bajaj hindusthan ltd. - aceanalyser meet/100032_20041010.pdfconsumed where produced world sugar...
TRANSCRIPT
OCTOBER 2004
GLOBAL SUGAR INDUSTRY
INDIAN SUGAR INDUSTRY
BAJAJ HINDUSTHAN - PROFILE
BAJAJ HINDUSTHAN - FINANCIALS
GOING FORWARD
SUMMARY
CONTENTS
Consumed where produced
WORLD SUGAR
Produced in more than 100 countries About 75% is produced from sugarcane Beet sugar has gone down from 40% in 1990 to 25% in 2003 The cost of sugar from cane is less than the cost of sugar
from beet About 70% of production is consumed in the country of origin The balance 30% is traded on world markets Almost 33% of export market is controlled by Brazil, 15% EU,
13% Thailand and 12% Australia.Source: International Sugar Organisation
Preferential exports:4.8m mt or 3.3%
DISTRIBUTION OF WORLD SUGAR SUPPLIES 2002/3 (Oct/Sept)
Free market exports:
38.98m mt or 27%
Consumed domestically:101.099m mt or 69.7%
WORLD SUGAR MARKET
Source: Tate & Lyle
WORLD SUGAR DEMAND-SUPPLY SCENARIO
50,00055,00060,00065,00070,00075,00080,00085,00090,00095,000
100,000105,000110,000115,000120,000125,000130,000135,000140,000145,000150,000
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1987
/88
1988
/89
1989
/90
1990
/91
1991
/92
1992
/93
1993
/94
1994
/95
1995
/96
1996
/97
1997
/98
1998
/99
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
000
Met
ric T
onne
s
ConsumptionProduction
Source: Tate & Lyle
* EstimateDetails 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 *Opening Stock 40.38 37.94 38.63 46.02 47.03 50.33 56.99 61.57 61.52 61.92 Production 111.62 116.19 125.66 124.28 128.50 134.69 134.23 131.59 138.12 146.00 Imports 32.56 35.06 38.53 37.23 39.23 41.52 41.20 43.70 45.27 46.50 Total Availibility 184.55 189.18 202.82 207.53 214.77 226.53 232.42 236.86 244.91 254.42 Consumption 112.51 114.95 117.75 120.90 123.17 125.44 128.31 131.48 136.16 142.00 Exports 34.11 35.61 39.05 39.59 41.27 44.10 42.54 43.85 46.83 48.00 Total Off Take 146.61 150.55 156.80 160.49 164.44 169.54 170.86 175.33 182.99 190.00 Closing Stock 37.94 38.63 46.02 47.03 50.33 56.99 61.57 61.52 61.92 64.42
(MMT- Raw Value )
Source: ISMA
WORLD SUGAR DEMAND-SUPPLY SCENARIO
1 MT Refined Sugar = 1.08 MT Raw Sugar
WORLD SUGAR STOCKS vs. SUGAR PRICE
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1987/88 1989/90 1991/92 1993/94 1995/96 1997/98 1999/00 2001/02 2003/04
Surplus/Deficit
0
50
100
150
200
250
300
350$ per metric tonne
Source: Tate & Lyle
TOP 10 EXPORTERS (000 Metric Tonnes - raw value)
0500
1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,5008,0008,5009,0009,500
10,00010,50011,00011,50012,00012,50013,00013,500
Brazil EU
Australi
a
Thaila
ndInd
iaCuba
South A
frica
Guatem
ala
Colombia
Maurit
ius
1990/911996/972002/03
Top 6 Raw Exporters account for 79% of World raw exports!
