Triveni Engineering and Industries Ltd Management Discussions.

THE SUGAR MARKET Market Analysis

Sugar industry in India is one of the significant contributors to GDP from agriculture, and supports 50 million farmers. It also provides employment to around half a million workers directly in sugar mills. This is one of the key reasons for the high degree of regulation in the sugar industry.

The industry witnessed two successive years of record production, backed by the significant increase in sugarcane production. This was achieved on account of favourable monsoon in the past two seasons, coupled with the strong cane development initiatives taken by the sugar mills and supported by the farmers. There has been a significant increase in the yield and recoveries, leading to record sugar production, even though the increase in area under sugarcane cultivation is marginal. During SS 2018-19, sugarcane planting has increased by 9.2% and the total area under sugarcane in the country increased from 50.42 lakh hectares in SS 2017-18 to 55.02 lakh hectares in SS 2018-19. The increase in sugarcane area has been mainly in Maharashtra, while in UP, the increase has been marginal. However, a marginal increase in sugarcane production has been estimated for SS 2018-19, close to 410 million tonnes.

Sugar Production

The countrys sugar production for SS 2018-19 is estimated to be around 33 million tonnes, marginally higher than the previous season. This will be the countrys highest sugar production so far, out-performing the previous high of SS 2017-18. This estimated increase in production is due to record production by the states of Maharashtra and Uttar Pradesh. As per recent estimates, Uttar Pradesh is expected to produce around 11.82 million tonnes of sugar, followed by Maharashtra at over 10.7 million tonnes, while Karnataka is expected to produce around 4.3 million tonnes of sugar. The substantial increase in sugar production in Maharashtra is attributable to improved climatic conditions. In Uttar Pradesh, continuous cane development efforts made by sugar mills, and the widespread adoption of new high sugared and high yielding varieties of sugarcane suited to the present subtropical climatic conditions. This has led to higher sugarcane yields with improved sugar recovery, resulting in record sugar production.

Sugarcane Pricing

Sugarcane pricing has always been a subject of both the Central and State Governments. The Central Government announces Fair & Remunerative price (FRP) for sugarcane, and FRP for SS 2018-19 was fixed at 32,750 per MT, higher by 3200 per MT over the previous season. The FRP so announced is subject to base recovery of 10%, and in the event of recovery beyond 10%, the FRP will increase by 32.75 /quintal for every 0.1% increase in recovery. Various states, such as, Uttar Pradesh, Punjab & Haryana etc., announce their own price, which is termed as State Advised Price (SAP). The SAP in Uttar Pradesh remained unchanged at 3 3,150/MT for general variety and 33,250/MT for early variety for SS 2018-19. Sugarcane pricing is a significant factor in the competitiveness of the Indian industry in terms of sugar exports. In view of high cane cost and the resultant higher cost of sugar production, it is not possible to compete with the export prices without help from the Government. Sugarcane price in India is 70-80% higher than that in Brazil or Thailand. For self-sufficiency, cane pricing policies would need immediate rationalisation, with focus on bringing them in line with global practices. Indian sugarcane farmers are mostly small and marginal, and therefore, the Governments attempt to protect them with a remunerative cane price and assured off-take has merit. However, unchecked increase in cane prices create mismatch in input and output prices at various stages of the sugar cycle and hurt the sugar sector. Such a situation is not desirable for the industry and thus, the burden of cane price on the industry should be based on commercial considerations only, with provisions for support by the Government in the years of cane pricing abrasion. This alone will lead to realistic sugar prices and help the sugar sector to aggressively compete in world trade. The present system of cane pricing is not working effectively, as is evident from the fact that as on March 31, 2019, cane price arrears to farmers stand at 320,000 crore, which means that one-fourth of the cane price to the farmers is still unpaid. Even though the Government supported the industry with soft loans, benefits of Buffer stocks, subsidies and incentives, etc., the root cause of the problem is the mismatch between cane price and sugar price. An excessively high sugarcane price makes Indian sugar uncompetitive globally.

Sugar Prices


The record production in SS 2017-18, coupled with unchecked despatches, led to the collapse of sugar prices during the early part of the year under review. The Government promptly sprang into action and announced Minimum Selling Price (MSP) of sugar with effect from June 2018, at 3 29/Kg. It also simultaneously introduced monthly release mechanism to limit oversupply of sugar in the market. These interventions had the effect of bringing about stability in the sugar prices, albeit artificially. The spot price movement in Delhi for FY 19, moved up to 334.80 per kg during June 2018, and then came close to MSP levels by end of September 2018. Thereafter, prices hovered in the range of 330 to 331 per kg between November 2018 and Mid February 2019. To improve cane price payment capacity, in February 2019, the Government decided to raise the MSP to 331 per kg, and also directed that no sugar can be sold below the MSP by the sugar factories. After revision in MSP during February 2019, sugar prices are moving closely in the range of 331 to 332 per kg.


Global surplus due to phenomenal rise in production in some of the Asian countries kept global sugar price range-bound. Output from Thailand is likely to remain close to 14.6 MMT, slightly higher than the previous season. EU may produce 16.97 MMT for SS18-19, whereas production in Australia is estimated at 4.6 MMT. Production in Pakistan is down to 5.2 MMT against 7 MMT of the previous season, thanks to decline in cane area due to drought conditions, as well as better and timely remuneration of competitive crops. Center South Brazil has produced 26.5 MMT of sugar. Overall, surplus for the season is estimated at 5 MMT,

Raw sugar contract moved in the range of 12 to 13.9 cents/ pound during the year. It has further tumbled in future contracts due to depreciation in Brazilian currency. As soon as the crushing started in the Asian countries, sugar prices started moving downwards. After touching a peak of 13.9 cents/pound in October 2018, the market never recovered during the year. Likewise, White sugar, which touched a peak of around USD 390/tonne, moved conservatively during this period against the rumours of Indian Raws for the world market and it fell down significantly to the range of USD 320 to USD 330 making it difficult for Indian sugar industry to export sugar.

Demand-Supply Scenario


Indian Sugar Industry

The countrys sugar production for the last two seasons was significantly higher than the consumption, resulting in a huge stockpile. Production for the current sugar season (18-19) is estimated to be the highest ever produced by India, which may replace Brazil as the highest sugar producing country globally for the current season. Sugar output as on March 31, 2019 has reached close to 29.8 MMT which is up by 1.5 MMT from the previous year. With a large number of mills in Uttar Pradesh still operating, overall sugar output for SS 18-19 is likely to surpass 33 MMT. With opening stocks of 10.7 MMT, consumption of 25 MMT & Physical exports to the tune of 3-3.5 MMT, the season is likely to end with carry-over stocks of ~15 MMT, clearly an indication of challenging conditions for the Industry.

UP Sugar Industry

Historically, the UP had been the largest producer of sugarcane in the country but only the second-largest producer of sugar. This was mainly due to higher diversion of sugarcane for manufacturing alternate sweetener, and also due to the relatively much lower recoveries and yield than the major sugar producing state of Maharashtra. However, for the past two years, there has been a turnaround in the UP sugar industry, owing to rapid propagation of a new variety of sugarcane Co-0238, which has resulted in unprecedented increase in recovery, along with rising yields.

This variety was initially planted in 2013-14 in UP and now it covers about 1.76 million hectares, ~69% of UPs total sugarcane area in SS 2018-19. The average cane yield rose to 79 tonnes/ hectare in SS 17-18 from 62 tonnes/hectare in SS 12-13. The estimated yield in SS 18-19 is ~80.5 tonnes/hectare. Similarly, the average recovery increased from 9.18% in SS 2012-13 to 11.48% in SS 18-19. This has led to a paradigm shift in the states sugar industry and it is estimated that UP will be the highest sugar-producing state in the country this season also, similar to last season.

The area covered under this high-yield high-sucrose variety in various sub-tropical regions of UP in SS 2018-19 is depicted below:

Regions 2017-18 2018-19
Total Cane area Area under Co-0238 % share in total area under sugarcane in the region Total Cane area Area under Co-0238 % share in total area under sugarcane in the region
(lakh Ha) (lakh Ha) (lakh Ha) (lakh Ha)
West UP 5.68 3.43 60% 6.18 4.45 72%
Central UP 10.67 6.58 62% 11.85 9.01 76%
East UP 6.65 2.07 31% 7.48 4.11 55%
State 22.99 12.08 53% 25.52 17.57 69%

This variety is not extensively present in East UP as the crop cannot withstand excess water-logging issues, which are prevalent in that region. This overall change has led to better productivity for sugar mills and higher income for farmers, but at the same time, it has also resulted in overproduction of sugar in excess of domestic consumption. Higher sugar inventories necessitate blockage of working capital and decline in cane payment capacity, leading to increase in cane arrears.


