Shree Renuka Sugars Ltd Management Discussions

Company Overview

Shree Renuka Sugars Limited (SRSL/The Company) is one of the largest sugar and green energy producers in India. Based in Belagavi, Karnataka, the Company operates eight state-of-the-art mills (including two belonging to its subsidiary companies) equipped with the capacity for power co-generation and ethanol production capabilities in three mills. It also operates two of the largest sugar refineries in the state of Gujarat and West Bengal, making it one of the biggest refiners and exporters of refined sugar in the world. The Company is also leading contributor to Indias ethanol blending programme.

Economic Overview

Indian Economy1

Despite strong macroeconomic turbulence, the Indian economy recorded a growth rate of 6.5% in FY 2024-25. While aggregate growth slowed slightly compared to the previous year, consumption remained buoyant, led by ascending rural demand and supported by a favourable monsoon. The average headline Consumer Price Index (CPI) inflation remained at 4.6%, which was within the Reserve Bank of Indias (RBI) acceptable range and allowed for the subsequent 100 basis-point cut in repo rate to 5.5%.

Investment activity gained momentum in the year under review, fuelled by manufacturing and orders for exports. The Governments infrastructure expenditure and schemes like the Production Linked Incentive (PLI) Scheme 2.0 were also considered as major drivers of industrial activity and the inflow of Foreign Direct Investments (FDIs). Steep imports of capital goods further indicated companies investment in capacity augmentation.

Outlook

Despite the threats posed by persistent global headwinds on Indias industries and trade, the overall prospect of growth remains optimistic for the economy. This outlook is supported by elevated consumer demand, private investment and favourable policies.

As inflationary pressures ease, the rate of consumption is expected to rebound. RBIs prudent policies combined with the additional income tax benefits for salaried individuals will catalyse the spending. Sustained public capital spending and additional reforms are expected to attract FDI and support domestic production. Expedited urbanisation is expected to continue to increase fuel consumption, supporting Indias ambitions for achieving a developed-nation status by 2047.

Indias real GDP growth

Industry Overview

Global Sugar Market3

The global sugar market performed remarkably despite a number of challenges. The tightening supply situation allowed sugar prices to remain stable even with expectations of a surplus earlier in the year.

World sugar output during Marketing Year (MY) 2024-

25 (October to September) is projected to reach 174.4 million tonnes, down by 3.6% year-on-year.4 The decrease in production is primarily attributed to the decreased production in India and Brazil offsetting increase in production in China and Thailand. During the period, consumption is projected at 178 Million Metric Tonnes (MMT).

The international trade volume is projected to reduce significantly, with the export dropping to 63.323 MMT from 69.342 MMT in the previous season.

Outlook5

The world sugar production is projected to rise to 181.3 MMT in MY 2025-26, primarily due to increased production in Brazil, India and Thailand, offsetting lower output in the European Union. Even with this increase, world exports are declining due to lower shipments from the European Union.

US sugar output is forecasted to decrease slightly to 8.4 MMT in the next year. Imports are forecasted to fall because of quota restrictions and smaller importations from Mexico, re-exports and high-tariff imports.

Sugar output in Brazil is projected to increase by 0.5 MMT to an all-time high of 40.5 MMT, aided by good weather and increased yields. Local consumption is expected to decrease, while exports will rise with increased output.

Production in the European Union is expected to decline to 15.7 MMT, largely because of a 10% fall in area devoted to sugar beets in key producer nations such as France and Germany. Domestic consumption and stocks are predicted to be stable but imports will increase to offset reduced production and exports will fall.

Thailands sugar output is expected to expand to 11.4 MMT as a result of greater sugarcane production and yields. Consumption continues to grow but at a reduced pace, with exports anticipated to drop due to increased competition from other major exporters such as Brazil.