Source: Tate & Lyle
TOP 10 IMPORTERS (000 Metric Tonnes- raw value)
0200400600800
1,0001,2001,4001,6001,8002,0002,2002,4002,6002,8003,0003,2003,4003,6003,8004,0004,2004,4004,6004,8005,000
Russia EU
IndonesiaJa
pan USA
South Kore
aIra
n
Canad
a
Malays
iaChina
1990/91 1996/97 2002/03
Source: Tate & Lyle
INTERNATIONAL RETAIL PRICE US Cents per Kg – 2003 Sugar Season
109
94
80
6862
51
39 37
168
132
0
20
40
60
80
100
120
140
160
180
Japan France UK USA Australia South Africa Swaziland Brazil Argentina India
Source: International Sugar Organisation
Prices in India are amongst the lowest in
the world
GROWTH IN CONSUMPTION IN ASIA
0
10,000
20,000
30,000
40,000
50,000
60,000
70,0001
99
0/9
1
19
91
/92
19
92
/93
19
93
/94
19
94
/95
19
95
/96
19
96
/97
19
97
/98
19
98
/99
19
99
/00
20
00
/01
20
01
/02
20
02
/03
20
03
/04
20
04
/05
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
Was 34% of total
World consumption
Currently, 41%
of consumption
Going towards 43%
Source: Tate & Lyle
SUBSIDIES & TARIFFS ON SUGAR – WTO IMPACT
India has lowest subsidies in the world India has amongst the lowest import duties in
the world
Subsidy Tariff(Rs./Kg.) %
India 0 60% + Rs. 0.85/kg. CVDEuropean Union 23 300%Brazil 3 55%Mexico 6 173%Thailand 4 104%
Country
Source: International Sugar Organization
Large industry
INDIAN SUGAR INDUSTRY
540 established sugar factories (140 non-operational) Around 60% are under co-operatives and corporations
controlled by state governments Annual turnover – Rs. 30,000 crore (US$6.7 bn.) Capital employed – Rs. 50,000 crore (US$ 11.1 bn.) Payment to farmers – Rs. 20,000 crore (US$ 4.4 bn.) Production has grown at 5.46% CAGR, consumption at
4.14% over the last decadeSource: BHL, ISMA
Consolidation a necessity
INDIAN SUGAR INDUSTRY
2.76% weight in annual industrial production
Rising inventory levels over the last 4-5 seasons due to excess
production
Open market prices were under pressure
95% of the players are incurring losses
Approximately Rs. 3,000 crore (US$ 670 million) outstanding to
sugarcane growers
Marginal cane growers – corporate farming not possible
Source: BHL, ISMA
Sugar largely price inelastic
INDIAN SUGAR INDUSTRY
Commodities Assumptions
Primary Articles (98 Items) Per Capita Income 350 US $ / AnnumFood Articles 15.40 Per Capita Income (@ Rs.47 / $) 16,450 Rs. / AnnumNon Food Articles 6.14 Per Capita Income 1,371 Rs. / MonthMinerals 0.48 22.02 No. of Members in a Family 5
Family Income 6,854 Rs. / MonthFuel, Power, Light & Lubricants (10 Items)Coal & Mining 1.75 Per Capita Consumption of Sugar 18.00 Kg. / AnnumMineral Oils 6.99 Per Capita Consumption of Sugar 1.50 Kg. / MonthElectricity 5.49 14.23 Family's Sugar Requirement 7.50 Kg. / Month
Manufactured Products (318 Items) Retail Sugar Price 17.00 Rs. / Kg.Sugar 3.62Other Food Products 7.92 Family's Total Exp. (80% of Income) 5,483 Rs. / MonthBeverages, Tobacco & Tobacco Products 1.34 Family's Expense on Sugar 128 Rs. / MonthTextiles 9.80 Which is 2.33 % of Family's Total Exp.Wood & Wood Products 0.17Paper & Paper Products 2.04 If Sugar Prices Increase by (Rs./Kg.) 0.50 1.00 1.50 2.00Leather & Leather Products 1.02Rubber & Plastic Products 2.39 Impact on Family's Exp. BudgetChemical & Chemical Products 11.93 Rs. Per Month 3.75 7.50 11.25 15.00Non Metallic Mineral Products 2.52 Monthly Exp. Up by (%) 0.07 0.14 0.21 0.27Basic Metal, Alloy & Products 8.34Machinery & Machine Tools 8.36 Impact on Wholesale Price IndexTransport Equipments & Parts 4.30 63.75 Sugar Price Increased by (%) 2.94 5.88 8.82 11.76
Weightage of Sugar in WPI (%) 3.62 3.62 3.62 3.62Total 100.00 WPI Up by (Points) 0.11 0.21 0.32 0.43
Wholesale Price Index - Commodities Basket
Weightage
Impact of Sugar Price Increase
Sugar largely price inelastic
INDIAN SUGAR INDUSTRY
Sugar has a 3.76 point weightage in the Wholesale Price Index compared to 22.02 point weightage of primary articles (food. etc.)
