uttam sugar mills ltd share price Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Your Directors are pleased to present its Management Discussion and Analysis Report as per Regulation 34(2)(e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

A. GLOBAL ECONOMIC OUTLOOK

After growing 3.1 percent last year, the global economy is set to slow substantially in 2023, to 2.1 percent, amid continued monetary policy tightening to rein in high inflation, before a tepid recovery in 2024, to 2.4 percent. Tight global financial conditions and subdued external demand are expected to weigh on growth across emerging market and developing economies (EMDEs). Projections for many countries have been revised down over the forecast horizon, with upgrades primarily due to stronger-than-expected data at the beginning of 2023 more than offset by downgrades thereafter. Inflation has been persistent but is projected to decline gradually as demand weakens and commodity prices moderate, provided longer-term inflation expectations remain anchored.

The rapid rise in interest rates in the United States poses a significant challenge to EMDEs. As the Federal Reserve has pivoted toward a more hawkish stance to rein in inflation, a substantial part of the sharp increases in U.S. interest rates since early 2022 has been driven by shocks that capture changes in perceptions of the Feds reaction function. These reaction shocks are associated with especially adverse financial market effects in EMDEs, including a higher likelihood of experiencing a financial crisis. Their effects also appear to be more pronounced in EMDEs with greater economic vulnerabilities.

State of the Indian Economy

The Asian Development Bank (ADB) projects growth in Indias gross domestic product (GDP) to moderate to 6.4% in fiscal year (FY) 2023 ending on 31^st March 2024 and rise to 6.7% in FY2024, driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem.

The growth moderation for India in FY2023 is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices. However, FY2024 is expected to see faster growth in investment, thanks to supportive government policies and sound macroeconomic fundamentals, lower non-performing loans in banks, and significant corporate deleveraging that will enhance bank lending, according to Asian Development Outlook (publication released in April 2023).

"Despite the global slowdown, Indias economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand," said ADB Country Director for India Takeo Konishi. "The Government of Indias strong infrastructure push under the Prime Ministers Gati Shakti (National Master Plan for Multimodal Connectivity) initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth."

Inflation will likely moderate to 5% in FY2023, assuming moderation in oil and food prices, and slow further to 4.5% in FY2024 as inflationary pressures subside. In tandem, monetary policy in FY2023 is expected to be tighter as core inflation persists, while becoming more accommodative in FY2024. The current account deficit is projected to decline to 2.2% of GDP in FY2023 and 1.9% in FY2024. Growth in goods exports is forecast to moderate in FY2023 before improving in 2024, as production- linked incentive schemes and efforts to improve the business environment, such as streamlined labour regulations, improve performance in electronics and other areas of manufacturing growth.

SUGAR INDUSTRY STRUCTURE & DEVELOPMENTS

> The sugar is one of the worlds major agro based industry and is also one of the most actively traded soft commodity on the exchange.

> More than 80% of the sugar produced is from Sugarcane while balance is from sugar beet.

> India is the worlds second-largest producer of sugar. After Brazil, the nation produced 32 million metric tonnes of sugar.

> Brazil & India are the largest sugar producers from Sugarcane & EU (European Union) and US are the major sugar producers from beet.

Global Sugar Industry Scenario:

World

The International Sugar Organisation (ISO) projected global production in 2022-23 (Oct - Sep) at 180.43 million MT, a revision from its previous projection of 172.53 million MT. Sugar consumption is expected to be 176.28 million MT. Imports demand decreased to 63.86 million MT from previous projection of 63.97 million MT.

Country wise Scenario:

BRAZIL: According to UNICA, mills in CS Brazil processed 43.0 million MT of cane in the second half (H2) of June, which is up by 2.2% on year. Sugar output during this period reached 2.70 million MT up by 7.6% on year. Cumulative Sugarcane crush for the current season reached 209.79 million MT with sugar production at 12.23 million MT i.e. 25.9% higher on the year. Platts estimates higher than expected agricultural yields and therefore it has revised CS Brazil cane availability for 2023-24 (April- March) to 612 million MT, up 10 million MT from the previous estimate. It has also estimated that cane planting (including renovation) increased by almost 10% in 2022 than in 2021. Sugar production for 2324 is therefore estimated to increase by 500,000 MT from their previous estimate, to 38.88 million MT. Favourable weather is expected to boost the following crop (2024-25), which was revised higher with the estimate for cane crush up at 616 million MT and sugar production at 38.6 million MT.