With an upward revision of sugar output estimates in 2018-19, the world surplus is likely to go up to 3.40 to 3.50 MTRV (Million Tonne Raw Value). Production estimates have been revised to 189.5 MTRV, whereas consumption is estimated to be up by 0.5 MTRV, close to 186 MTRV. This surplus is significantly down year-on-year due to sharp reduction in CS Brazils output, apart from reduced production from EU, Thailand, Pakistan & Russia. The final cane figure from Brazil was close to 570 MMT, with sugar output at 26.6 MMT. Brazil also produces ethanol from corn and the production has been rising, which has resulted in boosting the total ethanol production to 31 Billion Ltr. The capacity of corn ethanol is increasing for the upcoming season and is likely to compensate for the drop in cane ethanol production for SS 19-20. Like India, sugar recoveries in Thailand helped the millers produce sugar close to 14.6 MMT. Sugar output in European Union was noted at 16.97 MMT, down by 3 MMT from SS 17-18.

Government Policy

The sugar industry in India has been a regulated industry due to the large number of stakeholders. The regulations are both from the Central Government and State Governments. During the past year, apart from fixing of sugar cane prices, there have been many significant interventions by the Government in the form of fixation of Minimum Selling Price for sugar (MSP), price fixation for ethanol supplies to OMCs, monthly release mechanism, creation of buffer stock of sugar inventory, financial assistance by way of soft loans to sugar mills to make cane payment, support for industry for undertaking exports, support to the industry for setting up of new ethanol capacity etc. These policies enabled the sugar prices to remain stable in spite of inventory overhang, and also helped the mills make substantial payment to farmers, even though a significant amount of unpaid cane liability still exists.

Considering the impact of huge surplus sugar inventories on sugar prices, the Government implemented Reverse Quota Mechanism and later monthly release mechanism to limit supplies and to stabilise the market for better cash-flows to the industry in order to facilitate timely cane payment. Revised OGL Export policy under subvention scheme was mandated in SS 2017-18, but only a small quantum of sugar could be exported in view of inadequate time to manufacture raw sugar and limited demand of white sugar. With opening stocks for SS 2018-19 at a historical high of 10.7 million tonnes, equivalent to 4 months consumption, the Government announced further tranche of exports for SS 2018-19, even before the commencement of the season so that the sugar mills could enter into contracts well in time and plan manufacture of raw sugar. Simultaneously, the Government also announced some financial assistance to sugar mills towards payment of cane price, subject to completion of certain conditions, besides extending freight subsidies on exports. At present, cane price as well as sugar price (MSP), being essential commodities, are being controlled by the Government.

The concept of Buffer Stocks was reintroduced after a long time to limit supplies in the market for the stability of sugar prices. and to help the Sugar Industry meet a part of the inventory carrying costs associated with the high inventories held. All the sugar mills were given the option to participate in the scheme, and buffer stocks were created, aggregating to 3 million tonnes, across the country.

The Government of India took various measures to support the sugar industry in view of overproduction in the country and resultant challenging conditions:

To provide assistance to sugar mills by defraying expenditure towards internal transport, freight, handling and other charges to facilitate export during SS 2018-19

@ 31,000/MT for the mills located within 100 kms from the ports, @ 32,500/MT for the mills located beyond 100 kms from the ports in the coastal states and @ 33,000/ MT for mills located in other than coastal states or actual expenditure, whichever is lower. The total expenditure on this account would be around 31,375 crore, which will be borne by the Government.

Financial assistance of 313.88 per quintal of cane crushed in SS 2018-19 to sugar mills to offset the cost of cane. The assistance shall be provided to only those mills which fulfil the conditions as stipulated by the Department of Food & Public Distribution, including mandatory export obligations. The total expenditure on this account would be around 34163 crore, which will be borne by the Government.

To ensure payment of sugarcane dues of farmers, both the above-mentioned assistance would be credited directly into the accounts of farmers on behalf of sugar mills against cane price dues payable to farmers against FRP, including arrears relating to previous years. Subsequent balance, if any, would be credited to the mills account. Assistance shall be provided to those mills which will fulfil the eligibility conditions as decided by the Government.

Soft loan (with interest subvention of 7% for a period of one year) for the payment of cane price of SS 2018-19.

The Government of Uttar Pradesh also announced various financial aids for the industry to liquidate the sugarcane arrears – Cane price grant of 34.50 per quintal and soft loan at subsidised rate to pay the cane dues of SS 2017-18.


Market Analysis

India is the fourth-largest producer of alcohol globally, and the leading producer of alcohol in the South-East Asian region, with about 65% share. The Central Government has been actively promoting the production and blending of Fuel Ethanol with petrol, and has targeted 10% blending (EBP10). Towards this, various other feedstocks like B - Heavy molasses (an intermediate product of the sugar manufacturing process) and sugarcane juice have also been allowed for ethanol production, thereby enhancing its availability for blending. Apart from being environment-friendly, ethanol also ensures fuel security for the country, besides conserving foreign exchange and helping the sugar industry get additional revenue stream to minimise the impact of the inherent cyclicality in the industry.

Demand Drivers

Population growth and increasing urbanisation are pushing the need for mobility. Indias transportation sector is growing rapidly, with dependence on oil also concurrently rising. Considering the burgeoning oil import bill and the growing concern for the environment, there is need to adopt non-conventional fuels. The blending of ethanol at 5% with petrol helps in reducing dependence on oil, besides lowering pollution, while saving 36,000 crore in foreign exchange annually. Ethanol has about 30% oxygen, which in turn enables fossil fuel to burn much better within the engine. This significantly reduces the emissions. Ethanol, being a value-added product from molasses - a co-product in the manufacture of sugar from sugarcane, directly benefits the sugarcane farmers across the country.

Demand-Supply Scenario

Currently, out of the 530 sugar mills in the country, only about 133 have the capacities to produce fuel ethanol in addition to 24 standalone distilleries. The countrys total production capacity is 224 crore litres of ethanol. In Dec 2018-Nov 2019 (marketing year), Oil Marketing Companies (OMCs) released tenders totalling 329 crore litres to fulfil the 10% blending programme, against which only 260 crore litres of LOI were issued and 237 crore litres of PO have been issued . If the entire 237 crore litres is blended, it will be 7.2% of blending which will be the highest levels to be achieved. To achieve 10% blending, distillation capacities need to be increased, which requires increasing the existing capacities as well as the establishment of new3capacities.

With focus on use of clean fuel to improve the environment, to rationalise foreign exchange outflow on import of crude and also to facilitate the sugar industry to improve their financial position and their cane price payment capacity, the Government of India has announced the National Biofuel Policy 2018.

Government Policy

The various policy initiatives undertaken by the Indian Government for Ethanol blending:

The country has experienced two consecutive years of bumper production of sugarcane and sugar. This has resulted in higher volume of molasses production as well. With the appreciation of the issues being faced by the sugar industry and accumulation of arrears to farmers, the Governments focus on production of ethanol gained momentum during the year. The Government announced the National Biofuel Policy of 2018 for accelerated development and utilisation of biofuels in view of the current direct and indirect subsidies to fossil fuels and distortions in energy pricing.

The Policy categorises biofuels as:

"Basic Biofuels" viz. First Generation (1G) bioethanol & biodiesel

"Advanced Biofuels" - Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels

Third Generation (3G) biofuels, bio-CNG etc.

The Policy expands the scope of raw material for ethanol production by allowing use of Sugarcane Juice, Sugar containing materials like Sugar Beet, Sweet Sorghum, Starch containing materials like Corn, Cassava, as well as damaged foodgrains like wheat, broken rice, rotten potatoes, which are unfit for human consumption, for ethanol production.

In the determination of bio-diesel purchase price under the National Biofuel Policy, the Minimum Purchase Price (MPP) for bio-diesel by the OMCs will be linked to the prevailing retail diesel price. The MPP for bio-ethanol will be based on the actual cost of production and import price of bio-ethanol, and will be determined by the Biofuel Steering Committee and decided by the National Biofuel Coordination Committee. For ethanol supplies from December 1, 2018 to November 30, 2019, prices are fixed as:

Ex-mill price of ethanol will be fixed derived out of C heavy molasses to 343.46 per litre

B-heavy molasses/partial sugarcane juice at 352.43 per litre

100% sugarcane juice at 359.19 per litre

This is subject to changes to be announced by the Government of India from time to time. Production of ethanol using B-heavy molasses and 100% sugarcane juice will facilitate two objective:

a) restricting availability of sugar in the years of surplus production, and b) achieving 10% or higher ethanol blending, going forward.

