STRUCTURE AND DEVELOPMENTS
Sugar is one of the major agro based commodities produced around the
world. The Indian sugar industry is a critical part of the global landscape as the nation
is the largest consumer and the second largest producer of sugar.
The sugarcane and sugar sector in India ranks second among the
countrys agro-based industries. Indias largest integrated sugar business engaged in the
manufacturing of sugar ethanol and power. The slew of structural reforms undertaken by the
GOI in recent years has positively changed the fortune of the sugar industry from its
erstwhile morass.
In the Sugar season, 21 /22 India produced 35.8 million metric tons of
sugar and exported 11 million metric tons of sugar to the world market, after considering
a diversion of 3.2 million metric tons of sugar equivalent into ethanol for the ambitious
blending programme by Govt. In the current
22/23 season, pan India sugar production is estimated to be around 32.8
million metric tons after considering a diversion of 4.2 million metric tons of sugar
equivalent into ethanol. Thus, with an opening inventory of 7 million tons & estimated
production of 32.8 million tone, consumption and exports at 27.5 million tones and 6.2
million tons respectively, closing inventory on September 2023 will be at 6 million tons.
This is close to 3 months stock to use ratio so shall be supportive domestic sugar prices.
Increasing Ethanol production and reducing Sugar exports has been the key agenda on the
industry desk. Subsidized exports were objected by several other sugar exporting origins
at WTO, hence local value addition into Ethanol is great initiative. Currently, the
blending achieved is 12% as per the target. This Ethanol demand is new to the sector and
has created tightness in other alcohol segments driving the value for other alcoholic
products as Extra Neutral Alcohol, Rectified Spirit, etc.
| Particulars |
2018-19 |
2019-20 |
2020-21 |
2021-22 |
2022-23
(P) |
| Opening Stock as on 1 st Oct. |
107.16 |
145.79 |
107.40 |
82.00 |
70.00 |
| Production during the Season |
331.62 |
274.11 |
311.92 |
358.00 |
328.00 |
| Imports |
- |
- |
- |
- |
- |
| Total Availability |
438.79 |
419.90 |
419.32 |
439.00 |
398.00 |
| Off-take |
|
|
|
|
|
| i) Internal Consumption |
255.00 |
253.00 |
265.55 |
273.00 |
275.00 |
| ii) Exports |
38.00 |
59.50 |
71.91 |
111.00 |
62.00 |
| Total off-take |
293.00 |
312.50 |
337.46 |
384.00 |
337.00 |
| Closing Stock as on 30th Sep |
145.79 |
107.40 |
81.86 |
55.00 |
61.50 |
| Stock as % of off-take |
57.2% |
42.5% |
30.8% |
20% |
22% |
(Source: Indian Sugar Mills Association (ISMA)
Performance of the Company
| Particulars |
Year Ended 31.03.2023 |
Year Ended 31.03.2022 |
| Sugar |
|
|
| Installed Capacity (TCD) |
23700 |
23700 |
| Sugarcane Crushed (Lakh Tonnes) |
56.57 |
49.01 |
| Recovery (%) |
9.53 |
9.33 |
| Sugar bagged (Lakh Quintals) |
53.76 |
45.48 |
| Power |
|
|
| Installed Capacity |
|
|
| Co-gen Power (MW) |
129.80 |
129.80 |
| Wind Mills (MW) |
8.75 |
8.75 |
| Units Generated (Million Units) |
667.35 |
585.13 |
| Distillery |
|
|
| Installed Capacity (KLPD) |
217.50 |
217.50 |
| Alcohol Produced (Million B. Ltrs) |
54.22 |
12.44 |
| Polished Granite Products (Sq mtrs) |
125001 |
184518 |
Financial Performance of the Company
| Particulars |
Year Ended 31.03.2023 |
Year Ended 31.03.2022 |
| Revenue from operations |
|
|
| Sugar |
196138.84 |
168247.22 |
| Power |
22622.26 |
19892.10 |
| Distillery |
31337.54 |
7843.75 |
| Granite Products |
2458.95 |
3825.92 |
| Total Expenses (Excluding interest) |
|
|
| Sugar |
189364.77 |
166486.70 |
| Power |
9427.18 |
6664.22 |
| Distillery |
22999.54 |
6999.56 |
| Granite Products |
3812.33 |
4343.69 |
| Profit Before Interest and Tax (PBIT) |
|
|
| Sugar |
6774.07 |
1760.52 |
| Power |
13195.08 |
13227.88 |
| Distillery |
8338.00 |
844.19 |
| Granite Products |
(1353.38) |
(517.77) |
| Profit After Tax (PAT) |
14339.14 |
7998.39 |
| Earnings per Share (Basic and Diluted) |
114.35 |
T>63.78 |
Key Profitability Ratios
| Particulars |
Year Ended 31.03.2023 |
Year Ended 31.03.2022 |
| Profitability Ratios |
|
|
| Operating Profit Margin (EBIDTA / SALES %) |
13.60 |
11.08 |
| Net Profit Margin (PAT / SALES %) |
5.68 |
4.00 |
| Return on net Worth (PAT / Net Worth %) |
9.38 |
5.72 |
| Balance Sheet Ratios |
|
|
| Debt Equity Ratio (times) |
0.38 |
0.69 |
| Current Ratio (times) |
2.04 |
1.46 |
| Debtors Turnover (days) |
39 |
46 |
| Inventory Turnover (days) |
143 |
183 |
| Interest Coverage Ratios (times) |
5.46 |
4.87 |
Due to increased profit, profitability ratios has improved. Better
collections, improved sales and profit has improved the Balance Sheet Ratios.