Indias Sugar Market

Indias production of sugar during the SY 2024-25 is estimated at 26.2 MMT, sufficient to cover local annual demand. Indias consumption of sugar during SY 2024-25 is estimated at 28 MMT.7

Maharashtra is set to produce 8 MMT in SY 2024-25. Production in Uttar Pradesh is estimated at 9 million tonnes, consistent with previous estimates. Karnatakas sugar production is estimated at 4 million tonnes, marginally higher than preliminary estimates. The number of operational sugar mills in India stood at 535 in SY 2024-25.8

Currently, around 1.89 crore families across 26 states of India are receiving benefit under the Antyodaya Anna Yojana (AAY) scheme, for which around 2.27 lakh tonnes sugar is being allocated. The current scheme of supply of subsidised sugar to AAY households through Public Distribution System (PDS) will be extended during the 15th Finance Commission (FC) cycle (i.e. 2021-22 to 2025-26) with cumulative financial outgo of 1817.60 crore.8

Growth Drivers

Technological Improvements

Indian sugar mills are increasingly investing in technologies that unlock operational efficiencies, enhance productivity and reduce costs. The Indian sugar industry is anticipated to invest 5,000 crores in digital technologies over the next five years, highlighting the continued progress of technological adoption in the sector.10 Your Company also continues to take steps to improve operational efficiencies and reduce operating costs, details of which are given in Annexure III of the Boards Report.

Rising Demand for Specialty Sugars

The heightened consumer awareness about health and wellness is driving a notable rise in demand for specialty types of sugars such as organic sugar, brown sugar and low-calorie sugar. This growth is further aided by the increasing demand for premium and gourmet food-related products.

Government Initiatives

Sugar Development Fund (SDF): Under the SDF Act, 1982, the Government of India maintains a fund for modernisation of sugar factories as well as to build up and maintain a buffer of sugar stock. Currently, sugar mills are required to pay for levy of cess at 24 per quintal of sugar manufactured to the Consolidated Fund of India.

Antyodaya Anna Yojana: Under this programme, the Government aims to provide subsidised food, including wheat, rice and sugar to the poorest families of the country. Launched in December 2000, it initially targeted one crore families identified as the poorest among those below the poverty line (BPL). The scheme has since been expanded to cover around nine crore families.11

Pradhan Mantri Kisan Samman Nidhi (PM-KISAN): Under the scheme, financial benefit of

6000/- per year is transferred into the bank accounts of farmers families across the country, through Direct Benefit Transfer (DBT) mode. The scheme has benefitted more than eleven crore beneficiaries (Farmers) across the country.

Pradhan Mantri Kisan MaanDhan Yojana (PM-KMY): PMKMY is taking care of the farmers during their old age by providing a monthly pension of

3,000 to the enrolled farmers 60 years or above in age. Over 23 lakh farmers have already enrolled under the scheme.

Agriculture Infrastructure Fund (AIF): The AIF was launched as a part of the Aatmanirbhar Bharat initiative, with an aim to address the existing infrastructure gaps and mobilise investment in agriculture infrastructure. Under the scheme,

1 Lakh Crore will be provided by banks and financial institutions as loans to , with interest subvention of 3% per annum, for investment in viable projects for post- harvest management infrastructure and community farming assets. The fund is to be disbursed from FY 2020-21 to FY2025-26, with support under the scheme lasting through FY2032-33.

Export subsidy on raw sugar: The Government occasionally issues export subsidies to enhance the competitiveness of Indian raw sugar on the global market and help sugar mills with their liquidity crisis.

Ethanol Blending Programme: Molasses, a byproduct of the sugar industry, can be used to make ethanol. Besides lowering pollution levels, the EBP also ensures utilisation of molasses produced from sugar manufacturing, thereby reducing waste and improving the revenue stream of the sugar mills. SRSL also uses sugarcane juice for ethanol production, in addition to use of molasses.

