Vishwaraj Sugar Industries Ltd Management Discussions

Global Economic Scenario

The global sugar market is experiencing steady growth, with increasing demand fueled by population growth and its use in food and beverages. However, the market is also subject to fluctuations due to factors like weather patterns, government policies, and global economic conditions.

The Global Sugar Market influences economies worldwide, with production occurring in 108 countries through both cane and beet cultivation. Sugar consumption is universal, spanning food manufacturing and retail use, with per capita consumption varying significantly based on cultural practices and product accessibility.

International sugar trade primarily consists of surplus production exceeding domestic requirements. Sugar moves between countries either as food-grade product (typically white sugar) in consumer packaging or as raw sugar in bulk shipments requiring destination refining. The International Sugar Organization monitors global market dynamics, including futures exchanges, international trade patterns, national production levels, and consumption factors such as the implementation of soft drink taxes which impact consumption patterns.

The Sugar market accounted for USD 70.35 Billion in 2024 and is expected to reach USD 142.1 Billion by 2035. The sugar market designates the entire universe of activities underlying sugar production, distribution and consumption. It includes growing of sugar cane and sugar beets, the processing of raw sugar and trading it on international markets.

Weather, Government Policies, demand for sweeteners in food and beverages and global economic trends can affect the sugar market. Sugar is heavily regulated with many nations setting tariffs, subsidies and import and export controls to protect their domestic industries, Sugar is vitally important to both agriculture and food.

Indian Economic Scenario

The Indian sugar industry is a significant contributor to the nations economy, ranking as the worlds second-largest producer and largest consumer of sugar. It plays a crucial role in the agricultural sector, impacting the livelihoods of millions of farmers and workers.

India is a major player in global sugar production, with a significant share of both sugarcane and sugar production. It is also the worlds largest sugar consumer. The industry provides direct employment to over 5 lakh workers and supports the livelihoods of 5 crore farmers and their families. It contributes about 1% to the national GDP, with sugarcane alone contributing 1.1% to the GDP. The Indian government has implemented various measures to support the sugar industry, including fixing Fair and Remunerative Prices (FRP) for sugarcane and promoting ethanol blending programs. The industry faces challenges like fluctuating sugar prices, rising sugarcane costs, and the need for better resource management and increased productivity. Byproducts of sugarcane, such as bagasse, molasses and press mud, are utilized for power generation, ethanol production and other applications, contributing to the industrys diversification. The sugar industry in India is expected to continue growing, with a positive outlook for 2025, driven by factors like increased ethanol production and a potential increase in exports.

The expansion of the sugar industry is critical to the countrys economic growth. Sugar is Indias second biggest agro-based sector, and it plays an important role in the countrys socioeconomic growth. The Indian sugar industry is also a significant employer, accounting for about 7.5 percent of the countrys workforce. The sugar industry is a major player in the worldwide market, as it is the worlds second biggest producer behind Brazil, producing approximately 15% and 25% of all sugar and sugarcane, respectively. To meet local sweetener demand, the sugar industry produces 300-350 million tonnes (Mt) cane, 20-22 Mt white sugar, and 6-8 Mt jiggery and khandasri. Around 1300 MW of electricity may be sent to the grid by the industry. The sugar business is also involved in producing sugar, bio-Electricity, bio-ethanol, bio-manure, and chemicals in order to make use of sugar complexes. These make up approximately 1% of the national GDP. In India, the sugar industry is still controlled and provides a living for 50 million farmers and their families. It employs around 5 lakh people directly in sugar mills and related businesses across the country, including both trained and semi-skilled employees. The sugar sector in India has an estimated annual sale of Rs.41,000 crore, and it pays the government Rs.2,500 crore in taxes each year.

The Countrys sugar output for the 2025-26 sugar season (October-September) faces risk with early official data showing a marginal decline in sugarcane acreage. While initial figures indicate a slight dip in the area under cultivation weather and rainfall patterns, coupled with ongoing agricultural challenges, pose a threat to overall sugar production. This could potentially reduce the output from 2024-25 level.

Industry Structure and Development

The sugar industry primarily based on sugar cane and sugar beet cultivation, is a complex network involving various stages from agricultural production to processing and distribution. It is a significant agro based industry, particularly in countries like India where it is the second largest. The industrys structure includes both organized sectors like sugar mills and unorganized sectors like those producing traditional sweeteners like gur and khandsari.