Even if sugar prices were to increase by Rs. 2 per Kg., the increase in monthly expenditure of a family is a mere 0.27%
Further, for every Re. 1 increase in sugar price, Wholesale Price Index increase is just 0.21 points and does not cause any major inflationary impact or burden the common man
INDIAN SUGAR INDUSTRY SUGARCANE COST vs. SUGAR PRICES
* Based on SMP of sugarcane calculated on the basis of all India average recovery** Average wholesale price less excise duty and freight
-200400600800
1,0001,2001,4001,600
Sugarcane Cost (Rs./Qtl.)* 406 460 500 540 570 620 660 700 730 818 859 Sugar Realisations (Rs./Qtl.)** 1,231 1,134 1,195 1,240 1,329 1,328 1,345 1,312 1,264 1,117 1,297
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
Complete mismatch in prices of sugarcane and sugar in last 10 years
Sugarcane cost more than doubled from Rs. 406 to Rs. 859 per quintal
– INCREASED BY 111.59% IN 10 YEARS !! – CAGR @ 7.78%
Sugar prices increased from Rs. 1,231 to Rs. 1,297 per quintal – INCREASED BY ONLY 5.36% IN 10 YEARS– CAGR @ 0. 52%
INDIAN SUGAR INDUSTRY SUGARCANE vs. SUGAR PRICES
INDIA’S PRODUCTION, STOCKS vs. BHL’S REALISATIONS
-
2
4
6
8
10
12
14
16
18
20
22
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03
(MT)
-
200
400
600
800
1,000
1,200
1,400
(Rs.
/ Ba
g)
Production - October to September (MT) Closing Stocks - September (MT) BHL's Realisation (Rs. / Bag)
Not a political industry
INDIAN SUGAR INDUSTRY
Industry is NOT Political
– Cane price increase is applicable to all
– Lowest incidence of government levies (approx 8%)
– Imports not a threat even at 0% duty
– The present condition of the industry is self created
and not due to any political largesse / interference
Problems self created
INDIAN SUGAR INDUSTRY
Present state due to
– No maintenance and or modernization
– No new investments by most of the players
– Delayed payment to cane growers
– Myopic outlook
– Capital market unfriendly
Industry in correction phase
CURRENT STATUS
Cycle duration 5-7 years from peak to trough
Source: Crisinfac
FACTORS AFFECTING CANE CULTIVATION
Soil – Sandy loam soil
Climate – Warm and humid
Temperatures – Between 20 to 40 degree centigrade
Rainfall – Between 700 mm to 1200 mm
Seed Selection – Quality and treatment of seeds
Mill Support –
Support / Subsidies for seed procurement and treatment,
irrigation, fertilizers, pesticides, harvesting, transportation,
infrastructure development (road, power), etc.
SUGARCANE – VARIETIES & CROP CYCLE
Early Maturing Variety – 10 to 11 month crop
General Variety – 11 to 12 month crop
Late Maturing Variety – 12 to 14 month crop
Planting can be done anytime in the year, except from May to
September
In UP cane planting is done during 2 periods – 80% during 15th February to 30th April (Spring planting)
20% during 15th September to 20th October (Autumn planting)
Once planted, can produce crop for 3 to 6 years First year crop is called “Plant Crop”, and thereafter
1st Ratoon, 2nd Ratoon, 3rd Ratoon and so on
MODES OF CANE TRANSPORT
LowMediumHighDriage % (Weight and Sugar Loss)
Low -Mechanized Unloading
Medium - Semi Mechanized Unloading
Low – Manual & Semi Mechanized Unloading
Unloading Speed
LowMediumVery HighTransit Time & Turnaround Time
High – Generally Operated by Mills
Medium – Mainly Used by Big Farmers
Low – Mainly used by Small Farmers
Investment and Operating Costs
Need Good Roads to Operate
Can Operate even if Roads are not good
Can Operate even in absence of Roads
Plying Limitations (Road Requirements)
