Triveni and Engineering LTD
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BBA SUMMER PROJECT REPORT
Transcript of Triveni and Engineering LTD
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COMPANY PROFILE
Mr. Dhruv M. Sawhney, Chairman & Managing Director graduated with a Masters in
Mechanical Sciences from Emmanuel College, University of Cambridge, U.K. and M.B.A with
distinction from the Wharton School, University of Pennsylvania, U.S.A. He was on the Dean's
list for all terms, came second in the University, and is a life member of Beta Gama Sigma. Mr.
Sawhney has received the highest civilian award "Chevalier de la Legion d'Honneur" from
President Chirac of the French Republic.
Mr. Sawhney is a Past President of the Confederation of Indian Industry (CII), the Indian Sugar
Mills Association and the Sugar Technologists Association of India. He was the first Chairman
from the developing world of the International Society of Sugar Cane Technologists. Mr.
Sawhney has served on the Board of various public sector organizations and chaired Government
advisory councils on Industry, Energy and Sugar. He chairs the Commonwealth Leadership
Development Conferences founded by HRH Prince Philip, The Duke of Edinburgh in 1956 to
foster and broaden the understanding and decision-making ability of individuals in the
commonwealth countries. Mr Sawhney is Deputy Chairman of the Evian Group and Chairman of
the India Steering Committee of the World Economic Forum, Switzerland. He also chairs CII's
International and Internal Audit Committees.
Mr. Sawhney takes a keen interest in education, and was a past Governor of the Indian Institute of
Management, Lucknow, the Management Institute at the University of Delhi and Chairman of the
Doon School, Dehra Dun, one of India's most famous Public Schools. He is a Companion
Member of the Chartered Institute of Management, U.K. and chairs the Board of Trustees of
Delhi's oldest private charitable hospital. He was President of the All India Chess Federation for
12 years.
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TRIVENI NGINEERING AND INDUSTRIES LIMITED
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PERFORMANCE:
Particulars 2005-06 2008-09 % Increase
Sales (Gross) 12702.96 10212.92 24.38
Sales (Net) 11920.37 9610.50 24.04
Operating Profit ( EBIDTA) 2130.00 1724.46 23.52
Interest and Financial Charges 229.96 304.67 (24.52)
Depreciation and amortization 288.25 178.73 61.29
Profit before tax (PBT) 1611.79 1241.06 29.87
Tax liability- Normal 165.32 235.29
- Net deferred tax charges 131.51 10.57
Profit after tax (PAT) 1314.96 995.20 32.13
Surplus brought forward 82.40 44.55
Available for appropriation 1397.36 1039.75
APPROPRITATIONS
Provision for Dividend (included dividend
distribution tax)
Equity 147.54 93.95 57.04
Preference - 2.70 -
Transfers to molasses reserves 1.27 0.83
Transfer to capital redemption reserves 19.87 19.87
Transfer to general reserves 1150.00 840.00
Surplus carried forwarded 78.68 82.40
Earning per equity share of Re. 1 each (in Rs.) 5.88 4.77 23.27
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During the year under review, the company reported a record performance across the
following parameters:
Net sales increased 24.04 % to Rs 11920.37 million.
Profit after tax increased 32.13 % to Rs 1314.96 million.
There was a remarkable growth in turnover in all the engineering units accompanied by an
attractive increase in their respective margins. The company is optimistic of a similar or higher
growth in turnover and profit of all businesses in Financial Year 2006-07.
Divisionwise breakup of total external sales (%)
79.17
16.86
2004-2005
SBG TBG CBG GBG WBG Others
1.190.36
1.5757
0.85
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2005-2006
70.32
22.63
SBG TBG CBG GBG WBG Others2005-2006
2.481.691.77 1.12
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CORPORATE INFORMATION:
Sl. No. Name and Address of Stock Exchange Stock Code
01. Bombay Stock Exchange Limited
Phiroze Jeejeebhoy Towers,
Dalal Street, Fort
Mumbai – 400023
532356
02. National Stock Exchange of India Ltd.
Exchange Plaza, 5th Floor, Plot no c/1, G block, Bandera (E),
Mumbai - 400051
TRIVENI
Enhancing shareholders value:
The Triveni public issue: The shares of Triveni Engineering & industries Limited are listed
on the Bombay stock Exchange and National stock Exchange, the major stock exchange of India.
The company issued 50 million equity shares in November 2005 and the issue was oversubscribed
more then ten times reflecting investor confidence. The equity shares of RS. 1 each were issued
through a book building process within a price range of Rs. 42.50. While 97% of the demand was
for shares in the upper band, the company prudently fixed the issue price at Rs. 48 in general
investor interest. Consequent to this issue, the equity shares of the company were listed on NSE
and BSE on 13 December 2005. As on 31 March 2006, reputed institutional investors including
mutual funds, foreign institutional investors and domastic banks held 21.53% of the company’s
shareholding. The closing price of Triveni share at NSE on 31 March 2006 was Rs. 125.95,
impaling a market capitalisation of Rs.32480 million. The company has increased the limit of
investment by FIIs to 49%, which will enable more international investors to participate in its
growth story.
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SHARE PERFORMANCE OF TRIVENI Vs BSE SENSEX
Triveni Share Price- BSE low Triveni Share Price - BSE highBSE Sensex low BSE Sensex high
At Triveni, our principal achievement is that we started with one business, but leverage our
engineering knowledge to extend into four other growing and profitable business.
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SUGAR BUSINESS GROUP (SBG)
Highlights, 2005-06
13% increase in turnover from Rs. 7676.07 million in 2008-09 to Rs. 8663.25 million.
Recovery of the Deoband sugar unit of the highest in Western UP during the 2005-06 sugar
seasons.
60% increase in sugar capacity from TCD in 2008-09 to 40500 TCD.
Commissioning of the 7000 TCD Greenfield sugar unit in Sabitgarh in January 2006.
Outlook, 2006-07
Sugar prices are expected to stay firm for the next two years on account of domestic demand
and supply, high crude price influencing higher ethanol production as well as due to other
international factors.
The company will expend capacity from 40500 TCD to 61000 TCD in 2006-07
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It will commission three Greenfield units in Chandanpur (6000 TCD) and Rani Nagal (5500
TCD) by the start of the 2006-07 sugar season; the third plant in Narainpur (6000 TCD) will
be completed in the fourth quarter of 2006-07; capacity expansion of the Ramkola sugar unit
from 3500 TCD to 6500 TCD will be complete by the start of the 2006-07 sugar season.
The company is setting up a captive 160 KLPD distillery for ethanol production that will be
commissioned in the fourth quarter of 2006-07.
Performance
The company achieved 7% higher crushed in 2005-06, a good performance as it competed
successfully with producers of alternative sweeteners to reduce cane diversion and increase
drawal of sugarcane. Further, the company produces Rs. 0.38 million tones of White sugar in
2005-06. Due to late rains, winter frodt and overfertilisation, the sugar recovereries in Western UP
were lower by around 0.6-0.7% than what had been achieved in 2008-09. Averages recover for
our sugar units declined from 10.08% in 2008-09 to 9.59% in 2005-06 due to the aforesaid. It is to
the company’s credit that despite poor
weather, the Deoband units reported one of the highest recoveries
among all Western UP sugar factories during the season under
review.
In Sugar Division area during the down turn, they invested in the modernization of the sugar
units to achieve benefits which are fully under their control and invested additionally in the
cogeneration plant to insulate themself from the sugar cycle, developing an alternative stable
revenue stream. Besides they invested in state-of-the-art vacuum pans in a joint collaboration with
sugar research international of Australia. The result of these initiatives is that when the industry
turned around, Triveni was in the right place at the right time with the right capacity and the right
efficiencies.
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The government did not permit the import of white sugar during the last two years even when a
shortage was evident, but quite pragmatically allowed the import of raw sugar under an advance
License scheme with corresponding export obligations. Considering all the factors and as
described in detail in the Management Discussion and Analysis, the sugar outlook appears stable
till 2007.
The Khatauli sugar unit is being modernized and expanded to 16000 tcd and they are planning to
setup three new units, one of which will be set up at Sabitgarh, district Bulundshahar, UP. All
these units would have capacity of 5000-7000 tcd, expandable to 12000tcd. As a result, they
expect their sugarcane crushing capacity to significantly rise over our current base of 25250 tcd.
THE BRANDED SUGAR (SHAGUN)
The Company’s branded sugar is manufactured in ‘Khatauli’
and marketed under the Shagun Brand. The company
announced this sugar in 26 September 2003.the branded sugar
provides in 1-5 KG.packets. During the year under review, the
off take of Branded sugar increased by 44 % to 6522 MT.
While the market of branded sugar is not large, demand is
increasing due to increased urbanization and life style changes.And the branded sugar of Triveni
Shagun is packaged in a state-of-the-art sugar packaging section located in the sugar factory
premises. The sugar packaging section is considered to be the best designed sugar packaging
sections amongst all the players in branded sugar business in India.
THE COGENERATION GROUP (CBG)
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Plant:
Khatauli and Deoband
Bagasse-based cogeneration
power is a renewable,
enviournmant friendly
driver of sustainable development. The government of India has issued the national electricity
policy, which calls for the promotion of cogeneration and generation from renewable
Sources of energy.
Performance, 2005-2006
222% increased in the division’s revenue from Rs. 188.03 million in 2004-2005 to Rs. 605.5
million.
304% increased in EBIDTA from Rs. 58.6 million in 2004-2005 to Rs. 237 million.
Commissioning of new 23 MW co-generation plant in Khatauli reported PLF of over 98% in
March 2006.
92% plant load factor for the Deoband unit across 207 days of working (99% and 100% PLF
in February and March 2006 respectively).
Power purchase agreement with Utter Pradesh Power Corporation Ltd. (UPPCL), the buyer
for the power supplied to the grid; timely payments from UPPCL for the power supplied.
Triveni’s co-generation units
DEOBAND:
Cogen plant at Khatauli was one of the quickest commissioning schedules for co-generation plants in India.
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State of the art, bagasse-based co-generation unit with a capacity of 22 MW.
The company captivity consumed 31 % of the electricity produced by this plant and the rest
was supplied to the Utter Pradesh power corporation Limited, secured by a ten-year power
purchase agreement.
Plant operated at an average plant load factor of 92% for the 207 days it was operational in
2005-06; PLF could have been higher but for fuel shortage during the start of the sugar season
and high grid disturbances in January 2006. Plant achieved 99 % and 100 % PLF in February
2006 and March 2006 respectively.
KHATAULI:
State of the art and energy efficient, bagaees-based 23 MW cogeneration power plant
(commenced operation during 2005-06-sugar season).
The company captivity consumed 25 % of the electricity produced by this plant and the rest
was supplied to the Utter Pradesh Power Corporation Limited, secured through a 10- year
power purchase agreement.
One of the quickest commissioning schedules for co-generations plant in India. Commenced
the export of power in October 2005. After an initial period of stabilization, the cogen plant
has achieved full capacity; PLF was over 98 % for March 2006.
Additionally utilizes continuous Electro de-ionization (CEDI) process in its Boiler feed water
system (installed through the company’s water business Group) with the objective to
rationalize bulk acid and alkali handling as well as improve water quality. This is the largest
CEDI-based water treatment module in India and the first in a power plant in the country.
THE ENGINEERING BUSINESSES
Overview
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GDP growth increased from 6.9% in 2004-2005 to 8.1% in 2005-2006, driven by the
manufacturing and power sector. The index of industrial production for February 2006 rose to
227.3, up 8.8% against the corresponding month of the previous year.
According to figures available, the IIP for mining, manufacturing and electricity sectors stood at
153.9, 242.3 and 186 respectively in February 2006 against 152.5, 221.3 and 170.7 in February
2005. The cumulative growth during April- February 2005-2006 in these three sectors was 0.5%,
9% and 5.3% respectively.
Power sector (including IPP and co-generation units)
India consumes almost 3% of the world’s commercial energy and is the sixth largest consumer
of energy in the World. During 2005, the recorded energy requirement was 626 billion units
whereas energy available was only 546 billion units, reflecting a shortage of 80 billion units
(13%).
Captive power
It is estimated that a capacity addition 100000 MW will be required by 2012 to bridge the
supply deficit. Electricity generation will have to grow at a minimum of 10% per annum in
order to support the targeted industrials and economic growth. The government expects to
bring around 5000 MW of electricity (2008) to the grid through the captive generation route to
supplement capacity addition.
Out of the country’s installed captive power generation of 18740 MW, steam generation
power accounted for 46%, followed by diesel-based power generation.
TURBINE BUSINESS
GROUP (TBG)
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The contribution of the division to the company’s revenue increased from 16.9% in 2004-2005 to 22.6% in 2005-2006
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Turnover: Rs. 1.75 bnPlant: Bangalor
Overview
The turbine business unit was commissioned as a backward integration of the company’s sugar
buysiness.it is one of the largest manufactures of 1-12 MW steam turbine in the world with a 68%
market share in India’s high and low pressure turbine upto 18 MW.
Highlights, 2005-2006
71% increase in top line from Rs. 1626.4 million in 2004-2005 to Rs. 2779.9 million; 226%
increased in divisional profit from Rs. 114.3 million in 2008-09 to Rs. 373.1 million.
More than 500 basis point increased in EBIDTA margin from 11.1% in 2008-09 to 16.2%.
Current order book of Rs. 4.44 billion (159% of the division’s turnover in 2005-06).
Capacity increased from 300 MW in 2008-09 to 650 MW in 2005-06 in record time.
Outlook, 2006-2007
The company will expand its capacity by 70% effective from fourth quarter 2006-07.
Sales are expected to increase to over Rs. 5 billion in 2006-07, based on the strong domestic
demand and exports.
Increased exports to Europe and Asia, riding on the company’s worldclass technology, low
production cost and committed service. TBG exports are expected to increase to 20% of
turnover in two years.
