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For the complete report, get in touch with us at: [email protected] Abstract : The report highlights the analysis of the drivers and explains the factors for growth of the industry. Growing Population and Rise in Income, High Demand from Food and Beverage Industry, Growing Pharmaceutical Market, are the key drivers of this market. There is a huge untapped market which gives the industry more opportunities to expand. There is also a huge opportunity from by-products, and the sugar industry is considered as the chief source of raw material for ethanol production in India. To meet the rising demand of ethanol, sugar plants receive government aid which is facilitating ethanol production, in turn benefiting the overall sugar industry. There are various challenges too that the sugar industry faces, oversupply situation and rise in sugarcane prices, impact of cyclicality and pricing are the major challenges faced by the sugar industry. Rise in sugarcane prices will bring down the profitability of sugar mills. Due to the sugar pricing challenge, it is difficult for the sugar mills to recover their production costs which lead to frequent losses Government is likely to decontrol sugar sector to facilitate growth in the domestic sugar industry, also the sugar industry has been lobbying hard for decontrolling the sugar sector. The chief organizations, such as ISMA and NFCSF are looking for partial decontrol of the sector, allowing selling the entire stock of sugar in the open market. Table of Contents : Slide 1: Executive Summary Macroeconomic Indicators Slide 2: GDP at Factor Cost: Quarterly (2010-11, 2011-12, 2012-13, 2013-14), Inflation Rate: Monthly (Jul 2013 – Dec 2013) Slide 3: Gross Fiscal Deficit: Monthly (Feb 2013 – Jul 2013), Exchange Rate: Half Yearly (Oct 2013 – Mar 2014) Slide 4: Lending Rate: Annual (2008-09, 2009-10, 2010-11, 2011-12), Trade Balance: Annual (2010-11, 2011-12, 2012-13, 2013-14), FDI: Annual (2009-10, 2010-11, 2011-12, 2012-13) Introduction Slide 5: Sugar Industry Snapshot Market Overview Slide 6-10: Sugar Industry – Overview, Growth of Sugar Production(2013-2018), Growth of Sugar Consumption(2013-2018), Growth of Sugar Factories, Sugarcane – Overview, Growth of Sugarcane Production(2013-2018), Growth of Sugarcane Acreage(2013-2016), Sugar - Value Chain Regional Distribution Slide 11-17: Maharashtra – Overview, Uttar Pradesh – Overview, Karnataka – Overview, Tamil Nadu – Overview, Andhra Pradesh – Overview, Gujarat – Production Volume, Haryana– Production Volume, Punjab – Production Volume, Bihar – Production Volume Export-Import Slide 18: Export-Import Drivers & Challenges Slide 19: Drivers and Challenges – Summary Slide 20-25: Drivers Slide 26-28: Challenges Government Initiatives Slide 29: Decontrol of Sugar sector Competitive Landscape Slide 30: Porter’s Five Forces Analysis Slide 31: Public Trading Comparables, Top 3 Companies Slide 32-34: C
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Sugar Industry – India
October 2014
2
Executive Summary
Market
Drivers & Challenges
Competition
India’s sugar industry has exhibited a rapid growth and development over the past years
Estimated production a5 mn tonnes in 20-- - 20--, growing at a CAGR of y% from a1 mn tonnes in 20-- - 20--
Consumption volume has grown to b3 mn tonnes in 20-- - 20--
Drivers:
- Growing Population and Rise in Income
- High Demand from Food and Beverage Industry
- Opportunity from by-products
- Growing Pharmaceutical Market
- Untapped Market Potential
Government Initiatives
Remove the 10% levy sugar quota
Implement tax incentives
Cenvat Credit on Bagasse
Tax deduction under section 35 AD
Exemption from service tax
No VAT on sugar
Decontrol of the sugar sector
Challenges:
- Oversupply Situation and Rise in Sugarcane Prices
- Impact of Cyclicality
- Pricing Challenge
Major Players
Company 1 Company 2 Company 3 Company 4 Company 5 Company 6
SUGAR INDUSTRY IN INDIA 2014
3
•Macroeconomic Indicators
•Introduction
•Market Overview