12 to 20 Tonnes4 to 7 Tonnes2 to 3 TonnesWeight
Long (10 to 50 Km)Medium (< 10 Km)Short (< 5 Km)Distance
TrucksTractorsBullock Carts
Planting of Sugarcane
Sugarcane Harvesting
Transporting Sugarcane to
PlantsCane Crushing & Juice Extraction
Evaporation - Converting
Juice into Syrup
Boiling of Syrup - Crystallization of
SugarCentrifugal
separation of Sugar Crystals
& MolassesDrying of
Sugar
Grading of Sugar
Packing of Sugar
Farms – Cultivation of Land for
Sugarcane Planting
SUGAR PRODUCTION PROCESS
SUGAR CANE MATERIAL BALANCE
Typical Sugar Cane Material Balance
Recoverable Sugar, 11%
Sugar Losses, 2%
Molasses, 5%
Press Mud, 4%
Bagasse, 33%
Water, 45%
TYPICAL SUGAR SEASON AND RECOVERY
Typical Sugar Season and Recovery
11.2%
8.8%
9.6%
10.3%
11.0%
11.6%12.1%
8.0%
9.9%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
Oct
ober
Nov
embe
r
Dec
embe
r
Janu
ary
Febr
uary
Mar
ch
Apr
il
May
June
Monthly Recovery Season Average Recovery
10.3%
KEY OPERATIONAL PARAMETERS
Capacity Utilization Crushing rate (Tonnes / Day)
Duration of the season (Number of days)
Cane Drawal Cane crushed by plant vs. total cane produced in plant’s culturable area
(%)
Breakdowns and Stoppages (Number of hours lost) No cane, mechanical or electrical faults Imbalance in the capacities of various sections of the plant
Sugar Recovery (%) Extraction of sugar from sugarcane
Sugar Losses (%) (Total sugar in sugarcane less sugar recovery) Residual sugar in bagasse, press mud and molasses
LAST 5 YEARS SUGAR SCENARIO
15.5418.21
20.1418.51
14.20
18.52
19.25
18.5018.9816.08
15.4215.04
6.89
10.0111.20 10.66 10.53
7.10
12,56912,924
13,69314,149
12,644
14,850
-
5
10
15
20
25
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 est.
Millio
n Ton
nes
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
Rs./M
T
Production Consumption Closing Stock Prices Rs./MT
Expected lower production and inventories in 2004
STATEWISE AREA UNDER CANE CULTIVATION
( 000 Hectares )
Sr. No. States 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
1 Andhra Pradesh 176 209 214 199 192 214 231 217 218 234 2 Bihar 120 123 125 130 108 107 97 94 113 187 3 Gujarat 128 155 162 166 165 196 201 178 176 203 4 Haryana 111 120 144 162 142 125 137 143 161 180 5 Karnataka 301 345 313 282 310 339 373 417 407 385 6 Madhya Pradesh 53 37 48 45 42 40 47 75 42 53 7 Maharashtra 344 517 580 516 460 530 590 595 578 599 8 Punjab 77 83 132 173 126 103 108 121 142 154 9 Tamil Nadu 249 327 326 260 283 306 316 315 321 284
10 Uttar Pradesh 1,761 1,839 1,974 2,111 1,985 1,975 2,011 1,938 2,035 1,852 11 Uttaranchal - - - - - - - 122 126 130 12 Others ( Assam, Kerala,
Orissa, Rajasthan, etc. ) 102 112 129 130 117 120 109 101 111 100
Total 3,422 3,867 4,147 4,174 3,930 4,055 4,220 4,316 4,430 4,361
7 Maharashtra 344 517 580 516 460 530 590 595 578 599 10 Uttar Pradesh 1,761 1,839 1,974 2,111 1,985 1,975 2,011 1,938 2,035 1,852
Total 2,105 2,356 2,554 2,627 2,445 2,505 2,601 2,533 2,613 2,451 % of Total 61.51 60.93 61.59 62.94 62.21 61.78 61.64 58.69 58.98 56.20
STATEWISE CANE PRODUCTION
(MMT)
Sr. No. States 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
1 Andhra Pradesh 14 16 15 15 14 17 19 18 18 15 2 Bihar 4 6 6 6 5 5 4 4 5 5 3 Gujarat 10 11 11 11 12 14 14 13 13 14 4 Haryana 6 7 8 9 8 7 8 8 9 8 5 Karnataka 27 33 25 23 28 35 38 43 33 33 6 Madhya Pradesh 1 1 2 2 2 2 2 2 2 2 7 Maharashtra 28 44 47 42 38 47 53 50 45 37 8 Punjab 5 5 9 11 7 6 7 8 9 9 9 Tamil Nadu 26 37 33 26 30 34 34 33 33 30
10 Uttar Pradesh 104 110 120 125 129 117 115 106 118 116 11 Uttaranchal - - - - - - - 7 8 8 12 Others ( Assam, Kerala,
