Vishwaraj Sugar Industries Ltd Management Discussions

Global Economic Scenario

The global industrial sugar market size stands at USD 50.54 billion in 2025 and is forecast to reach USD 58.67 billion by 2030, advancing at a 5.12% CAGR. Sustained demand from processed-food manufacturers, strategic capacity shifts between sugar and ethanol in Brazil, and steady consumption in beverages underpin this expansion. Asia-Pacifics leadership rests on robust household demand and large-scale refining capacity, while South Americas cost-competitive cane sector is accelerating exports. Technological upgrades from higher-yield cane varieties to automated extraction lines are improving margins and mitigating tightening environmental rules. Despite the rise of alternative sweeteners, the sugar market continues to benefit from sugars multifunctional role in texture, preservation, and fermentation, especially in baked goods and beverages.

As processed food consumption surges, its reshaping sugar demand patterns. Industrial users are now prioritizing a consistent supply of sugar over price optimization. This shift underscores the food industrys heightened focus on supply security in the wake of the pandemic, alongside the increasingly intricate formulation needs spanning various product categories. With a commanding 37.67% market share, the beverage sector underscores sugars pivotal role in crafting taste profiles. This is especially evident as manufacturers grapple with sugar reduction mandates while striving to keep consumers satisfied. Data from the U.S. Department of Agriculture reveals that, despite a trend towards health consciousness, industrial sugar consumption is on the rise, driven by population growth and urbanization in emerging markets. Beyond its sweetening capabilities, sugar offers functional benefits like preservation, texture modification, and fermentation support. These attributes, not fully replicated by alternative sweeteners, highlight the processed food segments resilience.

Indian Economic Scenario

India remains one of the worlds fastest-growing major economies, with real GDP growth projected between 6.3% and 6.6% for fiscal year 2026–27. Growth is anchored by resilient domestic consumption, robust public capital expenditure, and a strong services sector, though policymakers navigate headwinds from global geopolitical tensions and fluctuating inflation.

Indias sugar sector is vital pillar of its agro economy valued at approximately $14.4 billion in 2026 and projected to reach $18.7 billion by 2032. As the worlds largest consumer and second-largest producer of sugar, the industry contributes roughly 1.1% to Indias GDP, supports over 50 million farmers, and is heavily regulated through government pricing and ethanol diversification policies.

India is a major sugar producing country in the South-Asian region and has recorded bumper sugar production in the recent past. It has a strong sugar sector backed by a well-developed R&D set-up. This has helped the industry overcome most of the challenges, be it in the area of production, processing or other related sectors. Even from very early period, as mentioned in medieval literature, India has been cultivating sugarcane and processing the cane. Slowly innovative technologies were developed to suit the time-based and location-specific demands that facilitated India to become a major player at the global level. The sugar industry is inherently inclusive with the crop occupying around 5.0 million hectares, i.e. 2.57% of the gross cropped area and supporting over 50 million farmers and their families, along with workers and entrepreneurs of over 550 sugar mills. In India, sugar is an essential item of mass consumption, and the domestic demand is around 27 million tons per annum. Sugar and jaggery are the cheapest source of energy, supplying around 10% of the daily calorie intake. Sugarcane has been projected as the crop for the future contributing to the production of not only sugar but also as a renewable source of green energy in the form of bio-fuels, bio-electricity and many bio-based products. The industry produces 370–400 million tons (MT) cane, 27–30 MT white sugar and 6–8 MT jaggery and khandsari every year. Besides, about 3.2 billion litres of alcohol and 4700 MW of power and many chemicals are also produced. The industry has the capability to export around 3500 MW of power to the national grid. Sugar industry has gradually transformed into sugar complexes by producing sugar, bioelectricity, bioethanol, biomanure, bio-CNG and chemicals. The Indian sugar industry has been capable of meeting the sweetener and energy demand of the nation and to a great extent, has become self-reliant, showing the path to the other countries in building a productive, profitable and sustainable industry.

Industry Structure and Development

The Indian sugar industry has 550 sugar mills across the country, with about 252 in the cooperative sector and 134 in the private sector and remaining in smaller segments. The top sugarcane producing states are Uttar Pradesh, Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. India is the largest consumer and second largest producer of sugar globally. The industry has a total annual turnover of Rs. 500 billion and contributes Rs. 22.5 billion in taxes to the central and state governments.

Sugar has been produced in India since ancient times or at least 1200 B C. It then spread to other parts. Sugar cane is native of tropical Indian subcontinent then to South Asia. In India sugarcane is planted thrice a year in October, March and July, depending on part of the country. Most of the sugarcane production in India takes at local co-operative sugar mills. After gaining independence India made serious plans, for overall industrial development of sugar industry.