•Regional Distribution
•Export-Import
•Drivers & Challenges
•Government Initiatives
•Competitive Landscape
•Strategic Recommendations
•Appendix
SUGAR INDUSTRY IN INDIA 2014
4
Economic Indicators (1/3)
11
12
13
14
15
INR tn
Q4
c4
b4
a4
Q3
c3 b3
a3
Q2
d2 c2
b2
a2
Q1
d1 c1
b1
a1
2013-14 2012-13 2011-12 2010-11
GDP at Factor Cost: Quarterly
Inflation Rate: Monthly
-2
-1
0
1
2
q
Aug 2013 - Sep 2013
r
Sep 2013 - Oct 2013 Jul 2013 - Aug 2013
p
Nov 2013 - Dec 2013
t
Oct 2013 - Nov 2013
%
s
SUGAR INDUSTRY IN INDIA 2014
5
Sugar industry in India, exhibiting rapid development with annual double digit growth through 20-- - --
• India is the world’s second largest sugar producing
country, representing p% of the total sugar production,
after Brazil with q%
• Sugar production is expected to grow at a CAGR of y% to
reach a5 mn tonnes in 20-- - --
• It is also the biggest sugar consumer in the world, with
consumption growing at CAGR of x% to amount b5 mn
tonnes in 20-- - --
• India’s sugar consumption is expected to surpass the
total sugar production by 20-- - --
Increasing GDP and changing lifestyle is expected to push up
the demand for sugar and processed foods
However, in the long run, limited land availability for irrigation
is expected to hamper the country’s sugar production
• Indian sugar industry has facilitated the socio-economic
growth of the rural areas by mobilizing rural resources,
creating employment resulting in higher earnings along
with the development of the transportation and
communication facilities
Growth of Sugar Production Sugar Industry – Overview (1/2)
0
10
20
30
mn tonnes y%
20-- - --e
a5
20-- - --e
a4
20-- - --
a3
20-- - --
a2
20-- - --
a1
Growth of Sugar Consumption
0
5
10
15
20
25
30
35
mn tones
x%
20-- - --e
b5
20-- - --e
b4
20-- - --
b3
20-- - --
b2
20-- - --
b1
SUGAR INDUSTRY IN INDIA 2014
6
Sugar industry had generated INR t bn in revenue in 20-- - --
Sugar Industry – Overview (2/2)
• India is home to ~x% of the total sugar mills in the
world, contributing y% of the global sugar production
Growth of Sugar Factories
0
200
400
600
800
Units
a3 z%
20-- - -- 20-- - --
a2
20-- - --
a1
No. of Sugar Mills
Installed Sugar Production
Capacity
Sugarcane Crushed
Sugar Production Industry Revenue Cane Payment
p q mn
tonnes/year r mn tonnes s mn tonnes INR t bn INR u bn
Sugar Industry Scenario – 2010-11
Sugar Industry
Segment 1 Segment 2
Example 1 Example 2
SUGAR INDUSTRY IN INDIA 2014
7
Growing cane production will support the consistent growth in sugar output, benefiting the Indian sugar industry
• Indian sugar industry is dependent on the production of
sugarcane as it is the most vital raw material required
for manufacturing sugar
• Most of the sugar mills are usually located near the
important sugarcane production bases in India, such as
state 1, state 2, state 3, state 4, state 5 and state 6
• Following cotton textile industry, sugar industry ranks
second among the agro-based industries in the country
Indian sugar industry supports the development of the rural
sector by engaging huge number of agricultural laborers in
sugarcane cultivation, harvesting, machine manufacturing
etc., representing ~z% of the rural population
• Some of the primary challenges faced by the sugarcane
farmers are shortage of land and water required for
cultivation resulting from soil and ground water
degradation without any construction of new irrigation
dams
Growth of Sugarcane Production Sugarcane – Overview
0
100
200
300
400
mn tonnes x%
20-- - --e
a4
20-- - --
a3
20-- - --
a2
20-- - --
a1
Growth of Sugarcane Acreage
0
1,000
2,000
3,000
4,000
5,000
6,000
‘000 hectares
20-- - --
b1
y%
20-- - --e
b4
20-- - --
b3
20-- - --
b2
SUGAR INDUSTRY IN INDIA 2014
8
Sugar – Value Chain (1/2)
Step 1 Step 2 Step 3 Step 4 Syrup
Boiling Step 6 Step 7 Step 5
d e f
g
h
i
D I S T I L L E R Y
z
x y
u a
b c
COGENERATION
S U G A R P L A N T
SUGAR INDUSTRY IN INDIA 2014
9
SAMPLE Sugar – Value Chain (2/2)
Step 8 Step 9 Step 10 Syrup
Boiling Step 12 Step 13 Step 11
S U G A R
R E F I N E R Y
Factory Raw Sugar
Imported Raw Sugar