US-WASDE Sugar Balance: Mexican mills are already closing for the season. The latest production report as of 29^th April showed that at this late stage only 665,435 MT of raw sugar with polarization below 99.2 required by the US has been produced. Meanwhile, 17 mills producing raw sugar for the US quota, six have already closed for the season. These six mills produce around 30% of the total raw sugar for the US. Five more of these mills are set to closed by 15th May, which means that production of the 117,000 MT pending should not be taken for granted.

CHINA: The agriculture ministry lowered its production for the 2022-23 harvest, which is now over, to 8.96 million MT. Mills in Yunnan ended operations on 11^th May. It expects production to recover to 10 million MT in 2023-24 due to better yields and despite a lower beet area and stable cane area, whereas consumption should grow slightly to 15.7 million MT.

As per the customs data, China imported 70,000 MT of sugar in April, down 82% on year, while the import of sugar syrup and premixed powder reached 179.000 MT, up 55,000 MT on year. China imported 1.02 million MT of sugar in Jan-Apr, down 25%, while syrup and premixed powder imports increased by 134.000 mT in the period to 490,000 MT.

AUSTRALIA:

According to the data from Australian Sugar Milling Council, 2023 sugarcane harvest reached 3.34 million MT as of 2^nd July, up around 0.4 million MT i.e. 15% year on year. The sugar industry estimates 31.7 million MT of total sugarcane availability for harvest in 2023, which makes the crush progress as of 2^nd July at about 10.5% of the initial estimate. Platts has estimated 32 million MT of sugarcane availability for harvest in 2023, nearly the same as the industry estimates. Sugar Production is estimated at 4.4 million MT with sugar content at 13.7%.

THAILAND: Platts estimates a drop in 2023-24 cane crush to 85 million MT, down 10% year on year. Sugar production estimates were cut 1.2 million MT to 9.78 million MT. Sugar mills consensus estimates are around 80 million MT, with a downside, if rains continue to underperform in months ahead. Although rains in Central and North Thailand were a cause of concern during June, they look improved in July for these regions, with the latest forecast for the coming two weeks showing overall above normal rains followed by a significant pick up in the third week.

AFRICA / MIDDLE EAST: Raw sugar imports by Middle East and North Africa are expected to finish the second quarter of 2023 at about 2.6 million MT, which would be in line with last year but still below previous few years. The ban on sugar exports from Algeria was lifted at the end of June and the flow of refined sugar to Europe can now be resumed. Consequently, raw sugar imports from Algeria are expected to pick up in the second half of 2023.

The world sugar balance is as shown in below chart:-

(from Oct/Sep)

	2022-23		Changes
Particulars	In million tonnes (Estimated)	2021-22 In million tonnes	In million tonnes	(%)
Production	180.43	172.53	7.91	4.58
Consumption	176.28	174.77	1.51	0.86
Surplus/Deficit	4.15	-2.24
Import Demand	63.86	63.97	-0.11	-0.16
Export Availability	64.55	64.37	0.18	0.27
End Stocks	103.39	99.92	3.47	3.47
Stocks/Consumption ratio in %	58.65%	57.17%

Source: Chinimindi, Ragus

Indian Sugar Industry Scenario:

Production figure of SS 2021-22 was 358 Lakhs tonnes after accounting for sugar sacrifice in favor of ethanol of 32 lakhs tonnes.

Highest ever sugar exports - During the previous sugar season, India reported its highest sugar exports of 111 lakhs tonnes, reinforcing the countrys position as a dominant global player. This export achievement was remarkable considering that they were not supported through subsidies / financial assistance by the Central Government. All logistic challenges at the ports were overcome seamlessly. As per the estimate drawn by ISMA, it was expected that during SS 2022-23, India will produce 328 Lakhs tonnes of sugar after considering sugar sacrifice of 40 Lakhs tonnes, taking the gross sugar production to nearly 363 Lakhs tonnes. The production was lower because of lower production in Maharashtra. The Government announced first tranche of export of 60 Lakhs tonnes under MAEQ mechanism and almost total quantity of export quota dispatched. All India sugar output from 1^st Oct2022 to 30^th June2023 reached 322.92 Lakhs tonnes i.e., 8.45% down from last year same period. Total 11 mills were operating as on 30^th June2023, whereas last year in the same period 14 mills were operating. (Source: ISMA)