Sugar Diversion for Ethanol Production12

As a part of the Governments drive towards clean energy, around 2.7 MMT of sugar has been redirected towards ethanol production by 30th April 2025, with another 0.6 to 0.7 MMT expected to be redirected by the end of MY 2024-25.13

One of the major developments in the ethanol industry has been the Governments move to increase the sugar diversion for ethanol manufacturing for Ethanol Supply Year (ESY) 2024-25 (November-October). The Department of Food and Public Distribution (DFPD) in collaboration with the Ministry of Petroleum and Natural Gas (MoPNG) will review from time to time the diversion of sugar to ethanol for providing sugar supply throughout the year for local consumption. Following the decline in sugar production in 2023-24, the diversion of sugar for ethanol was capped at 2.3 MMT for the season. Around 4 MMT of sugar is anticipated to be diverted during the MY 2025-26, which will help address high sugar inventories and improve liquidity for mills, facilitating timely payment of dues to farmers.

Outlook

The outlook for the MY 2025-26 appears promising, with rebound in production expected to around 35 million tonnes, of which 4 to 4.5 million tonnes is expected to be diverted for ethanol production, as a result of the good southwest monsoon received in key sugarcane producing states, coupled with an expected recovery in planted area for MY 2025-26.14

In Maharashtra and Karnataka, the arrival of a good monsoon in 2025 has resulted in a sharp pickup in sowing of sugarcane, paving the way for a timely crushing season from October 2025. In Uttar Pradesh and the rest of northern India, varietal replacement programmes are gaining momentum, which could result in increased cane yields and improved sugar recovery levels.

Linear (Sugarcane production) Linear (Sugar production)

Source: ISMA

Indian Ethanol Market

India is the worlds third-largest producer and consumer of ethanol. In the last 11 years, the countrys production capacity has seen considerable growth and achieved 16.85 Bn litres annually. Out of this, 9.41 Bn litres were from molasses-based distilleries and 7.44 Bn litres from grain-based distilleries.18 Government policies, including interest subsidies for establishing production facilities and loans to co-operative sugar mills for setting up multi-feed distilleries continue to support the industry.

Ethanol Blending Programme

The Government of India implemented the Ethanol Blended with Petrol (EBP) Programme nationwide, facilitating Oil Marketing Companies (OMCs) to sell petrol blended with ethanol. This has led to significant market expansion, reaching USD 3 billion in 2024.19 The growth was also supported by higher ethanol blending orders, heightened sugarcane production, expanding biofuel infrastructure and industrial utilisation beyond the transportation sector. With the attainment of 15% blending in petrol in 2024, India amended its target to 20% blending by ESY 2025 or approximately 990 million per year.20 21 As on 30th June 2025, India had achieved 18.9% blending in ESY 2024-25.22

The ethanol blending programme has generated massive economic and environmental returns in the past decade. These include foreign exchange saving of

1,06,072 crore, CO2 emissions saving of 544 lakh MMT and substitution of 181 lakh MMT of crude oil. OMCs have also made 1,45,930 crore payment to distillers and 87,558 crore payment to farmers, with a positive economic impact throughout the value chain.23

Outlook

To achieve the blending target of 20% by 2025, approximately 10.16 Bn litres of ethanol will be necessary for blending purposes, in addition to 3.3 Bn litres for other industrial applications. This amounts to a total requirement of 13.46 Bn litres of ethanol. With the current capacity at 16.85 Bn litres already exceeding this threshold, India appears well-positioned to achieve its blending target for 2025.25

Opportunities and Threats

Opportunities

Government Initiatives

The Indian government has made significant progress in ethanol blending, with around 18.9% blending by 30th June 2025.26 The target of 20% blending of ethanol is a great scope of expansion for the industry. From November 2024, sugar mills have greater flexibility in maximising their product portfolio as they are allowed to divert more sugar towards ethanol production. The rapid growth rate of the industry directly aligns with the Governments energy security needs while minimising foreign exchange outgo and generating new sources of revenue for sugar factories through diversified product output.

Favourable Weather Patterns

The favourable southwest monsoon predictions and availability of water in major sugarcane-producing states support production in the coming seasons. Maharashtra and Karnataka have also witnessed a good monsoon, resulting in better sowing, laying the basis for increased yields in the subsequent years. Private weather organisations and the Indian Meteorological Department have forecasted normal monsoon, which go hand-in-hand with high sugar recovery levels and improved sugarcane productivity.