SUGAR INDUSTRY IN INDIA 2014
10
Sugar industry in Maharashtra is one of the major and large-scale sugar producing sector in India
• Maharashtra is India’s largest sugar producing state with
a total sugar output of x mn tonnes as of month x 20-- in
the current sugar year, up by y% y-o-y
The recovery of sugar from cane has been z%
• It had produced x1mn tonnes of sugar in the sugar
season 20-- - --, up from x2 mn tonnes in 20-- - --
However, water scarcity is likely to hit sugar production,
bringing down the state output by t% in 20-- - --, with a cane
acreage area of d hectares
Production Volume*
Sugarcane – Area and Production Major Players
Maharashtra – Overview
No. of Factories
Sugar Production ( mn tonnes)
Avg. Sugarcane Production
(mn tonnes)
u v w
Note: Sugar Season refers to Oct-Sep
Top Sugar Factories in 20-- - --
Sugarcane Crushed (mn tonnes)
Sugar Production (mn tonnes)
Company 1 a1 Company 4 b1
Company 2 a2 Company 5 b2
Company 3 a3 Company 6 b3
0
20
40
60
80
100
0
200
400
600
800
1,000
1,200
Area ‘000 hectares
Production mn tonnes
20-- - --e
c6
d6
20-- - --
c5
d5
20-- - --
c4
d4
20-- - --
c3
d3
20-- - --
c2
d2
20-- - --
c1
d1
Area Production
SUGAR INDUSTRY IN INDIA 2014
11
Increasing sugarcane acreage has resulted in rising sugar production…
Sugarcane – Area and Production
Haryana– Production Volume*
Gujarat – Production Volume*
No. of Factories
Sugar Production ( mn tonnes)
Avg. Sugarcane Production * (mn tonnes)
u1 v1 w1 0
5
10
15
20
0
50
100
150
200
250
20-- - --e
a6
b6
20-- - --
a5
b5
20-- - --
a4
b4
20-- - --
a3
b3
20-- - --
a2
b2
20-- - --
a1
b1
Area ‘000 hectares
Production mn tonnes
Area Production
Sugarcane – Area and Production
No. of Factories
Sugar Production ( mn tonnes)
Avg. Sugarcane Production * (mn tonnes)
u2 v2 w2 0
2
4
6
8
10
0
50
100
150
d4
20-- - --
c3
d3
20-- - --
c2
d2
20-- - --
c1
d1
20-- - -- 20-- - --e
c5
d5
20-- - --
c6
d6
c4
Production mn tonnes
Area ‘000 hectares
Area Production
SUGAR INDUSTRY IN INDIA 2014
12
Indian sugar industry has witnessed inconsistent trade balance over the past years
Sugar Industry – Exports (Value-wise)
Sugar Industry – Imports (Value-wise)
0
20
40
60
80x%
INR bn
20--
a4
20--
a3
20--
a2
20--
a1
Country-wise Exports (20--)
Country-wise Imports (20--)
1.1% 3.8%
6.2%
6.3%
68.2%
14.4%
Country 5
Country 4
Country 3
Country 2
Country 1
Others
0
20
40
60 y%
INR bn
20--
b4
20--
b3
20--
b2
20--
b1
3.2%
9.6%
4.3% 5.2%
9.2%
68.5% Others
Country 5
Country 4
Country 3
Country 2
Country 1
SUGAR INDUSTRY IN INDIA 2014
13
Drivers & Challenges – Summary
Drivers
Growing Population and Rise in Income
High Demand from Food and Beverage Industry
Opportunity from by-products
Growing Pharmaceutical Market
Untapped Market Potential
Challenges
Oversupply Situation and Rise in Sugarcane Prices
Impact of Cyclicality
Pricing Challenge
SUGAR INDUSTRY IN INDIA 2014
14 SUGAR INDUSTRY IN INDIA 2014
Porter’s Five Forces Analysis
Competitive Rivalry • Texttext texttext texttext
texttext texttext texttext • Texttext texttext texttext
texttext texttext texttext
Bargaining Power of Suppliers • Texttext texttext texttext
texttext texttext texttext • Texttext texttext texttext
texttext texttext texttext
Bargaining Power of Buyers • Texttext texttext texttext
texttext texttext texttext • Texttext texttext texttext
texttext texttext texttext
Threat of Substitutes • Texttext texttext texttext
texttext texttext texttext • Texttext texttext texttext
texttext texttext texttext
Threat of New Entrants • Texttext texttext texttext
texttext texttext texttext • Texttext texttext texttext
texttext texttext texttext
Impact Low Impact
Low
Impact Low
Impact Low
Impact High
15
Competitive Benchmarking (1/5)
Public Trading Comparables (FY 2013) – Top 3 Companies
Company A Company B Company C
Market Capitalization (INR mn)
Share Price (INR)
EV/EBITDA (x)
EV/Revenue (x)
PE Ratio
Note: Top 3 Public companies based on the Market Capitalization, Share Price and PE ratio is as of --/--/----
SUGAR INDUSTRY IN INDIA 2014
16
SAMPLE Key Ratios of Top 3 Companies – Operational Basis (FY 20--) (1/3)