Balance sheet for 2022-23 SS indicates 40 Lakhs tonnes of available surplus sugar after meeting out domestic consumption and export as follows:-

					In Lakhs tonnes
S. No Particulars	2018-19	2019-20	2020-21	2021-22	2022-23*
A) Opening Stock as on 01 Oct.	107	146	107	81	55
B) Production during the Season	332	274	312	358	328
C) Imports	0	0	0	0	0
D) Total Availability	439	420	419	439	383
E) Off take
i) Internal Consumption	255	253	266	273	275
ii) Exports	38	60	72	111	62
Total offtake (i+ii)	293	313	338	384	337
F) Closing Stock as on 30th Sep	146	107	81	55	46
G) Stock as % of Offtake	50	34	24	14	14
H) Additional Information- Diversion for Ethanol	3	8	20	32	40

Source: ISMA

Note: *indicates estimates

It is to be noted that closing stock will be at six years lower and lesser than the level of closing stock in past season. The below chart showing the trend of closing stock from SS 2018-19:-

Sugar Pricing (International and Domestic Market)

Indias FY 2022/2023 sugar production decline has affected global market sentiments. India is among the largest exporters of raw sugar in the global market, and the downward production of Indian raw sugar led to a price spike in the international sugar market. On this note, the average international price of raw sugar reached an 11 year high at 25.39 cents/ pound on April 24, 2023 (As Chart given below), as compared to 17.18 cents/pound in September 11, 2022. Similarly, in April 2023, the FAO Sugar Price Index increased for the second time in consecutive months by 1.8 points (1.5 percent) to 127 points, the highest increase since 2016. This increase indicates lower global sugar stock availability in the 2022/2023 season because of dwindling productivity forecasts in India and other markets.

Source: International Sugar Organisation.

Domestic Pricing of Sugar ( per quintal):

Indias average domestic market price of sugar across all grades totalled INR 3,490/quintal, compared to INR 3,467/quintal last market year. Post estimates that lower domestic stocks combined with elevated diversion of sugar to ethanol and alcoholic beverages will drive prices higher in the near-term, barring government interventions.

INDIAN PERSPECTIVE OF SUGAR & ETHANOL INDUSTRY

• All India Sugar production from 1^st Oct till 30^th June, 2023 reached 322.92 Lakhs tonnes, i.e., around 8% decrease from 352.73 Lakhs tonnes produced last year same period. Total 11 sugar mills were operating as on 30^th June23, whereas last year same period 14 sugar mills were operating.

• FRP of Sugar Cane for Sugar Season 22-23 fixed at Rs.305 / Qtl for a base recovery of 10.25% (P.Y. Rs.290 / Qtl for 10%).

• State Advised Price (SAP) for SS 2022-23 of UP & Uttarakhand declared as under: -

- UP Govt. Rs.340/- Qtl (General variety)- same as per last season. (For Early variety Rs.350/- Qtl)

- UK Govt. Rs.345/- Qtl (General variety) - same as per last season. (For Early variety Rs.355/- Qtl)

• Government has allowed 60 Lakhs tonnes of the sugar in the current season. Indian sugar mills exported almost entire quota of 60 Lakhs tonnes.

• Uttar Pradesh crushing season has ended and mills therein have produced 104.82 Lakhs tonnes of sugar.

• Maharashtra crushing season has ended and mills therein have produced 105.32 Lakhs tonnes of sugar.

• In the State of Karnataka, 55.30 Lakhs tonnes of sugar have been produced in the state, which is around 5% decrease from last year. 2 sugar mills in Karnataka have commenced their operations for special season.

• Tamil Nadu produced 12.32 Lakhs tonnes of sugar and 8 sugar mills were operating as on 30^th June23.

• State wise comparison of current year vs last year production has been tabulated as below:

S. No State	Sugar production till 30th June 23 Lakhs MT	Sugar production till 30th June 22 Lakhs MT
1 Uttar Pradesh	104.82	101.99
2 Uttarakhand	4.80	4.53
3 Bihar	6.27	4.57
4 Punjab	6.55	5.96
5 Haryana	7.41	7.15
6 Madhya Pradesh	5.40	6.54
7 Gujarat	9.90	12.08
8 Maharashtra	105.32	137.20
9 Karnataka	55.30	58.27
10 A.P. & Telangana	4.49	4.38
11 Tamil Nadu	12.32	9.69
12 Others	0.34	0.37
Total	322.92	352.73

Source: ISMA

• Out of the 552.90 crore liters finalized by the OMCs for the Ethanol Supply Year 2022-23 (Dec.-Oct.) against a total requirement of 600 crore liters, contracts for 550.80 crore liters have been executed till 02^nd July, 2023.

