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Dwarikesh Sugar Industries Ltd.

BSE: 532610 Sector: Agri and agri inputs
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OPEN 24.00
VOLUME 42499
52-Week high 46.40
52-Week low 14.05
P/E 8.91
Mkt Cap.(Rs cr) 453
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 24.00
CLOSE 24.25
VOLUME 42499
52-Week high 46.40
52-Week low 14.05
P/E 8.91
Mkt Cap.(Rs cr) 453
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Dwarikesh Sugar Industries Ltd. (DWARKESH) - Director Report

Company director report

Your Directors take pleasure in presenting their 24th (Twenty Fourth) AnnualReport together with the audited accounts for the year ended 31st March 2018.


Rs. in Lakhs

Particulars Year Ended 31.03.2018 Year Ended 31.03.2017
Gross profit before depreciation interest & tax 15997.16 28792.12
Less: Depreciation 3250.37 2994.18
Finance Costs 2531.14 5249.76
Profit / (Loss) before tax and exceptional items 10215.65 20548.18
Add : Exceptional income (Net of taxes) 322.71
Profit / (Loss) before tax 10215.65 20870.89
Tax expenses 70.90 5260.41
Profit /(Loss) after tax 10144.75 15610.48
Total comprehensive income / (loss) 10246.64 15524.14


Dividend of B16057660 (including dividend distribution tax) is recommended to bepaid for the Cumulative Redeemable Preference Shares (Series I & II) in respect of thefinancial year 2017-18.

In view of the rapid & unexpected fall in sugar prices in the last few monthsresulting in near term uncertainties being faced by the sugar industry and in view of theCompany's avowed policy of protecting long term interest of the shareholders theDirectors have deemed it prudent to plough back the profits and therefore not recommendedpayment of any equity dividend for the financial year 2017-18.


During the year under review no amount has been transferred to reserves.



Distinguishing features of the crushing operations in your company are given below:

Metrics of sugarcane crushed sugar produced and recovery achieved during the year isgiven hereunder:

(FY 2017-18 (From 01.04.2017 to 31.03.2018) includes a small part of season 2016-17and a major part of season 2017-18)

Particulars 2017-18 2016-17 % Change
Crushing (Lakhs/Quintals) – total at all three units 323.81 260.74 24.19
Recovery % (Combined) 11.84 11.71
Production (Lakhs/Quintals) – total at all three units 38.33 30.34 26.33

Crushing season 2017-18 is yet not consummated. Comparison of season 2017-18 (up to 25thApril 2018) & full season 2016-17 is as below:

Particulars 2017-18 2016-17
Crushing (Lakh/Quintals) – total at all three units 337.28 283.40
Recovery % (Combined) 11.90 11.78
Production (Lakh/Quintals) – total at all three units 39.81 33.33

Highlights- FY 2017-18

• Sugarcane crushing up by 24.19%.

Small increase in recovery by 0.13% (from 11.71% to 11.84%)

Sugar production up by an impressive 26.33%

Higher yield across Uttar Pradesh resulted in higher sugarcane availability.

Impressive recoveries on account of superior varietal mix with increasingthrust on early maturing varieties such as Co 0238. Impressive recovery in spite of earlystart of the crushing season.

During the ongoing season of 2017-18 both DP & DD units are poised toclock the highest ever recovery. Group recovery highest in North India during season2016-17 and among the highest till 15th April 2018 during the ongoing season.

Performance of cogeneration division: Metrics of power sold:


2017-18 (01.04.2017 to 31.03.2018)

2016-17 (01.04.2016 to 31.03.2017)

Power sold in lakhs units Amount in Rs. Lakhs Power sold in lakhs units Amount in Rs. Lakhs
DN 308.19 1470 278.66 1273
DP 682.62 3283 561.30 2868
DD 946.51 4553 745.84 3811
Total 1937.32 9306 1585.80 7952

During the ongoing season 2017-18 (up to 30th April 2018) value of powerevacuated to the power grid is B94.96 crores (19.63 crore units)

Performance of Distillery:

During the year 86.90 lakh liters of industrial alcohol (previous period 79.65 lakhliters)was produced and 64.06 lakh liters of the same amounting to B24.91 crores (previousperiod 82.10 lakh liters amounting B33.49 crores) was sold at Dwarikesh Nagar unit of theCompany.