Orissa, Rajasthan, etc. ) 5 5 7 7 7 7 6 5 6 4
Total 230 276 281 278 280 289 299 296 298 282
7 Maharashtra 28 44 47 42 38 47 53 50 45 3710 Uttar Pradesh 104 110 120 125 129 117 115 106 118 116
Total 132 155 167 167 168 164 169 156 163 153% of Total 57.47 56.08 59.23 60.23 59.93 56.70 56.30 52.60 54.66 54.44
STATEWISE SUGAR PRODUCTION
(MT)
Sr. No. States 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
1 Andhra Pradesh 0.65 0.87 0.86 0.77 0.78 1.11 1.18 1.02 1.05 1.21 2 Bihar 0.23 0.39 0.38 0.36 0.30 0.26 0.37 0.29 0.34 0.41 3 Gujarat 0.83 0.76 1.13 0.97 0.89 1.03 1.14 1.07 1.06 1.25 4 Haryana 0.31 0.34 0.45 0.49 0.38 0.40 0.48 0.59 0.62 0.64 5 Karnataka 0.83 1.23 1.26 0.87 0.96 1.37 1.58 1.61 1.55 1.87 6 Madhya Pradesh 0.04 0.07 0.13 0.09 0.07 0.08 0.10 0.09 0.07 0.07 7 Maharashtra 2.75 5.03 5.39 3.45 3.85 5.34 6.50 6.71 5.61 6.22 8 Punjab 0.31 0.32 0.63 0.61 0.33 0.31 0.42 0.50 0.59 0.59 9 Tamil Nadu 1.09 1.86 1.61 1.05 1.23 1.73 1.72 1.78 1.84 1.64
10 Uttar Pradesh 2.72 3.61 4.38 4.08 3.92 3.73 4.56 4.76 5.26 5.65 11 Uttaranchal - - - - - - - - 0.44 0.50 12 Others ( Assam, Kerala,
Orissa, Rajasthan, etc. ) 0.10 0.17 0.22 0.17 0.15 0.18 0.15 0.11 0.09 0.10
Total 9.83 14.64 16.45 12.91 12.85 15.54 18.20 18.51 18.53 20.15
7 Maharashtra 2.75 5.03 5.39 3.45 3.85 5.34 6.50 6.71 5.61 6.2210 Uttar Pradesh 2.72 3.61 4.38 4.08 3.92 3.73 4.56 4.76 5.26 5.65
Total 5.46 8.63 9.77 7.53 7.77 9.07 11.06 11.46 10.87 11.87% of Total 55.54 58.96 59.40 58.34 60.45 58.35 60.76 61.91 58.68 58.92
STATEWISE SUGAR CONSUMPTION
(MMT)
States 1991-92 2000-01 2003-04*
Maharashtra 1.83 2.60 3.04Uttar Pradesh 1.64 2.26 2.64Gujarat 0.86 1.22 1.43Tamil Nadu 0.83 1.07 1.25West Bengal 0.71 0.97 1.13Andhra Pradesh 0.66 0.86 1.01Punjab 0.61 0.85 0.99Rajasthan 0.52 0.77 0.90Karnataka 0.54 0.73 0.86Madhya Pradesh 0.67 0.71 0.83Bihar 0.58 0.64 0.75Haryana 0.39 0.58 0.68Kerala 0.45 0.57 0.67Delhi 0.24 0.41 0.48Assam & Arunachal 0.22 0.30 0.35Orissa 0.20 0.27 0.32Others 0.31 1.43 1.68Total 11.27 16.25 19.00
Summary 1991-92 2000-01 2003-04*
Eastern States 1.71 2.18 2.55 Western States 3.89 5.30 6.20 Northern States 2.88 4.09 4.79 Southern States 2.48 3.24 3.78 Others 0.31 1.43 1.68 Total 11.27 16.25 19.00 * Estimated
India - Huge potential
PER CAPITA CONSUMPTION OF SUGAR
Brazil 55EU 37Thailand 36Australia 46Cuba 51SADC 21India 18China 7USA 31
COUNTRY / REGION
PER CAPITA CONSUMPTION IN KGS
Source: International Sugar Organization
Sustainable demand growth
DEMAND VARIABLES
Population growth
Rise in income level
Consumer preference for sugar v/s jaggery
Amongst the lowest per capita consumption
POTENTIAL DEMAND FOR SUGAR
Year Demand based on historical growth rate of 4%
(Million MT)1 2003-04 19.002 2004-05 19.763 2005-06 20.554 2006-07 21.375 2007-08 22.236 2008-09 23.127 2009-10 24.048 2010-11 25.009 2011-12 26.0010 2012-13 27.0411 2013-14 28.1212 2014-15 29.2513 2015-16 30.4214 2016-17 31.6415 2017-18 32.9016 2018-19 34.2217 2019-20 35.5918 2020-21 37.0119 2021-22 38.49
Increased preference for sugar
DEMAND ANALYSIS
Population expected to grow to 1.5 billion by 2040
1 kg increase in per capita consumption would
mean additional demand of 1 MMT p.a. of sugar
Overall sweetener demand in India stagnant at 27
kilogrammes with jaggery consumption going
down over the past decade from 15 kilogrammes to
9 kilogrammes per person per year
At times beyond control
SUPPLY VARIABLES
Area under cane
Sugarcane yield
Crop switching
Climatic conditions
Sugar recovery
Import ??