• Against the above, 341.50 crore liters have been lifted by the OMCs till 25^th June, 2023.

• The total lifted quantity is 62% of the contracted quantity and 62% of the finalized quantity.

• The average blending percentage is 11.74% till 02^nd July, 2023.

• Till 02^nd July, 2023, out of total ethanol supply of 341.5 crore litres, 122.2 crore litres have been supplied from Sugarcane Juice and 152.46 crore litres have been supplied from B- Heavy Molasses. For 122.2 crore litres, 18.33 Lakhs metric tonnes of sugar have been diverted and for 152.46 crore litres, 12.20 Lakhs metric tonnes of sugar have been diverted.

• Till 02^nd July, 2023, total contracted quantity from Sugarcane Juice and B-Heavy Molasses is 136.97 crore litres and 246.86 crore litres respectively. For 136.97 crore litres, 20.55 Lakhs metric tonnes of sugar shall be diverted and for 246.86 crore litres, 19.75 Lakhs metric tonnes of sugar shall be diverted.

• The State wise Ethanol position as follows:

SUPPLY POSITION AS ON DT. 02^nd JULY, 2023

		Quantities (Cr. Ltrs.)
STATE	Finalized Quantity	Contracted Quantity	Supplied / Lifted Quantity	% to Total Supply	State Blending %
Uttar Pradesh	89.00	85.86	50.38	15	11.96
Maharashtra	70.02	68.10	40.28	12	11.91
Karnataka	38.92	37.01	24.45	7	11.84
Bihar	18.20	18.17	9.88	3	11.91
Andhra Pradesh	21.69	21.89	14.71	4	11.89
Uttarakhand	3.48	3.46	2.19	1	11.92
Madhya Pradesh	24.33	24.23	13.59	4	11.81

Source: ISMA

• The Supply of Ethanol Raw Material Wise

Raw Material	Total LOI Qty	Total Contracted Qty	Receipt Qty	% Total Receipt Against Total Contracted Qty
Sugarcane Juice	143.77	136.97	122.20	89
B- Hy Molasses	240.21	246.86	152.46	62
C- Hy Molasses	6.49	6.09	3.78	62
Damaged Food Grains	22.57	19.51	7.87	40
Maize	0.04	0.01	-	-
Surplus Rice	139.77	141.33	55.20	39
Total	552.86	550.76	341.50	62

Source: ISMA

Sugarcane Production and Pricing Policy:

The Government of India (GOI) supports research, development, training of farmers and transfer of new varieties and improved production technologies to growers in its endeavour to raise cane yields and sugar recovery rates. Following Cane Development activities which improve the productivity, yield & Sugar Recovery Percentage of Sugarcane, are undertaken:

a. Varietal Replacement with proven high recovery varieties.

b. Ratoon management.

c. Development of Agri Research Centres.

d. Integrated Pest Management Programme.

e. Soil testing facilities.

f. Encouraging use of Bio-fertiliser & Biopesticides.

g. Training facilities to the Farmers.

h. Introduction of Latest methods of farming and use of various mechanical equipments for cultivation.

i. Spraying of fertilizer etc. through Drons.

The Indian Council of Agricultural Research (ICAR) conducts sugarcane research and development at the national level. State agricultural universities, regional research institutions, and state agricultural extension agencies support these efforts at the regional and state levels. The central and state governments also support sugarcane growers by ensuring finances and input supplies at affordable prices. To increase the area of cultivation and production in India, a centrally sponsored scheme called the Sustainable Development Fund of Sugarcane Based Cropping System Area under the Macro Management Mode of Agriculture is being implemented in various sugarcane growing states.

The GOI establishes a Fair and Remunerative Price system (FRP) for sugarcane on the basis of recommendations given by the Commission for Agricultural Costs and Prices (CACP) and after consulting state governments and associations of the sugar industry and cane growers.

Following factors are considered for fixation of FRP:

- Cost of Production of Sugarcane.

- Recovery of Sugar from Sugar cane

- Inter Crop Price parity.

