Thiru Arooran Sugars Ltd Management Discussions.


Your Company is engaged in the business of manufacture of Sugar, and Potable/Industrial Alcohol (including Ethanol). The operations are spread across two locations, viz., at Tirumandankudi in Thanjavur District and at A.Chittur in Cuddalore District. The Management presents its report on the industry and Companys performance and future prospects.



After two consecutive years of deficit in 2015-16 and 2016-17, the global sugar balance for 2017-18 is now estimated at a 10 million plus MTs. Raw value, surplus, on the strength of massive production increases in India, Thailand, and the EU, which have more than offset the huge decline in Brazil. This has resulted in a huge increase in stock levels, pushing stock to consumption ration close to 40%.

With 2018-19 also projected to register a surplus of around 5 million MTs, the outlook for world market prices has been distinctly bearish. The prices of raw sugar futures have however been rallied after hitting 10- year lows in August, on report of drought / dry weather and low yields in key cane and beet growing regions of the world.


The steep decline in production to 20.2 million MTs during the 2016-17 sugar season and the calibrated imports under Tariff rate Quota for defict regions instead of imports under Open General Licence, enabled sugar prices to recover to viable levels, providing much needed and long awaited relief to the sugar mills. This breather for the industry turned out to be short lived as the 2017-18 production exceeded the original estimate of 25.0 million MTs and is now estimated at 32.5 million MTs. Sugar prices crashed as the season progressed and the Government of India was compelled to introduce various regulations to maintain domestic sugar prices and to ensure to export of the surplus sugar so as to avoid huge build-up of cane price arrears. Even with enforcement of all these regulations, the sugar prices are still ruling below breakeven levels and with an equally large surplus on the anvil for the 2018-19 season, the outlook for industry appears to be none too bright unless the export drive and the ethanol policy, which enables diversion of surplus sugar for ethanol prouction are successful in achieving the targets set.

(mm MTs)
2016-17 2017-18 (E)
Opening Stock 7.75 3.85
Production 20.20 32.50
Imports * 0.45 0.20
Total Availability 28.49 36.58
- Internal 24.56 25.40
- Exports 0.50 0.46
Total Offtake 24.61 25.86
Closing Stock 3.88 10.72
% of Internal offtake 15.80 42.20


Source: ISMA



• The Government of India increased import duty on sugar from 40% to 50% in July 2017 and further to 100% in February 2018. In April 2017, the Directorate General of Foreign Trade (DGFT) amended the Foreign Trade Policy to permit Tariff Rate Quota (TRQ) for import of 5 lakhs MTs of raw sugar at zero percent basic customs duty. An additional TRQ of 3 lakh MTs of raw sugar was announced in September 2017.

• Stock holding limits on the sugar trade were withdrawn in December 2017.

• Minimum Stock levels for sugar mills were mandated for end of February and March 2018.

• Minimum Indicate Export Quota (MIEQ) was notified millwise in March 2018 for the 2017-18 sugar season, aggregating to 20 lakh MTs.

• Export Tax of 20% was removed in March 2018.


• The Government of India announced Fair and Remunerative Price (FRP) for 2017-18 season at

$ 255/- per quintal linked to average recovery 9.5% as against $ 230/- per quintal for 2015-16 and 2016-17 seasons.

• The Government of Tamil Nadu has announced that with effect from the 2017-18 season onwards, the sugarcane price would be fixed on the basisi revenue sharing as envisaged vy the Dr. Ranagarajan Committee Report and that the same would replace the State Advised Price (SAP). In addition, the sugar nills would be mandated to bear the cost of transportation from filed to factory.

To facilitate the transition from SAP to the revenue sharing formula, the State Government would reimburse the farmer for any shortfall in price realization under the new formula with reference to the last announced SAP of $ 2750/- per MT for 2016-17.


Products UoM 2016-17 2017-18
Cane Crushed MTs 6,00,048 1,80,909
Sugar Production MTs 47,504 25,667
Sugar Sales
- Domestic MTs 54,761 41,213
- Export MTs
- Total MTs 54,761 41,213
Molasses Production MTs 31,930
- Production KL 9,719 6,067
- Sales KL 9,107 8,097
Bio Fertilizers
- Sales $ in million 4.30 2.01


The management cautions that the risks and concerns outlined herein are by no means exhaustive and merely highlight the salient among them. Investors are advised to exercise due diligence in assessing the various risk factors associated with the industry and your Company.