Performance
The company’s turbine division posted an increase of 71% in its turnover from Rs.2779.9 million
in 2005-06. During the year under review, the division’s performance in terms of supply of
turbines, increased from 228 MW in 2008-09 to 425 MW in 2005-06 on account of a growing
power sector (co-generation and IPP) and growth in user industries (sugar, cement, paper,
pharmaceuticals and textiles etc.).
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The contribution of the division to the company’s revenue increased from 16.9% in 2008-09 to
22.6% in 2005-06, indicating its growing importance.
GEAR BUSINESS GROUP (GBG)
Turnover: Rs. 275.5 bnPlant: Mysore, Karnataka
During 2005-2006, 51% of the GBG’s sales comprised product upto 7.5 MW, the rest above 7.5 MW.
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Overview
The company’s gears division was started in 1976 to manufacture gears and gears boxes for the
turbine business group.competitiveness of this business has been reinforced through a technology
license agreement with Lufkin, the world leader in high speed gears.
Highlights, 2005-2006
89% increase in divisional revenue from Rs 238.8 million in 2004-2005 to Rs 450.3 million.
Increase in EBIDTA margin from 15.24% in 2008-09 to 20.85%.
Increased share of income from replacement activities from 25% of the total revenue in 2004-
2005 to 28% of the total revenue.
Manufacture of gear internals in the 15-25 MW segment under the terms of the new license
agreement.
Manufacture of several 50000 rpm speed gearboxes for ISRO for onward use in testing of
cryogenic engine pumps for satellites.
Emergence as the first company in India to manufacture a 36 MWhigh speed gearbox.
Outlook, 2006-2007
The company expects to enhance its presence in product segments like hydel gears and
provide high end technical solution in the low speed gearboxes segment.
Its expects to diversify its customer base, de-risking from cyclicality in any particular
industry.
Future growth of 30-35% expected in 2006-2007.
Performance
The company’s gear division posted an 89% increase in divisional revenue from Rs. 238.8 million
in 2008-09 to Rs. 450.3 million in 2005-06 and also EBIDTA margins improved from 15% in
2008-09 to 21% in 2005-06. It was protected from price increases in raw material due to long
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term fixed price supply agreement with vendors. Besides, the company streamlined its
manufacturing and supply-chain process, rationalizing overheads and production costs.
WATER BUSINESS GROUP (WBG)
Turnover: Rs. 81.5 mn Plant: Noida
Overview
The company entered the business of water and waste-water treatment in 1984 as a turnkey
manufacture. The division was restructured in 2003 to manufacture and package equipment
aligned with its other engineering businesses.
Highlights, 2005-2006
The division’s revenue increased 69% from Rs. 81.6 million in 2004-2005 to Rs. 138.1
million.
EBIDTA increased 317% from Rs. 5.4 million in 2004-2005 to Rs. 22.5 million in 2005-2006.
EBIDTA margin strengthened from 6.6% in 2008-09 to 16.3% in 2005-06, reflecting the
impact of cost reduction.
The WBG exported components like the clarifier drive head to Envirex.
The unit has currently an order book of Rs. 130 million, which is an increase of over 140%
over the order book as on March 31, 2005.
Water business group posted a 69% increase in revenues from Rs. 81.60 million in 21004-05 to Rs. 138.1 million in 2005-06
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Outlook, 2006-07
The division’s proposed Rs. 150 million expansion will comprise the setting up an office and
workshop for the WBG.
Following this expansion, the company will initiate the manufacture of critical components,
reducing its dependence on the capacity of subcontractors and enhancing cost efficiency.
The WBG exports three-digit growth in its top and bottom line in 2006-2007.
Performance
The company’s WBG posted a 69% increase in revenues from Rs. 81.60 million in 2008-09 to Rs.
138.1 million in 2005-06. The division’s EBIDTA increased 317% from Rs. 5.4 million in 2008-
09 to Rs. 22.5 million in 2005-06.the highlights of the year’s performance comprised:
A focus on team building; an increase in manpower from 45 on 31.03.05 to 56 on 31.03.06.
Successful commissioning of a double pass reserve osmosis system with a CEDI polishing
stage, as well as pilot for wastewater reuse system using the advance Memcor technology.
TRIVENI KHUSHALI BAZAAR
OVERVIEW
Triveni Khushali Bazaar is a one stop shop farmers and rural customers where they can buy agri-input, cattle feed, cycle, plastic furniture, FMCG, automobiles, building material and petroleum products.
Turnover: Rs. 12.4 mnPresence: Khatauli, Deoband & franchise store in Sisuali, Jansath & Ghatain
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Triveni leveraged its rural presence with a Triveni leveraged its rural presence with a synergic
diversification into agri-retail through the commissioning of branded stores called Triveni
Khushali Bazaar. It is a one-stop shop for farmers and rural customers where they can buy agri-
inputs like seeds, fertilizers, pesticides; cattle feed, cycle, plastic furniture and FMCG;
automobiles like tractors and bikes; cement, diesel and petrol etc. Several companies like ITC,
DCM Shriram and Godrej enhanced their presence through rural retail stores.
The first Triveni Khushali Bazaar was commissioned in February 2005 and within two months,
generated revenues of Rs 12.4 mn. Encouraged by this success, company plans to open new stores
not only in the command area of the existing and proposed sugar mills but also in Western Uttar
Pradesh towns in near future.
Performance
For Triveni Khushali Bazaar, 2005-06 was the first complete year in existence. The division’s
strength increased from one store in 2004-2005 to 11 stores in 2005-06 corresponding to an
addition of 22,000 sq ft.The division’s stood at Rs. 162 million during the year under
review(including the period during which the business was carried out by the subsidiary).
SUSTAINABILITY BEYOND BUSINESS
Apart of these Businesses Triveni also participated actively in various SOCIAL AND
COMMUNITY SERVICES to enhance the quality of rural life in an around its areas of
influence.
Triveni Engineering and Industries Limited recognize that business growth is linked with societal
progress, resulting in social obligations being reconciled with business decisions.
EDUCATIONAL INITIATIVES
Schools: the company’s unit at Khatauli, Deoband and Ramkola run schools, where the admission
is open to all community sections with negligible fees.
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It constructed a classroom and donated another to ‘The Government Model primary School’
and a prayer hall in ‘Government Junior College’ in Peenya.
Awareness programmes and workshops on literacy improvement, girl child education and the
abolition of dowry system were undertaken in sugar units in 2005-06.
The Deoband sugar unit conducted workshops in spreading awareness and educating the
community at large on safe drinking water.
The Khatauli sugar unit organized a programme in career counseling for student passing out
of school; it organized a sewing programme for ladies residing in the mill vicinity.
The Ramkola unit sponsored an inter school sports tournament.
HEALTH INITIATIVES
It organized two EYE CAMPS and two HEALTH CHECK-UP CAMPS in association with
I.M.A., providing free operation and treatment to all.
Dispensary and hospitals: Each of the company’s sugar units at Khatauli, Deoband and
Ramkola run a charitable dispensary and small hospitals.
Eye Camps: The Company’s Deoband unit organized two Eye camps through the District
Eye society for villagers; the sugar unit at Khatauli also organized an Eye camp in 2005-06.
Blood Donation Camps: The Company’s Khatauli unit organized blood donation camps.
OTHER SOCIAL INITIATIVES
Road Repairs: The Khatauli unit helped repair roads around the factory premises.
It repaired around 14 Kms of village approach roads and constructed 5 Km of new roads.
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Trees: The Ramkola unit under took a programme of aggressive tree plantation in and around
the factory as a result of which 1100 trees were planted.
Food: The Deoband unit organized an annual langar and Gurugobind Sahib Path.
Culture: The Khatauli unit organized an Akhil Bhyartiya kavi Sammelan in which prominent
national poets participated.
It worked with ‘Child Labour Rehabilitation Cum Welfare Fund’ in Mysore.
It worked with the World Renewal Spiritual Trust, a unit of Brahma Kumaris in Mysore.
It contributed substantially and also participated actively in social activities and seminars, among
them noted a one ‘healthy lifestyle’s by Dr. Premasand from Mount Abu.
It participated in a chess tournament organized for raising funds for Tsunami relief with the help
of employee’s contribution.
It conducted Cricket and Football tournaments in Babbal, Rankhandi, Bhaila and other villages
RISK REVIEW
There are 12 types of risks, which can occur in the company at any time. These are:
1) Climatic Risk
2) Raw Material Risk
3) Regulatory Risk
4) Competition Risk
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5) Liquidity Risk
6) Realization risk
7) Costs Risk
8) Funding Risk
9) Default Risk
10) Cyclicatic Risk
11) Technology Obsolescence Risk
12) Foreign Competition Risk
1) CLIMATIC RISK:
Cane is monsoon – dependent and monsoon failure could lead to a decline in cane availability.
Risk Mitigation:
The company’s units are situated in locations that enjoy abundant rain fall reinforced by
adequate irrigation facilities. High degree of irrigation in the western UP areas, where the
company’s three units are located, substantially insulates the cane crop from a monsoon failure.
The sugar units in the western UP are situated in the Doab, considered as one of the best regions
in India for cane cultivation, due to a fertile soil and adequate canal irrigation.
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2) RAW MATERIAL RISK:
Cane is the main raw material for a sugar mill. Lower cane realizations may force farmers to
shift to other crops.
Risk Mitigation:
Cane is a rewarding crop over other cash crops. Further, cane prices announced by the central
and state governments ensure a reasonable return. The sugar mills help the growers to increase
yield and propagate premium verities, contributing to additional farmer income.
3) REGULATORY RISK:
The Sugar industry is influenced by the government’s sugar policy. Populist measures may
influence profitability.
Risk Mitigation:
The government has been pragmatic of late with respect of sugar policies. During the Last two
years, when production was low, the government allows the import of raw sugar under an advance
license with corresponding export obligations. This ensured that the immediate demands were met
and the exports could then take place from subsequent surplus stocks. There are currently only
few restrictions on the sugar industry, most important being the fixation of the cane price by the
government. Lately the sugar mills in western UP are paying a cane price higher then the
government recommended price and hence, this risk is only minimal.
4) COMPITITION RISK:
An increasing number of sugar mills in the company’s vicinity could increase the war for cane
and effect utilization and growth.
Risk Mitigation:
The companies have taken the following initiatives to ensure an adequate supply of required cane
from its command areas.
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Maintaing strong farmer relations through timely payments.
Active involvement in cane development to increase cane yield and quality.
Reduce the diversion of cane for the manufacture of alternative sweeteners.
5) LIQIDITY RISK:
The company requires ready funds to meet working capital requirements. A lack of funds could
lead to a loss of raw material while a high cost could result in loss in profitability.
Risk Mitigation:
The company enjoys an excellent relationship with its bankers and has been able to mobilize its
working capital at competitive rates. The company also uses foreign currency loans and short-
term instruments like commercial paper to reduce overall cost. The company is rated A1+
(signifying highest safety) by ICRA with respect to short term loans, permitting is to access cheap
funds.
6) REALISATION RISK:
Any decline in sugar realizations could affect the Company’s performance.
Risk Mitigation:
The sugar units of the company are located in the vicinity of sugar deficit areas, like Delhi,
Haryana, Punjab and Rajasthan. As a result, it is able to earn relatively higher realizations.
Further, the sugar units produce substantial large crystal sugar brands its output, maximizing
realizations.
To insulate against advance realizations, the company commissioned a large cogeneration
capacity and has plans to set up a distillery, which are counter-cyclical to the sugar industry cycle
leading to stable earnings.
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7) COSTS RISK:
An inefficient fiscal control may threaten margins and profitability, especially during an industry
downturn.
Risk Mitigation:
The company employs strict internal and budgetary controls adequately supported with an
effective management information system to keep costs low. The company has a centralized
procurement cell to meet the Requirements of all its sugar units; it is able to source large volumes
at the Best terms.
8) FUNDING RISK:
The company may not be able to complete its ongoing projects on schedule in the absence of
adequate financial resources.
Risk mitigation:
The company maximizes the equity contribution for its expansion. It’s gearing of less then one
allows it to borrow prudently and maximize the mobilization of low cost borrowing from the
sugar development fund.
9) DEFAULT RISK:
The company provides customized solutions in its engineering business. Any default in
receivables could skew its financial structure.
Risk Mitigation;
The company mitigates its risk through the following measures:
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Appraisal of customer liquidity, both before initiating a contractual relationship with them and
also at different stages during the project.
Arranging timely receipts, both in terms of the advance at the initiation of the contract and at
various stages during the course of the project.
In the case of default, the company, after forfeiting the advance, can reengineer the Product
and supply it to another buyer after making suitable changes.
10) CYCLICATIC RISK:
As the turbine and gear divisions derive a higher share of their revenues from industries like
paper, sugar, steel and pharmaceuticals, a down turn in more than one can affect profitability.
Risk Mitigation:
The turbine and gear divisions supply their products to diversified sectors such as sugar,
cogeneration, independent power plants, paper and steel etc.Which mitigate the risk of cyclicality.
Further, there is an endeavor to enhance the product range with a view to enlarge the market size.
There is a focus to maximize the sourcing of profitable business from the supply of spares,
servicing, retro fitment and maintenance.
11) TECHNOLOGY OBSOLESCENCE RISK:
In a precision cum heavy engineering business, a company has to be quick to respond to
technology changes. Any delay could lead to a loss in market share.
Risk mitigation:
The company’s divisions are technology-conscious. Constant R&D initiatives, in – house product
development, extensive training programmes coupled with technology absorption from foreign
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partners has made it possible for the company to upgrade its products. There is a system of
benchmarking product efficiencies with the best global standards.
12) FOREIGN COMPETITION RISK:
A number of international entrants could enhance competition.
