Triveni Engineering and Industries Ltd Management Discussions.



As one of the largest agro-based industries in India, with a total turnover of over 1,00,000 crore, the Sugar industry, which includes sugar and its co-products, contributes significantly to the nations socio-economic development.

In the Sugar Season (SS) 2018-19 (October to September), around 732 mills produced more than 33 million tonnes of sugar, making India the worlds largest sugar producer. India also maintained its leadership position as the worlds largest consumer. The industrys value chain encompasses around 50 million farmers, along with around 2.5 million farm and industrial workers who are involved in sugarcane farming and the sugar manufacturing value chain.

Having emerged as a major driver of the countrys progress, the Sugar industry continues to be central to the Government of Indias strategic focus. The Governments proactive interventions have been crucial for the industry, which faces tremendous challenges due to excess production and carryover stock. The Government reforms have, in fact, been critical to the success of the sugar companies in recent years.

Among the key policy interventions of the Government are the creation of buffer stock, provision of soft loans, establishment of Minimum Selling Price (MSP) with a controlled monthly release mechanism for the sale of sugar, and the introduction of a financially supported export programme. These interventions have helped the country in maintaining the demand-supply balance for the Sugar industry, while securing the livelihood of farmers and ensuring that sugar companies do not face financial stress.

Further supporting the supply side management of the Sugar industry is the lower quantum of sugar production achieved as a result of the Governments thrust on ethanol production. Prompt approval of projects related to ethanol capacity enhancement assisted the diversification of the industry and the diversion of surplus sugarcane juice/syrup and B-heavy molasses towards the production of ethanol during the year.

The expansion of the global sugar deficit was also a positive factor in raising global sugar prices, resulting mainly from lower sugar production in Brazil and Thailand, thus leading to supply side shocks. This has further augmented the Indian sugar industrys export programme.


Market Analysis

As a major propeller of Indias progressive agenda, the Indian sugar industry has emerged as a key driver for the nations rural economic development. A decade of concerted sugarcane development and adoption of more scientific agronomical practices, together with timely regulatory changes, has led to significant transformation in the Indian sugar industry over the year. It has positioned India as a leading producer of sugar in the world.

Furthermore, the extensive sugarcane development programme undertaken by the industry has helped farmers to not only increase their yields but also double their incomes. Mechanisation of sugarcane farming, introduction and propagation of early maturing and high sucrose sugarcane varieties, adoption of the latest scientific techniques of farming, inter-cropping (the ability to plant two crops at a time) etc. have strengthened the financial robustness of sugarcane farming in the country. However, the sector is still impacted by weather conditions, such as the vagaries of the monsoon.

During SS 2019-20, sugarcane area, as reported by the Agriculture Department, was 52.45 lakh hectares, down by 5.51% year-on-year. The major drop was accounted by the states of Maharashtra and Karnataka, which were adversely impacted by poor water availability in the plantation period and floods during the crucial growth stage.

Sugar Production

As on March 31, 2020, the countrys sugar output for SS 2019-20 stood at 23.3 million tonnes, down by 6.4 million tonnes year-on-year. COVID-19 has impacted the sugar production positively, as gur (jaggery) and khandsari (unprocessed sugar) manufacturers shut down operations in UP early because of the lockdown, which led to the diversion of an additional quantity of sugarcane to mills for crushing. The sugar production in the country, till May 31, 2020, stood at 26.82 million tonnes, and is estimated to be over 27 million tonnes in SS 2019-20. This decline in production is a result of reduced output from Maharashtra and Karnataka, as well as the diversion of B-Heavy molasses towards ethanol production, which resulted in lower sugar output by around 0.5 million tonnes. The diversion during this season was twice the quantity diverted during the previous season.

Sugarcane Pricing

The Central Government announced Fair and Remunerative Price (FRP) for sugarcane for SS 2019-20 at 2,750 per tonne - unchanged from the previous year, as per the recommendations of the Commission for Agricultural Costs and Prices (CACP). The UP Government also retained the State Advised Price (SAP) at the level of the previous sugar season, at 3,150 per tonne for normal varieties delivered at factory gate, with a premium for early maturing varieties and a discount for sugarcane delivered at out centres as well as for rejected varieties.

The high cost of sugarcane, and resultant higher cost of production of sugar, makes it difficult for Indian manufacturers to compete in the international market, and adversely affects the sugar exports programme. Under the circumstances, exports are viable only with Export subsidy or financial assistance from the Government. Sugarcane price in India is 60-70% higher than that of Brazil or Thailand.

As per the Food Ministrys data, as on May 28, 2020, sugarcane arrears in sugar season 2019-20 stood at 17,134 crore on FRP basis and 21,238 crore on SAP basis. Sugar prices remained range bound, and in most parts of the country remained just above the MSP, thereby impacting the capability of the mills to pay sugarcane farmers. CACP, in its recommendations to the Government for the fixation of FRP, has strongly recommended implementation of the Revenue Sharing Formula (RSF) based on revenue generated from sugar and primary co-products, as earlier recommended by the Dr.œRangarajan Committee. Adoption of the formula by all States is the key to long-term sustainability of the Sugar sector. During the period when RSF is lower than FRP, the difference can be paid to the farmers through a Price Stabilisation Fund (PSF), which can be created by imposing tax on soft drinks / beverages, as well as dual pricing for industrial and household sectors, that can be planned to generate extra funds and keep those under PSF. The Commission recommended setting up of a Committee to explore various possibilities for managing the PSF.

CACP also recommended the abolition of SAP and adoption of FRP uniformly, throughout the country. In case the State Governments still decide to announce SAP, the difference between FRP and SAP should be directly paid by the State Government to the farmers.

While the Government has supported the industry with soft loans, benefits of MSP, buffer stocks, export subsidies and incentives, the root cause - mismatch between sugarcane price and sugar price - has remained unresolved. In order to bring financial stability to the Sugar industry, key reform for linking sugarcane price with sugar price is essential.

Sugar Prices


The average sugar price trend showed volatility during FY 20, with a peak of 3,490 per quintal in September 2019 from a bottom of 3,210 per quintal in July 2019. The variation in the domestic sugar prices was primarily due to difference in the monthly release of sugar for sale between various states of the country. Sugar price realisation for Triveni has always been much above the Minimum Selling Price (MSP) announced by the Government.

Domestic price is more fundamentally driven by the quota system, with the Government determining the quantity to be supplied in a month. This is done through monthly despatch quota prescribed for each sugar mill, taking into consideration the consumption pattern. It allows the Government to regulate the prices subject to MSP. The consumer demand in India is almost consistent but institutional supplies are based on seasonal factors and festivities.

From the above graph, it can be seen that a dip in sugar prices was followed by a rise in price levels and vice versa. This was due to the checks by Department of Food and Public Distribution (DFPD) with regard to liquidation of stocks and imposition of balanced monthly despatch quota for each sugar factory. Throughout the year, this variation in prices also helped in keeping under check the speculative stocks positioning by Institutional buyers and the volume of sugar inventory in transit. A few deficit states, like Andhra Pradesh, Telangana and Tamil Nadu, were well catered by supplies from the Western states of India, whereas majority of Gujarat and Rajasthan markets were covered by the North Indian mills.

Due to the lockdown imposed by the Central Government from the last week of March 2020, sugar prices have fallen to the level of Minimum Selling Price (MSP) of 31 per kilo from 32.5 per kilo in February 2020. The sugar mills were unable to fulfil their monthly sales quota allocated by the Government due to the significantly lower institutional demand in this period. The drop in sales consequently led to pressure on the working capital requirements of sugar mills, which further negatively impacted the sugarcane payment to farmers.


International price contracts of both raw and white sugar traded mostly based on Thailand and Brazil production estimates. After a peak of 15.78 USD cents/pound, the near-month contract of raw sugar dipped to 10 USD cents/pound.

Likewise, white sugar plunged to USD 294 per tonne after touching a peak of USD 451 per tonne.

The most challenging part of the Surplus to Deficit price trend was the transitional changes in the fundamentals, in addition to some other factors like drastic price decline against short of large specs, Chinas slow buying, Indian export subsidies etc. Thailands varying crop estimates, El Nio effects and regional carry forwards also triggered fluctuations. Thus, both raw and white sugar prices have been under pressure – because of global oversupply on the one hand and ramping up of Indias exports on the other. White sugars premium also varied during the timeframe - from a bottom as low as USD 40. During the last fortnight of March 2020, the near-month contract was additionally under undue pressure due to COVID-19.

The Brazilian currency traded at an all-time low and oil prices also remained weak during April-May 2020. Owing to the demand destruction of sugar and fall in ethanol prices, Brazil Real came down drastically. The impact of COVID-19 resulted in lower sugar demand, stalled exports, and lower ethanol sales. The world also witnessed sharp decline in oil prices due to COVID-19 and various geopolitical factors. This impacted the mix of sugarcane usage in Brazil for manufacturing of ethanol vis--vis sugar, while in Thailand sugar production declined due to drought. With shortage of packing materials and labour at ports, there were problems in shipping sugar consignments to export markets. This resulted in decline in the global sugar prices. Lower demand adversely impacted the sale of both sugar and ethanol, with maintenance of sugar inventory and storage of ethanol emerging as major problems for integrated sugar manufacturers.

