Dear fellow stake holders, 

Welcome to all of you at the 16th Annual General Meeting of your Company. It is my proud privilege to address you on this special occasion and share my thoughts with you.
 
The year gone by:
 
It will be a long time before the world forgets the year 2009-2010. From a gloomy beginning triggered by the global financial crisis to a dramatic turnaround that marked the end of the fiscal, it was a memorable journey indeed for the Indian economy. Powered by a robustness that most of us knew existed, but few had the fortune to witness earlier, the Indian economy zoomed back to impressive levels of growth as it came surging out of the recession that had not long ago threatened to derail it completely.
 
This is not to say that all is well with the Indian economy. Glaring disparities between the haves and the have-nots continue to impact our future projections of growth as the country still struggles to cope with the myriad problems of illiteracy, unemployment and inadequate infrastructure.
 
However, these are problems that no longer seem insurmountable as we, as a nation, strive hard to address them with a united powerful will that seeks to bring a new ray of hope to the future of India. I salute that will and look forward to a new and better tomorrow for us all.
 
Sugar Industry: 2008- 09:
 
The sugar industry, like most other sectors of the Indian economy, seemed to reflect the overall financial scenario during the year 2008-09, with drought conditions in several parts of the country adding to the industry woes. A significant consumption-production gap hit the industry for the second year in a row, sending sugar prices skyrocketing to their highest level since 1981. With low output severely impacting sugar exports from Brazil, global sugar output also came crashing down to unprecedented levels.
 
On the domestic front, production estimates have gone haywire, going down from the original estimate of 21.4 million tons to an actual production level of 14.7 million tons. A poor showing indeed, compared to the 26.3 tons produced in the previous year.
 
India responded to the situation by importing large quantities of raw and refined sugar.
The fact that the trend in the sugar industry reflects the overall trend in the Indian food industry is hardly a consolation and the situation begets immediate government attention.
 
Dwarikesh Sugar Industries: 2008- 09:
 
The overall negative environment notwithstanding, it is with a strong sense of pride and pleasure that I announce that your Company has actually shown a marked improvement in its financial performance over last year.
 
Though 10 per cent obligation of levy sugar was sold @ Rs. 1,331, the rate at which it was sold in the earlier years, average realization on sale of free-sale sugar increased to Rs. 2,136 per quintal in the current year as compared to average realization of Rs. 1,428 per quintal in the previous year. While sales increased, there was significant depletion in the stock levels. High interest burden though impacted our financials.
 
Let me, however, assure you that all efforts are on to rationalize interest costs and, if possible, pre-pay the debt which was raised for our various projects. .
 
Highlights 2008-09
 
It is all with immense pride that I announce that on the operational side, your company had the distinction of recording excellent recovery (amongst the top 5) in Uttar Pradesh at two of its plants.
 
What is more, the process losses recorded at DN and DP unit were one of the lowest in the sugar industry in Uttar Pradesh during the year. The efficiency in plant operations is adequately reflected in the recovery recorded in these units.
 
Recovery clocked at DD plant, however, was a cause of concern. Massive cane development efforts have been embarked upon in the Command Area of DD unit that are aimed at bringing varietal change, planting of more and more sugarcane and better farming practices. Although DD is a new unit, the plant is technically balanced and is capable of operating at optimal capacity. Efforts are focused on augmenting cane supplies and I am confident that things will improved substantially, going ahead.

Particulars	2008-09	2007-08	% change
Crushing(Lac/Quintals)	126.48	193.91	(35)%
Recovery (%)	DN - 10.31 DP - 9.93 DD - 8.61	DN - 10.64 DP - 10.33 DD - 10.27
Production (Lac/Quintals)	12.35	20.22	(39)%

During the year, the Company sold 1,999,209 quintals of sugar as compared to 1,528,961 quintals of sugar sold in the previous year. In effect, there was significant depletion in the stock levels. Stock of sugar as on 30th September, 2009 was 397,636 as compared to 1,161,967 quintals of sugar stock on the same date last year.

Financial score card:

The numbers for the year 2008-09 were impressive. After two frustrating years, the numbers for the year offered something to cheer about. Impressive numbers were attributable to host of factors:

a.        Recording of highest operating efficiency

b.        Liquidation of low cost carried forward stock

c.        Upsurge in prices of free sale sugar

 The following table is illustrative of the impressive numbers clocked.   

Particulars	Year 2008-09 Rs. in crores	Year 2007-08 Rs. in crores
Net sales	462	273
EBIDTA	126	50
EBDTA	64	0
EBTA	31	(29)

EBIDTA as a % of net sales at 27% is among the highest in the peer group. It bears testimony of the fact that your company has always strived to optimize and maximize resources.