Risk Mitigation:
The company enjoys established brand equity in the domestic and international markets in terms
of superior products and servicing, technology and refurbishment solutions, which will enable it
to withstand competition. The turbine division faces competition from imported products and yet
has maintained its market share at around 70 per cent. The company is focused on servicing
customer in innovative and efficient ways at a reasonable cost leading to prompt and reliable
services.
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TECHNOLOGYS
TECHNOLOGIES IN SUGAR DIVISION:
Continuous Vacuum Pan
Syrup Clarifier System
Short Retention Clarifier
Continuous vacuum Pan
Developed by Triveni SRI Limited, a wholly owned subsidiary, in association with Sugar
Research International (SRI) of Mackay, Australia, the CVC was installed in the Deoband sugar
factory for usage on ‘C’ massecuite, the first time an SRI pan was installed for ‘C’ massecuite in a
sulphitation plant.
SRI is one of the sugar machinery technology authorities in the world; its subsidiary,
Triveni SRI Limited, has an exclusive license in India from SRI International for many of their
products. Owing to technical improvements made on the CVP, Triveni and SRI are now eligible
to jointly own the intellectual property for this new improved vacuum pan. Company has in the
past presented these details in a paper jointly presented with SRI at a convention of the
International Society for Sugar Sugarcane Technology.
30
Syrup Clarifier System:
Installed at the Deoband and Khatauli sugar plants to improve the quality of sugar, this
licensed product from SRI has been sold to EID parry in Tamil Nadu, where it is working
efficiently.
Short retention Clarifier:
To be installed in 2005-06 at the Khatauli unit and at the new plant, the clarification of
juice is achieved in only 30 minutes while in a normal clarifier juice is retained for approximately
150 minutes. This prevents the inversion of sugar and also leads to an improved sugar recovery
and quality.
Mill-Tandem:
Designed and manufactured by the company (captive technology), installed in company’s
sugar plants. The mill-tandem has proved to be one of the most efficient in India: reflected in the
reduction in Bagasse losses and increase in reduced mills extraction (RME); RME for the unit is
96 while that of the industry is around 95; bagasse loss in the unit is 1.6 compared to 1.9 for the
rest of the industry; strong design feature ensures a negligible downtime. Triveni has set up over
65 sugar plants and supplied over 300 cane mills to sugar factories in India and overseas.
TECHNOLOGIES IN TURBINE BUSINESS GROUP:
The business of turbines is perhaps more sophisticated then most other technology led
business on the grounds that it combines precision engineering with manufacturing. The
company’s most impressive accomplishment was the completion of an R & D project where in the
services of impact technologies (USA) and consulting professors from the Indian Institute of
31
Science, the Indian Institute of technology and the university of De Mont fort (UK) were utilized.
The result was the successful development of highly efficient low pressure twisted and tapered
blades. The company already has received orders for turbine incorporating these blades. The
company also developed new efficient turbine designs up to 22 MW.
TECHNOLOGIES IN GEAR DIVISION:
The company was selected by Lufkin France to execute a drafting and hi-end designing
assignment, which enhanced its high end design credibility. Due to pioneering engineering skills,
the company has established its reputation as a major player in the retro fitment segment for high
speed gears. As a result, it derives nearly 30 % of its revenue from this line of business, growing
its knowledge capability due to a continuous exposure to diverse technologies.
TECHNOLOGIES IN WATER BUSINESS GROUP:
Over the years, company has brought advance technologies to the Indian market through
close relationships with several business groups of US Filter Inc.:
Everex for conventional treatment equipment (license agreement since 1987).
Ion pure for continuous electro de-ionizing (CEDI) equipment.
Memcor for Membrane Bio-Reactor (MBR) and micro filtration membrane solutions and
equipment.
Process water system for process engineering and support.
The company expects to revolutionize India’s water and waste water treatment segments
through the introduction of various technologies relevant to the current / evolving market
needs, particularly the following:
32
CEDI Technology
Relevance: India’s water treatment business in the power sector
Source: Ion Pure (US Filter)
Replacing: Conventional de-mineralization based on resin.
Advantages:
Absence of chemical additives
Safe for human handling
Use of a tenth of the conventional space
Reduced boiler blow downs
Four year pay back
Membrane technology – micro filtration
Relevance: India’s wastewater treatment business in recycle / reuse segment.
Source: Memcor (US Filter)
Replacing: Conventional Clarifier and aerobic biological treatment
Advantages:
Barrier filtration technology that cans rationalize coli form content in polluted
water to less then safe limits making the water conducive for marine life.
Enhanced post- treatment water quality or downstream cities down to only 3-4
ppm BOD.
Zero discharge and the absence of additives to treat the water, minimizing side
effects.
Lower space requirement (a quarter of the normal plant size ) and a 40 % power
cost saving over the conventional system.
Minimal civic disruption; more then 70 % of value addition done in the
workshop.
33
Automated with minimal human interface.
FINANCIAL REWIEW
KEY PARAMETRES:
2006-07 2008-09
Return on Net worth (RONW) (%) 72.59 38.92
Return on Capital employed (ROCE) (%) 43.52 29.34
Total Debt Equity Ratio (Times) 2.74 0.79
EBDITA margin (%) 17.94 17.87
PAT margin (%) 10.36 11.03
Interest Cover (Times) 4.89 8.60
Book value (Rs. Per equity share of Re. 1, post bonus) 7.91 19.82
Financial and operational highlights
2004-05 2006-07 2008-090
2000
4000
6000
8000
10000
12000
5910.98
9610.58
11920.37
NET SALES
34
2004-05 2006-07 2008-090
500
1000
1500
2000
2500
646.487
1724.46
2130
EBIDTA
2004-05 2006-07 2008-090
200
400
600
800
1000
1200
1400
177.58
995.2
1314.96
Profit after Tax
35
2004-05 2006-07 2008-090
1
2
3
4
5
6
0.93
4.77
5.98
Earning Per Share (Post Bonus Issue)
2004-05 2006-07 2008-090
5
10
15
20
5.287.91
19.83
Book Value (Post Bonus Issue)
36
2004-05 2006-07 2005-060
0.51
1.52
2.53
3.54
3.74
2.74
0.79
Total Debt/ Equity Ratio
ACCONTING POLICIES:
Our company follows mercantile system of accounting to present credible reports to the
shareholders. The significant accounting policy followed by the company is stated in note 28 (1)
to the accounts.
PERFORMANCE:
The company followed the landmark in financial year 2008-09 with significant growth in
financial year 2005-06.
Net turnover was higher by 24% at Rs 11920.37 mn.
EBIDTA was higher by 24% at Rs 2130.00 mn.
PBT was higher by 30% at Rs 1611.79 mn.
PAT was higher by 32% at Rs 1314.96 mn.
EPS strengthened to Rs 5.88 from Rs 4.77 in the previous financial year.
37
As a result of this improvement financial performance and substantial equity infusion, the
financial condition of the company has strengthened as indicated by the various financial ratios.
TURNOVER
During the financial year under review, gross turnover increased by 60 per cent to Rs
10.21 bn, a record for the company. Sugar sales increased by 68 per cent, turbine sales by 33 per
cent and gear sales by 27 per cent. The cogeneration plant at Deoband commenced operations in
December 2004 and during the limited period of working in 2008-09 contributed Rs 183.3 mn to
the turnover.
Net turnover was 24% higher at Rs 11920.37 mn.there was an increase in turnover in all
the business segments. The turnover of the sugar operations increased by 13 % and that of
cogeneration by 222%. The turbine, gear and water divisions recorded an increase in turnover by
71%, 89%, and 69% respectively. The revenue of the various business segments are provided
below:
38
BUSINESS SEGMENT WISE GROSS REVENUE:
Rs. Million
Business segments 2008-09 2005-06
Sugar 7676.07 8663.25
Co-generation 188.03 605.50
Total - Sugar 7864.10 9268.75
Turbines 1626.41 2779.93
Gears 238.78 450.35
Water / waste water treatment 81.57 138.07
Total - Engineering 1946.76 3368.35
Others 21.16 157.79
39
39%
1%8%1%0%0%
40%
10%
2004-2005
Sugar Co-generation Turbines Gears Water- Waste Water Others
Total- Sugar Total - Engineering
34%
2%
36%
11%
2%
1%13%
1%
2005-2006
40
The net segment revenue provided here in is prior to the inter unit adjustments and further “other”
include operations of the agri centers up to October 25, 2005; following this date, the business
was carried out by a wholly owned subsidiary.
Sugar Division:
This division accounted for a gross turnover of Rs 8.13 bn, 78 per cent of the company’s revenue
in 2008-09.the revenue break - up in respect of its major products is given below:
Products 2008-09 2007-08 2006-07 2005-06 2004-05
Sugar 7461.8 4376.1 5087.6 4222.1 3571.8
Molasses 526.9 337.4 293.9 297.4 237.6
Bagasse 127.7 118.6 66.8 30.6 27.6
Others 15.2 14.0 9.6 10.0 22.7
A 22MW cogeneration plant was commissioned at the Deoband sugar unit with the twin
objectives to insulate the business from industry cyclicatic and provide steady alternatives
revenues.
Turbine
This division accounted for a gross turnover of Rs 1.75 bn, 17 per cent of the company’s revenue
in 2008-09. The product wise revenue break up is below:
41
Products and services 2008-09 2007-08 2006-07 2005-06 2004-05
Turbine 1486.9 117.3 959.3 806.8 720.1
Spares 133.1 118.7 121.3 113.3 127.0
Refurbishing 42.7 24.7 50.9 31.4 45.7
Others 84.7 56.9 56.2 43.4 26.7
Gears:
This division accounted for a turnover of Rs 275.5 mn, 3 per cent of the company’s revenue in
2008-09. Spares and services remained a high margin segment but accounted for only around 11
per cent of division’s turnover in 2008-09. The total division’s revenue grew by a CAGR of 29
per cent in five years.
Water / waste water treatment:
This division accounted for turnover of Rs 81.5 mn, 1 per cent of the company’s revenue in 2008-
09. While the base is currently small, in view of the company’s technology range and potential in
the industry, there is a substantial growth opportunity.
EXPENDITURE
Rs. MillionEXPENCES 2007-08 2008-09 % INCREASE
Raw material 6014.59 7621.63 26.72
Manufacturing Cost 521.41 614.70 17.89
Personnel cost 531.77 676.22 27.16
Administration & Selling Cost 395.33 511.58 29.41
Depreciation and Amortization 178.73 288.25 61.29
42
Finance Cost 304.67 229.96 (24.54)
Expenses as a % to Sales
5.43
62.58
5.534.111.863.17
2008-2009
Raw Material Manufacturing Cost Personnel Cost Administration and Selling
Depriciation and Amortization Finance Cost
43
5.16
63.94
5.674.292.421.93
2008-2009
Raw Material Manufacturing Cost Personnel Cost Administration and SellingDepriciation and Amortization Finance Cost
The various expenses are here below:
RAW MATERIAL:
With respect to the sugar operations, the increase was 18.74 percent due to an increase in
crush and cane procurement price. In the case of the engineering divisions, the increase was 55.66
per cent as against an increase in net turnover by 73.02 per cent.
MANUFACTURING EXPENCES:
In terms of the percentage to net sales, manufacturing expenses were marginally lower
then 2008-09.in the case of sugar operations, the expenses per unit of crush was Rs 131.11 per
MT of cane crushed as against RS 125.47 per MT in 2008-09. In respect to engineering units, the
44
total expenses were 2.36 per cent of the net sale whereas these were at 2.33 per cent of the net
sales in 2008-09.
PERSONNAL EXPENCES:
The increase in personnel cost was higher due to normal salary increase on an account of
the operations of the new co generation plant at Khatauli and new sugar unit at Sabitgarh. In the
case of the turbine, gear and water divisions, the personnel cost was also on account of increased
activity and expansion.
ADMINISTRATION AND SELLING EXPENCES:
With respect to the engineering division, expenses increased commensurately with
increased activity. There were additional expenses on account of the Sabitgarh sugar unit and the
Khatauli cogeneration plant, which were setup during the year.
DEPRICIATION AND AMORTISATION:
There was an increase in depreciation to the extent of Rs 112.92 million on account of
various projects capitalized during the year, namely the Khatauli co generation unit,
modernization an expansion of Khatauli unit, expansion of Deoband and the expansion of
infrastructure at the turbine and gear divisions.
FINANCE COST (NET):
The reduction was primarily due to decline in the finance cost on working capital due to
lower bank limit utilization by 37 percent owing to lower inventories carried as well as due to the
surplus funds including unutilized IPO proceeds. However, in the case of term loans, there was an
increased utilization by 52.5 per cent on account of various loans contracted for new projects,
Finance cost also reduced due to the overall cost of funds being lower.
45
MARGINS:
The PBIT margins of the company were 15.45 per cent higher at Rs 1841.75 mn. The
major contributories of the increase were the turbine and co generation operations where the
margins increased by 173 per cent and 265 per cent respectively.
The margins of the gear and water business also increased substantially and the margins of
the sugar operations declined marginally to Rs 2925 PMT of sugar sold as against Rs2959 PMT in
financial year 04-05.
SHARE CAPITAL:
The share capital increased from Rs 103.02 mn to Rs 257.88 mn. Outstanding preference
share of Rs 19.87 mn were fully re deemed on April 1st, 2005. The equity share capital increased
due to an issue of bonus share (in the ratio 3:2), which were allotted on 17-06-2005 and a fresh
issue of Rs 50 mn equity share in the recently concluded public issue which were allotted on 7 th,
December, 2005.
RESERVES:
Reserves as on March 31st, 2006 increased by 174.41 per cent from Rs 1838.27 mn as on 31st March 2005 to
Rs 5044.48 mn due to improved financial for the year under review as well as due to an accretion of share premium
of Rs 2350 mn relating to the public issue. The free reserve accounted for 96.27 per cent of the total reserves as on
31-03 –2006.
