• Chairman's Speech

Chairman’s Speech

Good morning Ladies and Gentlemen

Welcome to the 25th Annual General Meeting of your Company. On behalf of the Board of Dwarikesh, I thank you for joining us today. Your presence is indeed a true testimony of your involvement with and support to the Company.

Through the unique opportunity provided by the AGM, I shall share my thoughts with you, take you through the operations of the company and brief you of the contemporary developments which will have far reaching implications on the future of sugar industry. With your kind permission, I take it that you have read the audited financial statements and the Directors' report for the year ended on the 31st March 2019.

Let me make you walk through the financial numbers of the FY 2018-19. The financial performance may be considered satisfactory as the industry operated in an extremely challenging environment.

  • During the financial year, the company had earned revenue of Rs. 1,084 crores vis-à-vis Rs. 1,458 crores in the previous year. This decline in revenue is attributable to the monthly release mechanism administered by the Central Government, which resulted in lesser quantity of sugar sold and lesser realization on sugar sold.
  • EBIDTA, during FY 2018-19 both in absolute numbers and in % terms is better as compared to the EBIDTA during previous period. In absolute numbers the EBIDTA amount is Rs 165 crores (15.23%) as compared to EBIDTA amount of Rs 160 crores (11.19%) in the previous FY. While power & distillery segments have clocked better EBIDTA, the sugar segment has reported lesser EBIDTA.
  • The company had earned EBDTA of Rs 144 crores as compared to Rs 135 crores earned in the previous FY and earned EBT of Rs 111 crores when viewed in juxtaposition with that of the previous FY (Rs 103 crores) has also improved.
  • Earnings after tax at Rs 95 crores as compared to the earnings after tax of previous FY of Rs. 101 crores is lower on account of higher provisioning of taxes.

Global Sugar Industry – emerging trends

Global production for sugar season (SS) 2018-19 was estimated at 179 million tons compared to ~183 million tons in 2017-18 SS.

This production decline was primarily due to unfavorable weather conditions and more sugarcane being diverted towards ethanol production.

Indian Sugar Industry

  • Considering surplus sugar production in India and the impetus provided by the Government for export, India has contributed 3.5 million tons of sugar to the Global trade. Raw sugar contributed to the major chunk of exports.
  • India's sugar production figure for SS 2018-19 is pegged at 33 million tons vis-a-vis actual sugar production of 32.5 million tons during SS 2017-18 and original estimate of sugar production of 35 to 35.5 million tons. Approximately 4.5 lac tons of sugar production was sacrificed in favor of ethanol production through B-heavy molasses route.

Government Initiatives

  • Announcement of a minimum ex-factory selling price of Rs. 2900 per quintal for sugar to be sold ex-factory, subsequently increased to Rs. 3100 per quintal by the Central Government.
  • Reintroduction of monthly release mechanism.

Uttar Pradesh sugar sector highlights, 2018-19

  • UP State has clocked yet again bumper sugar production of 11.8 million tons during season 2018-19 at an impressive recovery of close to 11.5%.
  • The economics of sugar industry continue to be unviable. Sugarcane dues of SS 2017-18 were cleared by availing production subsidy from the Central Government, soft loan under SEFASU 2018 by the State Government and a subsidy of Rs. 4.50 per quintal also form the State Government. Central Government has announced yet another soft loan scheme under which mills will be eligible to receive interest subvention for one year @ 7% per annum.
  • In spite of various measures, the arrears of season 2018-19 have built up and the amount due presently is in excess of Rs. 6,451 crores as on 03rd September 2019. Some companies with checkered record aren’t in a position to avail any assistance under the Government announced schemes. Till date very few companies including your company has made full cane price payment of SS 2018-19.
  • Power segment which was an area of immense strength for sugar industry has become a defensive bet for the sugar industry in UP as the tariff of power evacuated by the industry to state grid has been revised downwards by more than Rs. 2 per unit (more than 40% decline), effective 1st April, 2019.
  • The same though will be legally challenged as the revised tariff is based on fundamentally flawed hypothesis.

Dwarikesh score card, FY 2018-19:

  • Total cane crushed is during SS 2018-19 is 306.84 lakh quintals and sugar produced (including BISS) is 37.77 lakh quintals at a recovery of 12.31%. Sugarcane crushed during SS 2018-19 is lower by nearly 16% vis-à-vis crushing of SS 2017-18.
  • The distillery capacity expansion project execution is as per schedule. The plant is based on the technology of incinerating the spent wash mixed with bagasse. The technology adopted is the latest and the estimated project cost is Rs. 146.1 crores. It is expected that the same will be operational during November, 2019.

Thank You
B. K. Agarwal
(September 5, 2019)