Sugar industry is a big business in India. Around 525 mills produced more than 30 million tonnes of sugar in the last crushing season, which lasted from October to April. This makes it the worlds largest producer unseating Brazil. Some 50 million farmers and mllions of more workers are involved in sugar cane farming. India is worlds largest consumer of sugar. According to data from the Indian Sugar Mills Association the contrys sugar mills are expected to produce around 279 to 324 Lakh tonnes of sugar during the sugar season October 2025 to September 2026.

Sugarcane varietal development is a very significant component of the sugarcane R&D in India. The nation has several research organizations, viz. ICAR-Sugarcane Breeding Institute (ICAR-SBI), Coimbatore, considered as the cradle of sugarcane breeding, ICAR-Indian Institute of Sugarcane Research (ICAR-IISR), Lucknow, which caters to the sub-tropical part of the nation, Vasantdada Sugar Institute (VSI), Pune, state funded research institutions like Uttar Pradesh Council of Sugarcane Research (UPCSR), Shahjahanpur in Uttar Pradesh, the various sugarcane research stations under the State Agricultural Universities (SAUs), etc., that take care of the location-specific as well as the nation-wide demands.

In India, through a well-organized network of All India Coordinated Research Project (AICRP) on Sugarcane, around 116 improved sugarcane varieties have been identified and approximately 60 varieties have been notified for commercial cultivation from 2000 till now. All these have been developed by the researchers in India, and many of these varieties are under cultivation in large areas, for example, Co 86032 (70%) in Peninsular Zone, Co 0238 (55%) in North West and North Central Zones, CoLk 94184 (28.25%) in North Central Zone, CoM 0265 (18%) in Karnataka, CoOr 03151 (18%) in Odisha & Co 06030 (18%) in East Coast Zone (Shukla et al. 2018). The recently notified varieties like CoLk 11203, CoLk 12207, CoLk 12209, CoLk 14201, Co 11015, etc., have begun to show their worth in the respective sugarcane growing zones. This speaks volumes about the well-developed self-reliant varietal development scenario in the country that caters to all the sugarcane growing zones of the country in terms of improved high yielding, high sugar, stress resistant sugarcane varieties.

Risks and Concerns

The Indian sugar industry faces major risks, including water-intensive crop demands in drought-prone areas like Maharashtra and Karnataka, unpredictable weather and climate change reducing cane yields, heavy government pricing controls causing huge farmer payment arrears, and low sugar recovery rates compared to global competitors.

Sugarcane needs a lot of water, but it is grown in areas that rely heavily on weak or shifting monsoon rains. Droughts, extreme heat, and floods frequently lower cane production. Aging seed varieties (such as the widespread Co-0238 in Uttar Pradesh) suffer from declining resistance to pests and red rot diseases. Overproduction drives down local sugar prices, hurting mill profits and delaying payments owed to farmers. Rising expenses for labor, transport, and fertilizers squeeze factory profit margins. Indias average sugar recovery rate stays low (around 9.5% to 10%) compared to top producers like Brazil. State-mandated high cane prices (SAP/FRP) combined with controlled sugar sales often leave mills unable to clear farmer debts. Frequent government interventions, export bans, and shifting ethanol-blending rules create policy unpredictability for investments and long-term mill revenue.

Commodity price fluctuations are posing significant challenges for sugar processors, as raw material costs account for 60-70% of their total production expenses and have become increasingly linked to energy and transportation markets. The Egyptian sugar industry serves as a prime example of this vulnerability. Here, multiple devaluations of the Egyptian pound have not only hampered imports but also compelled local producers to shift crops towards molasses production. This shift has, in turn, diminished the feedstock availability for state-owned mills. Such volatility poses a particular challenge for smaller processors, who often lack the means for hedging and the security of long-term supply contracts. As a result, theres mounting pressure for consolidation within the industry. Furthermore, the tight interconnection between sugar prices and the broader agricultural commodity markets means that external factors be it weather events, energy costs, or currency fluctuations can swiftly disrupt profit margins throughout the entire value chain.

Outlook

The global and Indian sugar industry outlook for 2026/27 points to tightening supplies, a shift toward a global market deficit, and surging domestic prices. Driven by weather risks, robust ethanol diversion programs, and robust festival demand, the sector faces a delicate balance between higher cane yields and restricted free-market availability.

