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Dwarikesh Sugar Industries Ltd.

BSE: 532610 Sector: Agri and agri inputs
NSE: DWARKESH ISIN Code: INE366A01041
BSE 12:22 | 04 Jul 101.90 0.35
(0.34%)
OPEN

100.20

HIGH

102.40

LOW

100.20

NSE 12:09 | 04 Jul 101.85 0.45
(0.44%)
OPEN

101.70

HIGH

102.40

LOW

101.00

OPEN 100.20
PREVIOUS CLOSE 101.55
VOLUME 36352
52-Week high 148.45
52-Week low 62.40
P/E 12.35
Mkt Cap.(Rs cr) 1,919
Buy Price 101.80
Buy Qty 108.00
Sell Price 101.95
Sell Qty 379.00
OPEN 100.20
CLOSE 101.55
VOLUME 36352
52-Week high 148.45
52-Week low 62.40
P/E 12.35
Mkt Cap.(Rs cr) 1,919
Buy Price 101.80
Buy Qty 108.00
Sell Price 101.95
Sell Qty 379.00

Dwarikesh Sugar Industries Ltd. (DWARKESH) - Chairman Speech

Company chairman speech

The infiection point in the historyIndian government announced a of theIndian sugar industry transpired in 2018 when the National Biofuel Policy. This policyaddressed lingering challenges in one stroke. It addressed the overcapacity within thesugar sector the creation of a new revenue avenue (ethanol) and the enunciation of along-term national appetite for bio-fuels. It would be fair to state that this singlepolicy transformed the fortunes of the sugar industry; what used to be a cyclical businessnow appears to have entered a period of long-term sustainability. Thereafter the PrimeMinister emphasised the importance of moderating India’s carbon footprint through agreater role for ethanol. This was backed by a virtually unlimited ethanol appetiteenunciated by India’s mega oil marketing companies that provided sugar companies withan incentive to commission large distilleries. Even as this scenario has begun totransform prospects for the sector there is a premium on corporate preparednessresponsiveness and agility to translate a distinctive sectorial opportunity into enhancedstakeholder value. India’s sugar companies need relatively under-borrowed BalanceSheets liquidity to pay cane farmers on time cane development programmes that factor inthe need for technologically advanced cane varieties and a corporate willingness to investin distillery capacity to facilitate ethanol manufacture.

The opportunity is as large as it is transformative creating a once-in-decadesopportunity for the sector and nimble companies to transform their DNAs from a commodityorientation into a value-added bio-energy personality.

How we have responded

Dwarikesh awaited the full import of the policy and environment-friendly technologiesbefore selecting to make our first decisive investment. This transpired in 2019 when theCompany invested in enhancing its legacy distillery capacity from 30 KLPD to 100 KLPD inthe first phase commissioned towards the close of that calendar year. Thereafter thatcapacity was further enhanced to 162.5 KLPD which is where it stands today. Ourexperience with this distillery validated the confidence with which we invested in it. Thedistillery operated at a capacity utilisation of more than 95% during the year underreview; our operating efficiencies graduated to match the best standards of our sector; weenhanced the proportion of our organisational revenues from our distillery operations;there was an even sharper increase in the proportion of EBIDTA derived from our distillerybusiness.

Given that our distillery business is playing a potent role in transforming ourbusiness profitability the time has come to take our distillery business to the nextlevel. The more we grow our distillery business the higher our revenues margins andprofits. In view of this the Company is addressing this potential through twoinitiatives: maximise the utilisation of the existing distillery capacity and commission anew larger distillery capacity during the current financial year. The cumulative impact ofthese two distilleries will not only increase our cumulative revenues; they will alter ourpersonality and graduate our company from one orbit into another.

How we are transforming

Permit me to start with an India reference here which will set the tone for ourcorporate transformation as well. Until a couple of years ago India was a sporadicexporter; the country exported only when there was an excess within almost alwayssupported by government subsidy that made the exercise viable. As a result India despitethe size of its sugar capacity was never taken seriously in the international markets.

This has begun to change with India playing a growing role in the international marketin the last few years. In the last sugar season India exported a cumulative 7 milliontonnes of sugar and during season 2021-22 the country is expected to export more than 9million tonnes of sugar. This has established a consistent India presence in the globalmarkets generating huge export revenues in the last two years. Besides this exportpresence has helped evacuate a surplus sugar from the Indian market moderating ourinventory to reasonable levels. This correction in the national sugar inventory provides astable sugar market which in turn will empower manufacturers to remunerate farmers ontime – a win-win proposition. In 2022-23 we will possess a cumulative 337.5 KLPD ofethanol manufacturing capacity which should graduate our ethanol throughput of 5.5 crorelitres to an estimated 11 crore litres when both our distilleries are operated at theirrated capacity utilisation.

This sizable increase in our ethanol throughput will be derived through increased canecrushing and a larger sacrifice of sugar production in favour of ethanol manufacture.There is every possibility that even as we generate a larger quantum of ethanol we couldproduce a lower quantum of sugar. However the increase in revenue derived from theadditional manufacture of ethanol will more than compensate for the decline in sugarthroughput strengthening our overall profitability.

How we are evolving our DNA

Ever since we went into business we focused on enhancing value from a stick of cane.

We did so through initiatives related to superior farm yields be er logisticaleffectiveness advanced technologies and a prudent investment in the utilisation ofbyproducts. We believe that the sizable increase in our distillery capacity during thecurrent financial year will not only transform the scale of our operations; it willachieve something more fundamental. Following the commissioning of the second distilleryunit we expect to transform from a predominantly sugar-driven character to a bio-energypersonality; we expect to graduate from the manufacture of a lifestyle-centric product tothe increased throughput of a resource integral to national self-reliance and environmentintegrity; we expect to emerge from the shadow of cyclicality to business sustainability.

From this point onwards we expect to grow in a sustainable manner with a smallerBalance Sheet. Our distillery business expansion is expected to deliver a shorterinvestment payback. In turn our Balance Sheet is expected to generate a stronger Returnon Capital Employed.

Conclusion

In view of this paradigm shift we are positioned not only to enhance shareholdervalue; we are placed to enhance stakeholder value as well. By the virtue of investing inenvironmentally responsible assets and technologies we will protect the interest of theecology around our manufacturing facilities.

By sourcing more cane at remunerative prices that are remunerated with speed we willcontinue to strengthen livelihoods of our primary vendors (farmers). By providing aknowledge-enhancing workplace we will enrich the livelihoods of hundreds of individualsworking with us.

By manufacturing a range of products – sugar ethanol and co-generated power– we will address the needs of customers for a sweetener clean fuel blend and greenpower.

By addressing our debt interest and dividend obligations we will service thecommitments made to our financial partners (lenders and shareholders).

By addressing the complete needs of all stakeholders we believe we are positioned toenhance our overall value proposition from the current year onwards when our distillerybusiness expansion goes on stream. We now enter a new phase in our existence.

G. R. Morarka Executive Chairman

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