In June 2018, the Government, with a view to supporting the sugar sector and in the interest of sugarcane farmers, approved a proposal for extending soft loans of about 3 15,500 crore through banks to sugar mills and molasses-based standalone distilleries. This has been done under the Scheme for extending financial assistance for enhancement and augmentation of ethanol production capacity, for which the Government will bear further interest subvention amounting to 33,355 crore for five years, including moratorium period of one year.

Further, in March 2019, the Cabinet Committee on Economic Affairs gave its approval for funds amounting to 32,790 crore towards interest subvention for extending indicative loan amount of 3 12,900 crore by banks to the sugar mills under "Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity" for the 268 applications/proposals, in addition to 31,332 crore already approved by CCEA in June 2018.

CCEA has also approved 3565 crore towards interest subvention for extending indicative loan amount of 32,600 crore by banks to the molasses-based standalone distilleries to augment capacity through installation of incineration boilers and other methods in the existing distilleries. This is aimed at achieving ZLD and additional equipment for ethanol production, as well as for setting up of new standalone distilleries for ethanol production. A separate scheme for the molasses-based standalone distilleries would be formulated accordingly by the Department of Food & Public Distribution.

As per industry sources, there is significant spurt in setting up of new ethanol facilities across the country and this is expected to further increase ethanol availability and blending percentages, going forward.


Co-generation is a decentralised incremental power addition that has many associated benefits, such as mitigated risk of loss of power to large areas due to shutdown, reduced T&D losses, local power supply, and employment generation. The importance of having high efficiency grid connected co-generation power plants for generating exportable surplus has been established well in the Indian sugar mills.

Market Analysis

The installed power generation capacity in India was 356.1 GW as on March 31, 2019, out of which 78.3 GW was renewable power. The Government has set a target of 175 GW renewable power installed capacity by the end of 2022, which includes 60 GW from wind power, 100 GW from solar power, 10 GW from biomass power and 5 GW from small hydro power. The all-India potential of bagasse-based co-generation is estimated at 7,000-7,500 MW. UP is the leading state in bagasse-based power generation, with an installed capacity of around 1,2003 MW.

The3 potential of bagasse co-generation within UP is around 1,500 MW, from over 130 sugar mills. The sugar mills work on a Power Purchase Agreement (PPA) model with the Uttar Pradesh Power Corporation Ltd. (UPPCL) to export surplus power from the co-generation plants.

Demand Drivers

There has been a sharp increase in energy consumption, triggered by high levels of economic growth and industrialisation. Power demand in the residential sector has also increased. Limited fossil fuel availability requires usage of non-conventional fuel sources for power generation. Bagasse co-generation not only reduces dependence on conventional fuel sources but also helps in saving precious foreign exchange by limiting the import of coal. The Clean Energy so generated with bagasse has a favourable impact on climate. Indias climate action plan aims for 40% installed capacity from non-fossil fuel by 2030. Using bagasse for power generation also leads to significant revenue for sugar mills through the sale of electricity.

Demand-Supply Scenario

The potential for bagasse co-generation lies mainly in the nine key sugar-producing states, especially in U.P., since it is one of the highest sugarcane-producing states. Lately, due to availability of cheaper power, some reluctance is being observed on the part of UPPCL, the offtake of power of UP regarding purchase of bagasse based co-generation power. The rates for the export of power are proposed to be revised downwards, as per the draft Captive and Renewable Energy generation plants regulations, recently issued by UPERC – the state level regulator.

Government Policy

The Government is providing various incentives and schemes to promote grid interactive biomass power and bagasse based co-generation in sugar mills. Subsidy under Central Financial Assistance is provided for private sector projects, such as IPP Grid interactive biomass combustion power projects and bagasse co-generation. Central Financial Assistance @ 3 2.5 million/MW for bagasse co-generation projects with a total outgo of 31.7 billion, with a physical target of 740 MW between 2017-18 to 2019-20, is planned by the Government.

BUSINESS REVIEW Sugar Business Review

With its synergistic and strategic business units, the Company is continuously sowing new seeds to nurture greater success, year-on-year - to drive increased value for its stakeholders.

Sugar Business

Triveni operates seven sugar units spread across the State of Uttar Pradesh (U.P.). Most of its mills are located in Western and Central U.P., while one unit is located in Eastern U.P. The share of Triveni in UP for SS 2018-19 is ~7.5% of sugarcane crushed, while in sugar output, it is equivalent to ~7.9% of the States production. The Company manufactures refined sugar, which constitutes ~40% of the total sugar production and fetches a premium over normal sulphitation sugar. The refined sugar is supplied to high grade end-users, thereby creating a niche customer profile. The Company also produces different grades of pharma sugar that can be customised as per the user requirements. Its seven sugar units strictly adhere to best-in-class manufacturing processes and quality benchmarks, and supply sugar to major multinational soft drink companies, leading confectionery manufacturers, breweries, pharmaceutical companies and leading ice cream producers for their requirements.

Performance Overview

The Company achieved record recoveries during SS 2018-19 at 11.79%, which is 41 basis points higher than the previous season. Even though the Company crushed lower sugarcane as compared to last year owing to lower yields, it produced almost similar level of sugar as previous season due to record recoveries of sugar. The recovery rate of Triveni sugar units has been significantly higher than the U.P. state average – the differential recovery in the present season is 31 basis points more than the state average. The refined sugar production from the two units of Khatauli and Sabitgarh remained at ~ 40% of the total sugar production, which will also help Triveni achieve better overall average sugar realisation. The average domestic sugar price realisation for the Company has been 331,456/MT during the year.

(Million Tonnes)


Sugar Recovery (%)

Sugarcane Crushed

Sugar Production

2018-19 2017-18 2018-19 2017-18 2018-19 2017-18
Khatauli 11.67 11.38 2.12 2.21 0.25 0.25
Deoband 11.52 11.11 1.46 1.50 0.17 0.17
Ramkola 11.54 11.24 1.04 0.98 0.12 0.11
Sabitgarh 11.89 11.03 0.89 0.97 0.11 0.11
Chandanpur 12.40 12.00 0.89 1.00 0.11 0.12
Rani Nangal 12.35 12.00 0.87 0.93 0.11 0.11
Milak Narayanpur 11.50 10.97 0.71 0.78 0.08 0.08
Group 11.79 11.38 7.98 8.37 0.94 0.95

Chandanpur, Milak Narayanpur and Sabitgarh units operate incidental co-generation units and export the surplus power to the grid. Triveni generated power export revenue of 323.3 crore in FY 19.

Organic Growth through Cane Development Programme

The Company works and engages continuously with farmers to increase farm productivity through a well-planned Cane Development programme. This programme is carried out with rigour across all the seven sugar manufacturing units. Trivenis efforts in providing high-yielding seeds and inducing better agronomic practices have positively impacted the yields, earning the confidence of more than 3,00,000 sugarcane growers.

These continuous efforts have resulted in increase in area under sugarcane plantation, leading to increased sugarcane crushing and higher yields. While the state of Uttar Pradesh showed a CAGR of 7.99% in sugarcane crushed during the past five years, Triveni Sugar grew by 11.38% during the same period. Similarly, the average recovery improvement for the state of Uttar Pradesh has been 222 basis points, whereas Triveni successfully achieved an improvement of 247 basis points during the same period.

During the past few years, the Companys sustained efforts have helped in increasing the varietal mix towards early and improved varieties of cane, leading to significantly enhanced recoveries. Focus on plantation of high sugared/high yielding early varieties, such as Co-0238, Co-0118, Co-98014, CoJ-85 and improved variety CoJ-88, has helped in transforming the varietal balance. Over these years, the Company succeeded in shifting the farmers from planting rejected varieties of cane to high yielding high sucrose varieties, which resulted in overall improvement in the quantity and quality of sugarcane crushing in all the Triveni facilities.

Besides varietal development, the Company is also working on yield enhancement activities such as green manuring, intercropping, deep ploughing, planting by trench method, 4-5 feet planting; single bud planting and planting by upper 1/3rd portion of cane.

The cane development team works closely with farmers, right from seed preparation to plantation, pest management, plant protection and harvesting. As part of the programme, optimising the nutrient content in soil for farming operations is also undertaken. Farmers are being educated and persuaded about the benefits of these scientific methods through various channels, such as publicity, door-to-door contact, grower interactions, etc.


Based on the initial crop area estimates for SS 19-20, sugar production in the state of Maharashtra is estimated to be in the range of 7.0 to 7.1 million tonnes, down by 3.5-3.6 million tonnes due to lower planting resulting from drought conditions, whereas the estimates for Uttar Pradesh remain at the levels of SS 18-19. The area under sugarcane cultivation in Maharashtra is estimated to be lower by 25% to 30% from a year earlier due to poor weather conditions. Therefore, the countrys initial sugar production estimate for SS 2019-20 is ~28.2 to 28.5 million tonnes, on account of of climatic factors as well as expected diversion for ethanol production.

