees, to provide free vaccines to employees. Provisions for accommodation was also made for people engaged in cane harvesting. Along with it, blankets, masks and sanitisers were offered to workers. Special arrangements for distributing PPE kits, thermal testing guns and sanitisers were made for frontline workers.

Similar efforts were also undertaken for neighbouring villages around the factories. Isolation and Quarantine centres were also made for employees.

During the period, HR processes were digitally transformed with the introduction of new technology. In FY 2020-21, virtual recruitments were also conducted. Despite the pandemic, the Company continued its internal trainings, completing 4127 hours of training, as of 31st March 2021.

Employee welfare programs were also undertaken and festivals were celebrated in offices and factories to create a sense of unity and keep the employees motivated during a challenging period. The Company also undertook initiatives for employee health checkup. On National Safety Day, sports events and quiz competitions were also organised.

Environment, Health and Safety


The Company strives to be a responsible corporate entity. The Company, therefore, recognizes the impact of its operations on the environment and hence are committed to strictly adhere to the Environment, Health and Safety (EHS) norms and compliance standards set by the Government of India.

Green initiatives

Sugar manufacturing is a water intensive industry and has a high dependence on energy. Sugar manufacturing also produces effluents that must be treated before its release into the environment. To reduce its environmental footprint, the Company undertook the following initiatives in FY 2020-21:

Formed an inter-unit committee with the objective of minimising freshwater consumption. It is done by enhancing the use of recycled water, which automatically reduces the use of water.

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

Installed incineration boilers at all distilleries as a step towards achieving better utilisation of spent wash

After extracting energy from spent wash, the potash rich fly ash generated from these incineration boilers can be used as a source of potash nutrition for agricultural green belt development.

Green belt development

To reduce air pollution levels, the Company has planted a total of 10,267 trees during the year, across all its units. Besides, environmental awareness posters and banners have been put up at prominent locations, across units, to enhance awareness among employees. The Company also observes World Environment Day every year and plants trees to further the green cover in and around its operating areas.

Environmental initiatives

The company continues to abide by all applicable environmental regulations for all its operations in India. From energy generation to energy consumption, water consumption to wastewater generation and its disposal, product manufacturing to waste generation and fuel consumption is reported on a monthly basis to the management. SPCC tank assessments have also been initiated at all sites to identify gaps in the system and prepare plans to take necessary steps for its implementation.

Health and safety

During the year, the Company continued its efforts to strengthen the health and safety of its employees. All the sites of Shree Renuka Sugars have also increased visual safety awareness with the help of posters in different parts of the factory and office.

The organization actively conducted health and safety training sessions at all its sites. The following programs were :

Implementation of Lock Out Tag Out (LOTO): This training enables employees to protect themselves from injuries caused by machines that are being serviced or repaired.

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 the sites.

Safety week celebration: Employees were encouraged to take a safety oath with a promise to abide by it. Several competitions were also organised during the celebrations to promote awareness. Winners also received awards for their performance in various events.

Fall protection safety: Advanced fall protection systems were implemented in a phased manner at all sites to ensure better safety of employees.