Government Policies

The Government derives its power from the Essential Commodities (EC) Act 1955, which gives it the authority to declare policies such as the monthly sales quota mechanism for individual sugar factories, the minimum selling price for sugar (MSP), the creation of a sugar buffer stock, among others. Sugar has been declared an essential commodity as it is an item of mass consumption, with sugarcane being a highly remunerative crop that attracts and supports millions of farmers and their families across the country. The controls with respect to sugar include determining the mill-wise monthly despatch quota to maintain sugar prices, subject to MSP, in order to meet consumption demand. Other controls relate to managing a buffer between the deficit and surplus states, creating buffer stocks to mitigate higher sugar inventories, export decisions to correct surplus sugar inventory, and also to provide soft loans in challenging conditions to pay the sugarcane price. The controls with respect to sugarcane are fixed as per FRP by the Central Government and in some states, including Uttar Pradesh, the State Advised Price (SAP) is fixed by the State Government. Further, the Government of India has taken several steps to increase the viability of the industry through optimum utilisation of the co-products and to encourage several streams of revenue for the sugar mills.

Typically, large inventories of sugar would have had a devastating impact on pricing, but introduction of the MSP by the Government has prevented such a collapse. It is still argued by the industry association, however, that the MSP is lower than the average cost of production of the country. MSP offers a base price and, for most parts of the country, the sugar realisations are close to MSP, whereas the average realisation for UP sugar mills for sale of crystal sugar are typically higher than MSP, with refined sugar fetching some premium to the crystal sugar. The introduction of Maximum Admissible Export Quota (MAEQ), and the subsidy linked to it, encouraged the non-coastal sugar producing states of India to actively participate in the export programme. Various initiatives were also taken to engage in bilateral talks with nearby countries to promote the export of sugar from India.

In order to maintain the demand-supply balance in the country, the Government took various timely decisions during the fiscal under review: The Cabinet Committee on Economic Affairs (CCEA) approved creation of buffer stock of 4.0 million tonnes of sugar for one year - from August 1, 2019 to July 31, 2020, which would incur estimated maximum expenditure of 1,674 crore. The reimbursement under the scheme would be met through quarterly payments to sugar mills, to be directly credited into the farmers account on behalf of the mills against sugarcane price dues.

MAEQ - An Export Quota of 6.0 million tonnes was allocated to all sugar mills on September 12, 2019, with export date till September 30, 2020. The Government notified a scheme for providing Export subsidy of 10,448 per tonne for export of sugar, covering expense on marketing cost, including handling, upgrading and other processing costs as well as costs of international and internal transport and freight charges on export of sugar. All such assistance under the scheme will be used to clear sugarcane payment dues ofœfarmers.

On July 24, 2019, the GoI announced FRP of 2,750 per tonne for sugarcane to be purchased in SS 2019-20 – the same level as in SS18-19, corresponding to 10% recovery with a premium of 2.75 per quintal for every 0.1% rise in recovery.

Demand-Supply Scenario


Indian Sugar Industry

The Government of India has fixed an export target of 6.0œmillion tonnes for SS 2019-20. However, it is expected that the likely export of sugar will be in the range of ~5.0 million tonnes, on account of the impact of COVID-19, volatility in global sugar prices etc. Port activities also slowed down amid the COVID-19, thus impacting exports. Concurrently, international sugar prices plummeted to their lowest levels in recent years, though a few exports did continue to some destinations, based on specific demand. Mills had contracted about 4.2 million tonnes of exports by the beginning of May, and exports are likely to resume in the coming months of 2020. As per the industry association, "with demand picking up, and an expected increase in demand to refill the pipeline, which will come sooner or later, sugar sales in the 2019-20 sugar season ending September may be around 0.5 million tonnes less than last year". This will reduce the annual estimated consumption to about 25 million tonnes, and as a result, the estimated sugar inventory as at the end of September 2020 would be approximately 11.5 million tonnes.

With the re-opening of the country, especially markets, malls and restaurants, in the coming days, sugar demand should rise and reach its normal levels, thus translating into better sales. However, the recovery from COVID-19 related price falls will be slow, as consumption will remain subdued and global output is also estimated to rise.

With preliminary estimates of SS 2020-21 in the range of 31 to 32 million tonnes, India is expected to face another bumper year of sugar production, where industry will need to divert substantially more sugar towards ethanol production and also actively participate in the export campaign with support from the Government.


Sugarcane crushing in the Centre South Brazil (CS) ended at 589.90 million tonnes for the 2019-20 (April-March) season, which is an increase of 2.9% from 573.17 million tonnes a year ago. In the last 22 years, this season recorded the lowest recovery and only 34.32% sugarcane was used for sugar production, with the balance 65% of sugarcane used for manufacture of ethanol. The sugar production was marginally higher by ~1% at 26.73 million tonnes as compared to the previous season.

Thailand crushed 74.89 million tonnes of sugarcane in the 2019-20 season that ended in April, and produced only 8.27 million tonnes of sugar. The ongoing drought since last year has impacted the yield per plantation, which, along with low domestic sugarcane prices, led farmers to turn to other crops.

The world sugar balance is in deficit for the 2019-20 season, mainly due to supply side shocks resulting from decline in sugar production in the key sugar producing countries of Brazil, India and Thailand.


The Central Government has been actively promoting the production and blending of fuel ethanol with petrol, and has targeted 10% blending (EBP10). Apart from being environment-friendly, ethanol also ensures fuel security for the country, conserves foreign exchange, and creates an additional revenue stream for the sugar industry to minimise the impact of its inherent cyclicality.

Demand Drivers

With population growth and increasing urbanisation pushing the need for mobility, Indias transportation sector is growing rapidly, causing dependence on oil to also concurrently rise. Considering the burgeoning oil import bill and the growing concern for the environment, there is need to adopt non-conventional fuels. While the target is 10% blending, the country had achieved about 5% blending last year under the Ethanol Blending Programme (EBP), which helped in reducing dependence on oil and lowering pollution, while saving 6,000 crore in foreign exchange annually. Ethanol has about 30% oxygen, which in turn enables fossil fuel to burn much better within the engine, thus significantly reducing the emissions. Ethanol, being a value-added product from molasses - a co-product in the manufacture of sugar from sugarcane - benefits sugarcane farmers across the country.

The Government is proactively promoting the setting up of distillation capacities for the manufacture of ethanol for blending with petrol by offering substantial subvention of interest on loans required to set up distilleries, and has fixed remunerative ethanol prices through Oil Marketing Companies (OMCs). Higher ethanol prices have been fixed for ethanol manufactured from B-heavy molasses and directly from sugarcane juice, to encourage higher volume production of ethanol. As per industry estimates, on an average, B-Heavy molasses diverted by the Sugar industry during SS 2019-20 will be equivalent to at least 0.5 million tonnes of sugar.

Demand-Supply Scenario

For the marketing year (December–November) 2019-20, Oil Marketing Companies invited bids for 511 crore litres of ethanol, against which the quantity offered in the first round is approx. 163 crore litres, of which LOIs for 156.5 crore litres have been issued. Further, in January 2020, OMCs tendered additional 253 crore litres. The drastic reduction in bids is mainly attributable to lower sugarcane production in the major ethanol producing states of Maharashtra and Karnataka. The situation was further aggravated by the UP Governments decision to increase the reservation of molasses from 16% last year to 18%, and to extend this reservation to captive consumption of molasses, which was not there last year.

The OMCs, on June 1, 2020, floated the third round of Expression of Interest (EoI) submission, inviting bids from ethanol producers for another 990 million litres of ethanol for supplies during July-November 2020. Historical information on the ethanol requirement, contracts finalised and supplied by sugar companies since 2014-15 is as under:

A notable intervention by the Government in this area has been the National Biofuel Policy, announced in 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" - First Generation (1G) bioethanol and 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 that are unfit for human consumption, for ethanol production.

The Government has fixed higher price for ethanol derived from different raw materials under the EBP, for ethanol supply from December 1, 2019 to November 30, 2020, as under:

I. The price of ethanol from C-heavy molasses route increased from 43.46 per litre to 43.75 per litre II. The price of ethanol from B-heavy molasses route increased from 52.43 per litre to 54.27 per litre III. The price of ethanol from sugarcane juice/sugar/sugar syrup route fixed at 59.48 per litre IV. Additionally, GST and transportation charges will also be payable, and OMCs have been advised to fix realistic transportation charges so that long-distance transportation of ethanol is not disincentivised In order to boost the countrys ethanol production, the Government has approved 362 projects with an investment of 18,600 crore for enhancing additional ethanol production capacity of 400 crore litres in the next two years. The total ethanol production capacity would touch 755 crore litres, which will help the country achieve 20% ethanol blending with petrol, by 2030. The Government is proactively pushing to augment ethanol production capacities in order to achieve successful 10% ethanol blending by 2022 and 20% by 2030.

During the year, the Ministry of Environment also announced waiver of green clearance requirements for distilleries that are planning to produce up to 50% more ethanol than their nameplate capacity without increasing pollution, which will help sugar mills to divert more molasses towards ethanol.


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 shut-down, reduced transmission and distribution losses, sustained local power supply, and employment generation. The importance of having high efficiency grid connected co-generation power plants for generating exportable surplus has been well established in the Indian sugar mills.

Market Analysis

The installed power generation capacity in India was 3,70,106 MW as on March 31, 2020, of which 87,028 MW 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 hydropower. 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 1,200 MW. The potential of bagasse co-generation within UP is around 1,500 MW from over 130 sugar mills.

Demand Drivers

India has witnessed sharp increase in energy consumption, triggered by high levels of economic growth and industrialisation, in the past couple of decades. Power demand in the residential sector has also increased. However, limited fossil fuel availability necessitates utilisation 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 generation for sugar mills through the sale of electricity.

Demand-Supply Scenario

The potential for bagasse co-generation lies mainly in the countrys nine key sugar-producing states, especially U.P., since it is one of the highest sugarcane-producing states. Lately, due to availability of cheaper power, there has been reluctance on the part of UPPCL to purchase bagasse-based co-generation power. The rates for bagasse-based co-generation power have thus been revised downwards by the Regulator, Uttar Pradesh Electricity Regulatory Commission (UPERC) effective from April 1, 2019.