The sugar industry in India is highly vulnerable to policy as well as climate induced cyclical fluctuations and hence fraught with several risks of varying magnitude. Some of the inherent business risks and the mitigation measures initiated therefor by your Company are outlined hereunder:

a) Raw Material Risks:

Adequate availability of quality sugarcane and cost thereof affects both the sugar as well as the distillery operations. While the quality of sugarcane varies with climatic conditions as well as agronomic practices adopted by the farmer, the quantum of sugarcane available is determined by the relative attractiveness of sugarcane to the farmer as compared to other remunerative crops and also the availability of adequate water for irrigation. Even when adequate ground water is available, uninterrupted power supply from the grid is required for pumping such water for irrigation. The cost of sugarcane itself is determined by the Fair and Remunerative Price fixed by the Central and the State Advised Price announced by State Governments, as also the taxes and duties levied on sugarcane. Another major factor affecting sugarcane cultivation is the availability and cost of harvest labour, which is increasingly becoming a scarce resource due to alternate employment opportunities.

To mitigate these raw material related risks, your Company, besides ensuring a remunerative cane price, provides subsidies to farmers for drip irrigation, ratoon management, full reimbursement of cane transport cost, and full/part reimbursement of seed/ seed transport cost, apart from providing assistance in obtaining crop loans for cultivation. Your Company also provides a variety of extension services to educate the farmers about the latest agronomic practices, apart from providing assistance for sinking of borewells, adoption of drip irrigation, mechanised ratoon management and development of link road infrastructure. Of late, your Company has given special focus to promotion of mechanisation of all agricultural operations including cane harvesting. Assistance is also provided to farmers for obtaining electricity connections and loans for sinking of wells and borewells.

b) Product Risks:

Post decontrol, sugar prices are determined by the interplay of domestic demand and supply as well as Government policies on export and import, and the erstwhile controls on sale and distribution of sugar have been removed. On the other hand, alcohol prices and distribution continue to be directly or indirectly controlled by the State Government to varying degrees, especially through regulation of export and import of molasses and alcohol. The impact of domestic and global market forces and regulatory changes are beyond the control of the Company. To mitigate these product related risks, your Company is constantly exploring the possibilities for hedging sugar price risk in the domestic and international commodity futures markets in respect of domestic sales and exports/imports, respectively, apart from providing flexibility in producing and packing to customer specifications for export. As regards alcohol, the strategy has been to provide for adequate storage capacities to enable sale at the opportune time and avoid distress sale.

c) Regulatory Risk:

Sugar and alcohol are subject to a range of direct and indirect controls by both the Central and State Governments, encompassing the entire gamut of sugarcane pricing, sugarcane command area reservation, location of new sugar mills, sugar packing and storage, sale and movement of molasses and alcohol, export/import of sugar, molasses and alcohol etc.

Such regulatory risks emanate from Government policy and legislation and are beyond the control of the Company. While your Company complies with all regulatory requirements, it proactively represents to Government both directly and through the industry associations on various regulatory issues which have a significant bearing on its operations and future prospects.

d) Financing Risk:

Sugar is a seasonal industry requiring storage of the finished product over an extended period of time, whereas, the cane dues, which constitute nearly 65-70% of the cost of production, have to be discharged within 14 days as per law. Thus, the major financing risk relates to sourcing adequate working capital, apart from finding sufficient funds for capital expenditure for modernisation and expansion. Related thereto are the interest rate risks attached to such financing, which derive from the general movement of interest rates in the economy and especially the prime lending rate fixed by various Banks and Financial Institutions from time to time. Overlaid on these is the added risk from currency fluctuations in the case of exports/imports and loans contracted in foreign currencies, and consequential risks from any attendant hedging transactions.

To mitigate these risks, your Company, which enjoys a sound reputation and good rating with the Banks and Financial Institutions, strives to focus on low cost financing options and minimising inventory levels to reduce working capital requirements. Likewise, only essential capital expenditures are undertaken and that too only after in-depth analysis. Hedging transactions are undertaken as and when deemed necessary, but only within prudent limits and constant monitoring and control.


Your company has adequate systems and internal controls to safeguard the assets of the Company and to ensure maintenance of proper accounting records. Computerised information systems are available to capture, present and analyse the data for management information and decision making. The Company has successfully implemented an ERP system and the same is fully operational now. There is also an internal audit system in place which reviews the key business processes and controls and also test checks on routine transactions and reports deviations. Besides, the Audit Committee also periodically reviews the functioning of the entire system.