Market Diversification

The sugar sector has opportunities to diversify into value-added products and circular economy schemes through enhanced utilisation of by-products. Bagasse can be efficiently converted to electrical and thermal energy from co-generation, contributing to secondary revenues while fulfilling sustainability objectives. Manufacture of grades of ethanol, such as rectified spirit, extra neutral alcohol and absolute alcohol, provides market diversification opportunities.

Threats

Impact of Climate Change

Water deficiency is a major risk in the sugar sector, with sugarcane being a water crop that demands high irrigation water resources. Non-uniform rain patterns and severe weather conditions risk sugarcane yields and thereby the rate of sugar yield. The frequency of droughts and erratic monsoon patterns increases the uncertainty of production planning and challenges the sustainability of sugarcane production in conventional growing areas.

Input Cost Volatility

The financial burden on the sugar industry is escalating due to rising input costs, especially for feedstocks employed in ethanol manufacturing. With rising cost of rice and maize impacting grain-based ethanol manufacturers, there is a risk of macroeconomic factors affecting sugarcane and other input costs, thereby heightening margin pressure on other ethanol manufacturers.

Segment-wise Highlights

Sugar

With a total crushing capacity of 37,500 Tonnes of Cane/Day (TCD) and a sugar refining capacity of 5,500 Tonnes Per Day (TPD), SRSL is one of the top producers of sugar in India today. The Company also operates some of the largest sugar refineries in the world, located at Kandla on the western coast and the other at Haldia on the eastern coast. The Companys ‘Madhur is Indias premium packed sugar brand. Sugar milling generated a revenue including inter-segment sales of 25,771 million in FY 2024-25 as compared to 19,842 million in the previous year. The Company generated 74,912 million in revenues from refineries as compared to 83,781 million in FY 2023-24.

Ethanol

The Company is one of the top manufacturers of ethanol in India with a capacity of 1,250 Kilo Litres Per Day (KLPD). It has pioneered the production of ethanol from sugarcane juice by employing an advanced process that helps it maximise its contribution to the ethanol-blending programme, while balancing the sugar inventories. During the year, ethanol production scaled up by 2% and sales by 12%. The Companys distilleries generated a revenue of 10,094 million during FY 2024-25 as compared to 8,604 million in the previous year.

Renewable Energy

SRSL is one of the first companies in the industry to harness the potential of sugar as a source of green energy since over two decades. The Companys co-generation business generated a revenue of 3,380 million in FY 2024-25, compared to 4,144 million in the previous year.

Engineering, Procurement and Construction (EPC)

SRSLs engineering and EPC segment is independently managed and grown by its wholly-owned subsidiary, KBK Chem-Engineering Private Limited. It is one of Indias leading EPC solution and technology providers for distilleries, bio-ethanol, brewery, sugar, chemical processing and co-generation plants with efficient management. They are also known to provide water and waste water solutions. The Group engineering segment generated a revenue of 1,126 million, compared to 2,449 million in the previous year.

Trading

The Companys trading business generated a revenue of 735 million during the year, compared to 2,420 million in the previous year.

Financial Overview

Profit and Loss statement

The Companys operating revenue stood at

102,794 Mn. in FY 2024-25, compared to 108,413

Mn. in FY 2023-24. The Company generated EBITDA

(excluding forex loss) of 7,206 Mn. as compared to 7,195 Mn. last year. The Company recorded a loss (after tax) of 2,558Mn. as compared to loss (after tax) of 5,595Mn. for the previous year.

Balance Sheet

The Companys net worth as on 31st March 2025 stood at (3,905) Mn. as compared to (1,457) Mn. as on

31st March 2024.

Working capital management

Current assets as of 31st March 2025, stood at 38,669 Mn. as compared to 50,161 Mn. as on 31st March 2024. The current ratio is 0.69 as of 31st March 2025, as compared to 0.77 as on 31st March 2024.