Opportunities and Threats
Presently, the sugar industry is recovering from its recent troughs,
through timely and game-changing policy intervention related to sugar MSP, higher ethanol
pricing, blending mandates, favorable export policy, etc., thereby, moderating sector
cyclicality and improving profitability, leading to structural re-rating of the sector.
We have greater participation in the export campaign and the ethanol
blending program will incentivize farmers and will result in an increase in the sugarcane
acreage in the country. We have a great opportunity for the expansion of Milling and
distillation capacity for the betterment sugar Industry and those who are directly or
indirectly associated with the industry.
India is a tropical country with varied agro-climatic regions leading
to diverse cropping pattern. Heavy dependence on Monsoon for the crop continues. Any below
normal performance of monsoon is the only major threat to the industry. Rest of the usual
threats wittness during cyclic nature of the industry are not much prevalent due to timely
preventive decisions made by the Govt.
Risk and Concern
Government policies on sugar and sugarcane prices will continue to
influence and render volatility to the overall
profitability of sugar manufacturers. The non-linkage of sugarcane cost
to sugar realization is the key negative for the industry and would continue to result in
huge volatility. Being an agro-based industry, performance of the Company is dependent on
the availability of sugarcane for crushing which may get adversely affected due to adverse
weather conditions resulting in lower availability and diversion of cultivable lands to
alternate crops. Govt, should link the revision of sugarcane price to the revision in
sugar floor price, as this shall help mills operate at a good spread where the margins
shall not be under pressure.
Currently, no linkage for revision of sugar prices but only revision of
sugarcane prices, is a concern and is eroding margins in sugarcane milling business. Sugar
floor price was announced at INR 31 per kg ex-mill and is unchanged for last 5 years in a
row while Sugarcane prices are revised higher every year.
Internal Control Systems and their Adequacy
The company has adequate internal control systems in place and also has
reasonable assurance on authorizing, recording and reporting transactions of its
operations. Proper and adequate internal controls are being adopted by the company
commensurate with its size, scale and complexities of operations.
Details of Adequacy of Internal Financial Controls
The Companys internal control system is aimed at proper utilization
and safeguarding of the Companys resources and promoting operational efficiency. The
internal audit process reviews the in-system checks, covering significant operational
areas regularly.
The Companys Audit Committee is responsible for reviewing the Report
submitted by the Internal Auditors. Suggestions for improvements are considered and the
Audit Committee follows up on the implementation of corrective actions. The Audit
Committee also invites the Statutory and Internal Auditors for regular meetings to
ascertain their views on the adequacy of internal control systems and keeps the Board of
Directors informed of its observations from time to time.
Human Resources and Industrial Relations
The Company employs 1922 permanent employees and the company maintains
excellent relationship with its employees during the year under review. No case was filed
under Sexual Harassment of women at workplace (Prevention Prohibition and Redressal) Act
2013.
The company has created an excellent relationship with the farmers as
well as other stakeholders including bankers.
CSR Activities
Most of the CSR Activities are carried out directly by the company. We
are working tirelessly to enrich the lives of people in the rural community by providing
them with a host of amenities that not just make their lives a whole lot easier but also
ensures agricultural, educational and economic independence. More details are furnished in
the Annual Report on CSR Activities.
Outlook
In FY23 and FY24, Sugar crops growth is projected to decrease sharply
due to agroclimatic concerns in northern hemisphere driven by El Nino. World is already in
deficit of 1.5 million metric tons sugar for crop year 2022-23. Mounting weather concerns
and early indications of El Nino pose threat to upcoming crush in India which could keep
Govt, concerned. Exports could be allowed at a later window than normal for crop 2023-24,
probably in Q2 2024. Export/World market prices are almost 30% higher than domestic
prices, so any delay or non-allowance for exports shall be a big dent to the profitability
of sugar companies. It is a very sweet spot where world market is in deficit and India is
in a position to export. Federal elections in 2024 shall push policy makers to regulate
the domestic price environment to keep the inflation in check. Geopolitical tensions
across Ukraine and Russia shall ensure that food prices are high enough for rest of the
2023 and first half of 2024.
Cautionary Statement
Statements made in this Management Discussion and Analysis Report may
contain certain forward-looking statements based on various assumptions on the Companys
present and future business strategies and the environment in which it operates. Actual
results may differ substantially or materially from those expressed or implied due to risk
and uncertainties. These risks and uncertainties include the effect of economic and
political conditions in India and abroad, volatility in interest rates and in the
securities market, new regulations and Government policies that may impact the Companys
businesses as well as the ability to implement its strategies. The information contained
herein is as of the date referenced and the Company does not undertake any obligation to
update these statements. The Company has obtained all market data and other information
from sources believed to be reliable or its internal estimates, although its accuracy or
completeness cannot be guaranteed.
DECLARATION ON COMPANYS CODE OF CONDUCT
This is to confirm that for the financial year ended March 31,2023, all
members of the Board and the Senior Management Personnel have affirmed in writing their
compliance with the Code of Conduct adopted by the Company.
|
S V BALASUBRAMANIAM |
| Place : Coimbatore |
Chairman |
| Date : 24.05.2023 |
DIN 00002405 |
+91-9892691696
