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Dwarikesh Sugar Industries Ltd.

BSE: 532610 Sector: Agri and agri inputs
NSE: DWARKESH ISIN Code: INE366A01041
BSE 00:00 | 18 Jan 24.25 -0.70
(-2.81%)
OPEN

24.80

HIGH

25.00

LOW

24.15

NSE 00:00 | 18 Jan 24.35 -0.65
(-2.60%)
OPEN

25.30

HIGH

25.30

LOW

24.30

OPEN 24.80
PREVIOUS CLOSE 24.95
VOLUME 16652
52-Week high 47.95
52-Week low 14.05
P/E 8.98
Mkt Cap.(Rs cr) 457
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 24.80
CLOSE 24.95
VOLUME 16652
52-Week high 47.95
52-Week low 14.05
P/E 8.98
Mkt Cap.(Rs cr) 457
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Dwarikesh Sugar Industries Ltd. (DWARKESH) - Chairman Speech

Company chairman speech

Humko mann ki shakti dena mann vijay karein Doosron ki jai se pehle khud ko jaikarein.

Lyrics Gulzar Film Guddi (1971) Song Humko mann ki shakti dena

IT IS INDEED AN IRONY THAT EVEN 27 YEARS AFTER LIBERALISATION – WHICH IS MORE THANA GENERATION IN CONVENTIONAL PARLANCE – THE INDIAN SUGAR INDUSTRY CONTINUES TO BECONTROLLED AND POLITICALLY-INFLUENCED.

I say this with regret and irony.

India is the second largest sugar producer in the world. At a time when there is agrowing emphasis on the Make in India story there could perhaps be no better showpiece ofthe country's resolve to carve out an international presence for a product than sugar.

I say this for a number of reasons.

If India succeeds in carving out a steady global presence and market for sugar itcould help the country achieve a number of things.

One it could create an insurance for the time the country subsequently encounters asurplus making it possible to evacuate sugar with speed restoring the stability of thecountry's sugar industry.

Two the export of an agricultural produce could in turn inspire a range of qualitybest practices and cost management initiatives integrating the sector into the global wayof doing things.

Three this export could correct sugar's long-standing under-performance compared withinflation creating a win-win proposition for farmers millers and consumers alike.

Sadly the reality has been completely different.

After a number of years of under-performance the country's sugar sector revived in2015-16 and extended its rebound into 2016-17. At a time when most industry players wereconvinced that the sector would remain stable across the medium-term the Uttar Pradeshstate government announced a small increase in cane prices that millers were required topay farmers. In view of the successive increase in sugarcane price over the years canebecame easily the most profitable crop from a farmer's perspective; a number of farmersallocated a larger part of their farm areas to cane growing.

The result has been unprecedented marked by a complete failure ofintelligence-gathering agencies related to the country's sugar sector. What started out asan initial annual sugar production estimate of 25.5 million tonnes was revised upwardsevery successive month; the country finished the 2017-18 sugar season with an output ofaround 32 million tonnes. Never before in my experience of a quarter of a century have Ibeen witness to such a vast variation between a season-start estimate and a season-endoutput and seldom too have I been witness to such a short-lived sectoral recovery.

The result is that sugar realisations collapsed from around B36 per kg ex-factory toaround B26 per kg which in a number of instances could not even recover the cost ofsugarcane. The result has been an unprecedented increase in cane arrears in Uttar Pradeshthe ripple effects of this extending deep into the social fabric of the state.

I draw from my experience to state that the scenario will need a policy correction onhow the country's sugar industry needs to be treated. If cane prices will continue to bepolitically influenced and controlled so should sugar prices with a safety net (which weknow is not possible). The only alternative would be to decontrol cane prices and link thecane grower's fortunes closer with sugar realisations: the better sugar realisations thehigher the cane prices – and vice versa. The de-politicisation of cane prices on theone hand and the partnerisation of the cane grower with the sugar industry are the onlytwo sustainable alternatives. If this critical agricultural reform is not implemented theconsequences would be severe: cane arrears social unrest bank loan repayment defaultsfarmers moving away from cane declining sugar output and even the ironic prospect ofregular sugar import.

The next year's sugar output threatens to be even higher. The need of the hour then isto find collaborative – industry and government – ways to evacuate the nationalsurplus. The savior in the scenario could be the unexpected increase in the cost of crudeoil prompting Brazil to shift from the production of sugar to the manufacture of ethanolused as a petroleum additive. The result could be a modest global deficit that India couldplug. If India can capitalise on this opportunity window the surplus may be evacuated andthe Indian sugar industry may breathe again.

Dwarikesh Sugar is not insulated from the industry scenario. The pain of the sector hashad a trickle-down affecting our profitability. However as a passion-drivenorganisation we took a number of safeguards in the last couple of years to protectourselves from any prospective slowdown. The company made a qualified institutionalplacement of equity shares the proceeds of which were utilised to repay long-term debt.The current sectoral slowdown is possibly the first time in our existence when we havelittle long-term debt on our books. Besides we continued to maximise efficiencies andhere I am pleased to report that the Company reported its highest-ever recovery in thesugar season 2017-18 (group recovery of 11.88%) making it possible to cover fixed costsmore effectively.

Dwarikesh Sugar will continue to maximise efficiencies and economies within its controlin the hope that when the sugar industry revives it would be one of the first off theblocks in strengthening its performance and profits.

We wish to communicate that we continue to stay committed to enhance long-term valuefor all those who hold shares in our company.

Gautam Morarka

Founder and Mentor