Sugar Year
Cane Production
Cane Yield
Sugar Recovery
Duration Season
Oct t o Sept
000 ' Hect Lakh T onnes
T onnes/ Hect are
Lakh T onnes
% of T ot al Cane
Lakh T onnes
% Change % of Cane
Avg Days
1980-81 2 ,667 1 ,542 57 .80 516 33.46 51 .47 20 .79 9 .98 1051981-82 3 ,193 1 ,864 58 .40 873 46.83 84 .37 63 .92 9 .66 1731982-83 3 ,358 1 ,895 56 .40 827 43.64 82 .29 (2 .47) 9 .95 1581983-84 3 ,110 1 ,741 56 .00 590 33.89 59 .17 (28 .10) 10 .02 1111984-85 2 ,953 1 ,703 57 .70 601 35.29 61 .44 3 .84 10 .22 1061985-86 2 ,849 1 ,706 59 .90 686 40.21 70 .16 14 .19 10 .23 1161986-87 3 ,079 1 ,861 60 .40 852 45.78 85 .02 21 .18 9 .98 1411987-88 3 ,279 1 ,967 60 .00 939 47.74 91 .10 7 .15 9 .70 1521988-89 3 ,329 2 ,030 61 .00 857 42.22 87 .52 (3 .93) 10 .21 1331989-90 3 ,438 2 ,256 65 .60 1 ,111 49 .25 109 .88 25 .55 9 .89 1581990-91 3 ,686 2 ,410 65 .40 1 ,223 50 .75 120 .47 9 .64 9 .85 1661991-92 3 ,844 2 ,540 66 .10 1 ,340 52 .76 134 .04 11 .26 10 .02 1731992-93 3 ,572 2 ,280 63 .80 1 ,030 45 .18 106 .09 (20 .85) 10 .31 1231993-94 3 ,422 2 ,297 67 .10 983 42.79 98 .33 (7 .31) 10 .00 111
1994-95 3 ,867 2 ,755 71.30 1,476 53 .58 146 .43 48 .92 9 .92 1611995-96 4 ,147 2 ,811 67 .80 1 ,748 62 .18 164 .51 12 .35 9 .42 1811996-97 4 ,174 2 ,776 66 .50 1 ,304 46 .97 129 .05 (21 .55) 9 .90 1301997-98 3 ,930 2 ,795 71 .10 1 ,292 46 .23 128 .55 (0 .39) 9 .95 1231998-99 4 ,055 2 ,887 71 .20 1 ,576 54 .59 155 .39 20 .88 9 .87 1411999-00 4 ,220 2 ,993 70 .90 1 ,785 59 .64 182 .00 17 .12 10 .20 152
2000-01 4 ,316 2 ,960 68 .60 1 ,767 59 .70 185 .11 1 .71 10.48 138
2001-02 4,430 2,984 68 .20 1 ,803 60 .42 185 .29 0 .10 10 .27 138
2002-03 4 ,361 2 ,816 64 .60 1 ,944 69.03 201.45 8 .72 10 .36 140
Sugarcane Crushed
Production of Sugar
Area Under Cane
CANE & SUGAR PRODUCTION DATA
Source: National Co-operative Federation Sugar Magazine
Highest yield / hectare since 1980-81 71.30 MT / HectareCane production at highest acreage & yield / hectare 316 MMTHighest percentage of cane crushed since 1980-81 69.03 %Cane crushing at highest drawal percentage 218 MMTHighest recovery of sugar since 1980-81 10.48 %Sugar production at highest recovery percentage 22.85 MMTIf production higher by 5 % 23.99 MMTIf production higher by 10 % 25.14 MMT
POTENTIAL SUPPLY OF SUGAR (PRODUCTION)
PROJECTIONS – IMPORTS INEVITABLE