Global perspective

A bumper cane crop across most sugar producing countries coupled withmoderate consumption growth in the regions translated into a global sweetener glut in thesugar season 2017-18. Even as the latest and precise estimates are awaited the mostrecent International Sugar Organization's global production estimate indicates a 180million tons-plus the highest global output. There is every possibility that productioncould be higher leading to an output surplus of almost 10 million tons. This recordoutput was the result of India Brazil and Thailand reporting hefty production increases.India was a large contributor to this reality as sugar production exceeded consumption bya vast estimate.

Raw sugar prices had reached the lowest since 2008 - around 10.50 cents perpound in 2015 but thereafter rebounded and traded between 22 and 23 cents per pound inSeptember 2016. However this rally was short-lived; sugar prices crashed to between 11and 12 cents per pound. Correspondingly the London White variety that hovered around 540USD PMT in September 2016 declined to 325 USD PMT.

India story

India's production was 20.3 million tons during 2016-17; in sugar season2017-18 this is expected to cross 31.5 million tons following several upwards revisions.The sugar output in Maharashtra rebounded from 4.2 million tons in season 2016-17 to 10million tons-plus; Uttar Pradesh which had reported an impressive 8.8 million tonsproduction coupled with a recovery of 10.62% in season 2016-17 now reported a projectedproduction in excess of 11.5 million tons in season 2017-18. This rebound was largely theresult of remunerative cane prices inspiring a large allocation of farm area at a timewhen other crops delivered weak returns. In addition to larger farm space most producersreported superior yields. The result was that virtually every single sugar producing statein India delivered its highest sugar production during the 2017-18 season.

With sugar production being unprecedented and consumption virtually stagnantacross India the result was a substantial glut. Sugar companies that were attractivelyprofitable as recent as only a couple of years ago now address a grim near-term outlook.The glut translated into a meltdown in sugar realizations: prices of above B3700 perquintal in late December 2017 crashed by nearly B800 to B900 per quintal in the space of acouple of months stretching sectoral financials. Even as the country's sugar productioncrossed 30 MT a number of serious and committed sugar mills continued to crush cane intothe summer at low recoveries that threatened their viability even further.

The cyclicality of the Indian sugar industry was aggravated by the decisionof the government to influence cane costs and preventing free market forces from findingtheir own level. The sustained increase in raw material costs dictated by the governmenthad a disproportionate impact on production which in turn had a sensitive influence inmarket realizations.

The outlook for season 2018-19 appears challenged: the country faces itssecond successive bumper production season based on cane initial planting indicators. Thesecond successive year of record output indicates that sugar realizations could stayconsiderably subdued threatening sectoral viability and the ability of sugar mills toremunerate cane farmers on schedule. The Central Government and State Government addressedthis sharp and sudden decline in sugar prices through a series of initiatives. The CentralGovernment introduced reverse stock holding limits raised import duty to 100% andabolished sugar export duty to arrest the price decline which at best had a fleetingimpact as the production proved way too large to absorb.

The Central Government ordered compulsory export of 2 MTs of sugar under theMIEQ scheme. The Central Government has also announced granting a financial assistance ofB5.50 per quintal of cane crushed to enhance the ability of sugar mills to clear theirsugarcane dues. A higher production estimate estimated year-end stock of more than 10.5MTs (without considering exports) and evacuation of 2 MTs of sugar appear unlikely tostrengthen weak sugar realizations.

The Central Government strengthened the sugar ancillary business of ethanolmanufacture. The ethanol procurement price was increased from B39 per liter to B40.85 perliter and there is an expectation of a second ethanol price increase coupled with areduction in GST rate that could strengthen prospects for this business segment.

Given the prevailing sectoral reality sugar cane arrears crossed B10000crores in Uttar Pradesh and around B20000 crores across the country by end-April 2018with every fear that the eventual number would be considerably higher.

