Dhampur Sugar Mills Ltd Management Discussions

GLOBAL ECONOMY

Overview

Global economic growth declined from 3.5% in 2022 to an estimated 3.1% in 2023. A disproportionate share of global growth in 2023-24 is expected to come from Asia, despite the weaker- than-expected recovery in China, sustained weakness in USA, higher energy costs in Europe, weak global consumer sentiment on account of the Ukraine-Russia war and the Red Sea crisis resulting in higher logistics costs. A tightening monetary policy translated into increased policy rates and interest rates for new loans.

Growth in advanced economies is expected to slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024 as policy tightening takes effect. Emerging market and developing economies are projected to report a modest growth decline from 4.1% in 2022 to 4.0% in 2023 and 2024. Global inflation is expected to decline steadily from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024, due to a tighter monetary policy aided by relatively lower international commodity prices. Core inflation decline is expected to be more gradual; inflation is not expected to return to target until 2025 in most cases. The US Federal Reserve approved a much- anticipated interest rate hike that took the benchmark borrowing costs to their highest in more than 22 years.

Global trade in goods was expected to have declined nearly US$ 2 Trillion in 2023; trade in services was expected to have expanded US$ 500 Billion. The cost of Brent crude oil averaged US$ 83 per barrel in 2023, down from US$ 101 per barrel in 2022, with crude oil from Russia finding destinations outside the European Union and global crude oil demand falling short of expectations.

Global equity markets ended 2023 on a high note, with major global equity benchmarks delivering double-digit returns. This outperformance was led by a decline in global inflation, slide in the dollar index, declining crude and higher expectations of rate cuts by the US Fed and other Central banks.

Regional growth (%)	2023	2022
World output	3.1	3.5
Advanced economies	1.69	2.5
Emerging and developing economies	4.1	3.8

(Source: UNCTAD, IMF)

Performance of major economies, 2023

Outlook

Asia is expected to continue to account for the bulk of global growth in 2024-25. Inflation is expected to ease gradually as cost pressures moderate; headline inflation in G20 countries is expected to decline. The global economy has demonstrated resilience amid high inflation and monetary tightening, growth around previous levels for the next two years. (Source: World Bank)

INDIAN ECONOMY

Overview

The Indian economy was estimated to grow 7.8% in the 2023-24 fiscal against 7.2% in 2022-23. India retained its position as the fifth largest economy. The Indian rupee has demonstrated resilience compared to the preceding year, outperforming many other Asian currencies. Since April 2023, it has experienced a 0.6% depreciation against the dollar, indicating its relative stability. This resilience is underpinned by the robust growth anticipated for the Indian economy, expected to reach 7.6% during the fiscal year 2023-2024 according to government projections. The rupees stability is strengthened by the countrys surplus in balance of payments.

In the 11 months of FY 2023-24, the CPI inflation averaged 5.4% with rural inflation exceeding urban inflation. Lower production and erratic weather led to a spike in food inflation. In contrast, core inflation averaged at 4.5%, a sharp decline from 6.2% in FY 2022-23. The softening of global commodity prices led to a moderation in core inflation.

The nations foreign exchange reserves surged to a record high of US$ 645.6 Billion as of March 2024 surpassing the previous high of US$ 642.49 Billion recorded in March 2023. The credit quality of Indian companies remained strong between October 2023 and March 2024 following deleveraged Balance Sheets, sustained domestic demand and government- led capital expenditure. Rating upgrades continued to surpass rating downgrades in H2 FY 2023-24. UPI transactions in India posted a record 56% rise in volume and 43% rise in value in FY 2023-24.

Growth of the Indian economy

	FY 21	FY 22	FY 23	FY 24
Real GDP growth (%)	-6.6%	8.7	7.2	8.2

Growth of the Indian economy quarter by quarter, FY 2023-24

	Q1 FY 24	Q2 FY 24	Q3 FY 24	Q4 FY 24E
Real GDP growth (%)	8.2	8.1	8.4	7.8

(Source: Budget FY 24; Economy Projections, RBI projections, Deccan Herald)

Indias monsoon in 2023 hit a five-year low, with August marking the driest month in a century. Despite receiving only 94% of its long-term average rainfall from June to September, wheat production estimatedly recorded 114 Million Tonnes in the 2023-24 crop year due to higher coverage. Rice production was anticipated to decrease to reach 106 Million metric Tonnes (MMT) in comparison to 132 Million metric Tonnes in the previous year. Total kharif pulses produced in 2023-24 stood at an estimated 71.18 Lakh metric Tonnes, which is lower than FY 2022-23 due to climatic conditions.