Triveni Engineerings exceptional performance during FY 20 has to be read in the context of the macro industry scenario and the various developments cited above. The Company pursues a positive and proactive approach that is steered by its ability to harness new opportunities and expand its business outlook to effectively embrace the same.

Sugar Business Performance

Triveni operates seven sugar units spread across the state of Uttar Pradesh (U.P.). Most of the mills are located in Western and Central U.P., while one unit is located in Eastern U.P. The Company manufactures refined sugar, which constitutes over 40% of the total sugar production and fetches a premium over normal crystal sugar. The refined sugar is supplied to high grade end-users, including large institutional buyers, thereby creating a niche customer profile for Triveni. The Company also produces different grades of pharmaceutical sugar that can be customised as per the user requirements, and has, over the years, developed a large customer base for this product.

The seven sugar units strictly adhere to best-in-class manufacturing processes and quality benchmarks. The Company supplies sugar to major multinational soft drink companies, leading confectionery manufacturers, breweries, pharmaceutical companies, dairies and leading ice cream producers.

The Sugar business has performed well in FY 20, owing to continuous improvement in reducing the cost of production of sugar, backed by stability in sugar prices. Trivenis focussed sugarcane development programme, with almost cent percent high yielding and high sugared variety sugarcane, helped the farmers achieve higher return from their farm while improving the Companys profitability through improved recoveries of sugar. The 40% refined sugar production, coupled with the high grade pharmaceutical quality sugar produced by the Company, helps it secure higher realisation in comparison to its peers in the industry. Its right and proper mix of co-product capacities further helps the Company optimise its overall profitability. Over and above these factors, its strong balance sheet also contributes to the Companys success in achieving consistent profitability from all its businesses.

The biggest challenge for the sugar industry, especially in Uttar Pradesh, has been to effectively manage its working capital, which has increased significantly due to higher production and limited despatches through monthly quota. The Company has also aggressively engaged in exports under the MAEQ scheme. It fully exported its allocated export quota of 1,79,183 tonnes in FY 20. Following the second announcement of the Government to reallocate export quota to mills that have contracted 95% of the existing quantity of their initial MAEQ, and have lifted 50% of their MAEQ for export, by March 31, 2020, the Company has received further tranches of quota, aggregating to 94,210 tonnes. A substantial quantity of this additional quota has been exported. Most of the exports have been through raw sugar manufactured by the Company. Additionally, the Company is producing B-heavy molasses at three of its sugar mills. Consequently, 33.7% ethanol has been produced from B-heavy molasses in the current year.

The Company achieved recovery of 11.54% during SS 2019-20, which is 25 basis points lower than the previous season. Diversion of sugar towards B-heavy molasses, was the major reason for decline in the recovery rate. On like-to-like basis, however, the recovery for SS 2019-20 is equivalent to 11.97% as against 11.79% in the previous season. Even though the Company crushed higher sugarcane of only 0.77 million tonnes as compared to the previous season, it produced approx. 70,000 tonnes more sugar in spite of diversion of B-heavy molasses from three of its facilities. The refined sugar production from the two units of Khatauli and Sabitgarh remained at 40% of the total sugar production, which will help Triveni achieve better overall average sugar realisation. The average domestic sugar price realisation for the Company was 33,184/tonne during the year as against 31,456/tonne in the previous year.

Units Sugar Recovery (%) Sugarcane Crushed Sugar Production
2019-20 (*) 2018-19 2019-20 2018-19 2019-20 2018-19
Khatauli 11.67 11.67 2.47 2.12 0.29 0.25
Deoband 10.95 11.52 1.68 1.46 0.18 0.17
Ramkola 12.00 11.54 0.83 1.04 0.10 0.12
Sabitgarh 12.11 11.89 0.97 0.89 0.12 0.11
Chandanpur 12.25 12.40 0.95 0.89 0.12 0.11
Rani Nangal 11.22 12.35 1.03 0.87 0.12 0.11
Milak Narayanpur 10.83 11.50 0.81 0.71 0.09 0.08
Group 11.54 11.79 8.74 7.98 1.01 0.94

*For SS 19-20, on a like-to-like basis, the comparable recovery would have been 11.97%

The sugarcane crush in the current season has been also helped by extremely low diversion of sugarcane since the last week of March 2020 till conclusion of the season, as manufacturers of jaggery and alternate sweeteners stayed away due to COVID-19.

Chandanpur, Milak Narayanpur and Sabitgarh units operate incidental co-generation power plants and export the surplus power to the grid. Triveni generated power export revenue of

12.55 crore in FY 20 from these power plants.

Organic Growth through Triveni Sugarcane Development Programme

Trivenis sugarcane development programme is a key propeller of its socially and financially inclusive growth strategy. The Company works and engages continuously with farmers to increase farm productivity through its well-planned Sugarcane 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 yields, earning the confidence of about 3,00,000 sugarcane growers.

The Company has been working relentlessly with sugarcane growers, encouraging and incentivising them to adopt new technologies to promote efficiency and competitiveness. The programme is also aimed at helping the Government in achieving the goal of doubling farmers income by 2022. Trivenis focus during the year remained on the following key activities: a) Increasing productivity considerably by using new technologies b) Better farm management practices, including soil testing and mapping c) Improving sugarcane yield with propagation and adoption of high sucrose varieties d) Better irrigation techniques, since sugarcane is a water-intensive crop; Improvement in productivity also provides opportunity to save a scarce resource like water

Cumulatively, these continuous efforts have led to significant increase in sugarcane yields from the given area under sugarcane plantation, leading to increased sugarcane crushing. While the state of Uttar Pradesh showed a CAGR of 8.47% in sugarcane crushed in the past five seasons, the Company achieved a CAGR of 11.24% in sugarcane crushing during the same period, underlining the positive robustness of the Companys strategic approach.

During the past few years, the Companys sustained efforts have helped in increasing the varietal mix towards early and improved varieties of sugarcane, 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 the improved CoJ-88 variety, has helped in transforming the varietal balance. Over the years, the Company has succeeded in shifting the farmers from planting rejected varieties of cane to high yielding high sucrose varieties, resulting in overall improvement in the quantity and quality of sugarcane crushing at all the Triveni facilities.

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

Trivenis extensive Soil Health Programme is focussed on regular monitoring of the soil fertility status. The programme promotes farm holding based soil sample collection and testing, with active participation of the farmers. Based on the soil test reports, recommendations with respect to nutrients and fertilisers required for individual farms are given to help farmers improve productivity through judicious use of high quality inputs.

Trivenis sugarcane development team works closely with farmers, right from seed preparation to plantation, plant protection - pest and disease control management 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.

For SS 19-20, on a like-to-like basis, the comparable recovery would have been 11.97%

Going forward, the Company believes that the Sugar sector should explore potential applications of Artificial Intelligence

(AI) in sugarcane production management, crop and soil health monitoring, predictive crop-analysis, and also in creating a smart and digital supply chain.

Sugar Outlook

Impact of COVID-19

Even after the imposition of lockdown in the country from March 25, 2020 in the wake of the outbreak of COVID-19, sugar factories continued to operate at full capacity in view of sugar being an essential commodity. The Central and State Governments worked closely together to address the initial supply chain challenges in this period. The sugarcane crush and sugar production for the current season have ended in early June 2020, and there has been no loss of production. However, the lockdown period did affect sugar consumption due to reduced institutional demand, resulting from closure of factories requiring sugar in their products (beverages, confectioneries, sweet shops), closure of restaurants and eateries, hotels, restrictions on social gatherings etc. It is expected that this could cause sugar consumption for SS 2019-20 to decline by around 0.5 million tonnes.

The profitability of sugar mills in the country may be impacted in FY 21 due to reduction in industrial usage of sugar, lower demand for ethanol in the first quarter, and decline in exports in view of the ongoing COVID-19 crisis.

The exports programme for the Indian Sugar industry has also been impacted due to decline in international sugar prices by almost a quarter between January and April. The decline has been caused mainly because large supplier nations, including Brazil, are switching from ethanol to sugar due to lower global oil demand and low crude oil prices.

Estimated production

During SS 2019-20, states like Maharashtra and Karnataka faced some erratic agro-climatic conditions. While majority of the sugarcane areas faced drought whereas during the plantation period, in the growth stages, there were excess rains leading to floods. Parts of Southern Maharashtra and Northern Karnataka were completely submerged in water, which resulted in variation in crop estimates and led to fluctuations in the fundamental parameters driving domestic market. However, opening stocks and sugarcane production from Uttar Pradesh were enough to offset the odds. Considering active participation in the Governments export campaign by the industry, SS 2019-20 is likely to close with a stock of at least 11.5 million tonnes – including the impact of lower consumption due to COVID-19 - which represents sugar consumption of around 5 months. This is a higher inventory level as against normalised level of 3 months.

Initial crop estimates of SS 2020-21 are indicating sugar production in the range of 31- 32 million tonnes, with significant increase from Maharashtra and Karnataka. Water availability is comfortable in most of the reservoirs, which will lure farmers to roll back to their favourite and most remunerative crop i.e. sugarcane. Estimates indicate a rise in cultivation area in the range of 20-25%. The India Meteorological Department (IMD) also predicted a normal monsoon for 2020, in the range of 96-104% of normal. Also, in Uttar Pradesh, the spring planting has been satisfactory and it will pave the way for normal crop next season.