LOANS:
The total loans of the company declined by 10.55 per cent from Rs 4500.93 mn to Rs
4026.04 mn. Working capital limits reduced substantially by 38.41 per cent to Rs 1837.93 mn
whereas other loans increased by 44.25 per cent to Rs 2188.11 mn. The utilization of working
capital loans was lower due to lower average inventories during the year as well as due to a
parking of surplus funds (including unutilized public issues proceeds) in the cash credit account.
46
The increase in other loans was due to various funding availed for capital projects executed in the
financial year 2005-06.
FIXED ASSETS:
During the year under review, there were additions to fixed assets to the extent of Rs
3268.37 mn owing to various projects executed during the year.
INVESTMENTS:
During the year, the total investment reduced from Rs 229.75 mn to Rs 18.64 mn . The
investments in the preference share of group combines aggregating to Rs 211.50 mn were
redeemed and accordingly all such investments were realized during the year.
WORKING CAPITAL MANAGEMENT:
Net current assets marginally increased by 1.57 per cent to Rs 3572.68 mn in spite of a
new sugar unit and a cogeneration plant set up during the year.
Inventories reduced 7 per cent mainly on account of lower sugar stocks. However,
receivables increased by 50.55 per cent to Rs 1003.44 mn mainly on account of year end
dispatches, which could not be realized by the year end. The excise duty deposited substantially
increased from Rs 75.18 mn to Rs 251.70 mn in view of cenvat availed on capital goods, 50 per
cent of which would be available in the next accounting year. Current liabilities were higher as
advances from customers (mainly in the turbine division) increased from Rs 511.43 mn to Rs
798.63 mn.
FOREIGN EXCHANGE MANAGEMENT:
The company did not have significant foreign exchange exposure. The foreign exchange exposure
during the year was managed through forward covers as well as through derivatives. As at the
year-end, the amount involved in foreign currency in respect of payables and receivables was
equivalent to Rs 26.80 mn and Rs 35.77 mn respectively at the exchange rates that prevailed at the
year-end.
47
CORPORATE INFORMATION
Chairman and Managing Director
Mr. Dhruv M. Sawhney
Board of Directors
Dr. F.C. Kohli
Lt. Gen. K.K. Hazari (Retd.)
Mr. M. K. Daga
Mr. R. C. Sharma
Mr. V. Venkateswarlu
Mr. R. K. Kapoor (IDBI Nominee)
Vice President (legal) and Company Secretary
Mr. V.P. Ghuliani
Bankers
Punjab National Bank
Central Bank of India
Canara Bank
Oriental bank of Commerce
Union Bank of India
Standard Chartered Bank
State Bank of Travancore
UTI bank Ltd.
48
Auditors
M/s. J.C. Bhalla & Co.
Branch Auditors
M/s. Virmani & Associates
COMPANY’S BUSINESS LOCATIONS
Registered Office
Deoband, District Saharanpur
Utter Pradesh – 247554
Phone: (01336) 222497, 222185,222866
Fax: 222220
Corporate Office
‘Express Trade Towers’, 8th floor
15-16, sector 16 A, Noida 201301 (UP)
Phone: (0120) 5308000
Fax: 5311010-11
Share department/investors’ grievances
‘Express Trade Tower; 8th floor
15-16, sector- 16 A Noida 201301 (U.P.)
STD code: 0120
Phone: 4308000
Fax: 4311010-11
49
Email: shares@tr i venigroup . Com
Registrar and share transfer agents
For equity shares held in physical and electronic mode. M/s
Karvy computer share Pvt. Ltd. Karvy house,46, Avenue 4
Street No. 1, Banjara Hills Hyderabad 500034 STD Code :040
Phone: 23312454,23320751
Fax: 23311968
Email: mailmanager @ karvy.com
Turbine business group
12-A, peenya industrial Area, Peenya, Banglore-560058
STD Code: 080
Phone: 28394721(4 lines), 28394843, 28394771
Fax: 28395211
Gear business group
1, 2, 3 belagola industrial Area Metagalli, K.R.S. road,
Mysore-570016, STD code: 0821
Phone: 5280502, 5280501
Fax: 2582694
Fixed deposit section
Accounts Department
‘Express Trade Tower; 8th floor
15-16, Sector-16A Noida 201301 (U.P.)
STD Code: 0120 Phone: 4308000
Fax: 4311010-1
Email:[email protected]
50
Khatauli sugar unit
Khatauli, District- Muzaffarnagar
Uttar Pradesh –251201
STD code-01396
Phone: 272561, 272562
Fax: 272309
Deoband Sugar Unit
Deoband, District Saharanpur
Utter Pradesh – 247554
Phone: (01336) 222497,222185, 222866
Fax: 222220
Ramkola sugar unit
Ramkola, District-Kushinager
Utter Pradesh-247305
STD Code: 05567 Phone: 256021
Fax: 256248
Satigarh Sugar unit
P.O. Karora, Tehsil Khurja
Districrt-Bulandshare(U.P.)
STD Code: 05738
Phone:228894
Fax: 228893
Water business group
51
Express Trade Tower’ 8th floor
15-16, sector- 16 A
Noida 201301 (U.P.) STD Code: 0120 Phone: 4308000
Fax: 4311010-11
Cogeneration Khatauli
Khatauli, District- Muzaffarnagar
Uttar Pradesh –251201
STD code-01396
Phone: 272561, 272562
Fax: 272309
Cogeneration Deoband
Deoband, District Saharanpur
Utter Pradesh – 247554
Phone: (01336) 222497, 222185,222866
Fax: 222220
Branded Sugar Business
‘Express Trade Towers’, 8th floor
15-16, sector 16 A, Noida 201301 (UP)
Phone: (0120) 5308000
Fax: 5311010-11
52
Subsidiary Companies
Triveni SRI Limited
104, 1st floor,99 grand Plaza
Old Rajinder Nagar Market
New Delhi 110010
Upper Bari Power Generation Limited
1560, H.I.G. Ground floor
Sector 70, Mohal
Panjab 160062
Abohar Power Generation Limited
1560, H.I.G. Ground Floor
Sector 70, Mohali
Punjab 160062
53
SALE DEPARTMENT
Selling procedure of sugar
First of all the company gets the 100% production, which is sale according to sugar classification:
Free sugar : A turnaround in free sale sugar realizations commenced in February 2004, with
subsequent increase in May 2004 and January 2005.90% free sugar supply in open market by
Agent and agent will issue delivery order to sales office in muzaffarnagar, and sale office will
issue delivery order to sugar sale office Khatauli.then sugar office Khatauli issue delivery order
to sugar godwan.then sugar godwan on behalf of that delivery order send to a/c office kht. Sugar
godwan make invoice to the parties. The sugar unit Khatauli just has about 10-15 agents. All
agents take the commission @ 0.5%.
On free sugar, the govt. decides excise duty @ 85 per quintals and 2% education cess, 1-%
higher education cess.
On free sugar price decided by head office in Noida on the basis of demand and supply.
Levy sugar: levy sugar determined each year by the ministry of food and civil suppliers; govt.
of India. 10% levy sugar supply to different government agencies such as army, state govt.etc.On
levy sugar price Declared by govt. the basis of sugarcane recovery. On levy sugar have excise
duty @ 52 per quintals and 2% education cess; 1% higher education cess.
In case of cheque rejection : if bank seem to have any error in cheque due to some
reasons; such as in-sufficient balance, different sign.etc.then company can get interest and penalty
to the competent party upto date represent that cheque as per company policy.
Sale section Discussed by: Mr.kulvendre Singh
(Depti manager of sale department)
54
PURCHASE DEPARTMENT
Purchase department : purchase dept. purchase the raw materials for required dept. the company
make the committee for purchase the materials on the basis of length of materials. These are
categorized into two parts:
CPC (central purchase committee): this committee have made the purpose for bulk material
purchase. In CPC cover the 90% item of total purchase. In CPC include these items: Bearing,
Electrodes, lubricants, iron, steel, limb, sulpher, cement, chain, gunybags, motor electric,electric
cables, and all type of chemicals etc.
UPC(unit purchase committee): this committee have made the purpose for small material
purchase. in UPC cover the 10% item of total purchase.
Procedur e of purchase of material: first of all the Required dept. makes the indent and
approved by GM.this indent placed to the store dept.store manager see that material in this indent.
if in store room have not that material then this indent placed to the purchase dept.for purchase
that material.
A format of indent (required list of material)
Item Item name quantity UOM date urgent approx.
Floating of inquiry: this inquiry is related to take the actual information about indent. Its require
only 3-4party.
Preparation of comparative statement: A comparative chart is a formal document to take the
different prices from different parties about the material. Purchase manager prepares the purchase
order against the minimum price.
55
A format of comparative statement:
s.n. material
required
Quantity rate last purchased M/S. rates M/S. rates M/S. rates
Prepare the purchase order: according to the comparative statement purchase manager prepare
the P.O.and give the order to the party. Three copies are required to be send to accounting section,
purchase dept.and supplier.receive material to be send to store room. After checking the material
by required party to be supply to the party.
Sales tax: sales tax paid under two sections:
3B : for purchase the material same state @4%.
4C : when purchase the material from out side state @12%.
Discussed by: Mr. Mahavir Singh
(manager of purchase department)
IT AND CANE DEPARTMENT
IT dept have the all information about cane areas, farmer, issuing the purchee of farmer etc. IT
dept. maintain the all records of cane area as well as salary, cane development, GRP, store and
PF.
Because sugarcane is the only significant raw material for sugar industry.
Cane development staff: Triveni sugar mill has appointed dedicated cane development staff in
addition to a cane procurement team, helping farmers imbibe the best farm practices and achieve a
desired varietal mix with the objective to maximize recovery and yield. Cane development staff
56
providing access to advanced farming best practices, arranging timely remuneration and taking a
leadership position in community development.
In off-season the staff surveys to farmer’s sugarcane production, and gives the report to IT
dept.
After receiving the report, IT dept. prepare the purchee according to sugarcane. In this purchee
include 12 rows and 15 columns. The purchee can be classified into two parts:
Society purchee : in this purchee have included data only before supply the sugarcane.
Mill purchee : In this purchee have included data only after supply the sugarcane.
Growth of farmers : The company deals with approximately 2000000 farmers across its four-
unit.the Khatauli unit have approximately 50, 000 farmers (growers).
Price policy: The Indian government follows a dual pricing policy:
Statutory minimum sugarcane price(SMP ): the purchase price of sugarcane is announced by
the ‘central government’. The govt. fixed the price considering the recommendations by the
commission for agricultural costs and prices. in 2005-2006, the SMP declared by the government
was RS. 795 per metric tones for an average recovery of 9.0% plus RS. 8.8 for every 0.1%
increase in recovery. The recovery calculated on peak period.
State advisary price (SAP): A majority judgement of the supreme court dated 5 may 2004 held
that the state government in U.P., in exercise of its regulatory power as contained in the U.P.
sugarcane(regulation of supply and purchase) Act 1953, could fix the price of sugarcane.
Additional cane price: The state and central govt. declared the prices of sugarcane. both price
policy have a difference, the difference is called additional cane price.
57
Varieties of sugarcane: In sugarcane crop have the different varieties. on the basis of
varieties the government declared the different pricies.the varieties can be classified into three
parts:
Early variety: in this variety the crop is mature and sugarcane have maximum cane. on this
variety announced the premium at RS.5 per quintal. such varieties are COG64, COG83,
COG88230 etc.
General variety: general variety has minimum cane and maturity as compare to early variety. the
central govt. declared the price on general variety. such varieties are CO767, 8432 etc.
Rejected variety : rejected variety has very low cane and has very low maturity. rejected variety’s
price at RS. 2.50 (per quintal) low as compare to general variety.
Cane areas: every sugar unit has different capacity. The govt. can be allocated the areas on the
basis of mill capacity. the cane areas are classified into two parts:
Reserved areas: the govt. allocated these areas according to last year payment, capacity of mill
and distance of areas.
Assiend areas: Sometime the govt. allocates the reserve areas to the every sugar mill, if any mills
cover of their requirement than reminder of areas the govt. gives to other mill.
Purchase tax: the govt. announced the purchase tax every year. Every sugar unit gives the
purchase tax. In 2005-2006 the govt. announced the purchase tax @ RS. 2.0 per quintal.
Procedure of supply of sugarcane: Every mill has a procedure of supply of sugarcane.
Khatauli sugar unit has a supply capacity 150,000-quintal per day in sugar season. In this
procedure has many steps:
58
1. Firstly the mill makes the requirement.
2. Secondly the indent placed to the society.
3. The society distributed the purchee to the farmers.
4. Farmers supply of their sugarcane to the society.
5. The payment made by IT department.
Every sugarcane supplies through society. Societies take the commission a particular
percentage. In 2005-2006 season the society taking the commission @ RS. 3% on SMP. The
society can be classified into two parts:
Cane society
Cane council
Sometimes the govt. open of different centers in many areas. If farmers supply of their
sugarcane on these areas then farmers get some deduction on this supply. These areas give
deduction @RS. 5.75 per quintal to the farmers.
Sugarcane brings by different transportation. The cane manager decided of freight. The freight
can be decided on the basis of distance.
Payment to the farmers: the payment makes by the IT dept. every payment gives by the
cheque. All farmers have a bank account. Every payment gives through society. when bank
checking of purchase. After purchase checking the bank payment to the farmers. All payment
should gives within 15 days after receiving the sugarcane.
Sometimes any farmer has lost of their purchee, then farmer should be reported to the society
and IT dept. then IT dept. issue a duplicate purchee of the farmer.
59
Supply of burnt sugarcane: sometime in sugarcane crop has get burn from many reasons.
But society accepted of this supply on little deduction. on this burnt sugarcane gives the first
priority of supply.
The mill laboratory taking the sample of that sugarcane. the laboratory gives the report to
society.
Burnt sugarcane price declared by the DM on the basis of that laboratory report, general rate
and burnt cane recovery. After receiving the supply of that sugarcane, payment to the farmer
at the last of sugar seasons.