- Price of Sugar Sold.

- Reasonable margins to Farmers.

- Realisation of By Product.

- Return to the growers from alternative crops and the general trend of prices of agricultural commodities;

Citing differences in cost of Production, productivity levels & also as a result of pressure from Farmers Group, some states declare state specific sugarcane prices called State Advised Prices (SAP), usually higher than FRP.

FRP of sugarcane is fixed to ensure a guaranteed price to sugarcane growers. This would encourage farmers to cultivate sugarcane and would facilitate continued operation of sugar factories and thus would encourage domestic manufacturing of sugar. The FRP is paid by sugar factories to the sugarcane growers against supply of sugarcane. About 5 crore people, i.e., sugarcane farmers and their families, will be benefited by this proposal. Thousands of farm labours are associated with the cane growers and thus payment of FRP to the growers directly benefits them. Secondly, there are about five lakh workers employed in the sugar factories and ancillary activities and their livelihood depends on regular supply of sugarcane by the growers. Fixation of FRP of sugarcane facilitates adequate production and thus availability and supply of cane to sugar factories. Sugar Mills are required to pay the "State Advised Price (SAP)" to sugarcane farmers irrespective of the Market Price of Sugar. Softening Sugar Prices, coupled with apprehensions of large cane crop, discouraged the sugar mills to pay higher cane prices.

Given below is a chart depicting the difference in the State Advised Cane Price (SAP) during 2019-20 to 2022-23 in the major sugar producing states:

						Rs./Qtls
State	2019-20 (SAP)	2020-21 (SAP)	2021-22 (SAP)	2022-23 (SAP)	2021-22 (FRP)	2022-23 (FRP)
Bihar	300	315	335	335	290	305
Uttar Pradesh*	315	315	340	340	290	305
Punjab	300	310	360	380	290	305
Haryana	340	350	362	372	290	305
Maharashtra	-	-	-	-	290	305
Karnataka	-	-	-	-	290	305
Andhra Pradesh	-	-	-	-	290	305
Tamil Nadu	-	-	-	-	290	305
Uttarakhand*	317	317	345	345	290	305

Source: ASTA/ISMA *General variety

*SAP mentioned are of General variety, in case of early variety it is higher by Rs.10/- Qtl.

Note:-

1. Fair and Remunerative Price (FRP) for sugar season 2022-23 declared at Rs.305 per quintal linked to a basic recovery rate of 10.25%; providing a premium of Rs.3.05 per quintal for every 0.1% increase in recovery above that level.

2. In Maharashtra, Andhra Pradesh, Tamil Nadu & Karnataka the SAP & FRP are same.

3. There is no change in SAP for U.P. & Uttarakhand for sugar season 2022-23.

Ethanol Manufacture:

Ethanol is a biofuel, that is, a fuel produced by processing organic matter. The auto fuels we commonly use are mainly derived from the slow geological process of fossilization, which is why they are also known as fossil fuels. Ethanol in India is obtained primarily from sugarcane via a fermentation process. Ethanol is high in oxygen content, which therefore allows an engine to more thoroughly combust fuel. It can be mixed with fuel in different quantities and can help reduce vehicular emissions. Also, since it is plant-based, it is considered to be a renewable fuel.

The Centre had "launched pilot projects in 2001 wherein 5 percent ethanol blended petrol was supplied to retail outlets". Success of field trials eventually paved the way

for the launching of the Ethanol Blended Petrol (EBP) Programme in January, 2003 for sale of 5 percent ethanol blended petrol in nine States and four UTs. Currently, 5 percent of ethanol is blended with petrol in India. The government of India has advanced the target for 20 per cent ethanol blending in petrol (also called E20) to 2025 from 2030. E20 will be rolled out from April 2023. The central government has also released an expert committee report on the Roadmap for Ethanol Blending in India by 2025.The roadmap proposes a gradual rollout of ethanol-blended fuel to achieve E10 fuel supply by April 2022 and phased rollout of E20 from April 2023 to April 2025.

Need for Ethanol blending in India:

• Ethanol has become one of the major priorities of 21^st Century India.

• Mixing 20 percent ethanol in petrol holds multiple attractions for India.

• First, it can potentially reduce the auto fuel import bill by a yearly Rs.40,000 crore.

• Second, it also provides for farmers to earn extra income if they grow produce that helps in ethanol production.

