I am happy to state that at the macro level globally and within India things appearto be somewhat better on the strength of policy reforms initiated by Governments acrossthe world. on the global economic landscape IMF has pegged the growth estimates for 2016at 3.6% (inflation adjusted) with both advanced and emerging economies contributing tothe improvement.
on the industry front too things have started looking up with global sugarstockpiles showing signs of reducing and global sugar prices rebounding after hitting alow. With demand outstripping supply for the first time in five years and prices showingsigns of stability value for sugar is expected to be reasonable remunerative globally inthe coming seasons.
As far as the domestic economic overview is concerned overall India continues to be ashining star on the global economic horizon showing signs of renewed positivity propelledby key policy reforms. pick-up in private consumption particularly in the rural beltbacked by inflation control steady global oil prices and strengthening of domestic demandare the vital factors invigorating the Indian economic performance.
after a prolonged period of gloom and depression the sugar sector in India has alsofound some reason to cheer. the positive effect of this change can be seen across theindustry including at Dwarikesh Industries triggering a sense of cautious optimism allaround.
Indian Sugar Industry
the Indian sugar industry is demonstrating signs of improvement despite a decline inoverall production figures for SY 2016. the lower production has been mainly on account ofthe drought in Maharashtra and Karnataka caused by the El Nino effect and partly due todecrease in cane availability in Uttar Pradesh. Tamil Nadu however reported higherproduction over the previous season due to better monsoon. As per the latest ICRAestimates an 11% decrease in production along with exports is expected to bring downthe closing industry stocks to around 7.6 million MT in SY 2016 from 9.5 million MT in SY2015. Buoyed by the forecast domestic sugar realization has been on the uptick sinceAugust 2015.
Further contributing to the positivity in the industry is a host of stimuli triggeredby the Central Government to bail out the sugar sector. A loan of ' 6000 crores to helpthe industry clear its sugarcane dues of 2014-15; mandatory exports requirement; subsidyto sugar mills fulfilling their export obligation as also their obligation to supplyethanol; and increase in mandated procurement price of ethanol are some of the measuresthat have enabled the sugar sector to find its feet after several years of skidding on aslippery road.
The marginal decline in production notwithstanding the sugar sector in Uttar pradeshwitnessed a good year in 2015 particularly in terms of recoveries as the StateGovernment launched a slew of industry- friendly measures to bring the sugar companies outof the depths in which they had been languishing over the last few years. Empathetic tothe problems faced by the sugar industry the U.p. Government did not raise the sugarcaneprice (SAp) for the fourth year in a row while also waiving off post-procurement leviessuch as entry tax society commission and purchase tax.
Announcement of subsidies and introduction of two-tier payment system were some of theother Government initiatives that contributed to lending a strong impetus to theindustry's performance in the State during the year under review. the favorable policiesof the State Government where our mills are strategically located supported ourperformance.
While the positive external conditions marked by key government interventions haveplayed a pivotal role in enabling a turnaround for the sugar industry in India yourCompany's performance is directly linked to its inherent efficiencies and the legacy ofexcellence which we have meticulously built over the years. During the year under reviewwe successfully leveraged our strengths to deliver positive performance with revenue fromoperations at ' 83151 lakhs for the 12-month period from April 2015 to March 2016. profitafter tax for April 2015 - March 2016 was ' 3897 lakhs. These figures compared favorablywith the numbers for the previous 18-month period when the revenue reported was ' 117643lakhs while there was loss after tax of ' 1675 lakhs.
Our positive performance matrices extended to recoveries and I am happy to share thatour recoveries were among the highest in North India even as we had the distinction ofbeing among the lowest cost producers of sugar in the country. As one of the top 15 sugarmanufacturing companies in India with NLDC accreditation for all our three power co-genunits we stand tall as a diversified and integrated entity on the industry landscape.
As part of our collaborative approach we are continuously investing in nurturing canegrowers to develop better quality of high-yielding sugarcane. It is our constant endeavorto introduce the farming community to new cane development methods and technologies byhelping them source better quality seed varieties pesticides and fertilizers and alsoproviding them with subsidies as needed. our demonstration plots as well as ourinitiatives to educate and encourage farmers to adopt intercropping trench farmingtechnique etc. are playing a critical role in enhancing their yield and earnings whilebenefiting sugar mills through improved recoveries and production. This results in awin-win proposition for both setting the stage for collective growth for all industrystakeholders.
While the overhang of past still remains we see the current positivity translatinginto vastly improved performance for the sugar sector in India as a whole and yourCompany in particular.
With our efforts focused on reaping the benefits of our strength and utilizing thefunds generated in the current phase to quickly repay our debts we are optimistic aboutdeleveraging the Company in the near term. What we see ahead is a more dynamic entityoperating in an auto pilot mode to surge steadfastly on a trajectory of stability andrecurring profits.