The expansion executed in the last two years was leveraged expansion. The gearing, therefore, is on the higher side. However, the Company is making all-out efforts to not only rationalize interest costs, but also to pre-pay debt. With the upsurge in the price of sugar, your Company is confident that it would de-leverage itself substantially in the coming years.  

 TRENDZ 2009-10

1. Initial estimate of sugar production in the country: 15 million tons.

2. Latest estimate of sugar production: 16.8 million tons. Remarkable trend of this year is that although area under cane cultivation has not increased, better yield at farm level has improved sugarcane production

3. Global production is also on the rise.

4. Recovery recoded by sugar mills in Uttar Pradesh – lower by about 25 to 50 basis points as compared to last year.

5. Sugar cane price paid to farmers – on an average INR 250 to INR 260, as against SAP of INR 165 per quintal announced by the UP State Government

6. Free sale sugar prices which had touched a high of INR 4,000 per quintal have now pummelled and presently hovering around INR 3,200 per quintal.

7. Levy sugar obligation increased to from 10% to 20%

8. Total uncertainty over future price of sugar.

9. With farmers being paid high price, profitability of sugar companies would depend on the sugar prices during the second half of year.

10. Central Government has clamped down a series of measures aimed at pegging the sugar prices at low levels. There has been lot of hue and cry over the rise in sugar prices.

It a strange paradox that while policy makers want highest possible price to be paid for sugarcane, they want consumers to pay the lowest price of sugar. In the entire value chain of sugar, sugar mills are the weakest link. All concerned are unmindful of the huge investment made by sugar mills. The CAGR of the capital employed by the sugar companies is among the lowest.
 
DSIL- Crushing season 2009-10:

Metrics of cane crushed, sugar produced and recovery recorded till 14th March, 2010 is as given herein under:  

Units	Sugar capacity (TCD)	Cane crushed in MT	Sugar produced in quintals	Recovery in %
Dwarikesh Nagar (DN)	6,500	508,230	504,250	10.06
Dwarikesh Puram (DP)	7,500	536,320	507,760	9.57
Dwarikesh Dham (DD)	7,500	581,330	502,250	8.75
Total	21,500

Crushing continues at all the units, although it is on the verge of closure at DD unit.

Going forward:
 
The situation, as it prevails today, is unlikely to change drastically in the immediate future. The sugar prices are expected to sustain for a couple of years. Accelerated releases will result in low inventory levels.
 
However, better cash flows would help enable your Company recast its debt structure. Interest costs on working capital are also expected to be lower, which will lead to their rationalization.
 
Moving ahead, we may explore the opportunity to import raw sugar and process the same with a view to maximizing profits.
 
The State Government in Uttar Pradesh has announced a new energy policy. The energy policy, if implemented in the right spirit, would offer a plethora of opportunities and open additional streams of revenue for the sugar mills.
 
Depending on the details announced in the policy, your Company may convert its bagasse plant into a multi fuel fire (bagasse and coal-based) plant. This will help us in two ways: First, dual usage of boilers – bagasse and coal-based - will allow us to refine raw sugar even in the off season between March and September, when local cane is not available. Secondly, we will enjoy the dual advantage of selling power in the open market while continuing to de-risk our revenue generation capability.
 
Our initiatives to follow a green and sustainable growth continue. Two of our plants are already CER (Certified Emission Reduction) registered and in future, this revenue stream of generation of power by using bio-degradable fuel i.e. bagasse will continue to be important.
 
Hence, moving forward, we at Dwarikesh see growth prospects for the industry and we believe that with the right decisions taken at the right time, we are poised to further ride the growth curve in the times to come. The challenges though are expected to haunt the industry.
 
Summing up:
 
The new energy policy will encourage coal-based power generation, the industry is looking forward to an additional revenue stream.  We remain committed to ensuring a sustained growth of wealth of our shareholders. Better rainfall in the coming year will enhance the strong and positive sentiment of growth. I am confident of returning next year with equally impressive performance.
 
I would like to take this opportunity to thank you for all your support. I seek your continued support in our endeavor to achieve even better results in future. I would also like to use this opportunity to thank all our business associates, our employees who are the fulcrum of our organization, our farming brethren who have reposed immense confidence is us, our Banks and Financial Institutions who have proved to be our reliable and trustworthy friends, various Government agencies and last but not the least the illustrious members of our Board who have provided their valuable guidance whenever required.
 
Gautam R Morarka

(Chairman and Managing Director)

Date: 16th March,2010