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 92003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Opening Stock 11.40 7.10 0.84 (3.21) (5.08) (6.31) (6.93) (6.97) (6.47) Production # 14.20 13.50 16.50 19.50 21.00 22.50 24.00 25.50 27.00 Imports @ 0.80 - - - - - - - - Total Availibility 26.40 20.60 17.34 16.29 15.92 16.19 17.07 18.53 20.53 Internal Consumption * 19.00 19.76 20.55 21.37 22.23 23.12 24.04 25.00 26.00 Exports @ 0.30 - - - - - - - - Total Off Take 19.30 19.76 20.55 21.37 22.23 23.12 24.04 25.00 26.00 Closing Stock 7.10 0.84 (3.21) (5.08) (6.31) (6.93) (6.97) (6.47) (5.47) Minimum 3 months carry forward inventory
4.75 4.94 5.14 5.34 5.56 5.78 6.01 6.25 6.50
Excess / (Shortfall) 2.35 (4.10) (8.35) (10.43) (11.87) (12.71) (12.98) (12.72) (11.98) # Historically production reaches previous peak every 4-5 years
(Million Tonnes)
* Historical growth rate of 4% per annum
ACTUAL SUGAR STOCKS MUCH LOWER THAN BOOK STOCKS – GOV’T INDIA RECORDS
Actual demand is more than the quota released – even as per Government records
This excess demand means, people are selling more that quota
Consequently the physical stocks would be far lower than book stocks
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04Ratio
Levy % 40 40 40 40 40 40 30 15 10 10 10Free % 60 60 60 60 60 60 70 85 90 90 90
Releases (MMT)Levy Qty (MMT) 4.21 4.26 4.52 4.66 4.55 4.53 4.91 3.70 2.66 2.15 2.50Free Qty (MMT) 7.12 7.81 8.51 9.05 9.23 9.33 10.33 11.63 12.13 11.30 14.60
Total Releases 11.32 12.07 13.03 13.71 13.78 13.86 15.23 15.33 14.78 13.45 17.10Imports 2.00 0.20 0.00 0.00 0.90 1.00 0.00 0.00 0.00 0.00 0.00
Total Supply 13.32 12.27 13.03 13.71 14.68 14.86 15.23 15.33 14.78 13.45 17.10Total Demand 11.96 12.27 13.12 13.79 14.72 15.22 16.10 16.25 16.52 18.38 19.00
Demand Supply Gap (+/-) 1.36 (0.00) (0.10) (0.08) (0.04) (0.36) (0.87) (0.92) (1.74) (4.94) (1.90)Cumm. Gap (+/-) 1.36 1.26 1.18 1.14 0.77 (0.10) (1.02) (2.76) (7.70) (9.59)
Source: BHL, ISMA
IMPORTS & ITS IMPACT ON PRICES
Next 8 years India need to import 12MMT.
All imports have to be within first 4 years itself @ 3MMT/p.a.
Maximum import ever to have taken place is 2MMT/p.a. in year 93-94
Even after imports, stock position would be 3 months consumption in
2007-08, as against 5 months currently.
3MMT/p.a. quantity would be about 10% of the world surplus.
Hence international prices would move up from current levels (in
93-94 white sugar price reached $335/MT).
Consequently, domestic prices should remain at least at current levels
and not lower than international prices.