60
61
INTRODUCTION TO THE TOPIC
OVERVIEW OF SUGAR BUSINESS
The company’s installed capacity of 40500 tcd across the three units is among the largest
in India. The company’s Khatauli unit is credited with having crushed the largest quantity of
sugar across any unit in India in the 2005-06-sugar season.
RATIONALE FOR PRESENCE
India is the largest consumer of sugar and its per capita consumption is still below the
levels achieved by peer countries. With a projected increase in per capita incomes and an
improvement in lifestyle quality across India’s middle and lower economic classes, we expect that
sugar consumption will increase significantly on account of two factors: the crossover from the
consumption of gur and khandsari to sugar and an increase in direct consumption by all sections
of the Indian society.
COMPANY’S VALUE PROPOSITION
Sugarcane is the only significant raw material for the domestic sugar industry. Consequently,
any interruption in sowing or harvesting of sugarcane could lead to a detrimental impact on the
sugar industry at large and to our company.
Global sugar production is expected to increase from 144.05 MMT in 2004-2005 to 148.80 MMT in 2005-2006.
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As a forward-looking organization, Triveni is actively engaged in mitigating foreseeable
risk factors. In relation to fostering the availability of sugarcane in its ‘command area’,
Cane Development Programme
Triveni protects farmer interests in a number of ways-ensuring consistent and equitable cane
purchases from farmers, providing access to advanced farming best-practices, arranging timely
remuneration and taking a leadership position in community development. In turn these initiatives
encourage farmers to allocate a significant acreage towards the cultivation of sugarcane, making
the arrangement mutually rewarding. The quality of the company’s output has helped it graduate
to the states of a major brand in India’s retail and wholesale markets, thereby enabling it to enjoy
a premium and a distinctive recall in a relatively unbranded marketplace.
The philosophy of the cane development and marketing is almost common for all the sugar units.
While in following paragraphs, description is for Khatauli but applies generally to Deoband &
Ramkola units as well. After identifying the constraints in the area of operation, the mill has
undertaken an ambitious programme of Cane Development for improvement in productivity and
quality of cane. The mill has separate cane development wing with qualified staff and experienced
personnel. For this purpose the operational area has been divided into sub-zones and the field
supervisory staff has been provided with the necessary facilities for efficient working and proper
supervision of the various cane development activities. The cane development programme is
planned with following activities:-
To educate the farmers regarding modern agricultural practices in sugarcane cultivation.
To replace the unapproved and degenerated cane varieties
To initiate and propagate the use of healthy and generically pure, seed material.
To initiate heat therapy for the treatment of cane seed through moist hot air treatment plant to
eliminate the diseases.
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The details of various schemes of cane development being undertaken by mill are enumerated as
below:-
» Plantation of High Yield Variety of Sugarcane
» Seed Distribution
» Demonstration Plots
» Technical Assistance to Cane Growers
» Moist Hot Air Treatment
» Irrigation
» Ratoon Management
» Biological Laboratory
» Soil Analysis and Soil Treatment
» Control of Post Harvest Sugar Losses
» Awareness Among Cultivators
» General
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COMPANY’S STRENGTHS
Advanced technological assets and capital equipment, represented by world-class continuous
vacuum pans at the B (sugar boiling) and C (sugar boiling) stages, resulting in boiling
consistency, uniform crystal size, reduced molasses purity, decline in steam consumption and
enhanced product quality. The technology and intellectual property for this equipment were
jointly developed with Sugar Research International, the premier Australian organization.
Positive recall in a competitive marketplace, translating into a premium and quicker off-take.
The location of the sugar manufacturing plants in the fertile Doab region (between the Ganga
and Yamuna rivers), resulting in a superior sugarcane quality and an exceptionally high yield.
Canal water availability over a large part of the region, representing one of the highest
penetrations of man-made water intervention in India, reducing the company’s dependence on
monsoon vagaries.
Established culture of cane cultivation in the region.
Largest cane crushing capability across any one unit in India (18.66 million quintals in the
2008-09-sugar season at Khatauli); a quicker crush enables the farmer to grow wheat on fallow
land and earn an attractive supplementary income.
Excellent cane procurement logistics, critical for any large sugar unit, demonstrated in the
systematic pooling of cane from no less then 220 purchase centers in the Khatauli command area
without any shortage or inventory pile-up.
Dependable relations with more than 160,000 farmers across the Khatauli, Deoband and
Ramkola command areas, resulting in a reliable and increasing supply of sugarcane.
Strong in-house technical and project management capability, resulting in the commissioning
of the Deoband co-generation project in the fastest implementation time lines; proposed
expansion of the Khatauli capacity from 11750 tcd to 16000 tcd.
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Vast project execution experience in setting up sugar plants and carrying out expansions in
view of our earlier experience in sugar plant machinery and through our subsidiary, Triveni SRI
Limited.
INDUSTRY ANALYSIS
World Sugar
The forecast of the
world sugar balance
(October2004 to
September 2005)
indicates that
production will be 2
mn tones lower than consumption: world sugar output (October 2004 to September 2005) has
been estimated at 146.1 mn tones (raw value) as against 143.7 mn tones in the previous year while
consumption is estimated 2.1 per cent higher at 148 mn tones (raw value) with increased demand
coming out of Asia and the Far East.
Interestingly, leading trade house ED&F Man sees this global (2008-09, Oct-Sept) deficit
widening to 4 mn tones; its production estimate for 2008-09 is unchanged from its 2007-08
benchmark of 143 mn, while consumption, driven by Asia, is forecast to increase from 144 mn to
147 mn.
In fact, the principal factor behind the price rise over the past 18 months was the
conviction that global demand growth could outstrip production in 2008-09, depleting stocks, as
well as the belief that high oil prices may induce Brazil and other countries to divert more cane
towards the production of ethanol, reducing cane supplies directed towards sugar manufacture.
The total consumption of sugar increases by 1.2 MMT in 2003-04 to 18.5 MMT in 2004-2005.
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Looking into the short-term, two developments are likely to tip yhr Asian balance: India’s
sugar consumption has been growing at an average annual rate of around 3 per cent over the last
ten years; besides, global sucrose demand, discounting the role of artificial sweeteners, is
expected to grow by around one mn tones a year. China too is likely to become a major importer
after 2007, given the limited availability of its resources to expand sugar production.
WTOSugar and dairy products are probably the most protected agricultural sector. As a result,
the impact of product-specific negotiations in the WTO Doha Round (as agreed in the July 2004
framework) on sugar was more significant then in the last WTO round of multilateral trade
negotiations.
The critical factors: the base period chose for the duty reduction commitments, the length
of the implementation period for making the reductions and whether sugar would be included in a
WTO list of sensitive products, which would allow it to escape a part of the WTO trade reform
process.
More recently, the World Trade Organization’s highest court issued a final ruling on April
28, 2005, ordering the European Union to stop dumping subsidized sugar illegally on the global
markets or face trade sanctions. The decision by the Who’s Appellate Body in Geneva gives the
EU up to 15 months to strictly comply with this directive. It is important to note that the export of
white sugar, especially from European Union, is heavily subsidized at prices less than 25 percent
of the prices prevailing in the European domestic markets. But for such exports, the international
prices of the white sugar would be higher and would in turn have a favorable impact on India’s
domestic prices.
In 2004, a panel of WTO experts estimated that the EU exported about four million metric
tones of sugar in 2004-05 (period under investigation) or about three times more then what the
rules permitted. As a result, any reform in this area will give Indian exports a significant boost and
have a positive impact on global prices.
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India also suffers from a small quota in the Loma and ACP conventions, which gives
members a preferential price in the lucrative EU and US markets. Any increase in these quotas
could help domestic manufactures in the short term.
EthanolAt the 13th annual International Sugar Organization seminar in 2004, Chairman Francisco
varua (also President of the Philippines Sugar Millers Association) pronounced that ethanol could
become the sugar cane industry’s principal product by the end of the first decade of the new
millennium. Not only are fuel ethanol programmes spreading across the globe, but more players
are becoming aware of the need for cross-order trade to help the product become more
competitive against gasoline.
Since Brazil will need to raise ethanol production by 14 bn liters (25 mn tones sugar
equivalent) just to meet its growing domestic demand- this represents 175 mn tones of cane, 2.5
mn hectare of extra land and an addition 85 to 90 mills – FO Licht does not expect a large
Brazilian sugarcane crop to upset the world sugar balance, especially as ethanol is expected to
become dearer over the foreseeable future.
DOMESTIC INDUSTRY SCENARIO AND OUTLOOK
Industry Structure
The sugar industry in India is highly fragmented, with 566 sugar units spread over 16 states. The
total capital employed by the sugar industry is Rs 250 bn, annual sugarcane payments Rs 180 bn,
direct employment for 500,000 and the involvement of 45 mn farmer/families in cane growth.
The average size of each unit is approximately 3300 tcd, substantially below the new
international economic size of 7500 tcd. Nearly 35 percent of all Indian mills are in the private
sector, 6 per cent in the public sector and 59 per cent in the co-operative sector. Despite the large
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recent profits shown by the Indian sugar industry, 112 mills – old and inefficient remained closed
during the year.
In a raw material-dependant industry, profitability is influenced by the following factors:
Cane availability:
Within the ‘reserved area’ of any factory, the yield and size of the area under sugarcane
are critical success drivers.
Economic size:
Without a minimum economic size of 5000 tcd (generally 10000 tcd in western Uttar
Pradesh), it is becoming increasingly difficult for a sugar unit to command pricing power.
Technology:
The ability to minimize sugar-processing losses depends on process technology.
Demand-pull:
The ability to draw a higher percentage of sugarcane from the reserved area reduces the
diversion to other sweeteners.
Sucrose content:
This is directly influenced by soil quality and cane development programmes initiated by
progressive manufacturers; a higher sugar content in sugarcane leads to the manufacture of more
sugar, while payment is still based on weight.
Operating efficiency:
The ability to bring cane in quickly from the fields and continuously operate a sugar unit
minimizes post-harvest sucrose evaporation.
OPERATIONAL PERFORMANCE:
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The company achieved 7 % higher crush in 2005-06,a good performance as it competed
successfully with producers of alternative sweeteners to reduce cane diversion and increase
drawled of sugarcane. Further, the company produced Rs 0.38 million tones of White sugar in
2005-06. Due to late rains, winter frost and overfurtilisation, the sugar recovers in western UP
were lower by around 0.6-0.7 % then what had been achieved in 2008-09. Average recovery for
our sugar units declined from 10.08 % in 2008-09 to 9.59 % in 2005-06 due to reasons a foresail.
It is to the company’s credit that despite poor weather, the Deoband unit reported one of the
highest recoveries among all western U.P. sugar factories during the season under review.
Triveni’s Khatauli, Deoband and Ramkola units crushed 18.66 mn tones, 13.8 mn tones
and 3.4 mn tones of sugarcane respectively during the 2008-09 sugar seasons. The sugarcane
crushed at the Khatauli sugar unit was the highest across any unit in the country. Recovery was
10.06 per cent at Khatauli, 10.19 per cent at Deoband and 9.86 per cent at Ramkola. The company
also imported 0.185 mn tones of raw sugar, which was converted into white sugar during the
2008-09-sugar season.
The company produced 1, 96,000 tones in Khatauli (included processed raw sugar),
1,52,000 tones in Deoband (included processed raw sugar) and 33,600 tones in Ramkola, a
cumulative 3,81,600 tones in 2008-09 (3,64,400 tones in 2007-08). As a result, company emerged
as one of the largest sugar producers in India and expects to preserve this position following the
increased production from its ongoing expansion programmes.
The company’s Khatauli unit procured cane from over 220 out-centers during the letter
part of the season, a record across any sugar unit in India. Dispersed prudently over a 59000
hectare commend area, Khatauli’s sugarcane marketing staff refined the logistical system of cane
harvest and transportation in the shortest time (empirical studies suggest that if whole stalk
sugarcane is not crushed within 16 hours following harvest, the sucrose in the cane is converted
into non-sugars with a consequent drop in sugar recovery). This efficiency will stand the company
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in good stead when it expends its capacity to 16000 tcd in the 2005-06 seasons. Besides
engineering stoppages were within the estimated budget there was an attractive improvement in
steam consumption, thereby increasing the allocation of Bagasse for the Deoband co-generation
plant.
FORWARD-LOOKING STATEMENTS
Global Corporate Strategy
In the opinion of leading international sugar expert F.O.Licht, regulatory, technological and
organizational issues will drive the growth of sugar companies. Since sugar is an agricultural
commodity, the last factor is expected to influence profits the most. In this connection, it would be
reasonable to assume that regulatory differences between various production locations may
decline. As a result, companies that profited from ‘regulation rents’ (guaranteed income within a
protected business environment) will need to change their strategy to protect their longer-term
survival.
The last of these determinants limits the expansionary drive of sugar companies to national
and /or supranational entities (EU) where an identical set of rules guarantees a high degree of
planning security. The regulatory environment under which sugar companies operate is often
challenging, requiring skill, experience and potential clout.
From an international perspective, the industry structure of the sugar sector is surprisingly
mature and yet fragmented; technology is advanced but innovations restricted to ‘normal
technological progress; markets saturated but driven by economic or population growth. As a
result, technological economies of scale are important in determining the size of an individual
plant.
From an organizational perspective, companies can succeed through prudent cost
reduction by centralizing functions (cost accounting and data processing) or optimizing
competencies (bargaining contracts with suppliers and customers etc.).
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Company’s Expansion Plans
Company intends to complete the following projects which will enable it to avail benefits /
incentives under the UP Government sugar policy:
The commissioning of three new sugar plants. Each plant to have 5000 to 7000 tcd
capacities (expandable to 10000-12000 tcd at a minimal cost). The commissioning of one of the
plants (Sabitgarh) at one of the best sites in India today, with 75 per cent of the cultivable area
being canal irrigated with almost no low lying sugarcane areas. In preparation, over 5000 hectares
of high recovery sugarcane have been planted.