The development of the sugar industry is critical to the countrys economic progress. Sugar is Indias second-largest agro-based business, and it plays an important role in the countrys socioeconomic growth. Sugarcane is Indias most important raw ingredient for sugar production. Sugar is derived from two separate raw materials: sugarcane and beet; both generate the same refined sugar. Two-thirds of the worlds sugar production comes from semitropical regions. Beet is grown in temperate climates for the remaining one-third. The well-known of India was the original home of sugar and sugarcane. Sugar and sugarcane are said to have originated in India according to Indian folklore. When compared to the cotton sector in India, sugar is the second most important agro-based industry. The most important commercial crop in India is sugarcane, which covers 5.0 million hectares. It makes a substantial contribution to the countrys socioeconomic progress. The development of the Indian sugar industry is critical to the economic development of rural areas, as it mobilizes rural resources and creates jobs, as well as providing transportation. Hospitals, schools, and colleges for rural development were established by many sugar mills. By producing sugar, bio energy, bio-ethanol, bio-manure, and chemicals, as well as paper and particle board manufacturers and cogeneration facilities, the sugar business is also involved in making use of sugar complexes. The Indian sugar industry produces surplus exportable electricity and is self-sufficient in vigour. The sugar industrys many byproducts also help to the countrys economic prosperity by encouraging a variety of auxiliary businesses. Sugarcane has evolved into a multi-product crop that may be used to make sugar, ethanol, paper, power, and other products. Sugarcane is an essential source of bio-energy for cattle, and there is a growing demand for it in rural areas. Distilleries rely on molasses as a source of nourishment. The countrys ethanol need is increasing all the time. The use of bagasse as an alternative raw material for wood pulp for economic and environmental sustainability was a common choice in the sugar industry.

Risks and Concerns

The sugar market is facing severe constraints due to mounting competition from artificial sweeteners and plant derived sugar. With the development of a highly conscious health conscious among consumers, preferences increasingly lean toward low-calorie, natural and plant-based alternatives. Artificial sweeteners like aspartame, stevia and sucralose allow for sugar reduction without compromising sweet carvings. Plant sugars such as coconut sugar and agave nectar are gaining ground due to their supposed health benefits and lower glycemic index. These alternatives are thought not to promote weight gain and to be diabetes aggravating, thus forcing the sugar market to reflect on its place in consumers list.

Moreover, government regulations like sugar taxes and health codes limit sugar consumption, placing a challenge in the path of traditional sugar producers. With consumers tilting towards healthier options, sugar demand is registering a slow but steady decline here. This change has led manufacturers to spread out their product folios, implementing sugar alternatives, just to remain competitive. As a result, the traditional sugar industry is being compelled to transform in to a giant low-calorie, healthier sweeteners.

Global sugar prices will likely to be under pressure in the 2025-26 season in October as production in India and Thailand is expected to increase while in Brazil, it is projected to be robust. "Global sugar prices continue to decline, spurred by optimistic projections for an enhanced global supply outlook" said research agency BMI, a unit of Fitch Solutions.

Outlook

The global sugar market, at times, pivots around dynamics from within the Indian sugar industry. In 2022/23, India represents around 15.5% of global consumption. It is the worlds largest consuming country, and its consumption total has increased by 10% since 2018/19. Meanwhile, Indian production has reached record output totals in 2021/22, of nearly 36 mln tonnes of sugar, up from the previous record tally in 2018/19 of 32.9 mln tonnes. This also represents a 10% rise and excludes product diverted to ethanol, which is reflected in the gross production total. The industry is however seen, by some, as a heritage industry, where new innovations have largely passed-by unnoticed and agricultural practices, such as the manual harvesting of green cane and the use of bullocks for field work, are still the norm. But even on these low-tech foundations, the government and industry have combined in recent years to build out both a successful ethanol fuel blending programme and a record sugar export total. Furthermore, the incorporation of some of the Rangarajan report proposals has seemingly brought production onto a more stable footing, if recent production totals are a good proxy for the success of these changes. This positive momentum, towards liberalisation, was set back by the WTO ruling against India, on charges of cross-subsidisation of exports and exceeding WTO-agreed limits for domestic support. While an appeal, lodged by India, cannot be heard given the absence of an appellant body within the WTO structure, the Indian sugar industry structure continues to evolve. The latest report from the Commission of Agricultural Costs and Prices (CACP) highlights the transition towards a revenue sharing structure between farmers and millers as a target, which had its roots in the Rangarajan report of a decade ago. But the fixing of the 2023/24 fair and remunerative price (FRP) for cane by the government and the anticipated fixing of State-Advised Prices (SAP) in states where private sector-owned mills dominate, and where state governments have a legacy of fixing a higher cane price through its legislature, means that any transition towards a revenue sharing mechanism will be at least a year away.

Opportunities and Threats

The sugar industry faces a mix of opportunities and threats. Key opportunities include the growing demand for the ethanol, increased consumption of speciality sugars and potential for diversification in to by products. Threats include fluctuating global sugar prices, increasing competition and challenges related to sustainability and changing consumer preferences.