As per the first advance estimates of national income released by the National Statistical Office (NSO), the manufacturing sector output is projected to have grown 6.5% in 2023- 24 compared to 1.3% in 2022-23. The Indian mining sector experienced an estimated growth of 8.1% in 2023-24 compared to 4.1% in 2022-23. Financial services, real estate and professional services grew a projected 8.9% in 2023- 24 compared to 7.1% in FY 2022-23.

Real GDP or GDP at constant prices increased from to H160.71 Lakh Crores in 2022-23 (provisional GDP estimate released on May 31, 2023) to an estimated H173.82 Lakh Crores in 2023-24. Growth in real GDP during 2023-24 stood at 8.2% compared to 7.2% in 2022-23. Nominal GDP or GDP at current prices was estimated at H295.36 Lakh Crores in 2023-24 as compared to the provisional 2022-23 GDP estimate of H269.50 Lakh Crores. The gross non- performing asset ratio for scheduled commercial banks improved from 4.1% as of March 2023 to 2.8% as of March 2024.

Indias exports of goods and services were expected touch US$ 900 Billion in 2023-24 compared to US$ 770 Billion in the previous year despite global headwinds. Merchandise exports were expected to expand between US$ 495 Billion and US$ 500 Billion, while services exports were expected to touch US$ 400 Billion during the year. Indias net direct tax collection increased 17.7% to H19.58 Lakh Crores in FY 2023-24. Gross GST collection amounted to H20.2 Lakh Crores, marking an 11.7% increase, with an average monthly collection of H1,68,000 Crores, surpassing the previous years average of H1,50,000 Crores.

The agriculture sector was expected to see a growth of 1.8% in 2023-24, lower than the 4% expansion recorded in 2022-23. Trade, hotel, transport, communication and services related to broadcasting segment are estimated to grow at 6.3% in 2023-24, a contraction from 14% in 2022-23. The Indian automobile segment was expected to close FY 2023-24 with a growth of 6-9%, despite global supply chain disruptions and rising ownership costs.

The construction sector was expected to grow 10.7% year-on-year from 10% in 2023-23. Public administration, defence and other services were estimated to grow by 7.7% in FY 2023-24 compared to 7.2% in FY 2022-23. The growth in gross value added (GVA) at basic prices was pegged at 6.9%, down from 7% in FY 2022-23.

India reached a pivotal phase in its S-curve, characterised by acceleration in urbanisation, industrialisation, household incomes and energy consumption. India emerged as the fifth largest economy with a GDP of US$ 3.6 Trillion and nominal per capita income of H1,23,945 in 2023-24.

Indias Nifty 50 index grew 30% in FY 2023-24 and Indias stock market emerged as the worlds fourth largest with a market capitalisation of US$ 4 Trillion. Foreign investment in Indian government bonds jumped in the last three months of 2023. India was ranked 63 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. Indias unemployment declined to a low of 3.2% in 2023 from 6.1% in 2018.

Outlook

India withstood global headwinds in 2023 and is likely to remain the worlds fastest-growing major economy on the back of growing demand, moderate inflation, stable interest rates and robust foreign exchange reserves.

The Indian economy is anticipated to surpass US$ 4 Trillion in 2024-25.

Union Budget FY 2024-25

The Interim Union Budget 2024- 25 retained its focus on capital expenditure spending, comprising investments in infrastructure, solar energy, tourism, medical ecosystem and technology. In 2024-25, the top 13 ministries in terms of allocations accounted for 54% of the estimated total expenditure. Of these, the Ministry of Defence reported the highest allocation at H6,21,541 Crores, accounting for 13% of the total budgeted expenditure of the central government. Other ministries with high allocation included Road transport and highways (5.8%), Railways (5.4%) and Consumer Affairs, food and public distribution (4.5%).