Global Deficit Expected: Major agricultural consultancies (such as Green Pool and StoneX) project the 2026/27 global sugar market to slip into a deficit ranging from 1.7 million to 3.3 million metric tons due to tightening production forecasts. Brazil remains the top global producer, but climbing crude oil prices are incentivizing Brazilian mills to divert more sugarcane toward ethanol production rather than raw sugar exports. Supply concerns have triggered sharp rallies in global sugar futures, reversing earlier downward trends seen in late 2025.

India Outlook & Domestic Pressures

Indias gross sugar production for the upcoming marketing year is forecasted to recover to roughly 33.6 million metric tons, supported by a 2% expansion in sugarcane acreage and favorable monsoon progress. Domestic ex-factory and wholesale prices have hit record levels (with wholesale rates crossing Rs 5,800 per quintal) ahead of peak festival consumption. The government is actively weighing interventions, including limited duty-free imports and stricter stockholding limits, to cool domestic inflation.

India continues aggressively advancing its 20% ethanol blending targets, structurally locking in the diversion of cane juice and heavy molasses away from pure crystal sugar production. Operating margins for integrated sugar mills are projected to remain range-bound around 10% to 10.5%. While raw material costs (Fair and Remunerative Prices) have risen for farmers, steady domestic sugar realizations and the distillery/ethanol segments cushion overall profitability.

The scaling of artificial intelligence and machine learning networks (such as AI-driven yield and water-use programs) across major cane-producing hubs like Maharashtra and Karnataka is helping improve overall sugar recovery rates at the farm level.

Opportunities and Threats

The sugar industry faces major growth vectors through green energy and product diversification, offset by severe threats from climate shifts, market volatility, and strict regulatory controls.

Opportunities

Diversifying cane juice and molasses into fuel ethanol captures lucrative government energy mandates. To push an ambitious shift towards 10 per cent ethanol blending, the government moved to align vehicle regulations to formally integrate E100 (100 per cent ethanol in to the countrys regulatory architecture effectively legalising the certification and mass production of flex fuel vehicles. While E20 (20 percent ethanol) will continue as monofuel available across the country, the latest move encourages introduction of higher ethanol blends in vehicle manufacturing.

Burning leftover bagasse allows mills to generate and sell surplus green electricity back to the grid.

Upgrading molasses and pressmud yields high-value biochemicals, bio-CNG, and organic fertilizers.

Adopting drip irrigation and high-yielding seed varieties raises crop output per hectare.

Threats

Erratic monsoons, droughts, and high temperatures heavily disrupt cane yields and sugar recovery rates.

Global overproduction creates surplus inventory, driving down market prices and crushing profit margins.

Unpredictable export quotas and capped domestic selling prices restrict cash flow for mills.

Sugarcane is a heavily water-intensive crop, raising long-term viability concerns in arid farming zones.

Challenges

The sugar industry faces major challenges including a short, seasonal crushing period, low crop yields and recovery rates, outdated machinery, high production costs, and severe financial stress from delayed payments to farmers. These structural and economic hurdles limit overall profitability and global competitiveness.

• Seasonal nature: Mills operate only 4 to 7 months a year, leaving workers unemployed and machinery idle off-season.

• Low yield and recovery: Sugarcane yield per hectare and sucrose recovery rates trail behind global leaders like Brazil.

• Transport delays: Cut cane must be crushed quickly; transit delays reduce sucrose content and lower sugar output.

• Water intensity: Sugarcane requires massive amounts of water, causing environmental strain in drought-prone regions.

• Outdated technology: Old machinery reduces energy efficiency and increases operational waste.

• Competition with local units: Small alternative producers of gur and khandsari draw away vital raw sugarcane supplies.

• Delayed farmer payments: Financial losses at mills frequently cause long delays in paying growers, straining future supply.

• Policy and price pressures: Strict government pricing for cane alongside stagnant sugar price floors create severe cash-flow crunches.

Discussion on financial performance with respect to operational performance

The Company has a cane crushing capacity of 11000 TCD, ethanol production capacity of 250 KLPD and power generation capacity of 36.4 MW. The ethanol production capacity is increased to 250 KLPD and has commenced from January 2026.

During the year under review, the Company crushed 7,86,007.98 MT of sugarcane and produced 5,67,650 quintals of sugar, produced 21,208.52 kilo liters of ethanol and generated 7,56,54,100 KWh of power. Out of the power generated 4,59,47,500 KWh was exported and the balance was consumed by the Company.