Uttar Pradesh report card

The SAP for season 2017-18 as announced by the government was higher by B10per quintal vis--vis season 2016-17. SAP for the general variety was B315 per quintalthe early variety B325 per quintal and for the rejected variety B310 per quintal. Societycommission was pegged at 2% of the FRP or B5.10 per quintal.

Even as the SAP increase for the sugar season 2017-18 was only 3% even thisproved excessive at a time of declining sugar prices. The arbitrary SAP announced in theearlier years has affected the delicate sectoral balance. Encouraged by the prospect ofreporting higher incomes farmers planted more sugarcane than ever. The farmers thereafterreported superior cane yield through the sowing of Co 0238 in Uttar Pradesh. Thecombination of these realities translated into record cane and sugar output in UttarPradesh aggravating the national excess.

Even as the decline in sugar prices was not enough the industry suffered anear-100% collapse in molasses prices. The result is that through much of the sugar seasonunder review molasses was disbursed virtually free and many sugar mills offered to beartransportation costs to deliver molasses to buyers. This decline in the price of molassesfrom B400 per quintal in the previous year aggravated sectoral profitability. Besides thehigher cost of transporting molasses made ‘export' to southern states unviable.

The Uttar Pradesh sugar industry which had posted a positive turnaround inearly 2016 is now at a crossroads. Sugar prices have dropped by more than B800 per quintalin the space of just a few months even as Central and State Governments have initiated aseries of measures to reverse market sentiment. However there is a general feeling thatGovernment measures may not be adequate in the face of the staggering productionestimates. The Uttar Pradesh sugar industry has also appealed to the State Government togrant subsidies which could be directly paid to farmers in lieu of their cane dues.

The reality is that most Indian sugar mills do not possess adequate banklimits to address cane purchases or payments while the stronger mills are seeing anerosion in working capital mobilization capability following a continuous decline in sugarrealizations. This augurs challenging times for the industry and the prospect is that onlythe integrated and highly efficient among the country's sugar mills will be in a positionto weather the impact of the downtrend.

The reassuring news though is that the Governments (both Central &State) are abreast and well-informed of the crisis engulfing the industry and are keen toensure viability of the industry such that interests of all stakeholders is notendangered. A series of measures have already been initiated with prospects of moreannouncements very soon so that industry bounces back to robust health

Your company has been clocking the impressive recovery season after season and isconsidered to be among the most efficient sugar producer across the Nation. Process lossesrecorded at its plants are also among the lowest in the industry. Your company is alsolargely long-term debt free having done accelerated prepayment of its debts. With suchinherent strengths your company is better equipped to deal with the adversities and whenthe tide turns will obviously be advantageously placed.

Dwarikesh - Financial Scorecard:

Particular 2017-18 Lakhs % 2016-17 Lakhs %
Gross revenue 145828 125610
less: Excise duty 2833 6570
Net revenue (from operations) 142995 100.00% 119040 100.00%
EBIDTA 15997 11.19% 29115 24.46%
EBDTA 13466 9.42% 23865 20.05%
EBT 10216 7.14% 20871 17.53%
EAT 10145 7.09% 15610 13.11%
Total comprehensive income 10247 7.17% 15524 13.04%


*Exceptional income of Nil (Previous year B323 Lakhs) is added to EBIDTA andEBDTA

EBDITA during FY 2017-18 both in absolute numbers and in % terms hasdeclined as compared to the EBIDTA during previous period. Margin of EBIDTA is 11.19% vis--vis margin of 24.46% in the previous year. In absolute numbers the EBIDTA amount isB15997 lakhs as compared to EBIDTA amount of B29115 lakhs in the previous FY. Whilepower & distillery segments have clocked better EBIDTA the sugar segment has reportedlesser EBIDTA mainly on account of unexpected & steep fall in the price of sugarduring the latter part of the FY 2017-18.

During the year under review your company earned EBDTA of B13466 lakhs ascompared to B23865 lakhs earned in the previous FY.

Earning before tax when viewed in conjunction with that of the previous FYhas also declined.