The net surplus of sugar (after exports) shall remain a major concern and there are only two options to liquidate the surplus stocks: maximisation of sugar exports and optimal diversion of B-heavy molasses and sugarcane juice/syrup for ethanol production. With lower international prices of raw sugar, despite recent depreciation of the Indian Rupee, more support from the Government will be required by way of higher export subsidy or increase in MSP in the domestic market. Improvement in ethanol prices will also result in enhanced production of B-heavy molasses for ethanol manufacturing.

Brazil, which had witnessed demand destruction of sugar and fall in ethanol prices, coupled with the COVID-19 impact, is projected by recent industry estimates to see a surge in sugar production to 41.5 million tonnes in 2020-21 from 31.0 million tonnes in 2019-20. Due to the collapse in both crude oil prices and the Brazilian currency earlier this year, sugar millers could be seen switching to sugar production again at the beginning of the new crush (45.3% sugar mix as of May 15 compared with 32.2% a year ago). Output in the North/Northeast region is expected to rise to 3.0 million tonnes, from 2.8 million tonnes last year.

In Thailand, sugar production in 2019-20 declined to 8.4 million tonnes from 14.7 million tonnes a year ago, due to the combination of a sharp drop in area under cultivation and very poor yields following drought. It is estimated that the sugarcane crush may decline further to 60-65 million tonnes in 2020-21, as the most severe drought in four decades prevented planting during a key period. However, there has been improved rainfall since March, so it is estimated that there would be only a modest drop in sugar production - to 8.0 million tonnes, with poor sugarcane prices at a time of rising prices for cassava - a key competitor for sugarcane cultivation - estimated to have driven more farmers to switch between crops.

As per recent estimates, global sugar production (including beet sugar) in 2020-21 may rise by 15.5 million tonnes to 187.9 million tonnes - a 3-year high, which would more than offset the previous years drop of 13.5 million tonnes. This will be the second highest output ever after the record crop of 201.9 million tonnes produced in 2017-18. With Brazil and India expected to produce much more sugar in the new season, world cane sugar production is seen rising by 16.5 million tonnes in the year, to 147.6 million tonnes.

Alcohol Business Performance

The Companys Alcohol business comprises two distilleries with aggregate capacity of 320 Kilo Litre per Day (KLPD). These state-of-the-art molasses-based distilleries in Muzaffarnagar district and Sabitgarh Sugar unit, Bulandshahar district in U.P, are among the largest single stream molasses-based distilleries in India. These distilleries have assured access to consistent supply of captive raw material (molasses) – C-heavy as well as B-heavy molasses. The distillery at Muzaffarnagar 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, whereas the distillery at Sabitgarh is designed to produce only ethanol. Over the last few years, bulk of the Muzaffarnagar distillerys production has been ethanol, for supplying to OMCs for blending in petrol. The ethanol produced from the distillery is also supplied to other major players in the Oil and Gas sector. The distillery at Sabitgarh started production during Q1 FY 20.

In line with the new directives and guidelines of the Government of India regarding effluent treatment, and to ensure Zero Liquid Discharge, the Company has set up concentrated spent wash (termed as SLOP) fired incineration boilers at both the distilleries. Both the distilleries are in compliance of all pollution norms. Permission has been received in respect of the distillery at Sabitgarh to operate for 350 days in a year, and permission for Muzaffarnagar distillery to operate for 350 days is expected shortly.

Performance Overview

Triveni has maintained steady growth in this business, on account of the increasing focus on ethanol production. 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 carbon footprint and results in savings of precious foreign exchange on import of crude oil. As per the bio-fuel policy of the Central Government, ethanol blending is targeted at 20% by 2030, creating continued demand from indigenous suppliers. The offtake by OMCs has been steadily improving, and Triveni has aggressively participated in all tenders issued by the OMCs for procurement of ethanol, securing sizeable quantities. Encouraged by the Government policies, both the Companys distilleries have operated with B-heavy molasses successfully.

The distillery units continued to operate efficiently and achieved high levels of the fermentation and distillation efficiencies during the year. More than 97% sales of the alcohol business was of ethanol during the year, with the balance around 3% being ENA. The total production of the distilleries for FY 20 was 93.83 million litres, while sales stood at 84.57 million litres.


Impact of COVID-19

The operations of the distillery remained normal during the lockdown period, and it continues to operate normally in view of ethanol being an essential commodity. However, during the lockdown period, the offtake of ethanol to contractual depots was severely affected due to the much reduced petrol consumption. But it was possible, even during this period, for the Company to work out arrangements with OMCs to deliver ethanol to some distant depots, so that the distillery production was not affected. It is expected that with increase in economic activities, fuel consumption will gradually increase, which in turn will lead to restoration of normal offtake of ethanol.


It will take some time before normalcy is achieved in ethanol offtake, but the Company will continue to produce B-heavy and C-heavy molasses to produce ethanol.

In view of the spread of COVID-19 pandemic in the country and the growing requirement for hand sanitizers, the Company has set up a hand sanitizer production facility at its Muzaffarnagar distillery, with production having already commenced. The Company plans to enhance the production, and also foray into manufacturing of premium hand sanitizers in the months ahead. These activities, while aimed at supporting Indias fight against the pandemic, would be a source of additional revenue streams from the distillery business in FY 21.

The Company has also decided to set up a Carbon Dioxide capturing unit at Sabitgarh distillery on BOO basis, as well as an Ash granulation plant at Sabitgarh distillery, since ash from the incineration boiler is rich in potash content. These projects are aimed at deriving value from possible new avenues.

The ethanol blending programme is a key factor for the Indian Sugar industry to balance its demand-supply scenario, as, in lean sugar years, revenue from the distillery business helps sustain operations. In SS 2020-21, a healthy ethanol blending programme will help balance the higher sugar stocks. Due to the lockdown, demand from OMCs reduced and ethanol tanks at mills are full, which is putting operations at integrated sugar plants at risk. However, the production of hand sanitizers by restructuring the production lines has helped to some extent, and going forward, it should help in earning more revenues from the distilleries.

Co-generation Business

Triveni continues to put Sugar co-products to productive use, thus also enhancing its revenue stream. 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 Uttar Pradesh Power Corporation Ltd. (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 strong 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 power tariff has been significantly reduced with effect from April 1, 2019, which is a setback for the co-generation business, and the industry association has approached the Court and the matter is currently sub-judice.

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 during the year, 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 the captive supply.

The Companys incidental co-generation facilities also performed well and its plants at Chandanpur, Milak Narayanpur and Sabitgarh units recorded good power export in 2019-20. During the year under review, the co-generation units generated 244.20 million units, while the exports to the grid were 145.34 million units. Apart from this, the incidental co-generation units of Chandanpur, Milak Narayanpur and Sabitgarh exported 39.14 million units to the State Grid.



The co-generation operations remained unaffected by COVID-19. As a relief measure, however, the Government has decided to infuse liquidity in the Distribution companies to the extent of œ90,000 crore, which should also help the UPPCL to clear the power dues of the Company.


The Companys sustained focus on sugarcane development activities in the command areas of its sugar units should lead to continued better sugarcane 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.


A powerful drive of the Companys growth strategy, the Gears Business Group (GBG) of Triveni has three distinct segments viz., Gears segment, Defence segment and Built to Print segment.


The Industrial Gears industry

The Gears Industry in India is broadly categorised into Industrial Gears and Automotive Gears. The Industrial Gears segment manufactures Gears, Gearboxes, Gear Motors and Gear Assemblies. Industrial gearboxes are a common type of power transmission devices, used as a component in various types of machineries and heavy electrical equipment. The majority of the gears manufacturers in the domestic market manufacture standard products i.e. standardised catalogue type, as it requires less customisation and engineering. The limited presence of companies in customised gears manufacturing, which requires advanced technology and stringent adherence to international standards, with requisite infrastructure and highly skilled manpower, gives Triveni a differentiated edge.

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 growth of the industrial gearboxes market.

Trivenis core product - High-Speed Gears - are 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 for products related to the Capital Goods segment. 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 lifecycle costs etc.

Business Opportunities

In FY 20, as a result of the distinctly positive policies being pursued by the Government, business sentiment and capacity utilisation improved perceptibly, and there have been indications of fresh capital investment in industrial segments like Steel, Cement, Sugar and Oil & Gas. Increased acceptance of engineered capital goods from India in global markets has further boosted sourcing from quality-conscious credible Indian manufacturers. The Government has recently announced the Aatma Nirbhar Bharat Abhiyan scheme, which is an economic package of œ20 lakh crore and will cater to the sustenance of labourers, middle class, cottage industry, Medium and Small Enterprises (MSMEs) and other industries. Under the Scheme, apart from other financial support offered to MSMEs, a major step has been taken to restrict Government procurement tenders up to 200 crore to Indian MSME companies. This will be a step towards Self-Reliant India and will support the ‘Make in India programme while helping MSMEs to boost their business. Gears business can significantly contribute to indigenisation of gearboxes to further align with the Aatma Nirbhar programme announced by Government of India. Apart from the above, there are many Government policies which may benefit the Gears business in the short and long term: BS-6 policy has given way to Refinery expansions, both brownfield and greenfield, having good potential for high speed gearboxes for all applications Pollution control equipment has been made mandatory for Thermal projects. The new standards are estimated to cut PM emissions from new thermal plants (after 2017) by 25%, sulphur dioxide emissions by 90%, nitrogen oxides by 70% and mercury by 75%


The Gears business can be segmented into three broad divisions

– Original Equipment Manufacturers (OEM) (Domestic); OEM (International); and Refurbishment segment including loose gear manufacturing.