Risk Management

Shree Renuka Sugars Limited has developed a robust risk management system characterised by a methodical approach for recognising and evaluating risks. This enables the Company to implement effective strategies aimed at reducing risks and navigating operational challenges that may arise.

The oversight of risk management policies is entrusted to the Risk Management Committee, comprising the Chairman of the Audit Committee, the Executive Chairman, the Executive Director and the Chief Financial Officer. The Risk Management Committee meets on a periodic basis to review the measures taken by the Company to manage the risks and reduce their impact. The Committee also reviews the Risk Management Policies periodically to keep it updated to the changing business environment.

Internal Control Systems and their adequacy

The Company has enforced stringent internal controls to ensure strict compliance with applicable laws and regulations, protect Company assets and guarantee the accuracy of financial reporting. Establishing effective internal controls is crucial for any organisation, as it promotes efficient, effective and ethically sound business practices.

The Companys internal control framework encompasses a comprehensive array of policies, procedures and guidelines that offer thorough oversight of financial reporting and other vital aspects of the organisation. The organisational structure is clearly defined, with distinct roles and responsibilities, fostering accountability and transparency in the decision-making processes.

A comprehensive internal control system upholds the integrity of the Companys financial reporting by incorporating measures such as segregation of duties, access restrictions and routine review procedures as integral components of the control environment. The independent Audit Committee assumes a pivotal role in monitoring internal control procedures and regularly updates the Board of Directors on their efficacy.

Human Resource (HR)

Over the years SRSL has transformed from a traditional manpower model to a digitally empowered, people-centric enterprise. This evolution has enabled the Company to deliver performance while nurturing an inclusive workplace culture built on care, trust and empowerment. The Companys commitment has been recognised with two notable accolades in 2025- Indias Best Workplaces in FMCG and inclusion among the Top 50 Best Workplaces in Manufacturing.

that support business transformation. This approach is enabled through-

Cross-functional projects and team-based assignments;

Feedback-driven systems that promote continuous learning and improvement;

Structured developmental conversations that align personal goals with organisational priorities.

Digital Transformation

The Companys HR function has undergone a digital evolution to ensure greater agility, transparency and connectivity across its network. A unified HRMS platform has been implemented across all units including newly acquired ones like Anamika Sugar Mills Private Limited.

Paperless human resource management;

Self-service capabilities through Jinie, the in-house HR chatbot;

Real-time analytics to support better decision-making and workforce planning;

Consistent training for adoption of digital modules- PMS, learning, recruitment, engagement, compliance and benefits.

Culture of Empowerment

SRSL has built a culture rooted in trust, ownership and accountability. Employees are encouraged to lead from the front, take initiative and contribute ideas

Diversity and Inclusion

Diversity and inclusion continue to be embedded within SRSLs organisational culture. Through structured Diversity, Equity and Inclusion (DEI) policies, cultural awareness programmes and community-based hiring, the Company ensures balanced representation across roles, age groups, geographies and gender. Initiatives include-

Employee Satisfaction Surveys (ESS) and periodic town halls that provide a platform for two-way feedback;

Madhurvaani, SRSLs internal HR magazine, which promotes storytelling and employee visibility;

Integration with local communities to ensure that operations create positive social impact.

Learning and Development

The Company has moved beyond traditional classroom-based learning to a blended model that includes on-the-job exposure, digital modules and external partnerships. Learning journeys are tailored based on skill-gap assessments and are co-created with functional managers to ensure relevance and impact.

Employees undergo continuous development through technical sessions in ethanol production, cogeneration and sugar refining, complemented by leadership programs delivered in collaboration with premier institutes.

Digitallearningplatformsandinteractivee-modules enable self-paced, on-demand upskilling;

Cross-functional and cross-location exposure promotes knowledge sharing and business understanding;

Mentorship by senior leaders accelerates technical depth and leadership growth;

Compliance, safety and regulatory training ensures workforce readiness and adherence to standards.