Indias production at above 28 million tonnes appears to be the new normal for the country. With consumption almost unchanged during the past three sugar seasons, a policy is required to manage the surplus sugar without depressing the domestic sugar prices. For Indian manufactures to be competitive in the global market, it is essential that cost of production should reduce to the extent of the impact of unrealistic cane price being imposed on the sugar industry to provide more remunerative cane price to the farmers. This is the biggest challenge of the policy makers and once it is provided for, sugar manufacturers will be in a position to export without seeking ‘bail out or subsidies from the Governments. However, in the short term, the present policies of the Government towards stabilisation of sugar prices, mandatory exports and financial incentives / soft loans will keep the sugar industry afloat.

The recent National Biofuel Policy may be a game changer for the sugar industry. The policy unshackles the sugar industry and permits it to manufacture ethanol for blending with petrol from B-heavy molasses and sugarcane juice. To encourage production of ethanol, the Government has fixed higher prices for ethanol produced from B-heavy molasses and sugarcane juice and is providing subvention of interest on loans availed for setting up distillation capacities. It would lead to higher production of ethanol and the sugar production will diminish accordingly. Apart from fuel security and conservation of foreign exchange, it may provide the much-needed lever to the sugar industry to regulate production of sugar, and enable it to decide on the product mix of sugar and ethanol based on commercial considerations. However, long-term commitment of the Government is imperative to lend support to the ethanol blending programme regardless of crude prices, and to fix remunerative prices of ethanol for commercially accepted returns on capital cost incurred in setting up additional distillation capacities.

These interventions and relevant policy changes should help in uncapping the immense potential of the sugar industry in providing power through renewable energy sources and green fuel through ethanol blending with petrol. Most importantly, in view of flexibility to export freely and ability to regulate sugar production, the sugar cycles would become less pronounced, and the good financial health of the industry will ensure timely cane price payments to farmers.

Co-generation Business

Bagasse is a fibrous residue left after crushing of sugarcane and is a key co-product of the sugar industry. Being a renewable fuel, it does not lead to any net carbon dioxide addition to the atmosphere and is thus regarded as green fuel.

Triveni currently operates three grid-connected large capacity co-generation plants and three smaller co-generation capacities (incidental co-generation facilities) at its five sugar units, namely Khatauli, Deoband, Chandanpur, Milak Narayanpur and Sabitgarh units. The former three large-sized plants are part of the operations of co-generation, whereas the other three small-sized plants are considered a part of the sugar operations. Trivenis co-generation plants at Khatauli and Deoband utilise highly efficient 87 ata / 515C steam cycle to maximise efficient usage of bagasse.

After meeting the sugar factorys captive requirement, as well as the co-generation plants auxiliary power requirement, surplus power from these plants is exported to the grid. The Company has power purchase agreements with UPPCL for all its co-generation facilities.


The co-generation plants at Khatauli and Deoband utilise highly efficient high pressure (87 ata) and temperature (515C) steam cycles, and are regarded amongst the most efficient co-generation plants in India. The Companys smaller capacity co-generation plants operate mostly on medium pressure steam cycles (46 ata/440C). These plants are designed to conduct fully-automated operations, using the latest Distributed Control System (DCS). Highly experienced and skilled manpower operates these plants, thus ensuring trouble-free efficient operations with high uptime and reliable operations, along with very high operating efficiencies. The Company puts significant emphasis on maintaining excellent management of the boiler feed water quality parameters to ensure sustained and trouble-free operation of the boiler and the turbine.

Unit-wise capacities of the co-generation plants are as follows:

Sl. No. Name of the unit Installed capacity
1. Deoband 22 MW
2. Khatauli - Phase 1 & Phase 2 23 MW each
3. Sabitgarh 13.5 MW
4. Chandanpur 10 MW
5. Milak Narayanpur 13 MW
Total 104.5 MW

Performance Overview

The operation of the bagasse-based co-generation plant depends, to a large extent, on the availability of bagasse from the sugar operations. This, in turn, depends on cane availability for the crush during the season and efficient operations of the sugar factories. Higher cane availability leads to more season operating days, higher bagasse savings, and therefore longer operation of the co-generation plants.

The Company has undertaken an extensive and focussed cane development programme in the command areas of its sugar units, particularly in the past few years. This has led to much better availability of sugarcane in view of the significantly improved yields and corresponding increase in availability of bagasse.

The performance of the co-generation plants at Khatauli and Deoband continued to be excellent, with very high uptime and reliable operations. The requirements of process steam and captive power of the sugar factory operations were fully met. Apart from captive supply, bagasse was also procured from outside sources to optimise the co-generation operations at both the co-generation plants.

The Companys incidental co-generation facilities also performed well and its plants at Chandanpur, Milak Narayanpur & Sabitgarh units recorded good power export in 2018-19. Due to increased cane availability at Chandanpur unit, a small capacity low pressure boiler was installed and commissioned during the crushing season 2017-18, which facilitated power export throughout the 2018-19 season.

During the year under review, the co-generation units generated 265.8 million units, while the exports to the grid were 174.93million units. Apart from this, the incidental co-generation units of Chandanpur, Milak Narayanpur and Sabitgarh exported 403million units to the State Grid.

Awards & Recognition

The Company lays high level of management focus on the safety of its operating staff, plants and machinery. The Company has won many awards in the past in the OHS category.


The Companys sustained focus on cane development activities in the command areas of its sugar units should lead to continued better cane availability for crushing, resulting in higher operating days of the co-generation plants due to enhanced bagasse availability. The Company is also taking various steps to further improve the efficiency of the sugar plants operations in order to reduce the process steam consumptions. This will enable more savings of bagasse for enhanced operation days of the co-generation plants.

Distillery Business

The Company is already operating a 160 Kilo Litre Per Day (KLPD) capacity state-of-the-art molasses-based distillery in Muzaffarnagar district in U.P. It is one of the largest single stream molasses-based distilleries in India. Strategically located in close proximity to two of the Companys largest sugar units (Khatauli & Deoband), the distillery has an assured access to consistent supply of captive raw material (molasses).

The distillery has a flexible manufacturing process, allowing it to produce high quality Extra Neutral Alcohol (ENA), Rectified Spirit (RS), Specially Denatured Spirit (SDS) and Ethanol, based on the market dynamics and requirements. However, over the last few years, the distillery has been producing the bulk of ethanol and supplying it to OMCs for blending in petrol. The ethanol produced from the distillery is also supplied to other major players in the O&G sector.

Further, due to substantial increase in cane crushing across all of its seven sugar units, and the resultant increase in generation of molasses, the Company decided to set up a 160 KLPD molasses based distillery adjacent to its already operational sugar unit at Sabitgarh. The decision was also aligned to the Companys participation in the ‘Scheme for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity introduced by the Central Government. The distillery has been commissioned subsequent to the year in the last week of April 2019. This new distillery will start supplies to OMC from June 2019.

In line with the new directives and guidelines of the GoI regarding effluent treatment, and to ensure zero liquid discharge, the Company has set up the new distillery with a concentrated spent wash (termed as SLOP) fired incineration boiler. Also, the existing bio-composting based effluent treatment system at the Muzaffarnagar based distillery is under upgradation to incineration-based effluent treatment system.

Performance Overview

Ethanol, also known as fuel alcohol, is blended with petrol as a green fuel. Apart from augmenting the countrys fuel self-sufficiency with cost advantage, it helps in reducing the nations carbon footprint and enabling savings of precious foreign exchange on import of crude oil. As per the bio-fuel policy of the Central Government, ethanol blending is targeted to be 20% by 2022, creating continued demand from the indigenous suppliers. The off-take by OMCs has been steadily improving. Triveni has aggressively participated in all tenders issued by the OMCs for procurement of ethanol, and has secured sizeable quantities.

The distillery unit continued to operate efficiently and achieved high levels of the fermentation and distillation efficiencies during the year. During the year under review, approximately 97% sales of the distillery was of ethanol, with the balance 3% being ENA. The total production of the distillery for FY 19 has been 48.035 million litres, while sales stood at 51.2793million3litres.


The Central Government has embarked on an ambitious ethanol blending programme under its National Biofuel Policy, and is keeping a strong focus on enhancing the ethanol blending percentage, with the aim of going to over 20% in future. Various financial assistance schemes have also been announced by the Central Government to promote new capacity additions.

In view of continued higher sugarcane crush in the state of Uttar Pradesh in SS 2018 -19, there has been a glut of molasses. Since the introduction of the scheme by GoI to promote production of ethanol, many new distillery projects have been announced, set up and commissioned, leading to increased distillation capacity in UP. The Companys new distillation capacity, operationalised in Q1 FY 20, would lead to increased ethanol supplies to OMCs and thus additional revenue. The additional capacities will also help the Company to produce ethanol from B-heavy molasses, if required and found viable.