OEM Domestic

Gears business caters to the high-speed gears used as speed enhancers and speed reducers. Triveni has leadership position in the high-speed gears segment in India, and enjoys a market share of more than 80% across all major OEMs supplying Steam Turbines, Pumps and Compressors, Forced Draft (FD) and Induced Draft (ID) Fans.

Major customers for high speed gears segment include Indian OEMs of Steam Turbines, Gas Turbines, Centrifugal Pumps and Compressors, FD and ID Fans catering to API and Non API segments. In the low-speed segment, the Company caters to gearboxes used in reciprocating compressors, pumps mainly used in Oil & Gas and Fertiliser plants. The Company also caters to the low head hydropower units which require gearboxes for power generation.

During FY 20, orders from domestic OEMs have remained nearly same as previous year. However, it was, to some extent, compensated by increased booking in the Steam Turbo Generator (STG) segment and Built to Print segment.

OEM International

At present, Gears business is supporting international OEMs in select geographies and has been successful in closing several orders. It has also started marketing in international markets with new OEMs and new countries for both high-speed and low-speed gears.

Currently, the Gears Business is supplying gearboxes to various OEMs in Japan, Korea, China, Malaysia, and Indonesia and in Europe (Italy, France, Germany, and Spain), US and Latin America. During the year, the business entered new regions of France and Korea.

Global energy demand is on the rise and needs higher investments in power generation facilities. Globally, the power generation market is substituting fossil fuel with renewables focussed on the distributed and decentralised power generating facilities. These facilities are smaller in size and uses locally available biomass, municipal and industrial waste based waste heat recovery plants and waste to energy plants etc.

With the slowdown in the global economy due to the impact of the pandemic, major investments may get delayed and there is a possibility of reduced demand for new equipment till normalcy is restored. However, in segments such as

Petrochemicals, Pipeline projects etc., the Company expects there could be demand for pumps and compressors.

During FY 20, OEM exports order booking has been slightly lower due to some of the major orders being shifted from Q4 FY 20 to FY 21 owing to the pandemic situation.

OEM Highlights:

STG segment recorded the highest share of order booking from Sugar, Cement and Paper end-users Gears business bagged multiple gearboxes orders for Indian Fertiliser expansion requirement through various OEMs for all high-speed applications First qualification orders received from a new segment of Built to Print from a major global OEM. These are high potential orders and are expected to ramp up for higher share in coming years 8 New OEMs were added to the customer portfolio in FY 20.


Another major segment of the Gears business is Refurbishment, which continues to push the Companys leadership position in the global market. The Company undertakes refurbishment of own makes and other makes of gearboxes. This segment contributes 40% of the turnover and caters to all end-users across industries.

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, Triveni finds increasing acceptance by multinational OEMs and industries for its products for their global projects – both in terms of new products as well as for providing refurbishment / replacement solutions.

In FY 20, the Refurbishment segment registered a growth of 5% in order booking, while in turnover it showed an increase of 25%. The export turnover of Refurbishment segment showed significant growth while the domestic turnover increased by 16%.

In the Loose Gears manufacturing, the Gears business undertakes limited exposure and the market dynamics of this segment is similar to the OEM segment. While there has been an increase of 42% in booking in FY 20, the turnover showed a decline of 42%, largely on account of unprecedented delays in certain deliveries by the OEMs.


The Triveni Defence business is a strategic foray guided by the Companys ability to identify and harness emerging opportunities. The segment is poised to cater to engineered equipment requirements for Defence under the ‘Make in India initiative. With extensive experience in critical rotary machinery technology, and in supplying and meeting requirements of Defence and Defence support organisations in the past, as well as Triveni Groups expertise in turbo machinery, the Defence business has successfully procured approvals for both new projects and for refurbishing requirements in Naval Defence space.

To promote indigenous design and development of defence equipment, most of the new enquiries in Indian Navy have been issued to bolster Indian industry in major mission critical equipment and services. Triveni is actively engaged with the naval headquarters, shipyards and other naval establishments for participating in major upcoming projects with indigenous designs or with Transfer of Technology (ToT) collaborations for varying products.

The Government of Indias ‘Make in India initiative has unleashed new opportunities for diverse engineered products, and Trivenis Mysuru facility is actively participating in many of these indigenous development projects. The Defence Procurement Policy 2016 focusses on self-reliance for various equipment in Design, Development and Manufacture by Indian Industry. Most of the new projects envisaged by the Defence sector are customised requirements for critical equipment, offering substantial value to the existing portfolio of Triveni Gears rotating machinery. Triveni Gears is initially focussing on Naval Defence markets, where it has gained some foothold in the critical turbo pumps space. The Defence business is also currently working on several projects under Make-In-India programme, related to engineered products as well as gearboxes for Indian Navy and Indian Coast Guard.

Some of the other opportunities being explored are propulsion gearboxes across platforms for Indian Navy and Indian Coast Guard, propulsion shafting for special projects, Gas Turbine Generators for auxiliary power, Propulsion System Integration.

The Defence business can significantly contribute to indigenisation of gearboxes in line with the Aatma Nirbhar programme announced by the Government of India.


Gears business has partnered with global OEMs for precision manufacturing of components for wind gearboxes as well as industrial high-speed gears, facilitating productivity growth and enhancement of capacity utilisation. This segment offers high potential for growth for exports in the medium to longœterm.


The Gears business achieved a gross revenue of œ 154.2 crore - growth of 16% over the previous year, with 27% higher profitability.

The total order booking during the year was œ156.8 crore and the carry forward order booking at the end of the financial year was œ152 crore.

Impact of COVID-19

Amid the lockdown announced by the Government of India from March 25, 2020, the Triveni Gears business suspended its operations for four weeks, after which partial operations commenced in adherence with the Central and State Government guidelines, leading to complete opening in a short span of time. However, there may be postponement of projects by major customers owing to challenges in liquidity, pricing pressure, challenges in supply chain and logistics etc. There could be deferment of orders both from domestic as well as international OEMs, which may have an impact on the order booking as well as despatches for the current year. The Company believes that it will take a few months to understand the impact of the entire COVID situation on this financial year and thereafter.

Business Outlook

Gears business is focussed on increasing the market share and global footprint across various industrial segments through domestic and overseas OEMs. However, due to the spread of

COVID-19 across the globe, it will have an impact in the short term, both from order booking and delivery perspective.

Sectors such as Power, Cement, Fertiliser, Petrochemicals, Steel, Paper, Sugar etc. are potential segments where the Company expects growth in the medium to long term.

The Defence business is also poised to grow as the Government of India has ambitious plans to spend on the countrys defence, especially in the naval segments. This will also augur well for Triveni to achieve growth in the medium to long term. Built to Print - the new segment which the Company entered in the last couple of years for leading OEMs - is also expected to achieve good growth, as the Company has been able to manufacture quality products customised to the customers unique requirements.

In the Refurbishment segment, the Companys foray into the international market should result in good order booking in the coming years.



The Government of Indias spending on water infrastructure is increasing year-on-year under various schemes, including specialised water and wastewater projects such as Namami Gange. The State Governments are also increasing their investments in setting up more water and wastewater treatment plants, refurbishing old and broken water supply lines, and setting up water supply projects to cater to the growing demand from urban customers. The Water business in general is largely split between municipal, industrial, commercial, agriculture and household sectors.

The municipal sector remains the most active segment, wherein substantial funds are being committed and invested across the country to increase water supply through various means. Industrial wastewater treatment scenario in India has become very dynamic in the wake of the stringent environment norms prescribed by the Central Pollution Control Board and monitored by the National Green Tribunal (NGT). In view of the fast depleting groundwater table, industrial wastewater treatment has become a viable alternate to meet the large industrial demand, and many regions in the country are mandating to do so.

During FY 20, on account of general election and elections to major state assemblies, the overall order finalisation in the country witnessed slowdown.


With water expected to become more valuable than oil as rising demand from people, industries and agriculture puts pressure on supplies, India could soon be staring at a water crisis, as pointed out by various reports by multi-lateral agencies.

The potential of water recycling to meet non-potable needs - for gardening, toilet and laundry, which accounts for at least 60% of domestic water use - is huge. In fact, many cities across the world, such as Brisbane, Singapore, Windhoek (Namibia) and Californias Orange County - are recycling wastewater for drinking. While the use of sewage for potable purposes is still to pick up in a big way globally, its use for non-potable purpose worldwide is far more common.

The water sector is seen as becoming a huge opportunity on both new projects as well as Retrofitting and Operations

& Maintenance (O&M) of existing capacities. The water and wastewater treatment market size is expected to grow at a CAGR of 5.8%, with growing urbanisation a key factor driving the market.

1. In view of the growing demand for Water, water recycling is slated to become inevitable across all metros and large cities in India. Over-dependence on the monsoon has been a major challenge for India to meet its water needs. Only 60% of the country receives irrigated water, while the rest of the land is dependent on monsoon rains.

2. According to the World Bank, the current industrial water use is about 13% of the total freshwater in India, and it will grow at a rate of 4.2% per year, rising to 228 billion cubic metres by 2025.

3. The per capita availability of groundwater 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 in order to address the ever increasing demand for water, India needs to adopt and implement innovative solutions for more efficient water management and wastewater recycling and reuse.


As per estimates, only around 30% of the wastewater generated in Indias major metropolitan cities is treated, and the cities now face severe water shortages. The River Yamunas 22-km stretch in Delhi is barely 2% of the length of the river, but contributes over 70% of the pollution load. Water scarcity and strict regulation has led many industries to adopt cluster-based water-recycling systems, especially Food, Textiles, Pharmaceutical, Chemical and Power industries. Zero Liquid Discharge systems and wastewater recycling are becoming increasingly popular in India. The Company has used this technology in projects like Balotra.