Employee Wellbeing

The Companys wellness programmes address physical, emotional and social health through targeted interventions that support a holistic lifestyle.

Wellness Month features webinars on back care, heart health, liver wellness, cancer awareness and emotional resilience;

Employee Assistance Program (EAP) provides confidential counselling and mental health support;

Regular health check-ups and over 37 health camps were conducted across units in FY24-25;

Factory-level sports events build camaraderie and team spirit;

Cultural celebrations and township-based family activities promotes inclusiveness and social engagement.

Key Recognitions

Awarded Great Place to Work Certification for the second consecutive year (Jan 2025-Jan 2026)

Achieveda90%TrustIndexScoreacrosscredibility, respect, fairness, camaraderie and pride.

Environment, Social and Governance Initiatives

Environment

SRSL recognises the importance of sustainable development in ensuring a better future for the planet and its people.The Company has taken several initiatives towards promoting sustainability across its value chain, from sourcing raw materials to manufacturing products and delivering them to customers.

Sustainable Agriculture

The Company supports sustainable agriculture practices and encourages farmers to adopt eco-friendly and sustainable farming practices. It provides farmers with training and technical support to help them reduce their environmental footprint while increasing their productivity. The Company also encourages farmers to grow sugarcane crops that are suitable for the local soil and climate conditions, reducing the use of pesticides and fertilisers.

Renewable Energy

The Company has invested heavily in the use of renewable energy. All its units run on power produced in-house, building a circular economy through co-generation. The remainder or excess power is supplied to the Government grids for use by citizens along with other industries.

In line with the Governments goal of advanced development of ethanol production and use in blended fuels, the Company is focusing on enhancing ethanol production with sustainability at the core of its operations.

Tree plantation

The Company undertakes and promotes tree plantation in and around all its manufacturing units to help control pollution levels, with large scale measures to promote environmental awareness among employees and the society, through employee initiatives, community events and Corporate Social Responsibility (CSR) projects.

Water Conservation

Water conservation is a top priority for SRSL. The Company has implemented several measures to reduce water consumption in its factories, including recycling waste water and using it for irrigation. All its facilities are designed for Zero Liquid Discharge to enhance water conservation. The Company has also set up rainwater harvesting systems in its factories, which help to replenish groundwater resources.

Waste Management

SRSL has a zero-waste policy and implements the best practices in waste management. The Company segregates waste at the source and recycles as much waste as possible. The Company has also set up waste management facilities in its factories to ensure safe disposal of hazardous waste.

Social

SRSL continues to support the development of the communities in which it operates. The Company provides education, health care and vocational training programmes for the local communities. It has collaborated with an international Non-profit Government Organisation (NGO) for sustainable sugarcane production in the districts of Belgaum and Gulbarga in Karnataka. The project focuses on training and capacity building for sustainable sugarcane production.

The Company is also actively engaged in increasing occupational health and safety awareness, primarily among women farmers. It also supports various community initiatives such as building schools, providing clean drinking water and supporting local artisans.

Governance

The Company upholds the highest standards of business ethics and conduct. A robust governance framework includes code of conduct and ethics, internal controls, risk management systems and strict compliance with applicable laws and regulations.

The Board of Directors, with its expertise in business, finance, law and agro-marketing, meet regularly to oversee strategic direction and governance. The Board committees provide additional oversight and guidance. The Company ensures transparency, accountability and fairness in all its operations, building trust among stakeholders and supporting long-term growth.

Cautionary Statement

Some information in this Report may contain forward-looking statements which include statements regarding the Companys expected financial position and results of operations, business plans and prospects etc. and are generally identified by forward-looking words such as ‘believe, ‘plan, ‘anticipate, ‘continue, ‘estimate, ‘expect, ‘may, ‘will or other similar words. Forward-looking statements are dependent on assumptions or basis underlying such statements. The Company has chosen these assumptions or basis in good faith and it believes that they are reasonable in all material respects. However, it cautions that actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.