• Third, and no less important, is the fact that ethanol

is less polluting than other fuels and, as per the NITI Aayog paper, "offers equivalent efficiency at lower cost than petrol".

• Use of ethanol-blended petrol decreases emissions such as carbon monoxide (CO), hydrocarbons (HC) and nitrogen oxides (NOx), the expert committee noted. Higher reductions in CO emissions were observed with E20 fuel — 50 per cent lower in two- wheelers and 30 percent lower in four-wheelers.

• Spelling out the opportunity for India for embracing ethanol, the paper stresses that "availability of large arable land, rising production of food-grains and sugarcane leading to surpluses, availability of technology to produce ethanol from plant- based sources, and feasibility of making vehicles compliant to ethanol blended petrol make E20 not only a national imperative, but also an important strategic requirement".

• In Europe, biofuels have been seen as a measure to reduce emissions of greenhouse gases from road transport because they were considered CO2-neutral fuels once lifecycle emissions are considered.

B. OPPORTUNITIES & THREATS

Opportunities:

• Utilization of downstream by-products.

• Huge potential for increasing the High yielding cane crop to increase the cane crushing & sugar recovery rate.

• Potential for new and upgrading Technology for improved utility consumption factors and utilization of by-products.

• Potential for downstream production of Ethanol.

• Utilisation of waste of the distilleries in a productive manner.

• Potential for New Technology for Saving in Energy.

• Introduction of National Bio Fuel Policy.

• Potential for sale of Hand sanitizer

• New avenues like production & sale of Potash drives from molasses (PDM).

Threats:

• Vulnerability of sugar sector to inflation & unfavourable regulatory policies relating to fixation of higher cane prices.

• Weather conditions affecting yield and recovery.

• Deteriorating quality of soil due to overuse of fertilizer and pesticides.

• Fluctuations in selling price of finished product in domestic and global markets.

• Government policies regarding fixation of price of ethanol and power

C. RISKS AND CONCERNS

Sugar industry being agro based is vulnerable to commodity cycles and is hence, fraught with several risks. Given below is a discussion on the risks as perceived by the management. The list is not exhaustive and meant for information purpose only for Investors who are requested to rely on their own judgement while assessing the risks associated with the Sugar Industry and your Company.

a) Raw material risk - Sugarcane is the principal raw material used for sugar production. Its availability, quality, growth and cost are affecting factors. These are in turn impacted by uncontrollable factors such as:- the area under sugarcane cultivation;

- availability of water;

- Adverse weather conditions and crop dis ease;

- Availability of better and higher yielding seeds;

- Shifting of farmers preference to other crops;

- Diversion of sugarcane to other industries like Gur, khandsari etc.;

- Adequacy of harvesting and seasonal un skilled labour;

- Un-remunerative cane procurement price;

- High Local and State level taxes.

- Short crop cycle.

- Fragmented land holding - low yields at farm level.

- Mounting cane arrears.

Risk mitigation

This risk can be mitigated by steps taken by the company through its Cane Development Programme which has yielded results in terms of high yields and recoveries. Government programme of Improved Infrastructure for roads and communication; Provision of better quality and higher yielding seeds as well as fertilizers and pesticides; Prompt clearance of the cane dues of farmers and steps to improve their goodwill by adoption of social development measures such as establishing schools and dispensaries in the command areas etc.; Diversifying into multiple locations etc.

b) Regulatory Risks -

i. Environmental Risks

The Industry and Company is subject to environmental regulations and may be exposed to liability as a result of our handling of hazardous materials and potential costs for environmental compliance.

ii. Government policy related Risks

The Industry is regulated and your Company operates in a regulated environment. Central and State Government policies and factors such as:- State Advised Price (SAP) and Fair and Remunerative Price (FRP) for sugarcane;

- Control on sale of Molasses; affect the agricultural sector and related industries and in turn our operations and profitability.

Risk mitigation

The regulatory risks listed above are Government policy driven and beyond Companys control and cannot be alleviated unless the industry is completely decontrolled. Every effort is made to conform to regulatory requirements while judicial recourse is made when warranted. Various representations through the body of the industry like ISMA, UPSMA, and UPDA submitted to the government to come out with the solutions regarding above risks.

c) Sugar Price Risk

Sugar prices in the Domestic and International markets depend primarily on the supply and demand situation. Global prices influence and affect the domestic prices directly and sale of Molasses controlled by the respective States. Fluctuations in demand and supply arise on account of the changes in the availability and price of sugarcane, variances in the production capacities of our competitors, availability of substitutes for the sugar products and international demand and supply position.