Earnings after tax is B10145 lakhs. In % the same is 7.09% of the netrevenue

Main reasons for the decline in profitability are:

Steep & unexpected fall in price of sugar post January 2018. Allinitial estimates of production of sugar have gone haywire and the country is poised tonow produce record quantity of sugar creating a glut like situation. Sugar prices havecrashed from a high of B3700 per quintal during late 2017 to B2700 per quintal now anunprecedented decline.

Higher than estimated production (far in excess of estimated consumption)has created structural imbalances. With no parity with global prices the possibility ofexports is bleak unless the same is supported by the Government by way of some financialassistance.

The company started its crushing operations early and is on the threshold ofcrushing record quantity of sugarcane and producing record quantity of sugar. However theindustry is unable to reap the benefits of economies of scale as the sugar prices are ondownward spiral. The working of power segment though is satisfactory as commensurate withthe higher crushing the Company has been able to evacuate more power to the state grid.

Your company continues to maintain loftiest standards of efficiencies andhas been relentless in its pursuit to clock the best possible recoveries. Process lossesrecorded at its plants are also among the lowest in the industry. While macro factors suchas sugar prices etc. are beyond the realm of company's control company has kept a tightleash on its costs and is minimizing the collateral damage by being a cost efficient sugarproducer in the country.

Your company is relentlessly making efforts to trim its debt profile andreduce its long-term debt burden with a view to keep the interest cost under control. Notonly has the company been able to reduce its long term debt with some aggressive andaccelerated debt repayment program the company has had the benefit of lower rate ofinterest on account of its improved credit rating. The long term loans of the company arerated ‘A' (+) with stable outlook and commercial paper program (short term) beenaccorded the highest rating of A1 + by ICRA. The company has been able to substantiallyreduce its finance cost during the FY 2017-18.


The main policies of the government in relation to the sugar industry during the yearwere:

a) Hitherto applicable levy and free sale sugar ratio of 10:90 for the period up to 31stMarch 2013 has since been abolished pursuant to adoption of recommendations contained inthe report of Dr. Rangarajan. The sugar mills are now eligible to sell their entireproduction as free sale sugar.

b) The Fair & Remunerative Price (FRP) for the crushing season 2016- 17 was B230per quintal which has been increased to B255 per quintal for 2017-18 where both arelinked to recovery @ 9.50%.

c) Chronology of SMP /FRP announced by the Central Government on the basis of recoveryis given herein under:

Season SMP/F&RP Rs. / Quintal
2000-01(SMP) 59.50*
2001-02 62.05*
2002-03 64.50*
2002-03 (Revised) 69.50*
2003-04 73.00*
2004-05 74.50*
2005-06 79.50&
2006-07 80.25&
2007-08 81.18&
2008-09 81.18&
2009-10 (SMP since replaced by F&RP ) 129.84@
2010-11 139.12@
2011-12 145.00@
Season SMP/F&RP Rs. / Quintal
2012-13 170.00@
2013-14 210.00@
2014-15 220.00@
2015-16 230.00@
2016-17 230.00@
2017-18 255.00@

* Linked to recovery of 8.50%

& Linked to recovery of 9%

@Linked to recovery of 9.50%

d) The Company is required to pay State Administered Price (SAP) for the crushingseason 2017-18 the State Government of Uttar Pradesh announced SAP of B315 per quintalfor general variety of Sugarcane B10 per quintal is extra payable for early variety &B5 per quintal is less payable for rejected variety.


There is no change in nature of business of the company.


No Material changes have occurred subsequent to the close of the financial year of theCompany to which the balance sheet relates and the date of the report.


No significant & material orders have been passed impacting the going concernstatus & Company's operations in future.


The Company has adequate internal financial control in place. The Company has gotrobust systems in place to ensure prepayment audits of transactions concurrent internalaudit of all transactions of various segments of activities of the company.


During the year under review Company had split shares in the ratio of 1:10 (i.e 10equity shares of B1 each for every one share of B10 held) and simultaneously reduced thenominal value of shares from B10 to B1. As a result of which the equity share capital ofthe company remains the same.