The Companys revenue from operations stood at Rs. 37,681.01 Lakhs for the year ended March 31, 2026 as against Rs. 46,154.96 Lakhs for the previous year. The EBITDA for the year under review stood at Rs. (374.76) Lakhs as compared to Rs. 1,931.58 Lakhs for the previous year. The Company incurred a Loss of Rs. (2,817.14) Lakhs after tax expenses as compared to Loss of Rs. (3,702.33) Lakhs for the previous year.

Risk Management

VSIL considers timely identification and effective mitigation of risks as the utmost pre-requisite for maintaining stable and genuine returns, besides ensuring consistent increase in shareholder value. The major risks in this industry include impact on sugarcane production due to seasonal uncertainties.

Internal Control system and their Adequacy

The compliance certificate from the Whole Time Director and the Chief Financial Officer provided in the Annual Report confirms the adequacy of our internal control system and procedure. The Audit Committee in every meeting evaluates Internal Financial control and Risk Management Systems.

Material Development in Human Resources/Industrial Relations Front including number of people employed

Our strategic objective is to build a sustainable organization while creating growth opportunities for our employees and generating profitable returns to our investors. The total work force of the Company is 944. Number will be increased with the growth of business of the Company. The Company is aware that satisfied highly motivated and loyal employees contribute to the growth of the Company. The employee relations remained cordial throughout the year.

Disclosure of Accounting Treatment

In the preparation of financial statement for the year ended March 31, 2023, no treatment different from that prescribed in the Accounting Standards has been followed by the Company.

Segment-wise or product-wise performance

(Rs. In lakhs)

Particulars	31.03.2026	31.03.2025
1. Segment Revenue
-- Income from Operations
(a) Sugar	24,859.02	27,734.32
(b) Co-generation	2,436.26	2,440.33
(c) Distillery	9,409.95	13,632.48
(d) IML	-	-
(e) Vinegar Unit	1,260.43	1,686.23
-- Other operating income
(a) Others	51.88	2.80
(b) Unallocable revenue	-	-
Income from operations (net)	38,017.54	45,496.16
2. Segment Results
(a) Sugar	(14,233.86)	(10,841.01)
(b) Co-generation	744.21	677.54
(c) Distillery	11,203.75	9,661.48
(d) IML	200.03	163.49
(e) Vinegar Unit	879.61	1,077.32
Less: Unallocable (expenditure)/revenue
(a) Finance Costs	2,973.87	3,426.97
(b) Other expenditure	996.69	418.51
(net of other income)
Profit before tax	(5,176.82)	(3,106.66)
3. Segment Assets
(a Sugar	31,455.31	33,587.21
(b) Co-generation	6,235.07	6,258.24
(c) Distillery	40,841.78	35,908.38
(d) IML	329.22	317.26
(e) Vinegar Unit	2,162.46	2,213.05
(f) Un-allocable	1,751.63	3,568.78
Total Assets	82,775.47	81,852.93
4. Segment Liabilities
(a) Sugar	46,375.63	32,427.20
(b) Co-generation	23.58	264.86
(c) Distillery	15,290.50	12,905.60
(d) IML	-	-
(e) Vinegar Unit	65.90	107.03
(f) Un-allocable	21,019.87	36,148.24
Total Liabilities	82,775.47	81,852.93