The Industrial Gears industry

The Gears Industry in India is categorised into Industrial Gears and Automotive Gears. The Industrial Gears segment manufactures Gears, Gearboxes, Geared Motors and Gear Assemblies. Industrial gearboxes are a common type of power transmission devices, used as a component in various varieties of machineries and heavy electrical equipment. The majority of the players in the domestic market manufacture standard products i.e. standardised catalogue type, as it requires less customisation, both in terms of design and engineering. There are only a few players in customised gears manufacturing, which requires advanced technology and stringent adherence to international standards, with requisite infrastructure and highly experienced and skilled manpower.

Demand Drivers

The major demand driver for Industrial Gears is industrial capital expenditure, mainly in sectors like Power, Steel, Refineries, Fertilisers, Cement, Textiles, Sugar, Mining, Power, etc. The infrastructure-related investment in the country stimulates the growth of heavy industries, which in turn fuels the growth of the industrial gearboxes market. Trivenis core product - High-Speed Gears - is used for all turbo applications like gas turbines, steam turbines, water turbines, compressors, pumps, blowers and test rigs meeting AGMA and API design standards. Demand for these products is linked to industrial growth and the capital goods sector. However, part of the demand is generated from the exports undertaken by domestic OEM customers, which is linked to global demand of products related to Capital spend. Aftermarket opportunity demand is linked to plant utilisation levels, cost pressures on maintenance budgets, policy of keeping insurance spares, emergency breakdowns and alternate sourcing vis--vis global OEMs to bring down product life cycle costs. Further, considerable demand may arise from the Defence sector as a result of opening the sector to private players and due to the focus on Make in India.

Business Opportunities

There are some indications of fresh capital investment in industrial segments like steel, cement, sugar and oil & gas, which are customers of the Triveni Gears business. Increased acceptance of engineered capital goods from India in global markets has boosted sourcing from quality-conscious credible Indian manufacturers.

The Government of Indias Make in India initiative has led to new opportunities for diverse engineered products, and Trivenis Mysuru facility is actively participating in many such indigenous development projects.

The Defence Procurement Policy 2016 focusses on self-reliance for various equipment in Design, Development and Manufacture by the Indian industry. Most of the new projects envisaged by the Defence sector are customised to the requirement for critical equipment, offering substantial value to the existing portfolio of Triveni Gears rotating machinery. Triveni Gears is initially focussing on Naval Defence markets and has gained some foothold in the critical turbo pumps space.

Industry Outlook

The key demand sectors for gearboxes are Power, Cement, Steel, Refinery, Fertiliser and Petrochemical. In 2018-19, the overall power sector started showing signs of improvement and fresh investments led to a growth in demand. The order booking and enquiries have increased during the year. Government schemes like DDUGJY (Deen Dayal Upadhyay Gram Jyoti Yojana) and Integrated Power Development Scheme (IDPS) under GoIs focus of attaining ‘POWER FOR ALL is also helping to boost momentum in the sector.

Similarly, the cement industry has shown growth through brown field expansions and requirement for efficiency enhancements. Infrastructure development, including development of smart cities, highways etc., is giving the much-needed push to the sectoral demand. This is also leading to growth in the steel industry. Greenfield expansions in the steel sector have resulted in increased orders in the past year.

The Governments guidelines for compliance to Euro VI norms emission from April 2020 is driving investments in the Refinery segment. Similarly, the Government is also planning to revive the Fertiliser sector, which should show demand in the coming quarters. Complete revamping of current Petroleum, Petro-Chemical Investments in Regions (PCPIR) policy seeks to encourage long-term investments in the segment. This in turn shall see foreign investments in the segment. Free trade agreement is being promoted to directly aid this sector, which shall aid exports from the country.

Market Overview

The order booking for gearbox for steam turbines has shown an encouraging growth in the financial year under review, both from domestic and exports regions. In the Oil and Gas sector, the market witnessed announcement of expansions, which may result in new orders from FY 20 onwards. The expected growth from Fertiliser market has increased Trivenis order flow for many high speed applications through Indian and Global OEMs. This trend is likely to continue in the coming years, both for Fertilisers and Oil & Gas segments.

Thermal plant segment had very few brownfield expansions and greenfield projects, which is going to affect the orders for Booster pump applications and also for Gears used in Hydraulic couplings in the coming years. Due to high prices and low availability of gas, gas turbine power generation is still operating at very low capacity.

Business Overview


During FY19, both domestic and export markets have shown positive growth, which has resulted in increased order booking (excluding long tenure order) and turnover.

Major OEMs for high-speed turbo applications, such as Steam Turbine, Pumps and Compressors, have shown growth in the domestic as well as in export markets. Gears business has witnessed good growth in turnover and bookings except long term orders. The business is actively focussing on supply of Gearboxes to global OEMs for integrally geared compressor, a foray into very high speed applications. The growth in order booking includes diversification into machining of Wind gear components to utilise excess capacity.

Being one of the leading global players in industrial gearboxes with a fleet of over 8,500 Triveni Gears and 900 replacements of more than 80 global brands, there is an increasing acceptance by multinational OEMs and industries for Triveni products for their global projects.

Triveni Gears is a dominant player in High speed Gears segment and has considerable acceptance by OEMs for high power applications, including the Oil and Gas segment. Triveni has been maintaining over 80% market share in this segment in the domestic market and has started expanding the market reach to select overseas markets for select applications.

Triveni also supplies gearboxes for Hydel application and other low-speed applications, including reciprocating pumps and compressors, mill drives and pump drives.

Replacement, Refurbishing and Spares

Retrofitting business segment has witnessed growth of 15% in turnover, pre-dominantly contributed by Oil & Gas, Petrochemical, Steel, Cement & Fertiliser sectors.

Triveni is exploring additional avenues of growth, and thus utilising its existing infrastructure for component manufacturing aligned to customers drawing on a serial production basis. Rate Contracts for these are being modified to reflect the same.

This segment contributes 35% to the overall turnover of Gears business.

Loose Gearing

The market dynamics of this segment are similar to the OEM segment. This segment demands a capacity availability of critical machines like hobbing, teeth grinding, as well as surface grinding.


Having appointed international agents across select geographies, the business has witnessed a growth of 7% in order book – a trend that is likely to continue in the coming years.

Performance Overview

The performance of Triveni Gears has been good during the year under review. The turnover and outstanding order book has witnessed a growth of 19% and 31% respectively.

In the Non-Geared business for Defence sector, the Company is working towards aligning itself to the Make in India initiatives for various products, which should augur well for the business in coming years.

Key Highlights of FY 19 Domestic:

Received global repeat order for Gas turbine load gearboxes

• 100% market share in Oil & Gas and Fertiliser segments for all applications supplied through domestic OEMs and for boiler feed pump segment

• Repeat orders for Integrally Geared compressor gears

• Multiple large orders in Retro segment from O&G, Steel & Petro-chemical sectors


• Triveni has witnessed 7% increase in the order book as compared to FY 18.

• Approved as supplier to major global Pump OEMs and received multiple orders for overseas installations. OEM & Retrofitting business has witnessed 9.4% & 24% growth in order book respectively.

Indian Water Industry

Over the past one year, the Government has paid greater attention to improving water supply and wastewater treatment practices, especially in urban areas. However, urban local bodies have not yet been completely successful in addressing inherent issues, such as delays in project implementation, lack of financial autonomy, technical expertise, and high level of non-revenue water. There is a great scope of improving service delivery and scaling up infrastructure investment. Water sector has witnessed a surge in activity in terms of launch of new programmes and schemes, as well as projects uptake, during3FY319.

Market Analysis

India, home to 16% of the worlds population, has only 2.5% of the worlds land area and 4% of the worlds water resources at its disposal. Precipitation in the form of rain and snowfall provides over 4,000 trillion litres of fresh water to India.

1. The demand for water has been increasing at a high pace in the past few decades. The current consumption in the country is approximately 581 trillion litres, with irrigation requirements accounting for a staggering 89% followed by domestic use at 7% and industrial use at 4%.

2. The rapid increase in population, urbanisation and industrialisation has led to a significant increase in water requirement. In the next decade, the demand in water is expected to grow by 20%, fuelled primarily by the industrial requirements, which are projected to double from 23.2 trillion litres at present to 47 trillion litres. Domestic demand is expected to grow by 40% from 41 to 55 trillion litres while irrigation will require only 14% – these will push up the requirements to 592 trillion litres, up from 517 trillion litres currently.

3. The per capita availability of water has significantly come down and is likely to decline further with the growing population and demand. As per the Ministry of Water Resources, per capita water availability in 2025 and 2050 is estimated to come down by almost 36% and 60% respectively.