The Company redeemed 1000000 (Ten Lakhs) Cumulative Redeemable preference shares ofB100 each (Series III) on 30th September 2017.

The Company also redeemed 500000 (Five Lakhs) Cumulative Redeemable preference sharesof B100 each (Series IV) on 30th March 2018.


The extract of the annual return in Form No. MGT – 9 is annexed as

Annexure I


Dwarikesh has been an early adopter of CSR initiatives. The Company works primarilythrough its CSR trust viz R R Morarka Charitable Trust towards supporting projects ineradication of hunger and malnutrition promoting education art and culture healthcaredestitute care and rehabilitation environmental sustainability disaster relief and ruraldevelopment projects. Details of the CSR policy are available on our website The annual report on our CSR activities is appended as Annexure IIto the Board's report.


During the year under review five Board Meetings were held.


The Company has adopted policy on Vigil Mechanism in the Board meeting held on May 92014 so as to bring to the attention of the management the concerns about behavior ofemployees that raise concerns including fraud by using the mechanism provided in theWhistle Blower Policy. The details of the said policy are included in the CorporateGovernance Report.


No Loans Guarantees or investments are made under Section 186 of the Act during theyear.


In terms of the provision of Section 197(12) of the Act read with Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 a statementcontaining the disclosures pertaining to remuneration and other details as required underthe Act and the above rules are provided in Annexure III.


The Company does not have any fixed deposits at the beginning of the year in terms ofSection 74 of the Companies Act 2013. The Company did not accept any deposits during theyear.


The Company has Risk Management Committee to review and combat the risk on periodicalbasis. A detailed note on risk management policy elements of risk and its mitigation iscomprised in this Report.


The Company has put in place a policy on Anti Sexual harassment in line with therequirements of The Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. Internal Complaints Committee has been set up to redress complaintsreceived regarding sexual harassment. All employees (permanent contractual temporarytrainees) are covered under this policy.

No complaints have been received during the year under review.


Related party transactions that were entered during the financial year were on an arm'slength basis and were in the ordinary course of business. There were no materiallysignificant related party transactions with the Company's Promoters Directors Managementor their relatives which could have had a potential conflict with the interests of theCompany. Transactions with related parties entered by the Company in the normal course ofbusiness are periodically placed before the Audit Committee for its omnibus approval andthe particulars of contracts entered during the year as per Form AOC-2 is enclosedherewith and marked as Annexure IV. The Board of Directors of the Company has onthe recommendation of the Audit Committee adopted a policy to regulate transactionsbetween the Company and its Related Parties in compliance with the applicable provisionsof the Companies Act 2013 the rules thereunder and the Listing Regulations.


A. Changes in Directors and Key Managerial Personnel

Shri G R Morarka has resigned from the post of Managing Director w.e.f 18thApril 2018 owing to his health issues and has been advised by Doctors to take rest forfew months. The Board has recorded its sincere appreciation for the valuable servicesrendered by him.

Shri B J Maheshwari Director retiring by rotation and being eligible offers himselffor re-appointment.

B. Declaration by an Independent Director(s) and reappointment

Pursuant to the requirements of Section 149(7) of the Companies Act 2013 the companyhas received the declarations from all the independent directors confirming the fact thatthey all are meeting the eligibility criteria as stated in Section 149(6) of the Companiesact 2013.

All the three independent directors are appointed/re-appointed in the meeting of Boardof Directors held on August 13 2014 for a period of 5 years as per the requirements ofsection 149 of the Companies act 2013.

C. Formal Annual Evaluation

Pursuant to the requirements of Section 134(3)(p) of the Companies Act 2013 read withRegulation 17 of the listing regulations the Board has carried out an annual performanceevaluation of its own performance the directors individually as well as the evaluation ofthe working of its Audit Nomination & Remuneration Committees.

A structured questionnaire was prepared after taking into consideration inputs receivedfrom the Directors covering various aspects of the Board's functioning such as adequacyof the composition of the Board and its Committees Board culture execution andperformance of specific duties obligations and governance.