With urbanisation, increasing income level and growing middle class among the countries in Asia, the consumption of sweetener products, deserts, soft drinks and processed food is increasing rapidly. For instance, these markets, especially Southeast Asia and India have also established recurring consumption patterns and developing demands in some parts of the world with much concern regarding nutritional intake, which increases the need for natural and alternative sugar items and significant opportunities for extensive offerings are created here.

Asias lower per capita sugar consumption than western markets, provides room for expansion and opens up emerging markets for exporters to leverage economic growth and demographic trends to support their transition to long term market growth through revenue expansion of the global sugar supply chain. Improved infrastructure and trade agreements in these areas make it easier for sugar exporters to operate increasing accessibility and reducing logistical difficulties. Further owing to its advantageous position, this area serves as a gateway to other developing markets, such as those in the Middle East and Africa.

Indian Government has been encouraging ethanol capacity expansion to cut its dependency on imported crude oil and channelize the excess sugar inventories in to ethanol production. Those factors will further propel the growth of the ethanol market in India. India currently aims to achieve an E20 blend by 2030.

Now that India has been self-reliant in sugar for quite sometime and has been exporting sugar in the world market, the focus has shifted from production of sugar to conversion of sugar into fuel by converting the sucrose present in the cane into ethanol. This serves twin purposes, the first is consumption of excess of sugar and the second is savings of foreign exchange.

In keeping with this trend only, your Company set up a 100 KLPD sugarcane to ethanol distillery 5 years ago and this year we have added 150 KLPD distillery, thus increasing the capacity to 250 KLPD. In the new unit which we have added there is vision also of converting of any food grain into ethanol. Thus, enabling the utilisation of the capacity for the full year.

Challenges

The Indian sugar industry relies on worldwide sugar prices, which often change. These shifts in global sugar prices can affect how much money sugar mills make making it tough for them to keep running. Industry experts say the global sugar price has moved between Rs. 25 Rs. 35 per kg in the last 5 years. These price changes can affect how much money sugar mills bring in, making it hard for them to put money into new tech and grow their businesses.

The sugar industry in India is facing tougher competition from other countries that produce sugar, like Brazil, Thailand, and Pakistan. These nations can make sugar for less money and sell it abroad at prices that are hard to beat.

The Indian sugar industry relies on water, which is getting scarcer in many areas of the country. Droughts and water shortages can hurt sugarcane yields making it tough for sugar mills to keep up their production.

The Indian sugar industry struggles with steep logistics and transportation expenses, which can affect sugar mills bottom line. Moving sugarcane from farms to mills and then sugar to markets can rack up hefty costs.

The Indian sugar industry grapples with environmental issues and regulatory hurdles, which affect sugar mills long-term viability. The sector faces pressure to lessen its impact on the environment, including cutting down on water use and greenhouse gas output. Industry figures show that Indian sugar producers create about 10 million tons of bagasse , which can generate power and heat. Yet, the industry struggles to get rid of bagasse in a way thats kind to the environment. These environmental worries and regulatory obstacles will persist making it tough for sugar mills to keep their operations going.

Discussion on financial performance with respect to operational performance

The Company has a cane crushing capacity of 11000 TCD, ethanol production capacity of 100 KLPD and power generation capacity of 36.4 MW. The ethanol production capacity is increased to 250 KLPD and will commence from November 2025.

During the year under review, the Company crushed 7,44,743.38 MT of sugarcane and produced 5,52,900 quintals of sugar, produced 20812.38 kilo liters of ethanol and generated 7,81,33,800 KWh of power. Out of the power generated 4,91,05,800 KWh was exported and the balance was consumed by the Company.

The Companys revenue from operations stood at Rs. 46,154.96 Lakhs for the year ended March 31, 2025 as against Rs. 52,220.51 Lakhs for the previous year. The EBITDA for the year under review stood at Rs. 1,931.58 Lakhs as compared to Rs. 6,868.51 Lakhs for the previous year. The Company incurred a Loss of Rs. 3,702.33 Lakhs after tax expenses as compared to Profit of Rs. 1,449.78 Lakhs for the previous year.

During the year, crushing of sugarcane dropped by 2.13 lakh MT which resulted in less production of finished products. Further, increase in cost of raw materials and other expenses during the year has resulted in loss. The loss is only for the current financial year.

The Company is striving to increase the productivity by increasing the quantum of crushing of sugarcane and consequential increase in revenue. The Company has expanded the distillery capacity to 250 KLPD, thereby increasing the ethanol production.

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 964. 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, 2025, no treatment different from that prescribed in the Accounting Standards has been followed by the Company.

Segment-wise or product-wise performance

Details of Significant Changes in Key Financial Ratios

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.