(Source: Times News Network, Economic Times, Business Standard, Times of India, The Hindu Businessline, fxstreet.com)

GLOBAL SUGAR INDUSTRY OVERVIEW

The global sugar production is expected at 175.5 Million Tonnes in 2023-24, a 2% decline (3.6 Million Tonnes less) from 2022-23. Reduced outputs in key countries like Thailand and India due to El Nino-induced dry conditions are the primary contributors to this decrease.

Global sugar consumption is set to expand by 0.8% in 2023-24, a slowdown compared to the growth recorded in the previous three seasons. The increase is primarily driven by population growth, while the slowing world economy and high sugar prices are expected to partly offset the upward effect of population on demand.

The preliminary forecast for world sugar trade in 2023-24 is pegged at 60.7 Million Tonnes, slightly down from the estimated volume for 2022-23 due to lower exportable supplies anticipated in Brazil, India and Thailand. Global import demand is expected to be subdued, with a significant forecast decline in imports by the European Union and the United States of America, while purchases by China will likely recover after the decline in

2022-23. After retreating in June and July 2023, international sugar prices rebounded and in September 2023, they reached their highest level since September 2011. The price increases were mainly the result of concerns over a tighter global supply outlook in the upcoming 2023-24 season, with higher international crude oil prices providing further support. However, ample supplies from the 2022-23 sugar crop in Brazil limited the increases and contributed to a slight decline in world sugar prices in October.

Performance of major sugar producing nations USA: Sugar production in the United States is estimated flat at 8.4 Million Tonnes. Imports are estimated down 10% to 2.8 Million Tonnes based on projected quota programs set at minimum levels consistent with World Trade Organisation and free- trade agreement obligations, and on projected imports from Mexico, re-exports, and high-tier tariff imports. Consumption is up slightly while stocks are reduced with the lower imports, modest growth in consumption and decline in production.

Brazil: Sugar production in Brazil is estimated to increase 3.0 Million Tonnes to a near-record 41.0 Million as favourable weather and increased area are expected to result in additional sugarcane available for crushing. Favorable sugar prices encouraged farmers to use their land for growing sugarcane instead of grains. The sugar or ethanol production mix is expected to favour sugar relative to the previous season; sugar will rise from 48 to 49% and ethanol will fall from 52 to 51%. Consumption and stocks are down while record exports are projected with the higher supplies.

China: Sugar production in China is anticipated to increase 1.0 Million Tonnes to 10.0 Million as favorable weather is expected to result in higher sugarcane yields. Consumption is estimated unchanged. Imports are expected to rise to help fill the gap between supply and demand but total supply remains tight due to curbed imports related to high world prices. Stocks are projected down 50% due to lower beginning stocks and as China sources from stocks to support consumption.

Thailand: Sugar production in Thailand is estimated to drop 1.7 Million Tonnes to 9.4 Million due to drought during the intensive growth stage. Consumption, on the other hand, is expected up in line with anticipated economic recovery and tourism that will boost domestic demand for sugar. Exports are estimated higher and are expected to exceed production, while stocks are projected to drop sharply following strong domestic and export demand.

European Union: Sugar production in the European Union (EU) is projected to grow 3% in the 2023-24 season with a strong crop in the blocs East more than offsetting a drop in France. The European Union is the third largest sugar producer behind Brazil and India and is estimated by the USDA to be the fifth largest importer. EU imports in 2023-24 are forecasted to decrease 5,00,000 Tonnes to 2.5 Million Tonnes.

INDIAN SUGAR INDUSTRY OVERVIEW

India ranks first globally in sugar production. Indias sugar production for the 2023-24 season amounted to approximately 34 Million metric Tonnes. This gross sugar production for 2023- 24 SS without considering diversion towards ethanol shall be sufficient for domestic consumption. This is particularly promising, considering that Indias average domestic sugar consumption stands at approximately 278.5 Lakh Tonnes, signifying a favourable equilibrium between production and consumption in the coming year.

