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Bajaj Hindusthan Sugar Ltd.

BSE: 500032 Sector: Agri and agri inputs
NSE: BAJAJHIND ISIN Code: INE306A01021
BSE LIVE 15:48 | 20 Nov 14.94 0.17
(1.15%)
OPEN

14.78

HIGH

15.19

LOW

14.50

NSE 15:57 | 20 Nov 14.95 0.20
(1.36%)
OPEN

14.70

HIGH

15.20

LOW

14.45

OPEN 14.78
PREVIOUS CLOSE 14.77
VOLUME 1359204
52-Week high 18.44
52-Week low 12.90
P/E 16.06
Mkt Cap.(Rs cr) 1,694
Buy Price 14.95
Buy Qty 4167.00
Sell Price 0.00
Sell Qty 0.00
OPEN 14.78
CLOSE 14.77
VOLUME 1359204
52-Week high 18.44
52-Week low 12.90
P/E 16.06
Mkt Cap.(Rs cr) 1,694
Buy Price 14.95
Buy Qty 4167.00
Sell Price 0.00
Sell Qty 0.00

Bajaj Hindusthan Sugar Ltd. (BAJAJHIND) - Chairman Speech

Company chairman speech

Dear Shareholders

Globally sugar is facing a huge downturn in terms of prices. From the highs of over 20cents to a pound around February 2016 the prices have plummeted to below 13 cents level bymid June 2017 the lowest in the last 16 months. With over 180 nations producing sugarBrazil India Thailand Myanmar and China remain the dominant players in the globalindustry. Till last year a fair upturn in prices served as a sweet pill for most of thesugar players with most of the sugar producing nations enjoying an upsurge in production.

Brazil still remains one of the most dominant nations to impinge upon both productionand prices. Hence sugar observers will closely watch how Brazil would behave in such asugar price downslide. However initial information reveals that though Brazil this yearhas not had a swift take off in production like last year despite this the BrazilianSugarcane Industry Association predicted that sugar production will only declinemarginally from the previous year's record. It is said that though prices have dropped byaround 30 percent since last year large Brazilian mills have the early advantage of highlock-in prices in futures. On the other side small producers in Brazil would face thebrunt of tumbling market driven prices.

Reiterating the above International Sugar Organization (ISO) cautioned overexpectations of price weakness on the back of foreseeing global production surpluses forthe next two seasons. Initial forecasts for 2017-18 on an October-to-September basisstates the world returning to a production surplus of about 3 million tonnes with thepotential for further surplus the following season. If producers in 2018-19 manage to keepoutput at the level projected for 2017-18 the surplus phase may continue for one moreseason.

On the domestic front higher production is bearish for sugar prices. Production thisyear dropped to barely 20 million tonnes against an estimation in the range of 24 to 25million tonnes. Adding an inventory of 7.7 million tonnes we would have 27.7 milliontonnes of sugar available. With expected consumption of 24 million tonnes there would bea sufficient inventory to carry forward for the new season. Production would also getsupplemented with good monsoons expected at 98 percent levels this year creating adownward pressure on prices. This brings us to revisit the requirement for sugar importsand existing customs duty on sugar. At a 40 percent import duty and the present globalweakness in sugar prices it makes sugar imports further cheaper compared to domesticprices. It is essential to maintain a price parity and raise duty to at least 60 percentlevels to protect fair domestic prices save foreign exchange save domestic industryprotect jobs and farmers interest. To maintain a fair and remunerative price (FRP) of '255per quintal it is important to maintain a critical price of domestic sugar at least at '36a kg at mill level in local markets. In states where there is a state advised price (SAP)model the SAP ranges much higher from '305 to '315 per quintal. Any slippage in prices ofsugar from these levels would create a severe pressure on mills to pay the farmers ontime given that cane prices constitute almost 75 percent of the overall cost ofproduction of sugar. As I mentioned in my earlier observations this has to be perceivedthrough the proposals of Rangarajan Committee on sugar price decontrol and proposal of ashift to revenue sharing model based on domestic sugar prices. Hikes in administeredsugarcane prices would make it impossible to be brought down in the future when marketprice of sugar crashes creating severe financial distortions for sugar manufacturers.

Your Company continues to be the leading sugar and ethanol manufacturing company inIndia with its fourteen sugar plants having an aggregate sugarcane crushing capacity of136000 tonnes crushed per day (TCD) six distilleries having aggregate capacity toproduce Industrial Alcohol of 800 kilolitres per day and fourteen co-generation plantshaving a total power generation capacity of 449 MW. During the year ended March 31 2017the Company crushed 12.509 MMT of sugarcane. During the year the Company produced1272424 MT sugar and 594958 MT molasses. During the year Industrial Alcohol / Ethanolproduction was 111934 KL as against 125310 KL in the previous year. Alcohol / Ethanolsale during the year was at 109820 KL as against 142846 KL during the previous year.The operations of power generation were smooth at all the fourteen plants. While most ofthe power generated by us continued to be used for captive consumption to run our plantsthe surplus power was sold to the Uttar Pradesh state grid. During the year Powergeneration was at 729431 MW as against 686685 MW in the previous year. The Companyexported 267257 MW of power during the year as against 266106 MW during the previousyear.

India would witness a landmark shift to GST on July 01 2017. The one-tax one-nationtheory would take shape in terms of uniform taxes. I firmly believe it's a greatopportunity where India would set a landmark example to the whole world in terms of itseconomic intent and execution. Specifically for your industry GST in sugar has been setat 5 percent which would lower the existing cumulative taxes under various heads beingpaid by the industry by around 3 percent.

Your Company and family of employees are committed as always through a prudentmanagement to oversee the slowdown and shortfall in prices expected in the next one year.The inner strength of any organisation is tested during economic down cycles. We haveresolutely witnessed such economic cycles in the past and are confident of successfullybeing able to manage the present and future disruptions of sugar prices banking on ourstrong learning and experience as a market leader.

I take this opportunity to thank all the stakeholders including Central and StateGovernment authorities Bankers Shareholders Suppliers Customers and BusinessAssociates for their support in managing the Company.

Warm regards Kushagra Bajaj

Chairman & Managing Director