4. It is believed that these issues can be resolved by implementing innovative solutions for more efficient water management and wastewater recycling & reuse.

Demand Drivers

The waste water reuse is rising up the agenda form any industries, including power, refining & petrochemicals, pharmaceuticals and steel. This is being driven by stricter regulations around freshwater consumption and wastewater discharge. Municipal sector contributes about 60% revenues in the market.

There is an imminent need to deepen our understanding of our water resources and usage, and put in place interventions that make water use efficient and sustainable. The Central Governments focus on Namami Gange for cleaning of Ganga, JICA funded projects in Delhi & Karnataka, AMRUT programmes for Pollution abatement, Recycling and Re-use, Stricter Vigil by National Green Tribunal will be key demand drivers going3forward.

Anticipated CAGR & Business Growth Potential 2020

Sector* CAGR Investment
2020 USD Billions
Water & Wastewater 15.3% 16.2
Industrial Water 9.7% 2

*Includes all types of investments in respective sectors

Government Policy Framework

The Central Government has unveiled initiatives that promise to transform Indias ever-expanding cities and large towns to rival those in developed nations. In order to speed up the construction of water and wastewater projects across the country, the Government is adding new incentive tools – such as priority release of budget allocations on the basis of reforms implemented by states in the previous year, besides also undertaking a review of water tariffs.

The Government has vigorously worked for cleaning the Ganga River, providing safe drinking water to all Indians, and efficient use of water in irrigation using micro-irrigation techniques. Unveiling the development vision for the next decade, it would focus on 10 key areas, including job creation, physical and social infrastructure building, pollution-free nation and clean rivers. The Budget also saw allocation of 38,041 crore for 2019-2020 compared to 37,612 crore in 2018-19. The development of 100 Smart Cities will also catalyse significant opportunities in water and wastewater management.

Business Opportunities

Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and ‘Smart Cities Mission worth 3 9,000 crore will create significant business opportunities. These two schemes will create basic infrastructure services in water supply and sanitation, drainage, solid waste management and sewage treatment. Smart Cities programme, with a budget of over 36,000 crore, and AMRUT scheme with another 36,000 crore are expected to boost the business opportunities.

‘Namami Gange programme of 3 20,000 crore will create Hybrid Annuity Model (HAM) based projects, with focus on arresting the municipal and industrial pollution entering into the rivers, along with creation of 2,500 MLD municipal sewage treatment capacity. This programme will also implement zero liquid discharge (ZLD). All the industries have to install real-time online effluent monitoring stations. As water availability and quality declines, and pressure grows on industries to build CETPs and re-use water, Triveni Water will focus on CETPs, recycling and re-use projects with latest3technologies.


Performance Overview

Water business has witnessed significant growth in terms of order booking during the year. The Company recorded historical highest annual turnover of 3 249.15 crore and entered into positive P&L zone after a gap of 5 years. With focus on water & wastewater treatment and management, it has been successful in securing five new EPC orders in municipal and industrial segments in Delhi, Uttar Pradesh, Rajasthan and Punjab. Municipal segment has seen a surge of new orders in Hybrid Annuity Model (HAM), initiated by NMCG in cities like Mathura, Kanpur, Allahabad, Kolkata, Bhagalpur, Agra, etc.

At present, it is executing 14 EPC jobs located in Delhi, UP, Karnataka, Odisha, West Bengal, Tamil Nadu, Rajasthan and Punjab.

The Company is pursuing opportunities in desalination projects and hopefully will enter SWRO projects. Technology gap is being analysed and partnership with leading global players is being3explored.

Going forward, majority of investments are expected from the Central Government through NMCG, besides state funding from Karnataka, UP, Delhi, MP, Rajasthan and Gujarat. The Company is well positioned to undertake more jobs in its chosen area of expertise and will continue to evaluate opportunities in neighbouring countries on case-to-case basis.

Key Highlights

1. Secured new EPC orders worth 3687.71 crore (net of GST) and Equipment Orders of 3 30.26 crore (net of GST). All new EPC orders are with O&M component worth 3312.42 crore, with duration ranging from 5 years to 153years.

2. Secured Mathura Sewage Treatment Plants (STPs) and associated Infrastructure on Hybrid Annuity Model (HAM) funded by National Mission for Clean Ganga (NMCG) under One City One Operator concept. Major scope includes design & construction of 30MLD STP at Masani and 20MLD Tertiary Treatment Plant (TTP) at Trans Yamuna for supplying treated water to IOCL, Mathura Refinery for reuse. The O&M period is 15 years. This project is unique, wherein treated sewage is sold to IOCL and revenue is generated for Client (UPJN).

3. Secured Rehabilitation & Upgradation of Kondli Sewage Treatment Plant including Phase I (45.5 MLD), Phase II (113.7 MLD) & Phase III (45.5 MLD) capacities from Delhi Jal Board. This is a JICA funded project and is technically challenging, wherein existing old STP is to be demolished and upgraded for very stringent outlet parameters without disrupting the existing flow and quality of treatment. The entire facility will have O&M period of 10 years. This order has been secured in JV with Gharpure and GSJ, with the Company in lead with 80% share.

4. Secured 18MLD Balotra Zero Liquid Discharge (ZLD) project, including RO plant and Reject Management Facility, with O&M of 10 years. This plant will treat influent coming from textile dyeing units, and treated effluent will be reused by industrial units, thereby reducing the dependence on fresh water.

5. Secured Barmer 15 MLD RO Plant from existing client Barmer Lignite Mining Company Limited (BLMCL). Water coming out of lignite mines containing high TDS levels is not suitable for disposal, and therefore, RO plant will be installed to bring down the TDS levels. The O&M on this plant will be for 15 years.

6. Won order for 50 MLD CETP from Punjab Dyers Association, Ludhiana, for treating wastewater coming from textile dyeing units. SBR technology will be used to treat the wastewater. The O&M period is 5 years. CETP of this capacity will be good for future reference perspective.

7. Completed well sinking of Bengaluru ISPS, using well-sinking methodology for 210 MLD capacity. This is one of the largest facilities in the city to be constructed with such construction methodology.


Water sector has been largely plagued by underfunding issues. The continuous thrust by Central Government agency NMCG is important for the sector. Projects on HAM model will be on test and successful commissioning within time, and will give boost to rolling out of more projects by NMCG. It is evident that investors have shown confidence in Water HAM projects and majority of projects have achieved Financial Closure.

AMRUT funding majorly from Central Government will catalyse significant opportunities in this sector. JICA is funding new water projects in Delhi and Karnataka, and new bids are expected from these states in the coming quarters. CETPs for

Industrial clusters like textile and tannery are being built, mainly due to intervention of NGT, and it is expected that few more opportunities will arise in FY 20.

Sea Water Desalination projects are lined up in Gujarat on PPP/ HAM concept and expected to be rolled out in first quarter of FY 20. The Company will evaluate these opportunities and, if required, will bid in partnership with other players. The Desalination business is expected to have huge potential in future and may provide opportunities to the Company. Initiatives of the new Government at Centre will be instrumental in driving the way forward for water and wastewater business for next five years.


Rs. lakh
Description 2018-19 2017-18 Change %
Income from Operations (Gross) 3,15,156 3,41,186 -8%
EBITDA 37,668 30,013 26%
Depreciation and Amortisation 5,695 5,536 3%
Finance Cost 6,799 8,534 -20%
Profit Before Exceptional / Non-Recurring Items and Tax 25,174 15,943 58%
Exceptional Income 2,035
Tax 5,153 4,969 4%
Profit After Tax 22,056 10,974 101%
Other Comprehensive Income -137 122
Total Comprehensive Income 21,919 11,096 98%

The much improved financial performance of the Company is as a result of all businesses posting better performance as compared to the previous year, particularly distillery business and Engineering businesses. The improved productivity and efficiency level of the sugar operations as well as higher income from sugar linked businesses, Cogeneration and Distillery, have contributed significantly to the overall profitability.

The segment results of Sugar business include export losses of 381.25 crore (higher by 360.44 crore over previous year). The applicable subsidies (production subsidy, freight subsidy on exports and buffer stock subsidies) estimated at 3 102.07 crore will be accounted for after fulfilment of the prescribed conditions, including necessary export obligation under MIEQ. Apart from the increased productivity, the improved performance of the Sugar business is also due to several interventions by the Government, including introduction of Minimum Selling Price (MSP) of sugar prescribed by the Central Government with effect from June 2018 - it was initially prescribed at 329 / Kg and was increased to 331 / Kg in February 2019. Along with MSP of sugar, the Central Government also regulated supply of sugar by introducing monthly sale quota for each sugar mill. The aforesaid factors helped to maintain and support sugar prices. With a view to liquidate surplus sugar stocks, the Government also introduced the scheme of Minimum Indicative Export quantity (MIEQ) of 5 million tonnes for the Sugar Season 2018-19 pursuant to which every sugar mill was obligated to export prescribed quantity of sugar. The mandatory exports scheme was extremely vital in view of substantial surplus sugar stocks held in the country. .