In India, domestic sugar consumption reached 30 Million metric Tonnes, exceeding the previous years 6-6.3 Million Tonnes. Sugarcane cultivation is estimated to cover approximately 57 Lakh hectares of land in the 2023- 24 period, with total sugar production expected to reach 325 Lakh Tonnes. Indian sugar producers have benefited from favourable prices for the 6 Million Tonne export quota. In the fiscal year 2023-24, the total area of sugarcane cultivation is projected to increase by 1.37% to approximately 59.81 Lakh hectares compared to the previous years 59 Lakh hectares.

The Indian sugar industry serves as a catalyst for socio-economic development in rural areas, leveraging local resources to generate employment and boost farm income. Approximately 50 Million farmers and their dependents are engaged in sugarcane cultivation, while half a Million skilled and unskilled workers find employment in sugar factories and associated industries. This sector plays a pivotal role in creating job opportunities, thereby contributing significantly to the economic vitality of rural communities.

India continues to maintain its position as the worlds leading sugar producer and the second-largest exporter of the sweetener. However, projections suggest that India may not export sugar in the 2023-24 season due to lower output compared to the previous year. The country is expected to implement a ban on sugar exports for the upcoming season starting in October, marking the first halt in shipments in seven years due to decreased cane yields caused by insufficient rainfall. During the current season until September 30, India permitted mills to export only 6.1 Million Tonnes of sugar, a significant decrease from the record 11.1 Million Tonnes exported in the previous season.

(Source: Reuters.com, nfsm.gov. in)

Sugar balance sheet 2023-24 (in Million Tonnes)

Opening stock	5.7
Estimated production during sugar season FY 2023-24	31.6
Sugar availability	34.0
Estimated domestic consumption	30.0
Targeted exports during sugar season FY 2023-24	Nil
Closing stock	7.68

Source: Industry (Sugar year 2024-October 2023-September 2024)

Sugar opening stock, production, consumption and closing stock in India over the years (in Million Tonnes)

Year	Opening balance	Production	Consumption	Closing balance
2013-14	9.3	24.4	24.2	7.47
2014-15	7.47	28.3	25.6	9.08
2015-16	9.08	25.1	24.8	7.75
2016-17	7.75	31.6	24.5	3.88
2017-18	3.38	32.5	25.4	10.72
2018-19	10.72	33.16	26	14.5
2019-20	14.5	27.4	25.3	10.7
2020-21	10.7	30.8	26	8.5
2021-22	8.5	36	27.5	7
2022-23	5.7	35.0	27.5	6.2
2023-24	5.18	34.0	29.50	7.68

(Source: Financial express, Mordor Intelligence, Outlook India, Economic Times)

Top sugar-producing Indian States and their performance, FY 2023-24 Uttar Pradesh: The total sugarcane cultivation area in Uttar Pradesh for the 2023-24 season has reached 29.66 Lakh hectares, an increase of 9.12 Lakh hectares compared to the 2016-17 season. This marks the highest cultivation area in recent years. Sugar production reached 88.40 Lakh Tonnes, up from 79.63 Lakh Tonnes during the period under review.

Maharashtra: Sugarcane acreage in Maharashtra is expected to be 14.07 Lakh hectares in 2023-24 season.

The area under sugar cultivation has decreased by 6% compared to the previous year. As the 2023-24 crushing season in Maharashtra approaches its end, sugar mills in the state have processed 1,066.86 Lakh Tonnes of sugarcane, yielding 109.36 Lakh Tonnes of sugar.

Karnataka: Anticipated net sugar production in Karnataka for the 2023- 24 season is expected to reach 5.3 LMT. The area of sugarcane cultivation in Karnataka it increased to 6.9 Lakh hectares from 3.7 Lakh hectares between 2016-2023. Sugar production in Karnataka, the countrys third largest producer, the production stood at 5.06 Million Tonnes in 2023-24. (Source: chinimandi.com, The Economic Times)

Fair and remunerative prices

The Centre approved a H25/quintal increase in fair and remunerative price (FRP) of sugarcane for the 2024-25 season (October-September). Last year, the FRP was raised by H10/quintal. The FRP of sugarcane for season 2023-24 (October to September) will be H340/ quintal for a basic recovery rate of 10.25%. Earlier, it was H315/quintal. However, there will be a premium of H3.32/quintal for every 0.1% increase in recovery over 10.25% and a reduction of H3.32/quintal in FRP for every 0.1% decrease in recovery.