The modernization and expansion of the Khatauli sugar unit from 11750 tcd to 16000 tcd,
which will make it the largest single standalone sugar unit in India.
The commissioning of a 23 MW co-generation plant at Khatauli by September 2005 to
supplement the 22 MW cogeneration plant at Deoband.
Following the establishment of these three units and the expansions at the existing units,
company’s cane crushing capacity will significantly rise from its existing aggregate of 25,250 tcd.
The benefits of this scale equate to a better coverage of overheads, generation of adequate
bagasse to ensure the fullest utilization (over 270 days) of company’s two cogenerations units and
tax-free profits from the two-cogeneration units for ten years.
Going ahead, company also intends to commission a large distillery to fully consume the
large throughput of molasses with the objective to manufacture ethanol in line with the
government policy.
It is our opinion that there will be an inevitable consolidation over the next few years in
the sugar industry, with unviable plants in the co-operative, state government and private sectors
closing down. This will present attractive acquisition opportunities and your company expects to
avail of them especially if they lie in their targeted geographies.
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SUGAR PRODUCTION AND SELLING PROCEDURE
One of three largest sugar companies in India.
Crushing capacity of 40,500 TCD in FY 06.
Units situated in Khatauli, Deoband, Sabitgarh ( Western U.P.), Ramkola (Eastern U.P.).
Manufactures plantation white sugar.
Contributed 70 % to the company’s turnover in 2005-06.
Technical association with sugar research institute, AUSTRALIA, through a wholly
owend subsidiary.
Magnified crystals of refined sugar
Magnification of typical sugar
In general use, non-scientists take "sugar" to mean sucrose, also called "table sugar" or
saccharose, a white crystalline solid disaccharide. Humans most commonly use sucrose as their
73
sugar of choice for altering the flavor and properties (such as mouthfeel, preservation, and
texture) of beverages and food. Commercially-produced table sugar comes either from sugar cane
or from sugar beet.
The "simple" sugars, or monosaccharides (such as glucose), store energy which biological
cells use and consume. In a list of ingredients, any word that ends with "ose" probably denotes a
sugar.
In culinary terms, sugar as a type of food delivers one of the primary taste sensations, that
of sweetness.
FORMULA OF SUGAR
74
Cane Area and Production:
In the 2008-09-sugar season, a lower planting of sugarcane and poor yields resulted in a
fall in sugar production in India. With rising sugarcane prices and prompt payments to farmers,
this trend is expected to reverse over the next few years.
Year Area under
sugarcane
(million
hectares)
Yield (tones per
hectare)
Sugarcane
production
(million tones)
Sugar
production
(million tones)
1930-31 1.2 30.9 36.4 0.1
1940-41 1.6 32.1 52.0 1.1
1950-51 1.7 40.5 69.2 1.1
1960-61 2.4 45.0 110.5 3.0
1970-71 2.6 48.3 126.4 3.7
1980-81 2.7 57.8 154.3 5.1
1990-91 3.7 65.4 241.1 12.0
1999-00 4.2 70.8 299.2 18.2
2005-06 4.4 68.2 298.4 18.5
2006-07 4.3 64.6 281.6 20.1
2007-08 3.9 63.8 221.2 13.9
2008-09 3.7 62.9 201.9 13.0
ASSUMPTIONS:
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CURRENT YEAR
(2006-07)
Previous Year
(2005-06)
1) Cane area 43708 hect 45740 hect
2) Cane crush –from assigned area 145 lac qtl 129.22 lac qtl
3) -From cane punches 30 lac qtl 29.74 lac qtl
4) Total cane crush 175 lac qtl 158.69 lac qtl
5) Recovery 10.10% 9.65 %
6) Date of start 25.10.06 20.10.05
7) Gross days 170 183
8) Date of closer 12.04.07 20.04.06
1) Cane crush for financial year 183.87lac qtl 153.30 lac qtl
2) Recovery of financial year 10.08% 9.68 %
3) Cane price Rs.125/qtl Rs.115/qtl
4) Incentive for E.MV Rs.5/qtl Rs.5/qtl
5) Trpt.deduction for center Rs.5.75/qtl Rs.5.75/qtl
6) Total cane cost Rs.138.97/qtl Rs.134.95/qtl
7) Free sugar Rs.1900.30/qtl
(Average for
financial year)
Rs.1738.37/qtl
(Average for financial
year)
8) Levy sugar Rs.1300.60/qtl
(Average for
financial year)
Rs.1276.37/qtl
(Average for financial
year)
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9) Molasses Rs.229.85/qtl
(Average for
financial year)
Rs.234.04/qtl
(Average for financial
year)
10) Bagasse transfer price Rs.75.00/qtl Rs.75.55/qtl
11) Press mud Rs.13.50/qtl Rs.13.37/qtl
12) Repair expenses
13) a) Off season Rs.325 lac
14) b) Season Rs.150lac
15) c) House keeping Rs.65 lac
16) Total Rs.540 lac 547.88 lac
17) Procee expenses Rs.2.63/qtl of cane
crush
Rs.2.71/qtl of cane
crush
18) Steam from co-generation Rs 1329.01 lac (for
fin year)
Rs.1197.61
lac/financial year
19) Power from co generation Rs.744.92 lac (for fin
year)
Rs.654.45 lac for
financial year
20) Packing cost 49.50/Qtl 47.85/qtl
21) Head count 1029 1284
22) Profit Rs.3508.56Lac Rs.3462.66 lac
23) Cost of production (as per AS-2) Rs.1524.18 Rs.1588.30
24) Early maturity varty % 62.38% 58.285
25) General maturity varty % 37.62% 41.71%
Global Consumption Forecast
77
Global sugar consumption is expected to increase by an average 1.5 per cent over the next ten
years. While the outlook does not account for any significant demand shocks- the only country
that will reduce its consumption is the US- analysts have argued that China could increase its per
capita consumption levels dramatically during this period.
World Sugar Consumption Projection (1000 tonnes, raw value):
Country 2005 2010 2015
EU 18080 18612 19117
Russia 6860 7942 8866
Europe 32122 33976 35685
Africa 13842 15989 18114
U.S.A. 8959 8969 8949
N & C America 19221 20462 21760
Brazil 10395 11379 12383
South America 18161 18669 20254
China 12500 14143 16553
India 19250 22470 25188
Asia/Pacific 63204 71516 80187
TOTAL 149549 160709 176163
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Domestic Sugar Balance
Company has been fairly accurate in its sugar production forecasts (with reference to data given
the annual reports of the last two years) usually made in May, well before the monsoons. Looking
ahead, company has made a five-year nationwide production, consumption and inventory
forecast.
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Comparison between triveni Estimates and Actual Sugar Production (mn
tones):
Details 2006-07 2007-08 2008-09 2005-06
Company Estimate 19.05 13.6 13.0 18.0
Actual Production 20.1 13.6 13.0 18.2
The key determinant of average sugar prices over a year is the stock ratio (stock in the
country compared to consumption), which is also the basis on which the International Sugar
Organization, Sugar Journal F.O.Licht and global sugar trading houses draw out their estimates.
Some factors used by company in arriving at the estimated stock levels comprise the following:
Even as industry estimates have opening stocks as on October 1, 2004 that vary from 6.9 mn
tones to 7.5 mn tones, the Government is using a figure of between 8.2 mn and 8.5 mn tones. If
we take the Government figure, than internal consumption in 2007-08 will be even lower than
17.7 mn tones, which does not seem sustainable as the industry and Government have agreed on
the consumption figure of 16.80 mn tones in 2005-06 as their bases.
With low sugar prices in 2006-07 and 2007-08 as well as the impact of rising population
and prosperity, it would be reasonable to assume that sugar consumption increased by around 0.6
mn tones per year during the period.
According to Government estimates, the consumption of sugar is estimated to grow by
CAGR of 3 per cent. In the current sugar season up to March 31st, 2005, 1.4 mn tones of raw
sugar had been imported. Taking into account the existing contracts for raw sugar imports and
future contracts, Company forecasts that a further 0.6 mn tones of raw sugar will arrive in the
country before September 30, 2005.
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While it is difficult to accurately predict sugar production before the onset of the monsoons, as
in the past, Company have collected data on the existing area under sugarcane in different parts of
the country, and after making a prediction on sugarcane drawal rates based on expected
competition from alternate sweeteners, arrived at subsequent year’s production. Sugar production
for 2006-2007 has taken into account new crushing capacity, which will come on a stream and
the closure of sum unviable ones.
By the end of the 2006-2007 season, around 2.0 mn tones of raw sugar will have been
imported (as per Government policy, tolled white sugar will need to be exported within 24/36
months from the date of imports). It will only be possible for these exports commitments to be
completed by 2007-2008.
With closing stock as a proportion of consumption under 30 per cent up September 2007, we
expect sugar prices to keep pace with inflation and the inevitable rise in sugarcane cost during the
next three years, enabling current margins to be preserved.
Company has not factored an increase in disposable incomes, which, if it transpires, will
strengthen Indian average consumption for 2008-09 (17.82kg / year) towards the European
(39.34kg / year) and North American (37.24 kg / year) averages.
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Production, Consumption and Stock – Past, Present and Future (mn tones):
Details 2007-08 2008-09 2005-06 2006-07
Opening Stock 11.6 7.8 4.5 4.8
Production 13.6 12.9 18.0 22.0
Imports/ raw sugar processed 0.5 2.0 1.5
Total Available 25.7 22.7 24.0 26.8
Internal Consumption 17.7 18.2 18.8 19.4
Exports 0.2 0.4 1.6
Closing Stocks 7.8 4.5 4.8 5.8
Closing per cent (of domestic
consumption and exports)
43.6 24.7 25.0 27.6
Sugar price trends
Process of Sugar Production:
The whole sugar production is started from the procurement of raw material. Main raw
material is sugarcane. Sugarcane is purchased by the company through sugarcane society where
farmer sale their sugar for the production of sugar. Sugarcane has emerged as one of the most
attractive crops in the country today mainly because unlike other crops, farmers are assured of a
statutorily enforced minimum price by the government (as opposed to a minimum support
price).so, the government, both central and state level, plays a critical role in the fortunes of
India’s sugar industry. As a result, the central and state governments announce the price of
sugarcane. The purchase price of sugarcane declared annually by the central government is
referred to as the statutory minimum price (SMP). In 2005-06, the SMP declared by the
government was Rs.795 per metric tonnes for an average recovery of 9.0 per cent plus Rs. 8.8 for
every 0.1 per cent increase in recovery. The Sap, which is a fixed price by all Utter Pradesh sugar
factories, was announced at rs.1150 per metric tnnoes for the sugar year of 2005-06.at the time of
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purchase of sugarcane financial department make the purchase journal voucher which have all the
detail about the purchase of sugarcane. A fixed commission is to be given to the society agents by
the company.
Purchase journal vouchers have detail about the rate of sugarcane; quantity of sugarcane
purchased etc. And according to the quality and quality of the sugarcane and according to the
government price company give the payment to the cane cooperative society and then society give
the payment to the farmers. Company does not give the payment directly to the cane cooperative
society rather then it all the payment of sugarcane is given by bank to the cane cooperative society
and then society gives the payment to the farmers.
At that time company’s finance department prepare the payment vouchers and bank
vouchers. In Bank voucher department have to give all the details about the procurement of the
sugarcane how much cane and what type of cane is procured by the company. At this time
company have to give the projection of their project to the Bank and according to that projection
bank give the money to the company on Pledge.Then according to that pledged money Bank give
the payment to the cane comparative society according to the details and cane cooperative society
gives the payment to the farmers according to their cane quantity and quality.
Bank voucher has three types of accounts on the basis of requirement of bank and the
company.
BANK VOUCHER:
Cash credit
Bank overdraft account
Current account
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CASH CREDIT ACCOUNT:
In this cash credit account company have to give the projection of whole project to Bank
before starting the project and after starting the project and after starting the project company have
to give the actual production or actual progress to the bank. Bank gives the money to the company
on the basis of pledge of the company if company is not new. If company is new then Bank
provide the loan or money according to the working capital of company. It is known as
DEMAND LOAN. In cash credit bank has two type of limits.
1. Fund base Limit
2. Non-fund Base Limit
Fund base limit as Loan and Non-Fund base limit as Bank guarantee.
BANK OVERDRAFT ACCOUNT:
In bank overdraft account, bank gives a limit of money according to the money, which is already
in the account of the company and time limit also for deposit that overdraft money. In this limit
Company can take the money according to that overdraft limit. In this overdraft Account
Company can take money from the Bank even there is no money in their original account
according to that limit. This limit is known as SUB LIMIT. After the duration of Time Limit
Company has to give the some money so that Bank can extend the time limit for further
transaction. At this time Bank is treated as the Receiver.
CURRENT ACCOUNT:
Current account is known as simple account or we can say it’s a daily-transacted account.
It is an account in which company can withdrawal or deposit the money at any time, anywhere. In
this account there is no limit of time or money. Company can withdrawal or deposit the money
more then one time in one day.
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Now company starts the production of sugar. Company has to produce the sugar according
to the Grades. Grades are decided by the National Sugar Institute, Kalyanpur, Kanpur on basis of
the performance of the company in last years.
The commercial grading of sugar in India is based on grain size and colour categories.
Currently 3-grain sizes and 3 colour series are identified.