The performance of distillery operations has been substantially better than the previous year in view of higher production, higher sale volume and lower raw material cost. The performance of cogeneration operations was satisfactory and the profitability was marginally lower than the last year as there was no income from Renewable Energy Certificates (RECs) as compared to an income of 310.11 crore in the previous year.

There was a significant rise in the profitability of Engineering business, particularly the Water business wherein there has been a marked turnaround due to increased activities emanating from significant new orders of 3 1,030.4 crore (including O&M) received during the year. In the case of Gears business, there has been healthy increase in turnover, profitability and orders inflow (excl. long tenure orders) which has led to much improved3performance.

The Company was able to achieve reduction in the finance cost by 20% despite increased working capital requirements as a result of increase in sugar stocks (in quantitative terms) by 27% at the yearend. It has been made possible due to receipt of buffer stock subsidy to the extent of 311.23 crore and reduction in interest cost by 48% on term loans as average term loan utilisation has been lower by 27% during the year and the term loans availed during the year carried concessional interest rates under soft loans / interest subvention schemes of the3Government.


Rs. lakh
Description 2018-19 2017-18 Change %
Cost of material consumed 2,77,115 2,59,820 7%
Percentage to sales 88% 76%
Manufacturing expenses 24,650 20,692 19%
Percentage to sales 8% 6%

Raw Material Cost & Manufacturing expenses have increased by 7% and 19% respectively. In Sugar business, such costs are directly linked to the production undertaken rather than to the sales. The increase in such expenses is attributable to higher sugar cane crush in the Sugar business, higher production volumes in distillery business as well as increased turnover of Gear and Water business.


Rs. lakh
Description 2018-19 2017-18 Change %
Personnel cost 22,387 20,240 11%
Percentage to sales 7% 6%
Administration 7,768* 7,491 4%
Percentage to sales 2% 2%
Selling expenses 2,551 2,035 25%
Percentage to sales 1% 1%

*excluding loss on Third-party sugar exports.

The increase in personnel cost is reflective of annual salary increase. The increase in Administrative expenses is nominal. Selling expenses have increased by 25%, mainly due to higher sales volume in distillery business which takes place on FOR basis.


Rs. lakh
Revenue PBIT*
Description 2018-19 2017-18 Change % 2018-19 2017-18 Change %
Business Segments
- Sugar 2,94,777 3,33,016 -11% 30,303 24,123 26%
- Engineering 38,223 28,744 33% 4,547 1,748 160%
- Others 6,200 6,088 2% 7 20 -65%
Unallocated/inter unit adjustment -24,044 -26,662 -2,884 -1,414
Total 3,15,156 3,41,186 -8% 31,973 24,477 31%

*Before exceptional items

The Company has two major business segments - Sugar business and Engineering business. Sugar business comprises sugar manufacturing operations across 7 Sugar mills, 3 incidental cogeneration facilities at three of its Sugar mills and 3 Cogeneration plants located at two of its Sugar mills and a standalone Distillery, all located in the State of U.P. The Company has recently installed a new 160 KLD distillery in the State of U.P. at its sugar unit at Sabitgarh which has become operational in Q1FY 20. Cogeneration plants and Distillery source captive raw materials, namely, bagasse and molasses, from the Sugar mills. Engineering business comprises of Gears manufacturing at Mysore and Water and Waste Water Treatment business operating from Noida, UP.


Sugar Operations

Rs. lakh
Description 2018-19 2017-18 Change %
Turnover 2,53,100 2,99,923 -16%
PBIT 7,921 11,559 -31%
PBIT/Turnover (%) 3% 4%
Cane crush (MT) 76,84,100 73,38,500 5%
Recovery (%) 11.78% 11.29% 0.49%
Cane cost (landed) ( /MT) 3,344 3,337 0%
Production of sugar (MT) 9,05,431 8,28,517 9%
Volume of sugar sold (MT) 7,59,067* 7,61,276 0%
Average domestic sugar realisation price ( /MT) 31,456 36,244 -13%

*including exports of 5,816 MT

The operational efficiencies and the productivity of the sugar operations in terms of recovery have further improved during the year.

In the previous year, the benefit of higher sugar realisation prices has largely been offset due to substantial inventory write down of 3198.87 crore considered at the year end upon steep decline of sugar prices. The current year considers export losses of 381.25 crore (higher by 360.44 crore over previous year) in respect of export obligations of 86380 MT for the Season 2018-19 as against total obligation of 129465 MT. The entitlement of subsidies (production subsidy, freight subsidy on exports and buffer stock subsidies) estimated at 3 102.07 crore will be accounted for after fulfilment of the prescribed conditions, including necessary export obligation under MIEQ.

Co-generation Business

Rs. lakh
Description 2018-19 2017-18 Change %
Turnover 20,279 20,493 -1%
Income from carbon 0 1,011 -100%
Total turnover 20,279 21,504 -6%
PBIT 9,111 9,890 -8%
PBIT/ Total Turnover (%) 45% 46%
Power Generation – million 266 275 -3%
Power export (%) 66% 66%

The profitability in the Cogeneration business is lower as previous year includes income from REC to the extent of 310.11 crore, whereas no such income accrued in the current year.

Distillery Business

Rs. lakh
Description 2018-19 2017-18 Change %
Turnover 21,398 11,589 85%
PBIT 13,271 2,674 396%
PBIT/Turnover (%) 62% 23%
Operating days 312 256 21%
Production (KL) 48,035 26,624 80%
Sales Volume (KL) 51,279 28,093 83%
Avg. realisation price of 41.51 39.36 5%
alcohol /litre (net of
excise duty)

The improved profitability in FY 19 is due to increase in operating days and higher capacity utilisation which resulted in higher production by 80% and corresponding increase in sales volume. The higher profitability is also contributed by lower raw material prices.

The Companys new 160 KLD distillery at its Sabitgarh sugar unit will further increase its distillation capacity and is also setting up an incineration boiler at its existing distillery which will enable it to operate for 330 days while ensuring zero liquid3discharge.


Rs. lakh
Description 2018-19 2017-18 Change %
Turnover 13,308 11,177 19%
PBIT 3,814 3,142 21%
PBIT/Turnover (%) 29% 28%

The Gear business has performed well, both in terms of turnover and profitability, and has received orders of 3177.76 crore during the year, including long tenure orders of 3 26.00 crore. The outstanding order book as on March 31, 2019 stood at 3176.18 crore including orders of 3 74.90 crore executable beyond FY32019-20. The Company is exploring new products, geographies and actively engaged with the Defence Sector to tap business opportunities to further improve its turnover and3profitability.

Water and Wastewater Treatment Business

Rs. lakh
Description 2018-19 2017-18 Change %
Turnover 24,915 17,567 42%
PBIT 733 -1,394
PBIT/Turnover (%) 3% -8%

The turnaround in the performance of Water business during the current year was due to higher intake of orders, which enabled the business to achieve higher turnover by 42% and achieved profit of 37.33 crore as compared to loss of 313.94 crore in the previous year.

During the year, orders of 31,030.4 crore (including O&M) were booked as against orders of 3 161.50 crore (including O&M) in FY318. Orders in hand were at 31,313.59 crore (including long term O&M contracts of 3512.25 crore).


Major changes in the Balance Sheet items are explained as hereunder:

NON-CURRENT ASSETS Property, Plant and equipment

During the year, there have been additions to the extent of 353.15 crore. These mainly include construction of additional molasses tanks and additional sugar storage space for the Sugar business.

Capital Work-in-Progress

The Capital Work-in-Progress of 3204.77 crore mainly include expenses incurred for the project of setting up a new 160 KLD distillery at the sugar unit situated at Sabitgarh (3 139.86 crore) and towards installation of incineration boiler in existing distillery at Muzaffarnagar (348.79 crore).

Income Tax Assets (net)

The income tax assets (net) represents amount receivable in view of various appeals decided in favour of the Company, the refund procedures of which are in progress.



Inventories are higher at 32,118.66 crore as on March 31, 2019 from 3 1579.19 crore as on March 31, 2018. The higher level of inventories held as on March 31, 2019 is due to 27% higher sugar inventories held in quantitative terms and due to higher rate of valuation. In view of excess production of sugar in the country, sugar is sold as per the monthly releases announced by the Government for sugar mills.

Other Current Assets

It has increased from 3 86.45 crore as on March 31, 2018 to 3 132.78 crore as on March 31, 2019, mainly due to higher amounts incurred by the Water business on the construction contracts in view of increased activities and such amounts remain recoverable from customers pending contractual milestone billing.