(Source: thehindubusinessline.com)

FRP over the years (in J per quintal)

Year	FRP
2012-13	145
2013-14	170
2014-15	210
2015-16	220
2016-17	230
2017-18	255
2018-19	275

 

2019-20	275
2020-21	285
2021-22	290
2022-23	305
2023-24	315
2024-25	340

(Source: The Hindu)

INDIAN ETHANOL SECTOR OVERVIEW

Indias ethanol market surged to US$ 6,512.27 Million in 2023, set for robust growth at an 8.84% CAGR, potentially reaching US$ 10,456.98 Million by 2029. The surge is fueled by rising ethanol use in fuel additives and beverages. Government investments in converting surplus sugar to ethanol and establishing an ethanol economy further propel growth. The Ethanol Blended Petrol (EBP) program, launched in 2003, mandates blending ethanol with petrol to cut greenhouse gas emissions and promote cleaner fuels.

India aims for 20% ethanol blending by 2025, driving ethanol production. Despite an expected drop in blending rates for 2023-24, India targets 20% blending by 2025. Government efforts to expand ethanol capacity reduce reliance on imported crude oil and utilise excess sugar inventories, aiming for an ethanol market volume of around 6,400 thousand Tonnes by fiscal year 2035. In order to achieve the target of 20% blending by 2025, about 1,016 Crores litres of ethanol is required and total requirement of ethanol including for other uses is 1,350 Crores litres.

For this, about 1,700 Crores liters of ethanol producing capacity is required to be in place by 2025 considering the plant operates at 80% efficiency. The Government has estimated the demand of ethanol required for 20% blending by 2025 keeping in view the growth of petrol-based vehicles in two-wheeler and passenger vehicle segments and the projected sale of Motor Spirit (MS).

(Source: Chemanalyst, PIB)

INDIAN CO-GENERATION SECTOR OVERVIEW

Sugarcane serves as a significant agricultural biomass energy source, yielding two types of biomass: sugarcane trash and bagasse. Bagasse, comprising fibrous material left post-milling with 45-50% moisture content, consists of a blend of hard fibers and soft tissue with high water- absorbing capacity. Sugar factories, processing 100 Tonnes of sugarcane, typically generate around 30 Tonnes of wet bagasse. This fibrous residue is commonly employed as the main fuel source for sugar mills.

In substantial combustion, bagasse, a residue from sugarcane processing, produces substantial heat and electricity, capable of powering the complete operations of a standard sugar factory. This fibrous material, composed of hard fibers and soft tissue with a moisture content of 45-50%, is a byproduct of sugarcane processing and commonly serves as a fuel source in sugar mills.

The combustion of bagasse in significant amounts produces heat and electricity, supplying the necessary energy for mill operations. Furthermore, the CO2 emitted during this process is balanced by the amount absorbed by sugarcane during its growth, rendering the electricity generation from bagasse a carbon-neutral process.

India produces 450-500 Million Tonnes of biomass annually, contributing 32% to its primary energy use. With a total power generation capacity of 424 GW, including 180 GW from non-fossil fuels and 88 GW under development,

India aims for 500 GW of renewable energy capacity by 2030. The biomass market in India is projected to reach H32,000 Crores by FY 2030-31, driven by government initiatives and investments from global green energy firms.

New schemes supporting biomass cogeneration projects are bolstering capacity additions, particularly in remote and rural areas. Bagasse cogeneration stands at 9,433.56 MW, while non-bagasse biomass cogeneration is at 814.45 MW, according to the Ministry of New and Renewable Energy (MNRE). Additionally, around 70 cogeneration projects totaling 800 MW are in various stages of implementation.

(Source: mnre.gov.in, The Economic Times, Waste Management World Magazine, MongabayIndia, BoilerWorldUpdate)

government initiatives

The government capped sugar diversion for ethanol making at 17 Lakh Tonnes for the current 2023-24 season (October- September) in view of likely fall in sugar production due to drought in parts of Maharashtra and Karnataka. The government had recently announced an incentive for ethanol made from maize. But since the sugarcane crop is more efficient in terms of water, nutrients, land use or carbon sequestration, as compared to maize, sugarcane also deserves to be supported more by the government.