Sugarcane verities
We actively encourage the farmers in our cane areas to grow early maturing varieties of
sugarcane, which have high sucrose content. We conduct sugar content analysis of sugarcane
samples on a daily basis to have information base for our procurements and future development of
high sugared sugarcane varieties. Some of these varieties are CoJ-64, CoS-88230 and CoS-8436,
which are varieties which have been identified as early maturing sugarcane varieties by the
government of Uttar Pradesh and the SAP is higher than the SAP for general varieties by Rs.30-
50 per metric tones for these varieties of sugarcane. The areas on which sugarcane with high sugar
content is being grown in the Cane Areas of our sugar mills is detailed in the table below:
Khatauli DeobandTotal land under cultivation of
% of land under sugarcane cultivation
Total land under cultivation of
% of land under sugarcane cultivation
CoJ-64 17.20% CoJ-64 15.38%CoS-88230 10.94% CoS-88230 26.79%CoS-8436 3.11% CoS-8436 12.33%
We are focussed on using varieties of sugarcane, which have higher sugar content for crushing in
our sugar mills. The major varieties of sugarcane used in our sugar mills in Khatauli and Deoband
and the amount used in the last three Sugar Years are as detailed in the table below:
Quantity (Thousand Metric Tonnes)
85
Khatauli Deoband2006-07 2007-08 2008-09 2006-07 2007-08 2008-09
CoJ-64 251.0 364.2 377.6 198.7 230.9 309.5 CoS-88230 293.8 230.8 266.8 150.0 222.2 352.2 CoS-8436 320.4 208.9 57.6 343.4 302.3 367.4 CoS-767 1075.9 1074.7 913.1 909.6 717.0 360.8CoS-84212 40.2 3.0 3.0 3.0 3.0 2.2CoS-8432 42.0 30.8 31.5 7.0 3.3 3.0
The percentage wise breakup of the use of sugarcane varieties in our sugar mills in the last three Sugar Years, are as detailed in the table below:
Percentage of total sugarcane crushed in Sugar Year (in %)Khatauli Deoband
2007 2008 2009 2007 2008 2009 CoJ-64 15.0 21.0 22.0 12.0 16.0 22.0CoS- 88230 17.0 13.0 15.0 10.0 12.0 25.0 CoS-8436 2.0 2.0 3.0 20.0 23.0 26.0
In the Sugar Year 2005, at Khatauli we received approximately 33.00% of the sugarcane crushed
by the factory at the gate of our sugar mill and 67.00% of the sugarcane crushed was procured
through 220 sugarcane collection and purchase centers. In Deoband unit we received 47% of the
total sugarcane crushed
at the gate of our plant and 53% from collection and purchase centers. At our Ramkola unit we
received 70% sugarcane at the gate of our sugar mill and 30% from the collection and purchase
centres.We actively encourage the farmers in our cane areas to grow early maturing varieties of
sugarcane, which have high sucrose content. We conduct sugar content analysis of sugarcane
samples on a daily basis to have information base for our procurements and future development of
high sugared sugarcane varieties. Some of these varieties are CoJ-64, CoS-88230 and CoS-8436,
which are varieties which have been identified as early maturing sugarcane varieties by the
government of Uttar Pradesh and the SAP is higher than the SAP for general varieties by Rs.30-
50 per metric tone for these varieties of sugarcane. The areas on which sugarcane with high sugar
content is being grown in the Cane Areas of our sugar mills is detailed in the table below:
86
Khatauli DeobandTotal land under cultivation of
% of land under sugarcane cultivation
Total land under cultivation of
% of land under sugarcane cultivation
CoJ-64 17.20% CoJ-64 15.38%CoS-88230 10.94% CoS-88230 26.79%CoS-8436 3.11% CoS-8436 12.33%
We are focussed on using varieties of sugarcane, which have higher sugar content for crushing in
our sugar mills. The major varieties of sugarcane used in our sugar mills in Khatauli and Deoband
and the amount used in the last three Sugar Years are as detailed in the table below:
Quantity (Thousand Metric Tonnes)Khatauli Deoband
2006-07 2007-08 2008-09 2006-07 2007-08 2008-09 CoJ-64 251.0 364.2 377.6 198.7 230.9 309.5 CoS-88230 293.8 230.8 266.8 150.0 222.2 352.2 CoS-8436 320.4 208.9 57.6 343.4 302.3 367.4 CoS-767 1075.9 1074.7 913.1 909.6 717.0 360.8CoS-84212 40.2 3.0 3.0 3.0 3.0 2.2CoS-8432 42.0 30.8 31.5 7.0 3.3 3.0
The percentage wise breakup of the use of sugarcane varieties in our sugar mills in the last three
Sugar Years, are as detailed in the table below:
Percentage of total sugarcane crushed in Sugar Year (in %)Khatauli Deoband
2007 2008 2009 2007 2008 2009CoJ-64 15.0 21.0 22.0 12.0 16.0 22.0CoS- 88230 17.0 13.0 15.0 10.0 12.0 25.0 CoS-8436 2.0 2.0 3.0 20.0 23.0 26.0
In the Sugar Year 2005, at Khatauli we received approximately 33.00% of the sugarcane crushed
by the factory at the gate of our sugar mill and 67.00% of the sugarcane crushed was procured
through 220 sugarcane collection and purchase centers. In Deoband unit we received 47% of the
total sugarcane crushed at the gate of our plant and 53% from collection and purchase centers. At
87
our Ramkola unit we received 70% sugarcane at the gate of our sugar mill and 30% from the
collection and purchase centers.
Product quality The commercial grading of sugar in India is based on grain size and colour categories. Currently
3-grain sizes and 3 colour series are identified.
GRADE GRAIN SIZEL > 1.70 - mmM 1.18 - 1.70 mm S 0.60 - 1.18 mm
COLOUR APPROX. ICUMSA COLOUR UNITS
31 < 10030 100-15029 29 >150
Khatauli Sugar Quality
In India bold grain carries a premium. Keeping this in mind, the Khatauli unit produces sugar of
bolder grain of low colour value. The production is categorised as following (figures are approx.
as they vary every year)-
L-31 20%M-31 70%S-31 10%
Sugar is statutorily required to be packed in 100 Kg twill jute bags.
Now, company starts the production of sugar. There is a need of Licensing for the production of
88
Sugar, which is given by District Supply Office (D.S. Office). For the production of sugar there is
a need of cane crushing. With the help of cane crushing sugar is produced.
Year 2004-2005 2003-2004 2002-2003
Sugarcane crushed (MMT) 1.38 1.48 1.62
Average recovery rate (% of sugarcane crushed) 10.19 10.46 10.13
Sugar produced from cane (MMT) 0.141 0.155 0.164
Sugar produced from raw sugar (MMT) - - -
Number of days in operation 175 160 181
Expension
IN 2005-2006, the company added sugar capacity of 15250 TCD.
Unit Capacity added during 2005-06 Capacity as on 31-03-2006
Khatauli 4250 tcd 16000 tcd
Deoband 4000 tcd 14000 tcd
Sabitgrah (New unit) 7000 tcd 7000 tcd
Key Efficiency Figures
Following key efficiency figures have been determined to assess the performance of the factory. Results of Khatauli unit falls in close vicinity of the best obtained. Some of the results are summarized as below:
EFFICIENCY DATA APPROX VALUECRUSH 11,000 - 12,000 Tonnes Per Day
89
DMF 70 -72 JAWA RATIO 81 - 83 CLARIFICATION EFFICIENCY 1.7 - 2.1 MILL EXTRACTION 95.6 - 96 RME 96 - 96.2 BOILING HOUSE EXTRACTION 87 - 88 ROA EXTRACTION 87 - 88 RBHR 91 - 92 TOTAL LOSSES 1.90 - 1.95 SUGAR RECOVERY 10 - 11 % MOLASSES RECOVERY 4.5 - 5 % SUGAR PRODUCTION 1,80,000 Tonnes per annum ( Approx.)
Khatauli unit has the capacity of sugarcane crushing is 8500 tcd in 2008-09 and 11400 tcd
in 2005-06 and wanted to expend this to 16000 tcd in 2006-07.
Triveni produces two type of Sugar.
1. White Sugar
2. Branded Sugar
White Sugar:
Triveni produces plantation white sugar through the double sulphitation process. Sugar
accounted for 70 % of the Company’s revenue in 2005-06. The company posses the capacity of
40,500 tcd spreads across its Khatauli, Deoband, Ramkola and Sabitgarh units.
The company expects cane supply to be based on mill’s capacity and therefore expects
cane allocation to be increased from the 2006-07-sugar season.
Branded Sugar:
The Company’s branded sugar is manufactured in Khatauli and marketed under the
Shagun Brand. During the year under review, the off take of Branded sugar increased by 44 % to
90
6522 MT. While the market of branded sugar is not large, demand is increasing due to increased
urbanization and life style changes.
91
SUGAR PRICING
After the production of sugar, company sale their sugar. All sugar is taking place through
agents and Banks. The Indian Government follows a dual pricing policy, under which a fixed
proportion of production is to be sold by the sugar companies to the public distribution system at a
fixed price (Levy Sugar). This price varies from region to region and the sugar directorate (under
the ministry of consumer affairs, Food and Public distribution) releases this quantity in favor of
the various states.
Interestingly, there has been a decline in sales through the Public Distribution System as
the Levy sugar has declined from 60 per cent in the early 1980s to 10 percent effective from
March 2002 (according to the government’s Revitalization Report). The balance of sugar (free
sugar) can be sold in the open market, is not subject to the Levy, the government continuous to
regulate sales through a release mechanism, determining the amount of sugar that can be sold
each month.
A turnaround in free sale sugar realizations commenced in February 2004, with
subsequent increases in May 2004 and January 2005 (Indian Sugar Mills Association data).
Triveni’s realizations were higher than the all India average due to a combination of regional,
quality, colour and crystal size factors.
On average, domestic sugar prices strengthened in 2008-09 and demand-supply forecasts
indicate that they could remain firm over the coming two years.
Ex-Factory Prices of Free Sale Realizations:
(Rs/MT/sugar) 2006-07 2007-08 2008-09
October 11600 11290 14710
November 11140 12030 14650
December 10810 11770 15360
January 10710 11660 16630
92
February 10660 12930 16530
March 10540 12770 16500
April 10650 13420 16640
May 10580 13990 16650
June 10810 14220 16620
July 11810 14060 16710
August 12590 14650 17110
September 12340 14720 17010
Average 11190 13210 16260
India’s Sugar Import Policy:
The upturn in India’s sugar cycle is a direct result of the forward-looking policies of the Ministry
Of Food, Government of India. There have been instances in the past when a sugar shortage in
India was followed by a reduction in customs tariff, allowing an enormous quantity of white sugar
to flood the market and trigger a steep fall in sugar prices. This time the government permitted
only the import of raw sugar-by-sugar factories- not traders- with an export obligation under the
Advance License Scheme, one of a number of policies to ensure long-term price stability, given
the temporary imbalance between production and consumption.
In 2008-09, government policies ensured that sugar prices remained at reasonable levels,
which improved industry viability and resulted in a record, timely and even retrospective
payments to sugar cane growers, a win-win proposition. This encouraged nationwide sugarcane
planting and will translate into higher output, notwithstanding a lower-than-average monsoon.
Levy Sugar Prices:
Under the provision of sub-section © of section 3 of the Essential Commodities Act, 1955,
the ex-factory prices of levy sugar are determined each year by the Ministry of Food and Civil
93
Supplies, Government of India. The current ratio of free-to-levy sugar is 90:10 i.e. 10 per cent of
the sugar produced is to be sold at prices fixed by the Government for different levy price zones
in the country. Every month, a fixed quantity is released to each factory in respect of specified
buyers nominated by the Central Government. In U.P., there are three levy price zones: while the
Khatauli and Deoband factories figure in the Western U.P. price zones, Ramkola figures in the
Eastern U.P. price zones. The levy price for West U.P. was Rs 1275.92 per quintal and Rs
1383.41 per Quintal for East U.P.
Statutory Minimum Sugarcane Price (SMP):
This price is determined by the Central Government on the basis of Clause 3 of the
Sugarcane (control) Order, 1966 with respect to each sugar season. The Government fixes the
price considering the recommendations by the Commission for Agriculture Costs and Prices. The
SMP for 2008-09 seasons was fixed at Rs. 74.50 per quintal corresponding to a base recovery of
8.5 percent. The previous season’s average recovery for each sugar unit was used to determine
what SMP payment needed to be made by each factory, calculated on the basis of Rs 0.88 per
quintal for an every 0.1 per cent increase in recovery over 8.5 per cent. The SMP for Khatauli,
Deoband and Ramkola units were fixed at Rs 89.46 per quintal, Rs 92.10 per quintal and Rs 87.70
per quintal respectively.
For the purpose of extra sugarcane payments to growers above the SMP, a formula of
sharing sugar realizations with the growers has been prescribed under Sugarcane Control Order,
1966.after the ‘L’ factor (representing the cost of production) based on the SMP is announced by
the Government (which invariably comes some two or three years later), the cost based on the ‘L’
factor is subtracted from the actual realization of sugar; 50 per cent of this extra amount is shared
with growers. In reality, factories in U.P. invariably pay much more than what is warranted by
94
this formula as State Advised sugarcane Prices (SAP) announced by the U.P. government are
higher than the 50 per cent sharing payable.
State Advised Price:
A majority judgment of the Supreme Court dated 5 May 2004 held that the State
Government in U.P., in exercise of its regulatory power as contained in the U.P. Sugarcane
(Regulation of Supply and Purchase) Act 1953, could fix the price of sugarcane. A review petition
field by ISMA, highlighting the inconsistencies with an earlier unanimous decision of a five-judge
bench of the Supreme Court of 1956 in Ch. Tikaramji’s case, and other specific constitutional
points, was turned down. The U.P. Government announced an SAP higher than that paid by the
industry in 1996-97, 2006-07 and 2007-08. On a demand made by the sugarcane societies and the
U.P. Government, Triveni made all these payments for its three sugar units under protest, making
it one of a handful of such factories in U.P. to have done so.