Risk mitigation

Your Company is unable to mitigate this risk since one does not have any control on the market forces and the regulatory prices. The wholesale price of sugar has a significant impact on our profits. Like other agricultural commodities, sugar is subject to price fluctuations resulting from weather, natural disasters, domestic and foreign trade policies, shifts in supply and demand and other factors beyond our control. Additionally, 15% to 30% of the total Global sugar production is traded on commodity exchanges which are speculative in nature and can adversely affect the global sugar prices and in turn the operations of your Company.

However, your Company is trying to reduce the impact of this risk by foraying into newer markets, entering the export market, more value addition by concentrating on downstream projects, increasing the quality and volume etc.

Branded Sugar

Uttam Sugar Mills Limited produces one of the finest quality sugars in India. The Sugar that we

are currently packing is from our sugar plant situated at Libberheri, Roorkee. The quality/ purity of sugar is one of the best in the country as we are packing the quality of sugar accepted by European Union Standard. From last three year onwards your company has entered into a very speciality products of Sugar in the aforesaid plant, these speciality product include Bura, Brown Sugar, Table Sugar, Sachets (Both in institutional and retail trade), icing sugar, superfine, pharma sugar, cube sugar, invert syrup etc and sugar in the different packaging i.e. 80 gm /1Kg /2 kg/ 5Kg / 10Kg.

We have also started the manufacturing of brown sugar at our Khaikheri Unit.

Our packaged sugar is already selling in J&K, Himachal Pradesh, Punjab, Haryana, Delhi, Uttarakhand, Uttar Pradesh, Gujarat, Chandigarh, Rajasthan, Bihar, Assam and Madhya Pradesh through our distributors in the respective areas. We have already covered Modern Retails like Big Basket, Blinkit (Groffers), Reliance Jio Smart Store, Kendriya Bhandar, Mother Dairy, Bikanerwala, Britannia, IRCTC, CCD, Rasna, Amazon, Vestiage etc.

Uttam Sugar is a very quality centric company and the same will be reflected in our products to come. Our future plans are very ambitious and we want to push Packaged Sugar in Market very aggressively. We would like to inform you that very soon we will be introducing other products along with our existing products.

d) Cyclical Risk

The industry is dependent on monsoons for both production and price realisation. Moreover, switching to other crops by cane growers on account of better returns affect the industry.

Risk mitigation

Your Company is unable to mitigate this risk since one does not have any control on the cyclical nature of the industry. However, Governmental initiatives to improve the irrigation by introducing various schemes as well as improvement in the distribution system by augmentation of the Canal Irrigation and tapping of the available surpluses of water are expected to mitigate this risk significantly.

e) Finance Risk

The Industry is dependent on the availability of timely working capital at competitive interest rates and Long-Term Finance for capacity enhancements / economic size of mills as well as for the manufacture of by-products.

Risk mitigation

Your Company is mostly come out with the financial constraints.

D. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Broadly, the areas of operation have been classified as Procurement, Manufacture, Marketing and Finance, in the functioning of which, various checks and control systems have been incorporated as Standard Operating Procedures. Even though they are considered adequate to reasonable safeguard its interests, a continuous review is undertaken for further improvement since the management gives lot of emphasis on continuous upgradation of business processes and adherence to the designed system and processes.

Moreover, there is an adequate and effective internal audit system is place in your Company that employees periodic checks on the various systems and on-going process. The Audit Committee of the Board of Directors of your Company comprising of reputed professionals, regularly reviews the effectiveness of internal control system and suggests changes wherever necessary, to ensure due and proper compliance with applicable laws, accounting standards and regulatory guidelines presently in vogue.

E. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE (OPERATIONS)

The comparative operational figures of the Company are given below:

a) Figures for operational performance other than power export for last three Seasons.