The municipal wastewater discharge has become an issue of critical concern for environmental and public health concern, with necessary interventions involving introduction of high technology and innovative waste water treatment technologies to address the problem, since the existing systems are inefficient, incomplete and expensive. It is, therefore, important to adopt an integrated approach encompassing multiple elements, such as a) minimisation and prevention, b) treatment for reuse, and c) natural self-purification.

Due to stringent revision of discharge standards for Sewage Treatment Plants (STP) in metropolitan and other areas by NGT, all older STPs have become non-compliant, and there is need for retrofitting and refurbishment of these plants. Going forward, there will be enormous opportunities in this segment across the country.

The Central Governments focus on Namami Gange for cleaning of Ganga, JICA funded projects in Delhi and Karnataka, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) programmes for Pollution abatement, Recycling and Re-use, Stricter Vigil by NGT will all be the key demand drivers. Due to COVID-19 disruption, it is estimated that new order finalisation in FY 21 may be subdued due to possibility of lack of funding.


AMRUT and ‘Smart Cities Mission is expected to create significant business opportunities for the development of basic infrastructure services in water supply and sanitation, drainage, solid waste management and sewage treatment.

"Namami Gange" programme of 20,000 crore will create Hybrid Annuity Model (HAM) based projects, with focus on arresting the municipal and industrial waste / pollution flowing into the rivers, along with creation of 2,500 MLD municipal sewage treatment capacity. This programme will also implement Zero Liquid Discharge (ZLD), with all industries required to instal real-time online effluent monitoring stations.

As water availability and quality declines and pressure mounts on industries to build Common Effluent Treatment Plants (CETP) and re-use water, the Triveni Water business will be focussing on CETPs, recycling and re-use projects with latest technologies.


Triveni Water Business (WBG) is present in both industrial and municipal segments, with focus on providing wastewater treatment solutions. It is pursuing opportunities with Namami Gange (National Mission for Clean Ganga), UP Jal Nigam, Delhi Jal Board, Bangalore Municipality, and various other clients in Engineering Procurement Construction (EPC) and Hybrid Annuity Model (HAM) / Public Private Partnership (PPP) projects. WBG is also exploring PPP format for Sewage Treatment Plant (STP) recycling opportunities.

At present, the Water Business is executing 12 EPC jobs located in Delhi, UP, Karnataka, Odisha, West Bengal, Tamil Nadu, Rajasthan and Punjab.

The business activities of WBG picked up during FY 20 due to the strong carry forward order book. The business recorded its historical highest annual turnover of 305.9 crore, with PBIT of 24 crore, in the year under review. The order in-take for FY 20 was 39.3 crore while the carry forward order book as on March 31, 2020 was 995.3 crore, including O&M orders for 482.9 crore. The operating efficiency also improved significantly during the year as the indirect cost remained almost at the level of the previous year despite 22.7% increase in annual turnover.

Going forward, majority of investments in this business are expected from the Central Government through NMCG and Japan International Cooperation Agency (JICA), besides State funding from Karnataka, UP, Delhi, MP, Bihar, Jharkhand and Rajasthan. WBG is well positioned to undertake more jobs in its chosen areas of expertise. Though the business is not actively looking to expand in the foreign market, it will continue to evaluate opportunities in neighbouring countries on case-to-case basis.

Key Highlights

1. WBG achieved historic high annual turnover of 305.9 crore in FY 20

2. Secured overseas order from Maldives for Reverse Osmosis (RO) and STP package in Joint Venture (JV) with an export firm

3. Completed EPC of 15 MLD RO Plant within the allotted time, and successfully conducted PG Test and handed over the plant to Barmer Lignite Mining Company Limited (BLMCL)

4. Near completion of 40 MLD STP based upon Sequencing Batch Reactor (SBR) technology for Bangalore Water Supply and Sewerage Board (BWSSB)

5. Near to completion of 210 MLD ISPS project for BWSSB

6. NTPC Darlipali PG test for PT-DM package completed

7. Regular participation in new bids, positioning the Water business as a major recognised force in the industry

Impact of COVID-19 on Business Performance

Due to COVID-19 notifications from Government of India and various State Governments, all WBG sites were shut down, and supply chain was disrupted, resulting in loss of revenue to the extent of approximately 35 crore on account of the following:

1. Several supplies were ready for despatch but could not move due to lockdown

2. Several supplies were ready for inspection, which had to be cancelled due to lockdown

3. Some overseas supplies reached Jawaharlal Nehru Port Trust post but the Government of India closed the post, thus preventing equipment delivery at site

4. Raw material for site works held up due to lockdown and complete stoppage of works


During FY 20, the performance of WBG from order intake perspective was muted due to slow pace of order finalisation, largely due to Central and State elections. However, prospects for the Water sector are positive for FY 21, and major projects are expected to be finalised by NMCG, JICA and State Governments. Apart from new tenders of regular EPC and HAM projects, several tenders for retrofitting and refurbishments are expected to be floated due to NGTs revised discharge standards of STPs in metropolitan and other areas.

Due to prevailing Coronavirus (COVID-19) pandemic, the Governments focus and funding is expected to be diverted towards fighting the pandemic and there could be delays in its ability to allocate funds for new projects. The Company expects some subdued activities in new business opportunities in FY 21 and the business is gearing-up to tackle these issues.

AMRUT funding, majorly from the Central Government, may catalyse opportunities in the Water sector. JICA is funding new Water projects in Delhi and Karnataka, and new bids from these states are expected. CETPs for industrial clusters like textile and tannery are being built, mainly due to intervention of NGT, and it is expected that some more opportunities will arise in FY 21. Focussed initiatives of the the Central Government will be instrumental in driving the way forward for the Water and Wastewater business for the next 4 years.


Description 2019-20 2018-19 Change %
Income from operations 442357 315156 40%
EBITDA 57283 37668 52%
Depreciation & Amortisation 7489 5695 32%
Finance Cost 7932 6799 17%
Profit Before Exceptional/Non-recurring items & Tax 41862 25174 66%
Exceptional income 282 2035
Tax 9396 5153 82%
Profit After Tax 32748 22056 48%
Other Comprehensive income -96 -137
Total Comprehensive income 32652 21919 49%

The Company has reported record turnover and profitability in FY 20. Sugar business (including Distillery and Co-generation) has achieved 50% increase in turnover with 67% increase in Profit before Tax (PBT) and the Engineering Business has achieved 17% increase in turnover and 39% increase in PBT. All the businesses have done well with the exception of Co-generation where the results have been impacted by steep decline in the power tariff for the power exported to the grid.

The much improved operating performance of the sugar operations has helped the Company to report higher profitability – sugarcane crush during the financial year increased by 9%, recovery by 15 basis points (after considering adjustment of sugar diverted in B-Heavy Molasses) and sugar production by 7%. Higher production would have normally led to increase in working capital requirements and finance cost but the Company accelerated the export programme under Maximum Admissible Export Quantity (MAEQ) Scheme of the Central Government (GoI) and exported significant quantities during the current financial year. Further, it produced B-Heavy Molasses at three sugar units which accounted for diversion of sugar to the extent of 30209 MT. As per the scheme of monthly quota by the GoI, higher quota for domestic sale was allocated to the Company as an incentive for exports made and B-Heavy Molasses produced. Consequently, sugar inventories held as on March 31, 2020 are 15% lower than the inventories held on March 31, 2019.

Depreciation & amortisation have increased by 32% mainly due to capital expenditure of œ 215 crore incurred in setting up a new distillery and & installation of an incineration boiler at the existing distillery Further, due to adoption of Ind AS 116 "Leases" Right of Use (ROU) assets were recognised which has resulted in higher charge by œ6.32 crore.

The finance cost has increased by 17% despite increase in average utilisation of working capital requirements by 40% and term loans by 165%. To help the sugar industry and check supplies in the market, the GoI had introduced a Buffer Stock Scheme under which the sugar mills are required to keep the prescribed sugar stocks, which are not permitted to be sold. Accordingly, the GoI reimburses inventory carrying costs, including the finance cost incurred on the buffer stocks. During the year, the Company has received higher buffer stock interest subsidy of œ 28.48 crore (œ 11.23 crore last year). Further, average cost of funds has reduced by 156 basis points during the year on account of availment soft loans of œ396.93 crore with interest subvention for payment of cane price and for setting additional distillery capacity as well as due to decline in applicable interest rates.

The Company has decided not to opt for lower tax rate as provided under Section 115BAA of the Income Tax Act considering the various benefits that would be lost as a result thereof. Tax charge during the year includes reversal of an amount of œ40.59 crore as a result of re-measurement of deferred tax liabilities (net) as on March 31, 2020, taking into consideration net deferred tax liabilities expected to be reversed after the Company opts for lower tax rates after utilising all available benefits under old tax regime.


Description 2019-20 2018-19 Change %
Cost of material 303297 277115 9%
Percentage to sales 69% 88%
Manufacturing expenses 23465 24650 (5%)
Percentage to sales 5% 8%

Raw Material Costs have increased by 9% commensurate with the increase in sugarcane crush by 9% and 17% increase in the turnover of the engineering businesses. However, the raw material % to sales is not very indicative for sugar business as it is directly linked to the production of sugar and not sale of sugar.

Despite higher turnover by 40%, Manufacturing expenses have reduced by 5%. In sugar business (including distillery), such costs are directly linked to the production undertaken rather than to the sales. The savings in manufacturing costs is due to low costs associated with manufacture of raw sugar which formed 24% of the total sugar production and reduced civil work quantum in the projects executed by Water Business.