A separate exercise was carried out to evaluate the performance of individual Directorsincluding the Chairman of the Board who were evaluated on parameters such as level ofengagement and contribution independence of judgement safeguarding the interest of theCompany and its minority shareholders etc. The performance evaluation of the IndependentDirectors was carried out by the entire Board. The performance evaluation of the Chairmanand the Non Independent Directors were carried out by the Independent Directors who alsoreviewed the performance of the Secretarial Department. The Directors expressed theirsatisfaction with the evaluation process.

D. Policy on Directors' Appointment and Remuneration Including Criteria for Determiningqualifications Positive Attributes Independence of a Director Key Managerial Personneland Other employees

Directors/KMPs shall not acquire any disqualification and shall be persons of soundintegrity and honesty apart from knowledge experience etc. in their respective fields.

Policy on Directors nomination and remuneration is available on company's website at Policy-on-Directors-Appointment-and-Remuneration.pdf.


As required under the provisions of Section 134(3)(c) of the Companies Act 2013 yourDirectors confirm that:

(a) In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that year;

(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.


Pursuant to Regulations 34 of SEBI (Listing Obligation and Disclosure Requirement)Management Discussion and Analysis Report for the year under review is presented in aseparate segment which is forming part of the Annual Report.


As per Regulation 34 of SEBI (Listing Obligation and Disclosure Requirement) a reporton Corporate Governance together with the Auditors Certificate regarding compliance of theconditions of corporate governance is provided under Annexure V.


The Company has following mandatory Committees viz

1. Audit Committee

2. Stakeholders' Relationship Committee

3. Nomination and Remuneration Committee

4. Corporate Social Responsibility Committee

The details of the Committees along with their composition number of meetings andattendance at the meetings are provided in the Corporate Governance Report.


Pursuant to Section 134 (3)(m) of the Companies Act 2013 the particulars in respectof conservation of energy technology absorption and foreign exchange earnings & outgoare furnished in Annexure VI and form a part of this report.


The Company does not have any subsidiary in terms of provisions of Companies Act 2013.


Pursuant to the provisions of Section 139(2) of the Companies Act 2013 and rules madethereunder M/s. NSBP & Co. Chartered Accountants New Delhi (FirmRegistration No. 001075N) were appointed as Statutory Auditors of the Company forperiod of 5 years to hold office upto the conclusion of 28th Annual GeneralMeeting of the company subject to ratification of their appointment at every subsequentAnnual General Meeting.

A certificate from Statutory Auditors has been received to the effect that theirappointment as Statutory Auditors of the Company if ratified at ensuing Annual GeneralMeeting would be according to the terms and conditions prescribed under Section 139 ofthe Act and Rules thereunder.

The Auditors' Report for the financial year March 2018 does not contain anyqualification reservation adverse remark or disclaimer. The Statutory Auditors have notreported any incident of fraud to the Audit Committee of the Company during the financialyear under review.


Pursuant to the provisions of section 148 of the Companies Act 2013 and rules madethereunder the Board on the recommendation of the Audit Committee has re-appointed M/s.Ramanath Iyer & Co Cost Accountants as Cost Auditors to conduct cost auditsrelating to sugar electricity and industrial alcohol for the year ended March 31 2019.

The Cost Audit Report for the financial year March 2017 did not contain anyqualification reservation adverse remark or disclaimer. The Cost Audit Report for yearend March 2018 shall be made available by Cost Auditors on or before September 30 2018.


A Secretarial Audit Report given by M/s. VKM & Associates a companysecretary in practice is received and annexed herewith as Annexure VII. There areno qualifications reservation or adverse remarks or disclaimer in the Secretarial AuditReport.


Your directors wish to place on record their sincere gratitude and appreciation to itsmembers sugar cane growers employees bankers financial institutions Central &State Government Agencies for their valuable contribution in the growth of theorganisation.

By Order of the Board
B J Maheshwari Vijay S Banka
Place: Mumbai Managing Director & CS cum CCO Managing Director & CFO
Dated: May 7 2018 (DIN - 00002075) (DIN - 00963355)