Please see disclosures in the Directors Report. The financial performance of the Company is dependent on factors like cane price fixation, domestic demand supply balance, Government policies on export/import etc. over which it has no control. On account of the increase in price paid for cane, notwithstanding lower realisation on the sale of sugar, the Company reported loss for the year under review. Reserves and Surplus decreased from $ 933.49 million on March 31, 2017 to $ 433.54 million on March 31, 2018.


Industrial relations at your Company continue to be cordial. The Company has continued its efforts to rationalise the deployment of manpower while ensuring at the same time that adequate number of professionals is positioned at all levels and in every discipline. The total manpower employed by your Company aggregates to 464.

On behalf of the Board

R V Tyagarajan

Chairman and Managing Director September 30, 2018

Pursuant to Section 204(1) of the Companies Act,2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]


The Members,

M/s.Thiru Arooran Sugars Limited,

Eldorado Building, 112, Uttamar Gandhi Salai, Nungambakkam, Chennai - 600 034

We have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Thiru Arooran Sugars Limited, [Corporate Identity No. L15421TN1954PLC002915] (hereinafter referred to as "Company"). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our opinion thereon.

Based on our verification of Companys books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, we hereby report that in our opinion, the Company has, during the audit period covering the financial year ended on 31st March, 2018 complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

We have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on 31st March, 2018 according to the provisions of:

(i) The Companies Act, 2013 (the Act) and the rules made there under and the Companies Act, 1956 (to the extent applicable);

(ii) The Securities Contracts (Regulation) Act, 1956 (SCRA) and the rules made there under;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under;

(iv) During the year under review, the Company has not dealt with the matters relating to Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings under Foreign Exchange Management Act, 1999 (FEMA) and hence, the question of complying with the provisions of FEMA and the rules and regulations made there under does not arise;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (SEBI Act):-

a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;

c) The Company has not issued any securities during the year under review and hence the question of compliance of the provisions of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 does not arise;

d) The Company has not formulated any Scheme of ESOP/ESPS and hence the requirement of compliance of the provisions of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 does not arise;

e) The Company has not issued any debentures during the period under review, hence the compliance of the provisions of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 is not applicable; f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;

g) During the year under review, the Company has not delisted its Securities from any of the Stock Exchanges in which it is listed and hence the compliance of the provisions of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 is not applicable; and

h) The Company has not bought back any Securities during the period under review and hence the question of complying with the provisions of the Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998 does not arise;

Based on the information provided by the Company, its officers and authorised representatives during the conduct of audit, and also review of Compliance Certificate(s) issued by the Company Secretary and Internal Audit Reports taken on record by the Board of Directors at their meeting(s), we are of the opinion that the management has adequate systems and processes commensurate with its size and operations, to monitor and ensure compliance with rules, regulations, guidelines, etc. prescribed under various laws which are applicable to the Company and categorized under the following major heads/groups:

a. Factories Act,1948;

b. Acts and rules relating to Sugar industries including The Sugar Cess Act, 1982, The Sugar Development Fund Act, 1982, The Sugar(Packing & Marking) Order, 1970, The Sugar Cane Control Order, 1966, The Tamil Nadu Molasses Control and Regulation Rules, 1958, The Tamil Nadu Distillery Rules, 1981;

c. Labour laws and other incidental laws related to labour and employees appointed by the Company including those on contractual basis as relating to wages, gratuity, prevention of sexual harassment, provident fund, insurance, compensation etc.;

d. Acts relating to consumer protection including The Competition Act, 2002; e. Acts and Rules prescribed under prevention and control of pollution; f. Acts and Rules relating to Environmental protection and energy conservation; g. Acts and Rules relating to explosives, Boilers etc., and h. Other local laws as applicable to various plants and offices.

We further report that compliance of applicable financial laws including direct and indirect tax laws by the company has not been reviewed in this audit since the same has been subject to review by statutory auditors and other designated professionals.

We have also examined compliance with the applicable clauses of the following:

(i) The Secretarial Standards on General and Board Meetings specified by the Institute of Company Secretaries of India.

(ii) The Uniform Listing Agreement entered into with the BSE Limited and the National Stock Exchange of India Limited pursuant to the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

During the period under review, the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above.

We further report that

The Board of Directors of the Company is constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. No change had taken place in the Board of Directors during the period under review.

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

All decisions were carried through with the consent of all the Directors/Committee Members present and hence the question of recording the dissent of the members does not arise. However, in the minutes of the General Meeting, the members who voted against have been properly recorded.

We further report that there are adequate systems and processes in the Company commensurate with the size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.


Company Secretaries


CP No. 3239 FCS No. 4775

Place : Chennai

Date : 14th August, 2018