Description 2019-20 2018-19 Change %
Personnel cost 25498 22387 14%
Percentage to sales 6% 7%
Administration 8802 7768 13%
Percentage to sales 2% 2%
Selling expenses 6136 2551* 141%
Percentage to sales 1% 1%

*excluding expenses of 3761 lakhs incurred on arranging exports through third parties

The increase in personnel cost is due to additional manpower recruited for the new distillery commissioned during the year and due to annual salary increase. The increase in Administrative expenses is on account of increased activity, including operations of a new distillery. Selling expenses have increased due to transportation cost incurred for the export of sugar, majorly on FOR basis.


Revenue PBIT*
Description 2019-20 2018-19 Change % 2019-20 2018-19 Change %
Business Segments
- Sugar 443235 294777 50% 46632 30303 54%
- Engineering 44709 38223 17% 6203 4547 36%
- Others 8071 6200 30% -47 7
Unallocated/inter unit adjustment -53658 -24044 -2994 -2884
Total 442357 315156 40% 49794 31973 56%

*Before exceptional items

The Company has two major business segments - Sugar business and Engineering business. Sugar business comprises sugar manufacturing operations across seven Sugar mills, three incidental cogeneration facilities at three of its sugar mills, three Co-generation plants located at two of its Sugar mills and two Distillery units (including a newly established distillery), all located in the State of U.P. During the current financial year, a new 160 KLPD distillery adjacent to an existing sugar unit at Sabitgarh became operational in April 2019. Co-generation plants and Distillery units source captive raw materials, namely, bagasse and molasses, from the sugar mills. Engineering business comprises Gears manufacturing at Mysuru and Water and Waste Water Treatment business operating from Noida, UP and having projects all over the country.


Description 2019-20 2018-19 Change %
Turnover 385811 253100 52%
PBIT 30253 7921 282%
PBIT/Turnover (%) 8% 3%
Sugarcane crush (MT) 8393060 7684100 9%
Recovery % 11.93%* 11.78% 1%
Sugarcane cost (landed) ( /MT) 3333 3344 0%
Production of sugar (MT) 970731 905431 7%
Volume of sugar sold (MT)
Domestic 795096 753251 6%
Export 274449 5816
Total 1069545 759067 41%
Average sugar realisation price ( /MT)
Domestic 33184 31456 5%
Export (Net of transport costs & excluding subsidies) 19716 20768 -5%
Average 29728 31375 -5%

* After considering adjustment of sugar diverted in B-Heavy Molasses

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

Much improved PBIT during FY 20 is attributed to higher sales volume by 41%. Profitability of FY 20 also includes export related and buffer stock subsidies of œ100.5 crore pertaining to last year booked during the current year after fulfilment of the prescribed conditions, and subsidies of œ57.66 crore relating to current year could not be recognised in view of non-fulfilment of the prescribed conditions and the same will be recognised subsequently on completion/fulfilment of relevant conditions.

Co-generation Business

Description 2019-20 2018-19 Change %
Turnover 18307 20279 -10%
PBIT 5324 9111 -42%
PBIT/ Total Turnover (%) 29% 45%
Power Generation – 244 266 -8%
million units
Power export (%) 60% 66%

The profitability in the Co-generation business is lower than previous year as UPERC has reduced power tariff by approx. 40% effective April 1, 2019. Further, the power exported during the current financial year is lower due to increased requirements of sugar operations, frequent rains and consequent need to optimise bagasse utilisation.

Distillery Business

Description 2019-20 2018-19 Change %
Turnover 39117 21398 83%
PBIT 11055 13271 -17%
PBIT/Turnover (%) 28% 62%
Operating days 308 312 -1%
Production (KL) 93826 48035 95%
% Production from BH Molasses 34% NA
Total Sales Volume (KL) 84566 51279 65%
% Ethanol to total sales Volume 97% 97%
% Ethanol sales produced from B-heavy molasses 28% 0%
Avg. realisation price of alcohol /litre 46.09 41.51 11%

The current year includes operations of a new 160 KLPD distillery commissioned in the first quarter as a result of which capacity of the Company has doubled to 320 KLPD from 160 KLPD earlier. The company has also set up an incineration boiler at its existing distillery for ensuing zero liquid discharge.

Due to increase in capacity, the production and turnover has increased substantially during the current year. Sales volumes in March 2020 were impacted on account of COVID-19. Lower PBIT during the year is mainly on account of abnormally lower raw material (molasses) prices last year, which have increased substantially during the year based on market dynamics. The Company has for the first time produced B-heavy molasses at three of its sugar units for the production of Ethanol. It has helped the Company in optimum utilisation of distillation capacity as well to capture higher ethanol prices as applicable to ethanol produced from B-heavy molasses.

Average realisation price has improved by 11% as the Ethanol produced from B-heavy molasses fetches higher prices - œ54.27/ litre as against œ43.75/litre for Ethanol derived out of C-heavy Molasses.


Description 2019-20 2018-19 Change %
Turnover 15422 13308 16%
PBIT 4854 3814 27%
PBIT/Turnover (%) 31% 29%

The Gear business has performed well, both in terms of turnover and profitability. The business operations were impacted in March 2020 due to COVID-19. The Company is exploring new products, geographies and actively engaged with the Defence Sector to tap business opportunities for further growth and diversification.

The total order book at the year end, executable in FY 21, is at œ93.81 crore as against œ101.28 crore as on March 31, 2019. Gears Business would also be carrying long tenure orders of œ58.15 crore which will be executed after FY 21.

Water and Wastewater Treatment Business

Standalone Consolidated
Description 2019-20 2018-19 Change % 2019-20 2018-19 Change %
Turnover 29287 24915 18% 30593 24933 23%
PBIT 1349 733 84% 2401 719 234%
PBIT/Turnover (%) 5% 3% 8% 3%

The consolidated results include financial results of a wholly owned subsidiary, Mathura Wastewater Management Private Limited (MWMPL), which is engaged in the execution of a project awarded by National Mission of Clean Ganga (NMCG) under Namami Gange programme for the city of Mathura, UP.

The improved performance of water business during the current year, both in terms of turnover and profitability, is due to higher intake of orders received in FY 19. The business operations were impacted in March 2020 due to COVID-19.

During the year, orders of only œ39.29 crore were received by the Company. The Company has participated in large number of projects in pipeline, the finalisation of several projects were delayed due to various disruptions during the year. Orders in hand at the year-end are at œ995.32 crore (including long-term O&M contracts of œ482.88 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 œ 297.06 crore. These mainly include capitalisation of a new 160 KLPD distillery for œ 155.96 crore, incineration boiler project at existing distillery for œ59.03 crore, construction of additional molasses tanks for œ14.84 crore and other CAPEX incurred for smooth operation of the business.

Capital work-in-progress

The Capital work-in-progress of œ26.16 crore mainly includes assets under installation at the Muzaffarnagar distillery and sugar units at Sabitgarh & Chandanpur.

Right of Use (ROU) Assets

The Company has during the year adopted new Ind AS 116 "Leases" and applied the same to lease contracts existing as at April 1, 2019 using the cumulative effect method and accordingly, recognised ROU assets of œ25.67 crore as on the transition date i.e. April 1, 2019. Written down value of ROU assets as on March 31, 2020 is œ19.61 crore.

Investments in subsidiaries and Associates

Investments are higher at œ69.77 crore as on March 31, 2020 as compared to œ 49.87 crore as on March 31, 2019, mainly due to investment of œ19.90 crore in the equity share capital of wholly-owned subsidiaries for their respective businesses, including œ13.50 crore in MWMPL.

Income Tax Assets (net)

The income tax assets (net) represents amount receivable upon completion of the assessment and against various appeals decided in favour of the Company, the refund procedures of which are in progress. During the year, refunds of œ7.62 crore were received.


Inventories are lower by 10% at œ1912.13 crore as on March 31, 2020 against œ2118.66 crore as on March 31, 2019 due to 15% lower sugar inventories held in quantitative terms. Reduced inventory levels are a result of higher sugar sales volumes by 41% helped by substantial exports and diversion of sugar in the production of B-heavy molasses.

Trade Receivables

Trade receivables are higher at œ 295.32 crore as on March 31, 2020 from œ 237.97 crore as on March 31, 2019. Water Business and Distillery operations have higher receivables due to increased business activity.

Other Current Assets

It has increased from œ191.44 crore as on March 31, 2019 to œ437.51 crore as on March 31, 2020, mainly due to amount of œ235.14 crore (Previous year – œ6.93 crore) receivable from the Government towards grant / subsidies relating to exports, buffer stock and subvention of interest.

EQUITY Share Capital

The Company had during the year successfully completed buyback of 1 crore fully paid up equity shares and the share capital has reduced correspondingly.

Other Equity

During the year, the reserves and surplus increased by œ193.37 crore (18%) to œ1245.86 crore due to profit earned during the year and transferred to Retained Earnings, as reduced by premium paid on buyback of shares and interim dividend paid.


Total long-term borrowings at the year-end, including current maturities of long-term borrowings, are at œ 614.72 crore as against œ490.49 crore as at the end of the previous year. During the year, term loans of œ211.93 crore were availed and repayments were made to the extent of œ 87.70 crore. Term loans of œ 610.75 crore are at concessional interest rate or carry substantial interest subvention.

Other Non-Current Liabilities

Other Non-Current Liabilities are lower at œ 18.22 crore as on March 31, 2020 as against œ29.47 crore as on March 31, 2019 mainly due to utilisation of deferred grant in respect of concessional term loans.


Short-term borrowings are lower at œ943.44 crore as on March 31, 2020 as against œ1235.41 crore as on March 31, 2019. The utilisation is lower due to better working capital management resulting in lower sugar inventory held at the yearend as well as surplus funds parked in the cash credit account.