(Source: business-standard.com)

"demand drivers in the sector

Growing population: The population of India is projected at 1.44 Billion as of July 1, 2024, a 0.92% increase from 2023. This continuous growth guarantees an expanded market for the Company.

Climatic factors: Sugar cultivation in India is anticipated to increase because South India experiences milder summer temperatures and a moderate winter without frost.

FMCG-driven: Indias below-average per capita beverage consumption compared to the global average presents an opportunity for growth.

Rising demand for supplementary goods: The tea industry in India is projected to generate US$ 14.4 Billion in 2024 and have an annual growth rate of 5.99% from 2024-2028.

Sugar, a complementary product to tea, is anticipated to experience corresponding growth.

Government actions: The governments emphasis on ethanol production under its new Biofuel Policy is reshaping the industry by redirecting surplus sugar towards ethanol production.

Preference for value-addition: The surge in demand for value-added items is driving growth in the packaged products market.

Increasing demand of end products:

The increase in sugar demand is closely linked to the growing consumption of sweets and chocolate.

Pharmaceutical industry: The Indian pharmaceutical sector is predicted to grow to US$ 65 Billion by 2024 and reach US$ 130 Billion by 2030. The sugar industry is poised to grow as sugar is an essential component in the drug-making process.

(Sources: Worldometer, Business wire, Expert market research, IBEF, Statista, The Wire)

SWOT ANALYSIS

Strengths

- In India, sugar cane stands out as a profitable cash crop.

- India takes the lead in global sugar consumption and holds the second position in sugar production.

- The sugar sector not only fosters related industries growth but also enhances the well-being of the rural economy in India.

- Recognising its catalytic role, the Indian government acknowledges the sugar industrys impact on the local economy.

- The Indian sugar industry profoundly influences the livelihoods of around 50 Million sugarcane farmers and offers direct employment to 500,000 workers.

Opportunities

- Indias per capita sugar consumption averages around 20 kg, trailing the global average of 23 kg.

- Embracing enhanced farming techniques has the potential to substantially boost yields and efficiency.

- The governments mandatory ethanol blending policy is a key driver for ethanol demand.

- Technological upgrades can enhance the utilisation of by-products for greater efficiency.

Weaknesses

- Cane prices in the industry are notably higher than the global average.

- Several companies in the sector continue to employ outdated equipment.

- Financial challenges are prevalent among many mills, stemming from a shortage of funds.

Threats

- Cropping patterns and yield levels are impacted by climate change.

- The sector relies significantly on the unpredictable nature of monsoon seasons.

- Insufficient infrastructure often results in cane farming being highly contingent on unpredictable weather patterns.

FINANCIAL OVERVIEW

Analysis of the profit and loss statement

Revenues: Revenues from operations reported from H2,874.02 Crores in FY 2022-23 to H2,646.83 Crores in FY 2023-24. Other Income of the Company reported a 74.94% increased and accounted for a 1.01% share of the Companys revenues, reflecting the Companys dependence on its core business operations.

Expenses: Total expenses decreased by 6.93% from H2,666.71 Crores in FY 2022- 23 to H2,481.83 in FY 2023-24 Crores. Raw material costs, accounting for a 66.19% share of the Companys revenues, increased by 3.58% from H1,691.47 Crores in FY 2022-23 to H1,752.06 Crores in FY 2023-24. Employees expenses, accounting for a 3.24% share of the Companys revenues, increased by2.06% from H84.06 Crores in FY 2022-23 to H85.79 Crores in FY 2023-24.

Analysis of the Balance Sheet

Sources of funds: The capital employed by the Company were H2,145.38 Crores as on March 31, 2024 as against H1,825.95 Crores as on March 31, 2023. Return on capital employed, a measurement of returns derived from every rupee invested in the business, was 10.94% in FY 2023-24 as against 14.61% in FY 2022-23.