Building efficiencies across our value-added offerings
As an integrated sugar player we have committed ourselves to responsible growth withour strong forward linkages in the power co-gen and ethanol production segments. Not onlyare these segments enabling green and clean growth for your Company but are also emergingas important contributors to our revenue.
Given the Government thrust on the Ethanol Blending Program (EBP) ethanol productionoffers a strong risk-mitigating value-addition to our Twenty Second Annual Report 2015-16 17business. To leverage the potential in this business we successfully debottleneckedour plant with an outlay of nearly ' 10 crores during the year. this will improve ourethanol manufacturing capabilities and scale up our performance in this segment.
our corporate responsibility extends to ensuring minimal liquid discharge from oursugar mills as per the norms mandated by the pollution Control Boards across the country.our efforts in this area encompass recycling and reuse of the process water whileminimizing the use of ground water. We are also constantly monitoring the air and waterdischarge at our plants to keep the pollution levels under stringent control.
We have in fact a well-defined CSR charter aimed at uplift of the communities aroundour plants and we are regularly investing in various programs to nurture their progressas well as the progress of our own people.
Moving forward with cautious optimism
It would be correct to state that the foundation has indeed been laid for reasonablegrowth going forward. But the optimism needs to be tempered with some degree of cautiontoo. this cautious optimism stems from the uncertainty surrounding the global and domesticeconomic and industry environment. Globally the slow pace of economic growth is expectedto continue with emerging and developing nations in particular still falling short ofthe desired levels of structural reforms needed to incentivize growth. on the domesticfront economic performance is expected to fare somewhat better though still lagging onkey growth matrices on account of the slow pace of reforms.
Coming to the sugar industry much depends on the weather conditions both within andoutside India. Excessive rainfall in the harvest season could lower Brazil's productionestimates in the coming year and coupled with expectations of lower production inthailand India and China the global sugar balance is expected to remain somewhat tight.In India the effect of drought in Maharashtra and Karnataka is likely to cause productionto decline significantly though U.p. and TN. are estimated to partially make up for theloss. However at least for the next two years efficient sugar companies particularly inUttar pradesh will be able to sustain the momentum triggered over the past few months.And given our intrinsic strengths and value-accretive efficiencies we are optimistic thatyour Company will be at the forefront of this sustainable growth.
Imperatives needed to sustain positivity
For the Indian sugar industry sustained Government initiatives to keep prices undercontrol and stocks in a comfortable position will play an important role in ensuringcontinued momentum. other vital parameters that will determine the industry's futurecourse are: timely payments to farmers at reasonably remunerative prices taking steps tokeep employees satisfied servicing bankers and lenders on time delivering value toshareholders and meeting the corporate social responsibilities to which we are allcommitted. At Dwarikesh we believe that if the Government and the industry continue tocollaborate to deliver on these counts there is no reason for the sugar sector in Indianot to show marked improvement in the future. And with our inherent strengths andefficiencies we are well positioned to lead this expected improvement. a robust businessmodel and our integrated value chain also promise to steer our performance in the comingseasons.
The Government of India has been taking several steps in recent years to provide strongimpetus to EBp which augurs well for your Company. With prices of by-products such asbagasse and molasses remaining remunerative in India I am confident that our forwardintegration into power co-generation and distilleries will continue to yield healthyreturns for DSIL. This forward integration will be particularly critical for your Companyand in fact for the industry at large to boost profitability in view of the cyclic natureof the sugar business.
A few last words
at Dwarikesh Industries our differential thinking and innovative approach founded onan edifice of ethical & professional behavior and backed by our robust competency& capability framework has enabled us to reach this far. and we are hopeful of thingsgetting better at the back of our own strengths and efforts as also the expectations ofcontinued Government support.
It is my firm opinion that our reputation and goodwill coupled with the vendor loyaltywe have developed through our transparent and collaborative approach will continue todrive our performance. our focus on ensuring total customer satisfaction through stringentadherence to quality benchmarks and our employee-friendly policies are the key enginesof our growth and we shall further nurture them through the coming years.
While moving steadfastly to increase our share in the sugar market we shall alsocontinue to strengthen our power co-gen and ethanol production businesses.
In conclusion I would like to express the Company's gratitude to the Central and U.p.Government officials and authorities for all the help they have extended to the ailingsugar industry in an effort to nurse it back to good health. I am hopeful that ourcollaborative efforts underlined by affirmative action will enable us to scale newmilestones of excellence in the years ahead.
I would also like to express appreciation on behalf of the Board for all ourcustomers employees bankers partners and shareholders for standing by us in difficulttimes. Let me assure you at this juncture that we shall continue to strive to deliveraugmented value to all our stakeholders as we surge towards enhanced performance.
Gautam R. Morarka