											(In Lakh Quintals)
Particulars	SEASON 2022-23					SEASON 2021-22					SEASON 2020-21
	Libberheri	Barkatpur	Khaikheri	Shermau	TOTAL	Libberheri	Barkatpur	Khaikheri	Shermau	TOTAL	Libberheri	Barkatpur	Khaikheri	Shermau	TOTAL
Capacity (TCD)	6250	7000	4500	6000	23750	6250	7000	4500	6000	23750	6250	7000	4500	6000	23750
Cane Crushing	94.48	162.13	77.12	98.31	432.04	82.77	144.33	68.17	87.49	382.76	72.86	143.09	64.39	85.76	366.10
Recovery (%)	10.42	10.36	10.48	10.20	10.36	10.66	11.02	10.82	11.29	10.97	11.85	11.24	11.18	11.63	11.44
Production
Sugar	9.84	16.79	8.08	10.02	44.74	8.82	15.91	7.37	9.88	41.98	8.63	16.08	7.20	9.97	41.88
Molasses	5.20	8.67	4.28	5.46	23.61	4.37	7.68	3.88	3.99	19.92	3.04	7.26	3.53	3.70	17.53
Working Days	172	226	193	165		174	207	183	180		162	204	176	178	-

b) Figures for Power Export for last three Financial Years

(In Lakh Kwh)

	F.Y. 2022-23 (12 Months)					F.Y. 2021-22 (12 Months)					F.Y. 2020-21 (12 Months)
	Libberheri	Barkatpur	Khaikheri	Shermau	TOTAL	Libberheri	Barkatpur	Khaikheri	Shermau	TOTAL	Libberheri	Barkatpur	Khaikheri	Shermau	TOTAL
Power Export	400.99	507.23	302.38	293.41	1504.02	320.09	474.78	252.18	405.17	1452.22	356.69	488.78	282.12	318.81	1446.20

F. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES /INDUSTRIAL RELATIONS FRONT

Industrial relations in your Company have remained cordial throughout the year under review. As a result of huge gap between the cane price and the selling price of sugar, which to be mitigate through better utilization of B Hy molasses. This has resulted into cost reduction measures but that has not affected harmonious human development relations.

Your Company has overcome all this by upgrading the process and the systems that help harmonize culture of the varied manpower arising out of diverse sources and backgrounds. The organization values and human development as one of the cardinal principle in the growth of the Company. The organization has steadfastly stuck to its vision to enhance knowledge, skills and competencies of the human resources poolhelping them develop individually and collectively

thereby improving productivity. To achieve all this, the Company is providing compensation by way of salary and wages which is at par with the prevailing standards in the industry. The Company is also in the midst of providing regular training to the employees

for up-gradation of skills at various levels.

With these progressive steps, your Company has been able to maintain cordial relations with its employees even in this crucial time.

G. THE KEY FINANCIAL RATIOS ARE GIVEN BELOW WITH COMPARATIVE FIGURES FOR THE PREVIOUS YEAR:

Sl. No.	Particulars	Method of Calculations	2022-23	2021-22	Explanation for Significant Changes
1	Debtors Turnover ratio (In Times)	Revenue from Operations / (Opening Debtors + Closing Debtors) /2 = Average Debtors	37.87	37.21	No Significant changes
2	Inventory Turnover ratio (In Times)	Revenue from Operations / (Opening Inventory + Closing Inventory) /2 = Average Inventory	2.49	2.35	No Significant changes
3	Interest Coverage ratio (In Times)	EBITDA / Finance Cost	4.84	3.81	Due to lower interest cost
4	Current Ratio (In Times)	Current Assets / Current Liabilities	1.04	0.99	No Significant changes
5	Debt Equity Ratio (In Times)	(Long Term Debts + Current Maturity of Term Loans + Cash Credit Limit + Leased Liabilities+ Preference Share Capital) / Shareholders Equity	1.07	1.44	Due to lower debt and profit during the year
6	Operating profit margin (%)	EBITDA / Revenue	12.32%	14.02	Due to higher cane cost & Lower Stock Valuation
7	Net Profit margin (%)	Net Profit / Total Income	5.99%	6.58%	Due to higher cane cost & Lower Stock Valuation
8	Return on Net worth (%)	Net Profit after Taxes / (opening Shareholders equity + closing Shareholders equity) / 2 =Average Shareholders Equity	23.79%	33.70%	Consequential to change in Net Profit.

CAUTIONARY / FUTURISTIC STATEMENTS

Statements in this report detailing the Companys objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable laws and regulations and are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate and can be realised. The Companys actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements in future on the basis of subsequent developments, information or events. Investors, are, therefore, requested to make their own independent judgments before taking any investment decisions.

(Data and figures relating to industry and future expected developments in the industry have been taken from industry and industry-related publications and web-sites).