Trade Payables

Trade payables are higher at œ756.40 crore as on March 31, 2020 as against œ637.61 crore as on March 31, 2019 due to increased business activity.

Other Financial liabilities

Other Financial liabilities are higher at œ 200.79 crore as on March 31, 2020 as against œ126.09 crore as on March 31, 2019. The increase is mainly owing to increase in current maturities of long-term loans by œ67.62 crore.

Other Current liabilities

Other Current liabilities are higher at œ 153.56 crore as on March 31, 2020 as against œ 135.44 crore as on March 31, 2019. The increase is primarily due to higher liabilities towards customers under construction contracts of Water Business on account of initial higher billing.


Ratios Mar ‘20 Mar ‘19 Remarks Formula used for ratios
Debtors turnover 16.59 12.84 The ratio is higher due to higher Revenue from Operations by 40%. Revenue from Operations/Average Trade Receivable
Inventory turnover 1.85 1.45 The ratio is higher on account of higher quantities and faster pace of sugar sold during the year. Cost of Goods Sold / Average Inventory
Interest coverage 6.28 4.70 Improvement in the ratio is attributable to 56% increase in Profit before Interest and Tax (PBIT). PBIT/Finance Cost
Current ratio 1.28 1.18 Higher ratio is due to improved financial position as a result of higher profitability, better working management and lower availment of short-term borrowings. Current Assets / Current Liabilities
Long Term Debt-Equity 0.48 0.45 The ratio is slightly higher due to availment of term loans under various interest subvention Schemes. Long Term Debt / Equity
Total Debt-Equity ratio 1.20 1.59 The ratio is lower due to reduction in short-term borrowings and increase in Equity due to higher profits earned during the year. Total Debt (after Reducing Cash & Cash Equivalent) / Equity
Operating Profit Margin (%) (OPM) 11.26% 10.15% OPM is higher due to higher profitability, significantly contributed by Sugar Business. Operating Profit (PBIT)/ Revenue from Operations
Return on Net Worth (%) 28.81% 23.42% Improvement in return is due to higher Profit After Tax (PAT). PAT/ Average Net worth (Excl. Capital & Amalgamation Reserves)


The Company is engaged in multiple businesses and there are unique risks associated with each business. The Company follows a well-structured Enterprise Risk Management (ERM) Policy, which requires the organisation to identify the risks associated with each businesses and to categorise them based on their impact and probability of occurrence – at the business level and at the entity level. 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.


Before dwelling on the normal business risks, it is imperative to evaluate the recent emergent risks as a result of COVID-19. The pandemic has brought about most unprecedented public health and socio-economic crisis in our lifetime across the globe. To check the spread of virus, the Government declared complete lockdown from March 25, 2020 till May 3, 2020 during which period only essential services were permitted to operate. Subsequently, the lockdown is being relaxed in phases. Many sectors of the economy have been badly hit due to disruption in activities and they may take time to attain normal operations due to acute constraints relating to financial resources, supply chain, demand and labour availability.

It seems that the major business of the Company – Sugar along with Cogeneration and Distillery is not likely to be impacted. These businesses, being essential goods in nature, operated uninterruptedly during the lockdown period with the active support of the State and Central Government in overcoming supply chain challenges. The demand of sugar and ethanol declined temporarily during the lockdown period but since then these have been normalised.

The business operations of engineering business were impacted during the lockdown period due to the closure of the factory/ project sites but these resumed normal operations by the middle of May 2020. The normalcy in the business environment depends on how the pandemic is controlled and how the business cycle from supply chain partners to the customers is normalised. There is presently a great deal of uncertainty but the initial feedback from customers is encouraging. It is premature to assess any long-term impact.

The businesses are observing all precautions at the work places to keep the employees safe and to avoid spread of the virus. All prescribed protocols and guidelines are being followed. Wherever feasible, model of work from home is being followed and in view of travel restrictions, the digital modes are being followed to maintain active contacts with the supply chain partners and customers.


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, much above the average, so that it remains less impacted by the cyclicality associated with this industry. During Season 2019-20, the Company has achieved comparable recovery of 11.97% - 18 basis points over the previous season and 24 basis points higher than the average recovery achieved in Uttar Pradesh.

Some of the key external risks to which the Sugar business is exposed are described hereinbelow:

Risk of over dependence on Governments policies and support


After having achieved production of ~27.0 million tonnes, the sugar stocks at the end of the sugar year 2019-20 are estimated at 11.50 million metric tonnes (MMT) after considering consumption of ~25.0 MMT (reduced on account of COVID-19) and exports of ~5.3 MMT. Further, there is a forecast of 14% increase in sugar production to ~31 MMT in the sugar year 2020-21. Increased production will lead to higher inventory holdings, increased working capital requirements, higher finance costs and liquidity constraints.


The Government has been actively promoting export of sugar for the last 02 years to evacuate surplus sugar and provides subsidy to undertake exports. Further, the Government has also introduced a scheme to maintain buffer stock, presently valid until July 2020, to the extent of 4 MMT under which the

Government provides subsidy towards inventory carrying cost for the stocks allocated to be maintained by the sugar mills. The Government has been supporting production of Ethanol by using B-heavy molasses and sugarcane juice which results in diversion of sugar, which in the SS 2019-20 is estimated at 0.8 million tonnes and is estimated at 1.5 million tonnes in the SS 2020-21 in view of increased production. Pursuant to such policies, our Company had exported significant sugar in the SS 2019-20 equivalent to 24% of the production up to the year end and produced 34% Ethanol from B-heavy molasses Consequently, the sugar inventory as on March 31, 2020 is 15% lower the previous year.

The Government is unlikely to withdraw support as it recognises that the cane prices are unrealistically high which would not enable our high cost sugar to compete in the global market without any support. The liquidation of sugar stocks is imperative to improve liquidity position of sugar mills to pay cane dues. As a long-term solution for the sugar industry to be self-sufficient, the production of Ethanol from B-heavy molasses and sugarcane juice needs to be further encouraged by offering viable prices, which should result in setting up of additional distillation capacities and lastly, there should be a mechanism to pay unviable component of the cane price directly by the Government.

Sugar Price Risk


The sugar prices have significant impact on the profitability and viability of the sugar mills. In the event, the process go below the break-even levels, losses may be inflicted which may have material impact on the financial position of the company to manage its operations, including payment of cane dues and to service debts.


There are various mitigations available against this key risk, internally and externally:

a) The Government announces monthly quota for sale in the domestic market which ensures meeting demand adequately without any excessive supplies. Resultant, the prices remain range bound and excessive volatility is avoided.

b) The Government has prescribed Minimum Selling Price (MSP) of sugar below which sugar mills are not permitted to sell sugar. This mechanism avoids situations of collapse in the sugar prices due to overproduction in the country or temporarily excessive supplies in the market.

c) The Company has been focussing on improvement of recoveries and the recovery has improved by 91 basis points over the last 3 seasons. Higher recoveries lead to low cost of production of sugar and enables the sugar mill to tide over market variation in sugar prices and make the sugar operation profitable.

d) The Company produces premium quality sugar to increase overall realisation prices, The Company produces refined sugar equivalent to ~40% of its production and also produces pharmaceutical grade sugar which fetch substantial premium over plantation white sugar.

e) The sugar business of the Company comprises adequate mix of Cogeneration and distillation and because of diversified revenue streams, it is in a better position to meet and overcome various risks.

Risk of increase in Cane price


The cane price in Uttar Pradesh has remained unchanged for the last 3 years and it is possible that the cane price may increase in the forthcoming SS 2020-21. The increase in cane price may have significant impact on the financial position of the Company unless its impact is compensated by commensurate increase in sugar prices.


The Government reviews MSP of sugar from time to time and makes adjustment in the event of higher costs being incurred. It is expected that any increase in cane price will be nullified by commensurate increase in the MSP of sugar and thus, sugar industry will be largely insulated by the increase in cane price.

Risk of Climatic factors:


The climatic factors, such as, monsoon, flood, drought and crop diseases impact the yield and sugar recovery from cane. Lower yields result in lower cane availability to sugar mills whereas lower sugar recovery leads to higher cost of production.


In the State of U.P., in view of large irrigated areas, the impact of drought or lower rainfall is not much pronounced as compared to other monsoon dependent sugarcane producing States, such as, Maharashtra and Karnataka. Further, cane staff of the Company are 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.


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 of economic slowdown

Slowdown 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.

Scarcity of funds

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.

Technology risks

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.

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.


Gears business

Even during slowdown, the Gear Business has fared well in FY 20 with respect to turnover, profitability and order booking. The operations were somewhat impacted in March 2020 due to COVID-19. The business model of Gear Business is robust with main verticals being supply of Gear boxes to OEMs and Retrofitting and refurbishment business, with a focus to expand export footprints. The Company is working on new areas, such as manufacturing of Gear internals to other OEMs under ‘Built-to-Print and foray into Defence sector using a range of products which are aligned to ‘Make in India initiative. The diversified business model will enable Gear Business to avoid overdependence on few sectors and withstand sector specific cyclicality.

Water business

The order book of Water business is healthy and despite its operation getting affected in March 2020 due to COVID-19, it has reported impressive growth in turnover and profitability. The order intake had been subdued though, in view of prolonged election activities, other disruptions and finally the impact of COVID-19 towards the end of the year. These slowed down the order finalisation, which is likely to pick up momentum in third quarter of FY 2021.

In respect of water business, the Company has access to almost all technologies currently being used, including through its Israeli associate.

The Company does proper diligence on its customers prior to accepting any order, which includes evaluating its financials, ensuring 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.