Competitive Benchmarking (1/4)
-30
-20
-10
0
10
%
Player C
q3
Player B
q2 p2
Player A
q1 p1
Net Margin Operating Margin
• X
• X
SUGAR INDUSTRY IN INDIA 2014
17
SAMPLE Public: Domestic Company – Company 1 (1/4)
Key People
Products and Services
Company Information Offices and Centres – India
Corporate Address Address 400 0-- India
Tel No. 91-xx-yyyyyyyy
Fax No. 91-xx-yyyyyyyy
Website www.xxx.com
Year of Incorporation 19--
Ticker Symbol 5000--
Stock Exchange Bombay Stock Exchange (BSE)
Products
Product 1, product 2, product 3, product 4, product 5, product 6, product 7, product 8, product 9, product 10, product 11 and product 12 Name Designation
Person 1 Executive Chairman
Person 2 Vice Chairman
Person 3 President
Person 4 Chief Finance Officer
Noida
Head Office
Mumbai
Lucknow
Other Offices
SUGAR INDUSTRY IN INDIA 2014
18
SAMPLE Financial Snapshot Key Ratios
Financial Summary
• The company incurred a net profit of INRx4 mn in FY 20--, as compared to net profit of INR x3 mn in FY 20--
• The company reported total income of INR y4 mn in FY 20-- registering an increase of z% over FY 20--
• The company earned an operating margin of y% in FY 20--, an increase of z1 percentage points over FY 20--
• The company reported debt to equity ratio of u in FY 2011, a decrease of v1% over FY 2010
Key Financial Performance Indicators
Indicators Value (22/05/2012) Market Capitalization (INR mn) a
Total Enterprise Value (INR mn) b
EPS (INR) c
PE Ratio (Abs) (30/05/2012) d
Particulars y-o-y change
(2011-10) 2011 2010 2009 2008
Profitability Ratios Operating Margin - - - - -
Net Margin - - - - -
Profit Before Tax Margin - - - - -
Return on Equity - - - - -
Return on Capital Employed - - - - -
Return on Working Capital - - - - -
Return on Assets - - - - -
Return on Fixed Assets - - - - -
Cost Ratios Operating costs (% of Sales) - - - - -
Administration costs (% of Sales)
- - - - -
Interest costs (% of Sales) - - - - -
Liquidity Ratios Current Ratio - - - - -
Cash Ratio - - - - -
Leverage Ratios - - - - -
Debt to Equity Ratio - - - - -
Debt to Capital Ratio - - - - -
Interest Coverage Ratio - - - - -
Efficiency Ratios Fixed Asset Turnover - - - - -
Asset Turnover - - - - -
Current Asset Turnover - - - - -
Working Capital Turnover - - - - -
Capital Employed Turnover - - - - -
Improved Decline
Net Profit/Loss Total Income
0
20000
40000
60000
-2,000
-1,000
0
1,000
INR mn INR mn
20--
x4
y4
20--
x3
y3
20--
x2
y2
x1
y1
Public: Domestic Company – Company 1 (2/4)
20--
SUGAR INDUSTRY IN INDIA 2014
19
SAMPLE Key Business Segments Key Geographic Segments
Business Highlights
Description News
Overview • Company 1 is a flagship of the famous Group 1, engaging primarily in the production of
sugar and ethanol
Crushing Capacity • Company 1 owns x sugar plants in different parts of state 1 with an aggregate crushing
capacity of z TCD and a distillery capacity to produce y l of alcohol daily
Expansion Plans
• Company 1 is setting up t new coal based power plants of p MW each in state 1 with a
total investment of INR f bn
• It is also building u mega thermal power projects in state 1 with a power producing
capacity of g MW within a period of h years
80% 86% 86% 87%
5%3%4%4%
1%
0%
50%
100%
20--
6% 4%
20--
5% 5%
20--
6% 4%
20--
14%
Segment 4
Segment 3
Segment 2
Segment 1
Others
0%
50%
100%
20--
100%
Country 1
Country 1 is the only geographic segment in which
the company has been operating for the last five years
Public: Domestic Company – Company 1 (3/4)
SUGAR INDUSTRY IN INDIA 2014
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Public: Domestic Company – Company 1 – SWOT Analysis (4/4)
• Texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext
• Texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext
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• Texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext
• Texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext
T O
W S
SUGAR INDUSTRY IN INDIA 2014
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SUGAR INDUSTRY IN INDIA 2014