Dear Shareholders
I am happy to be sharing my thoughts with you at a time when India is witnessingexciting transformation. The economy continues to grow faster than the world's majoreconomies and the government is driving wide-ranging reforms which will augur well forall sectors of the economy going forward. It is worthwhile to mention in this contextthat the passage of GST Bill during the year was a landmark step to bring the entirecountry within the ambit of a uniform indirect tax structure.
The Union Budget 2017 also announced a slew of measures to bolster the income offarmers significantlyin the next five years and to accelerate rural development. Thesemeasures will also benefit the sugar industry which is witnessing gradual recovery.However it must be admitted that the health of the industry is still fragile and prone toheadwinds. Operating in such a scenario we at Avadh are striving to consolidate ourstrengths to create sustainable value for all stakeholders.
INDUSTRY INSIGHT
India's sugar industry continues to be a major economy driver supporting around 50million farmers and their families. The industry commercially utilises rural resources tomeet the large domestic demand for sugar and generates surplus energy to help meet thecountry's growing energy needs.
India's sugar industry is recovering on the back of balanced rainfall and favourablegovernment policies. According to ISMA's latest estimates production of 20.3 milliontonnes and consumption of 24.0 million tonnes are expected in Sugar Year Oct'16-Sep'17.With a high opening balance of 7.75 million tonnes the closing balance in the currentseason is estimated to be around 4.2 million tonnes. This indicates enough availability tomeet domestic demand until the end of November 2017. There has been a moderate increase insugar and sugarcane production over the last 10 years.
The reason for the lower production especially in Maharashtra Karnataka AndhraPradesh and Telangana is the continuous drought in the last few years. On the other handcane yields as well as sugar recovery in Uttar
Pradesh were significantly better compared to that of last year. With favourablemonsoons approaching yield improvement is expected in 2017-18.
The good news is that in India and other parts of the world sugar production andconsumption continue to grow despite challenges. In India the capacity utilisationimproved considerably during FY 2016-17 especially in U.P.
BUSINESS PERFORMANCE
We completed the restructuring of Oudh Sugar and Upper Ganges; and the rationale behindthis decision was to enhance efficiencies and commercial synergies among multiplebusinesses. Post the restructuring sugar business undertakings of The Oudh Sugar MillsLtd and Upper Ganges Sugar & Industries Ltd categorised geographically in the state ofUttar Pradesh stand transferred and vested in Avadh Sugar & Energy Limited.
Our performance was encouraging during the year. Sugar cane crushing was at recordlevels with better recoveries.
Our efficient operations innovative techniques and experiments with new varieties ofsugarcane differentiated us from other sugar industry players.
OUR CORE STRATEGIES
At Avadh Sugar we make conscious efforts to ensure that sustainability remains at thecore of our business strategy. We prioritize the needs of farmers and we are doing ourutmost to clear all arrears outstanding to them. We enjoy the trust and support of ourfarming community and they continue to rely on the ethical business policies of ourCompany.
Another focus area in FY17 was to achieve fiscal discipline. If we look at ourlong-term debt equity ratio it is now in better shape following the restructuring of thebusiness. Our profitability will now help us procure enough working capital resources andsignificant term debt.
WAY FORWARD
We are strengthening our operations and working towards building a robust balancesheet. At the same time we are implementing better strategies in collaboration with allour stakeholders to enhance the value proposition of our business and achieve a bettermargin profile. Co-generation and ethanol production will also help enhance ourprofitability.
The support of the Government of India and state governments deserve appreciation; andas a major industry player we look forward to working with the Central and stategovernments for sustainable growth of the industry as a whole.
Our experience and expertise powered by the support and guidance of all ourstakeholders have enabled us to reach the stature that we have attained today. More needsto be done to reinforce our fundamentals. We have a committed workforce to work on ourfuture strategies despite challenges; and the management will continue to invest inbuilding their capabilities and follow industry-leading HR practices.
I thank all our stakeholders for helping us build on our strong fundamentals and createsustainable value for the nation and the community.
Warm regards
Nandini Nopany
Chairperson