Share Capital

It has remained unchanged during the year.

Other Equity

During the year, the reserves and surplus increased by 3197.42 crore (23%) to 31,052.49 crore due to profit earned during the year and transferred to Retained Earnings.


Total long-term borrowings at the year-end, including current maturities of long-term borrowings, are at 3 490.49 crore as against 3165.78 crore as at the end of the previous year. During the year, repayments were made to the extent of 3129.29 crore. The long-term borrowings comprise loans of 3 364.00 crore availed from the UP Government under Scheme for Extending Financial Assistance to Sugar Undertakings – 2018 (SEFASU -2018) in November 2018 at a simple interest rate of 5% p.a. & 390.00 crore availed in February/March 2019 under SEFASU-Distillery Projects (at 50% interest subvention from GoI for a loan period of 5 years, subject to a ceiling of 6%).

Other Non-Current Liabilities

Other Non-Current Liabilities are higher at 329.47 crore as on March 31, 2019 as against 31.41 crore as on March 31, 2018 mainly due to recognition of deferred grant in respect of concessional loan of 3364.00 crore availed from the U.P. Government.



Short-term borrowings are higher at 3 1,235.41 crore as on March 31, 2019 as against 3 1,076.47 crore as on March 31, 2018. The increase is mainly in view of higher sugar inventory held at the year end.

Trade Payables

Trade payables are marginally higher at 3637.61 crore as on March 31, 2019 as against 3628.05 crore as on March 31, 2018.

Other Financial Liabilities

Other Financial liabilities are lower at 3 126.09 crore as on March 31, 2019 as against 3164.26 crore as on March 31, 2018. This is primarily due to lower current maturities of long term loans as on March 31, 2019.

Other Current Liabilities

Other Current liabilities are higher at 3 135.44 crore as on March 31, 2019 as against 3 79.90 crore as on March 31, 2018. The increase is primarily due to increase in advances from Customers on account of higher order booking in Water business Group.


The Company follows a well-structured Enterprise Risk Management (ERM) Policy, which requires the organisation to identify the risks the businesses are exposed to and to categorise them based on their severity. Mitigation plans are laid out for each risk along with designation of an owner thereof. It is the endeavour of the Company to continually improve its systems, processes and controls to improve the overall risk profile of the Company. The ERM policy defines the risk parameters within which the businesses should operate. It helps to build a discipline within the organisation wherein all business decisions are taken after assessing the attendant risks and formulating effective mitigation plans to contain the impact of such risks. Since the Company is engaged in diversified businesses having completely different risk profiles, Risk Management Framework for each business has been devised considering its complexity and uniqueness.

Sugar business of the Company is agro based and is largely dependent on uncontrollable climatic factors and Government Regulations and Policies whereas the Engineering business relates to capital goods and infrastructure sectors, which are dependent on the economic growth of the country.


Sugar business is exposed to significant external risks, which mostly are uncontrollable and thus, it is imperative to optimise the controllable business productivity and efficiencies on a dynamic basis to counteract the impact of such external risks. Other internal risks are moderate and are by and large predictable and manageable.

It is the objective of the Company to be amongst the top performers in UP, way above the average, so that it remains less impacted by the cyclicality associated with this industry. During Season 2018-19, the Company has achieved recovery of 11.79% (41 basis points over the previous season), which is 31 basis points higher than the average recovery achieved in Uttar3Pradesh.

Some of the key external risks which the Sugar business faces with are described herein below:

Risk Mitigations
Risk of over dependence on Governments policies and support: The Government is unlikely to withdraw support as it recognises
There has been excess production of sugar in the country in that the cane prices are unrealistically high vis--vis prevailing
the last 3 years, with production outstripping demand and sugar prices and any significant decline in sugar price may
resultantly, sugar stocks in the country are estimated to increase lead to non-payment of cane dues. For long-term solution, the
to 14.5 MMT as on September 30, 2019 from 10.72 MMT as on Government has announced a new Biofuel Policy in which it
September 30, 2018 and 3.88 MMTs as on September 30, 2017. has permitted production of ethanol from B-heavy molasses
In view of excessive supply of sugar, sugar prices had collapsed and sugarcane juice. It is also offering interest benefits on loan
and the Government had to intervene with various schemes and availed to set up distillation capacities for the production of
policies to support the sugar prices and to regulate the supplies ethanol. Subject to appropriate pricing of ethanol produced from
in the market. Besides providing soft loans to the industry to various feedstocks, it could be a game changer for the industry
pay cane dues, the Government also introduced a policy for and sugar mills will have the flexibility to regulate production of
mandatory export of sugar by all sugar mills to liquidate surplus sugar in favour of ethanol.
sugar stocks in the country. All these measures helped sugar
industry to meet challenging conditions.
Risk of Climatic factors: In the State of U.P., in view of large irrigated areas, the impact of
The climatic factors, such as, monsoon, flood, drought and crop drought or lower rainfall is not very much pronounced as compared
diseases impact the yield and sugar recovery from cane. Lower to other monsoon dependent sugarcane producing States such as
yields result in lower cane availability to sugar mills whereas Maharashtra and Karnataka. Further, cane staff of the Company are
lower sugar recovery leads to higher cost of production. quite vigilant and after the sowing season, they closely monitor the
growth of sugarcane and disease infestation so that timely action
could be taken to avoid or minimise the damage.
Sugar Price Risk: The domestic sugar prices are presently not aligned with either international prices or domestic sugar stock position in view of Minimum Selling Price of sugar prescribed by the Government along with regulated monthly sales system limit the supplies.
The sugar prices vary based upon demand and supply position in the country. In the periods of over-production, due to excessive supplies, the sugar prices decline whereas during period of short-production, due to demand being more than the supplies, the sugar prices increase. Variation in sugar price has significant impact on the profitability of the Company. The Company endeavours to enhance overall realisation price by manufacturing refined sugar (which forms 40% of the total production) and pharmaceutical grade sugar, which fetch premium over normal sulphitation sugar.
Working Capital Risk Management: To meet the requirements of increased working capital, the company deploys a judicious mix of own funds and borrowed funds so that operations could be managed effectively without steep rise in the finance cost. Further, the Government also introduces maintenance of buffer stocks and provide subsidy to meet the inventory carrying cost associated with the buffer stock.
In view of excessive production in the last three years, the Company is holding inventories which are 27% higher than as on March 31, 2018 and 46% higher than as on March 31, 2017. Additional borrowings to meet increased working capital requirements would entail higher finance cost whereas reduction in the quantum of borrowings will increase the cane dues.


The Gears and Water businesses are in the capital goods and infrastructure sectors and are largely dependent on the industrial and general economic conditions in the country which stimulate demand of the products of our Engineering businesses. These businesses are exposed to the following major risks:

Risk Mitigations
Risk of economic slow-down: Gears business
Slow-down in the economy results in sluggish demand of the products of the user industries, which in turn has adverse effect on investment spend on capital goods required for capacity creation or modernisation. While generally the position of slow down still continues, buoyance in demand has been witnessed in certain business segments relating to our business. – in Products as well as in services. The Company is also working towards aligning to ‘Make in India initiative in the Defence sector in various products which is expected to gradually result in increased sales and product diversification in the coming years.
Scarcity of funds: Water business
The sluggish demand puts financial stress on the industrial companies and in view of stressed financials and risk aversion, the lenders generally subject the projects to stringent diligence before arriving at funding decisions. The user industries are forced to defer their expansion plans in view of delay in funding, resulting in poor off-take of capital goods. In the case of Water business, we had been affected by slow pace of finalisation of orders for which we had tendered but during the year, we have received substantial orders which would allow us to operate profitably. We have also secured a prestigious order for setting up a sewage treatment plant at Mathura under ‘Namami Gange programme on hybrid annuity terms.
Technology risks: Being associated with world premier gear manufacturing companies, best technology is available with the Company.
It is extremely vital for the Engineering business to offer technology and benchmark efficiencies at par with the competition and in the event of a significant gap in its offerings as compared to its peers, the customers may not prefer the products of the Company. Additionally, the Company is actively engaged in R&D activities to develop its own products to broad-base its product offerings.
In respect of water business, the Company has access to almost all technologies currently being used, including through its Israeli associate.
Project delays and payment risks:
On account of financial problems with customers, including non- achievement of financial closure, the project may get delayed, resulting in credit risks, cost overruns and blockage of working capital. The Company does proper diligence on its customers prior to accepting any order, which includes evaluating its financials, to ensure financial closure of the project, credit ratings (if any), track record and market feedback, and continues to closely monitor any financial stress which the customer may be subject to during the execution of the project.
In view of financial stress in certain sectors, the water business is generally not inclined to accept orders from those sectors except in cases with special merit.