U.P. Government Sugar Policy:
To encourage investment in the sugar industry, the U.P. Government announced Sugar
Industry Incentive Policy 2004 during the year under review. It spelt out the following:
The sugar industry as the most important industry in the state and sugarcane as its principal
cash crop, supporting the livelihoods of 3.2 mn farmer families and a labour force of 160000
directly or indirectly in the state.
The industry’s position as a driver of social and economic growth in the locations of its
presence.
The identification of various ancillary or downstream industries like sugar machinery,
distilleries, electricity co-generation, ethanol and bio-fertilizers as being linked with the industry.
The contribution of almost Rs 4 bn to the Indian and state exchequer via excise and purchase
tax.
95
The reservation of almost 2.3 mn hectares for U.P. sugar mills, accounting for 124 mn tones
of sugarcane (almost 42 per cent of the national production).
The use of only 41.04 per cent of the sugar cane produced in the state by the sugar industry,
the rest going to gur, Khandsari, seed, juice, cattle feed and chewing.
The need to produced 7.5 mn tones of sugar by 2010-11 through enhanced cane drawal to
fulfill the country’s increased appetite for the commodity.
The planned special incentive policy for the entry of private mills into sugar manufacture due
to a funds constraint among the government and co-operative sectors.
An estimated capital requirement of Rs 20 billion to fund the new plants for which a special
incentive package may be required.
For being eligible for the incentives, the government announced the following guidelines:
Minimum one time capital investment of Rs 3.5 bn or phased (from2008-09) capital
investment of Rs 5 bn; to commence commercial production by 31 march 2007.
Eligibility covering the setting up of new sugar units, expansion of existing sugar capacity and
related projects (ethanol/alcohol from molasses as well as co-generation from bagasse).
Provision of monetary benefits in the form of capital subsidy and various incentives on the
cane purchase and sugar and molasses sale.
The government announced that these incentives would be provided only after the
company or the unit cleared all its sugar cane dues to farmers. For an investment of over Rs 3.5
bn, the incentive would be applicable for five years; for an investment over Rs 5 bn, the incentive
would be applicable for ten years with a provision that proceeds from the overall incentive did not
exceed the capital investment. Triveni intends to take advantage of this scheme.
96
2001-02 2002-03 2003-04 2004-050
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
80Stock Consumption Ratio Vs. Sugar Price
Stock Consumption Ratio Sugar Priceyear
%
Rs./ Q
uintal
The domestic price of sugar is expected to stay firm over the foreseeable future on account of the
following factors: inventory is expected to stay under control due to increased consumption and
rising exports; international sugar prices are expected to remain buoyant.
Some times saleable price is decided according to the average rate
(Rate of last 1 year+2year+3 year) / 3.
MARKETING AND DISTRIBUTION
97
The company markets major parts of its output across Gujarat, Rajasthan, Punjab, Utter Pradesh,
Delhi and West Bengal through a network of 23 agents, each enjoying an average relationship of
over 25 years with the company.
SUGAR SALE:
TAX / DUTY FREE SALE LEVY SALE
90% 10%
U.P. Sale Central
Sale
U.P. Sale Central
Sale
Basic Rate 1800 / beg 1800 / beg 1277.49(by
rail)
1275.92(by
road)
1277.49(by
rail)
1275.92(by
road)
Excise Duty 71 / beg 71 / beg 38 / beg 38 / beg
Cess 14 / beg 14 / beg 14 / beg 14 / beg
Educational Cess on duty 2% 2% 2% 2%
Entry Tax 2% NIL NIL NIL
98
Insurance charges NIL 2.25 / beg NIL NIL
Company also has to give a commission of 0.50% to the agent on the amount of sugar plus
excise duty on sugar.
If sale is above then 4,00,000 then company pay service tax plus cess on service tax.
Service tax is 10% plus 2% cess on service tax till 17 April and after 17 April 12% plus
2% cess on service tax.
Company has to pay 4% Trade tax also.
Impart of Sugar Company also sale the MOLASSES. Molasses is also a very important
product, which is come after the production of sugar. Molasses is used for the distillery.
Company has a distillery unit in Muzaffarnagar.there are two type of molasses sale.
Free sale. (80%)
Levy sale. (20%)
99
MOLASSES SALE
TAX / DUTY FREE SALE LEVY SALE
80% 20%
Basic rate 225/beg 225/beg
Excise duty 75/beg 75/beg
UP administration charges 11/beg 11/beg
Educational cess on duty 2%(1.50/beg) 2%(1.50/beg)
C.S.T. 4% 2.5%
OTHER SALES
Company also has some other type of sales.
Scrap sale
Press mud sale
Baggasse sale
SCRAP SALE
TAX/DUTY UP SALE CENTRAL SALE
Rate As per order As per order
Trade tax 5% Against C format 4% or 10 %
State development tax 1% NIL
TCS 1.02% 1.02%
100
PRESSMUD SALE
TAX/DUTY UP SALE CENTRAL SALE
Rate As per order As per order
Trade tax Nil Against C format at 4% or 10%
State development tax Nil NIL
TCS Nil NIL
BAGGASSE SALE
TAX/DUTY UP SALE CENTRAL SALE
Rate As per order As per order
Trade tax Nil Against C format at 4% or 10%
State development tax Nil NIL
TCS Nil NIL
There are some important points, which are necessary to understand or have to keep in
mind by the customers about the company.
Company has their sale office in New Mandi, Muzaffarnagar.
Each and every agent or customer has to pass there through this office.
After passing the bill, bill comes in the company.
Then company prepares a sale voucher and sends all details of sale to the bank.
Then sale takes place and bank receives the money from the agent or customers.
After this whole process starts from the procurement of sugar cane and payment of the
sugarcane to the sale of sugar and receiving the payments from agents or customers, Bank deduct
101
the payment from the receives amount and their interest or commission, give the rest money or
balance to the company. This receivableable amount, which is getting by the company, is known
as the profit of the company.
WORLD SUGAR BALANCE:
(October/ September) 1000tonnes, raw value
SUGAR 2005-06 2006-07 2007-08 2008-09 2008-09
Opening Stock 58443.1 58526.1 67104.7 65105.0 59501.4
Production 138456.8 150516.5 143711.4 144047.8 148796.3
Imports 45134.6 48086.0 49006.1 50290.8 49625.4
Disappearance 134713.8 140120.9 142184.8 145275.4 147548.9
Exports 48794.6 49903.0 52532.4 54667.0 52537.3
Ending stocks 58526.1 67104.7 65105.0 59501.4 57836.9
Cl. Stock/
Consumption (%)
43.44 47.89 45.79 40.96 39.20
DOMESTIC OVERVIEW
Performance: MMT
102
2006-07 2007-08 2008-09 2008-09 2006-07
(p)
2007-08
(p)
Opening
Stock
11.3 11.6 8.5 4.8 4.2 5.6
Production 20.2 14.0 12.7 19.0 23.0 24.0
Imports 0.0 0.4 2.1 0.0 0.0 0.0
Total
available
31.5 26.0 23.3 23.8 27.2 29.6
Local
Consumption
18.3 17.3 18.5 19.1 19.6 20.2
Exports 1.5 0.2 0.0 0.5 2.0 2.5
Total
Dispatches
19.8 17.5 18.5 19.6 21.6 22.7
Closing Stock 11.6 8.5 4.8 4.2 5.6 6.9
Closing
Stock/
Consumption
(%)
63.4 49.1 25.9 22.0 28.6 34.2
103
DATA ANALYSIS AND INTERPRETION
CHART 1
90%
10%
Free Levy
Proportion of distribution of produced sugar
104
CHART 2
80%
20%
Free Levy
Proportion of distribution of Molasses
105
CHART 3
41%
28%
21%10%
khatauli Deoband Ramkola Sabitgarh
Quantity of cane crushing in a particular unit / day
106
CHART 4
30%
70%
Rail Road
Percentage of use of the different way in distribution of produced sugar
107
CHART 5
35%
30%
20%
15%
U.P. Panjab Rajsthan Haryana
Contribution of a particular state in generating the sales revenue
108
CHART 6
67%
33%
2007-08
Sugar Other
Percentage of total profit contributed by the sugar business in respect of other businesses of the company
109
CHART 7
70%
30%
2008-09
Sugar Other
Percentage of total profit contributed by the sugar business in respect of other businesses of the company
110
CHART 8
55%
30%
9%
6%
Brazil Pakistan India Africa
The per capita sugar consumption in different countries
111
CHART 9
75%
25%
Bank Role company Role
The percentage role of banks played in the payment of sugarcane payment
112
CHART 10
100%
Yes No
Sweet affects the sale of sugar
113
CHART 11
60%
40%
Affect Not Affect
Extent raw sweet affects the sale of sugar
114
CHART 12
41%
29%
20%10%
Khatauli Deoband Ramkola Sabitgarh
The percentage of sugar production in each unit
115
CHART 13
45%
39%
10%6%
Khatauli Deoband Ramkola Sabitgarh
Percentage contribution of profit given by each unit
116
CHART 14
100%
Yes No
Company gives any commission to the agents of the company
117
CHART 15
35%
65%
U.P. Sale Central Sale
118
CHART 16
Percentage of sale of sugar in Utter Pradesh with respect to other states
7%
74%
19%
S M L
Type of sugar does the company produce
119
CHART 17
20%
30%35%
15%
In Cash In Credit By Check Partialy by Check and Credit
Mode of sugar payment by agents
120
CHART 18
30%
70%
Own Facility Hired
Type of transportation facility you have
121
CHART 19
20%
55%
25%
With in 7 days Within15 days With in 30 days
122
CHART 20
The time spending in between the delivery of sugar and payment of sugar
100%
To Bank To Company
Agents give the payment of sugar
123
LIMITATIONS
The problems being faced by me during this were as follows:
Appointment problems with the customers.
Time duration of the project as the whole project was to be done in the stipulated time of
two months.
Customer’s incorporation sometimes.
Hot and humid climate
Non-cooperation of farmers.
Certain other constrains affecting the study.
Concealment of certain trade secrets and trade facts affects my understanding towards the
working of the sugar industry which in return affect my financial analysis up to the extend.
124
SUGGESTIONS
Sometimes gap between top-level management and lower level management may cause
some harmful results. So proper steps should be taken to reduce this communication gap.
Proper empowerment.
Sufficient number of computers should be there.
Company should take the help of the cane society and local administrative authority of
their area to avoid unhealthy competitions.
Company should arrange sufficient number of trucks at centers to avoid accumulation of
cane purchased.
Company should have their own transportation.
Company should improve the supply chain management.
Try to get the payment as early as possible by giving the various discount.
125
CONCLUSION
The conclusion of whole project “Financial Analysis of Sugar Production and sale” is that
Triveni Engineering and Industries Limited is one of the largest sugar producers of India. The
revenue of sugar business is 70 % in respect of other businesses of the company. Company has
many sugar plants in west U.P. and East U.P. also in which total cane crushing is 40,500 tcd in
2005-06. In all the plants Khatauli plant has the largest cane crushing is 16000 tcd and in
Deoband plant 14000 tcd. These two plants gives the maximum revenue to the company.
There are twelve types of risks in the company and so many technologies are used by the
different divisions of the company. Company’s sugar plant gives the highest profit with the help
of large sugar production. Company produces two types of sugar – Branded Sugar and white
Sugar.
Sugar prices are decided by the government under the U.P. Sugar Policy. Company sales
their sugar in the different states of the country as Haryana, Punjab and Rajasthan etc.
The performance of the company in year 2005-06 is:
Net Sales 11920.37 Million
EBIDTA 2130.00 Million
Profit after Tax 1314.96 Million
Earning Per Share 5.98 Million
Book Value 19.83 Million
Total Debt / Equity ratio 0.79 Million
The overall working of the factory during the year 2005-06 was considering satisfactory.
126
BIBLIOGRAPHY
www.google.com
www.trivenigroup.com
Annual Report 2008-09.
(Triveni Engg. And Ind. Ltd)
Annual Report 2007-08.
(Triveni Engg. And Ind. Ltd)
Economic Times
127
QUESTIONNAIRE
Name : …………………………………………
Address: …………………………………………
Phone No.: ………………………………………….
Q1) What is the proportion of distribution of produced sugar?
Free
Levy
Q2) What is the proportion of distribution of Molasses?
Free
Levy
Q3) What is the quantity of cane crushing in a particular unit / day?
Khatauli
Deoband
Ramkola
Sabitgarh
Q4) what is the Percentage of use of the different way in distribution of produced sugar?
Rail
Road
128
Q5) What is the contribution of a particular state in generating the sales revenue?
Utter Pradesh
Punjab
Rajasthan
Haryana
Q6) What is the Percentage of total profit contributed by the sugar business in respect of other
businesses of the company?
In 2008-09
Sugar
Other
In 2007-08Sugar
Other
Q7) What is the per capita sugar consumption in different countries?
Brazil
Pakistan
India
Africa
129
Q8) what is the percentage role of banks played in the payment of sugarcane payment?
Bank Role
Company Role
Q9) does raw sweet affects the sale of sugar?
Yes
No
Q10) Up to what extent raw sweet affects the sale of sugar?
Affects
Not Affect
Q11) What is the percentage of sugar production in each unit?
Khatauli
Deoband
Ramkola
Sabitgarh
130
Q12) What is the percentage contribution of profit given by each unit?
Khatauli
Deoband
Ramkola
Sabitgarh
Q13) Does company give any commission to the agents of the company?
Yes
No
Q14) What is the percentage of sale of sugar in Utter Pradesh with respect to other states?
U.P. Sale 3
Central sale
Q15) which type of sugar does the company produce?
S-31
M-31
L-31
Q16) What is the mode of sugar payment by agents? a
In cash
In credit
By check
Partially by check and credit
131
Q17) Which type of transportation facility you have?
Own facility
Hired
Q18) What is the time spending in between the delivery of sugar and payment of sugar?
With in 7 days
With in 15 days
With in 30 days
Q19) To whom agents give the payment of sugar?
To Bank
To Company
132