Details of Significant Changes in Key Financial Ratios

Sr. No Particulars	Year ended
	31.03.2026	31.03.2025	% Change
1 Operating Margin (%) Operating profit/Revenue from operations	(0.06)	0.01	(928.50)
Explanation: There has been a decrease in the profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase in sugarcane prices and sales prices not increasing in consistency with the input costs. Hence, resulted in reduction in profit and operating margin.
2 Net Profit Margin (%) Net profit/Revenue from operations	(0.07)	(0.08)	(8.34)
Explanation: There has been a decrease in the profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase in sugarcane prices and sales prices not increasing in consistency with the input costs. Further, the increase in interest cost also affected the net profit. Hence, resulted in reduction in profit and net profit margin.
3 Interest Service Coverage Ratio (ISCR) (In times) EBIT/(Interest Expense on long term and short-term borrowing for the quarter/year)	(7.94)	1.77	(547.27)
Explanation: There has been a decrease in the profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase in sugarcane prices and sales prices not increasing in consistency with the input costs. Further, the increase in interest cost also affected the net profit. Hence, resulted in reduction of ISCR.
4 Debt Service Coverage Ratio (DSCR) (In times) EBITDA/(Interest expenses on long term and short-term borrowings for the quarter/year+schedule principal repayment of long-term borrowings during the quarter/year)	(0.05)	0.82	(105.79)
Explanation: There has been a decrease in the profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase in sugarcane prices and sales prices not increasing in consistency with the input costs. Further, the increase in interest cost also affected the net profit. Also, repayment of term-loan availed for expansion of distillery, has commenced. Hence, resulted in reduction of DSCR.
5 Bad Debts to Account Receivable Ratio (not authorised for the quarter) Provision for doubtful debts and bad debts charged to statement of profit & loss/Average accounts receivable	-	-	-
6 Debtors Turnover (In times) (not authorised for the quarter) Revenue from operations/Average accounts receivable	14.34	12.87	11.44
7 Inventory Turnover (In times) (not authorised for the quarter) Cost of goods sold/Average inventory	1.43	0.17	743.22
Explanation: Due to low allotment of ethanol supply quota from OMCs has resulted in the building of ethanol stock as inventory as the last quarter and due to which the inventory turnover has increased.
8 Debt Equity Ratio Debt (current and non-current portion of long-term borrowings+short term borrowings)/Net worth	1.66	1.39	19.42
9 Current Ratio (In times) Current assets/current liabilities	0.76	0.92	(17.11)
Explanation: Due to increase in current liability and reduction in current assets in proportion to current liabilities, has resulted in decrease of current ratio.
10 Current Liabilities Ratio (In times) Current liabilities/Total liabilities	0.73	0.68	7.35
11 Total Debts to Total Assets (In times) Debt (current and non-current portion of long-term borrowings+short term borrowings)/Total Assets	0.51	0.48	6.90
12 Long Term Debt to Working Capital (in times) (Current and non-current portion of long-term borrowings)/(current assets-current liabilities)	(1.75)	(5.19)	(66.20)
Explanation: Due to low allotment of ethanol supply quota from OMCs, which resulted in the holding of ethanol stock as inventory at the last quarter and due to which the current assets value increased, working capital has increased. Hence, there is reduction of the above ratio.
13 Net Worth (INR in Lakhs)	25,295.44	28,047.83	(9.81)
Explanation: There has been a decrease in profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase of sugarcane prices and sales prices not increasing in consistency with the input costs. Also, the increase in interest cost has affected net profits and hence the Company incurred loss. This resulted in reduction of net worth.
14 Debenture Redemption Reserve	-	-	-
15 Return on Equity Ratio (Net Income Average Shareholders Equity)	(0.10)	(0.14)	(25.12)
Explanation: There has been a decrease in profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase of sugarcane prices and sales prices not increasing in consistency with the input costs. Also, the increase in interest cost has affected net profits and hence the Company incurred loss.
16 Trade Payable Turnover Ratio Revenue from operations/ Average accounts payable	5.09	6.29	(19.16)
Explanation: Due to low allotment of ethanol supply quota from OMCs, which resulted in low sales and increased the holding of ethanol stock as inventory at the last quarter. Hence, the current assets value has increased and the working capital has increased. Hence, there is reduction of the above ratio.
17 Net Capital Turnover Ratio Net sales / Avg. Working capital	(5.79)	(14.41)	(59.85)
Explanation: There has been a decrease in profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase of sugarcane prices and sales prices not increasing in consistency with the input costs. Also, the increase in interest cost has affected net profits and hence the Company incurred loss.
18 Return on Capital Employed (ROCE) EBIT/ Capital employed	(0.09)	0.01	(862.62)
Explanation: There has been a decrease in profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase of sugarcane prices and sales prices not increasing in consistency with the input costs. Also, the increase in interest cost has affected net profits and hence the Company incurred loss. Hence, resulted in reduction of ROCE.
19 Return on Investment (Net profit / Cost of investment)	(0.07)	(0.09)	(23.24)
Explanation: There has been a decrease in profitability of the Company due to the increase in cost of raw materials and other input costs. Further, the government policies in respect to sugar, resulted in increase of sugarcane prices and sales prices not increasing in consistency with the input costs. Also, the increase in interest cost has affected net profits and hence the Company incurred loss. Hence, return on investment has reduced.

Definitions:

a. Operating profit= profit/(loss)Before tax +Depreciation and Amortization expenses + Finance costs - Other Income

b. EBIT = Profit/(Loss) Before tax + Finance Cost- Interest Income

c. EBIT= Profit/(Loss) Before tax+ Finance cost + Depreciation and amortisation expenses - interest income

d. Average Trade receivable = (Opening trade receivable + Closing trade receivable)/2

e. Average Inventory = (Opening inventory + Closing inventory)/2

f. Cost of goods sold = cost of material consumed + purchase of stock-in-trade + change in inventories of finished goods, work-in-progress and stock-in-trade.