The net worth of the Company was H1,101.01 Crores as on March 31, 2024 as against H1,043.04 Crores as on March 31, 2023. The Companys equity share capital decreased by ten lakh shares due to buyback of shares at a price of H300 per equity share for an aggregate amount of H30 Crores during the year under review. As on March 31, 2024 comprises of 65387590 equity shares of H10 each.

Long-term debt of the Company was H164.88 Crores as on March 31, 2024. The debt-equity ratio of the Company stood at 0.88 in FY 2023- 24 compared to 0.70 in FY 2022-23.

Finance costs of the Company decreased by 3.23% from H43.94 Crores in FY 2022-23 to H42.52 Crores in FY 2023-24. The Companys debt service coverage ratio stood at a comfortable 2.15 x at the close of FY 2023-24 as against 2.80x at the close of FY 2022- 23.

Applications of funds: Fixed assets (gross) of the Company was H1,833.37 Crores as on March 31, 2024 as against H1,686.46. Crores as on March 31, 2023. Depreciation on tangible assets was H53.06 Crores in FY 2023-24 as against H47.40 Crores in FY 2022-23 during the year under review.

Investments: Non-current investments of the Company were H1.00 Crores as on

March 31, 2024 as against H1.80 Crores as on March 31, 2023.

Working capital management:

Current assets of the Company were H1,181.89 Crores as on March 31, 2024 as against H964.36 Crores as on March 31, 2023. The Current and Quick ratios of the Company stood at 1.20 and 0.26 respectively at the close of FY 2023-24 compared to 1.24 and 0.38, respectively at the close of FY 2022-23.

Inventories, including raw materials, work-in-progress and finished goods, among others, was H917.06 Crores as on March 31, 2024 as against H666.75 Crores as on March 31, 2023. The inventory: turnover ratio was 2.77 times as against 3.21 times in FY 2022-23. Trade receivables were H163.39 Crores as on March 31, 2024 as against H194.49 Crores as on March 31, 2023. All receivables were secured and considered good. The Company contained its debtors turnover ratio at 10.04 times in FY 2023-24 compared to 9.36 times in FY 2022- 23.

Margins: The EBIDTA margin of the Company is 10.97% in 2023-24 while the net profit margin of the Company is 5.03%.

Key ratios

Particulars	FY 2023-24	FY 2022-23
Operating Profit Margin (%)	10.97	11.03
EBITDA/Net interest ratio (x)	6.90	7.26
Debt-equity ratio	0.88	0.70
Return on equity (%)	12.56	16.39
Book value per share (Rs)	168.28	157.04
Earnings per share (Rs)	20.27	23.72
Debtors turnover ratio	10.04	9.36
Inventory turnover times	2.77	3.21
Current ratio (x)	1.20	1.24
Net profit margin (%)	5.03	5.47
Interest Coverage Ratio	6.90	7.26

The variance and reasons for significant changes, if any, have been reported in the financial statements and forms part of this management discussion and analysis.

RISK MANAGEMENT

Geographical Risk: The distance between mills and cane fields poses operational challenges.

Mitigation: Mills are strategically located within a 30 Km radius of major cane-growing regions, ensuring accessibility via road connections.

Procurement Risk: Procuring sugarcane may present challenges.

Mitigation: The Company maintains longstanding relationships with cane farmers and implements programs to enhance their welfare and productivity.

Quality Risk: Theres a risk of receiving low-quality sugarcane.

Mitigation: The Company promotes early-maturing cane varieties and offers subsidised insecticides, along with educating farmers on modern farming practices to mitigate quality risks.

Financial Risk: Increasing debt poses financial risks.

Mitigation: Timely debt repayment enhances the Companys financial stability.

Human Capital Risk: Difficulty in attracting and retaining talent could impact prospects.

Mitigation: A structured human resource policy facilitates talent attraction and retention.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a robust internal audit system that is regularly monitored and updated to protect assets, comply with regulations, and promptly address any issues. The audit committee regularly reviews internal audit reports, takes corrective action if needed, and maintains communication with both statutory and internal auditors to ensure effective internal control systems.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company values its employees and is committed to enhancing their skills to match technological advancements.

In the past year, it conducted diverse training programs covering technical, behavioral, business, leadership, customer service, safety, and ethical skills. As of March 31, 2024, the Company had a workforce of 1166.