INDIA’S PRODUCTION, STOCKS, INTERNATIONAL PRICES, IMPORTS & DUTIES
Details 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 *
Production - October to September (MMT) 9.83 14.64 16.45 12.91 12.86 15.54 18.20 18.51 18.53 20.14 14.20
Closing Stocks - September (MMT) 3.09 5.60 7.91 6.60 5.61 6.90 9.34 10.36 11.32 11.61 7.10
International Prices (US $ / MT) - Avg. 322 396 384 319 272 216 202 250 227 216 222
Imports (MMT) 2.00 0.20 0.00 0.00 0.94 1.00 0.40 0.00 0.00 0.04 0.00
Import DutiesWith Effect From 28/4/98 28/2/99 30/12/99 9/2/2000Basic (%) - - - - 5 25 40 60 60 60 60 Surcharge (%) - - - - - 10 - - - - - C.V.D. (Rs. / MT) - - - - 850 850 850 850 850 850 850
2.00
0.20
0.00 0.00
0.941.00
0.40
0.00 0.00 0.04 0.00
322
396384
319
272
216202
250227
216 222
0.00
0.50
1.00
1.50
2.00
2.50
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 *
Years
Impo
rts (M
illio
n To
nnes
)
-
50
100
150
200
250
300
350
400
450
Inte
rnat
iona
l Pric
es (U
S $
/ MT)
Imports (MT) International Prices (US $ / MT)
INTERNATIONAL PRICES OF SUGAR & INDIA’S IMPORTS
STOCKS SCENARIO WITH IMPORTS
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 92003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Opening Stock 11.40 7.10 3.84 2.79 3.92 5.69 5.07 5.03 5.53 Production # 14.20 13.50 16.50 19.50 21.00 22.50 24.00 25.50 27.00 Imports @ 0.80 3.00 3.00 3.00 3.00 - - - - Total Availibility 26.40 23.60 23.34 25.29 27.92 28.19 29.07 30.53 32.53 Internal Consumption * 19.00 19.76 20.55 21.37 22.23 23.12 24.04 25.00 26.00 Exports @ 0.30 - - - - - - - - Total Off Take 19.30 19.76 20.55 21.37 22.23 23.12 24.04 25.00 26.00 Closing Stock 7.10 3.84 2.79 3.92 5.69 5.07 5.03 5.53 6.53 Minimum 3 months carry forward inventory
4.75 4.94 5.14 5.34 5.56 5.78 6.01 6.25 6.50
Excess / (Shortfall) 2.35 (1.10) (2.35) (1.43) 0.13 (0.71) (0.98) (0.72) 0.02 # Historically production reaches previous peak every 4-5 years
(Million Tonnes)
* Historical growth rate of 4% per annum
No threat of imports - Current duty 60%
LANDED COST OF SUGAR (in US $)
Base Price (US$ fob) 200 260 300 200 260 300 Freight 45 45 45 45 45 45 C&F Price 245 305 345 245 305 345 Import Duty (%) - - - 10% 10% 10%Cost with duty 245 305 345 270 336 380 Port & incidentals 10 10 10 10 10 10 Importer Margin (8%) 20 25 28 22 28 31 Brokerage 1 1 1 1 1 1 Landed Cost (US$) 276 341 384 303 374 422 Rs. / US$ 47 47 47 47 47 47 Landed Cost (Rs.) 12,991 16,036 18,067 14,234 17,585 19,818
0% Duty 10% DutyImport Dynamics
PROGNOSIS
Demand will exceed supply for the
next 7 years
Sugar prices will remain firm
Exports will cease
Imports will become necessary
Growth opportunity for BHL
Size and efficiency will matter
KEY SUCCESS FACTORS IN SUGAR INDUSTRY
SIZE – Economies of scale– Only large and efficient units will survive
LOCATION– Proximity to sugar cane (UP and Maharashtra)– Proximity to markets ( Sugar deficient States)
EFFICIENCIES– Profitability critically hinges on recoveries, throughput and control over
manufacturing costs
RELATIONSHIP MANAGEMENT– Farmer relationship– Prompt payment to the farmer is very essential
WHAT NEEDS TO BE DONE TO PROMOTE INVESTMENT IN INDIAN SUGAR INDUSTRY
NEED TO IMPROVE SUSTAINIBILITY OF SUGAR INDUSTRY
Remove mis-match between sugarcane and sugar pricesSugarcane prices must be linked to the prices of sugar
Protect economy from cheap importsVery high export subsidies provided by European countries have artificially pegged international prices at much lower levels, making Indian sugar non competitive, both within and outside India
Maintain sugar price parity with bordering countriesSugar prices in bordering countries (Pakistan, Bangladesh, China, Myanmar, Sri Lanka) being higher than India, sugar moves out to these countries through unauthorized channels, aggravating shortages in India. Retail sugar price parity must be maintained
RISKS Environmental Risks
Climatic conditions such as monsoons, droughts etc. Substitution Risks
Crop switching due to non-receipt of timely payment Crop switching due to better realisations for alternate crops Diversion of cane to Gur/Khandsari manufacturers
Regulatory Risks Fixation of arbitrary cane prices Control of end product prices by the Government Direct imports of sugar by the Government and subsidised
sales to check domestic prices Risks specific to Bajaj Hindusthan
Timely project execution and within costs
A Profile
PROMOTER INTENT
Bajaj Hindusthan will be the
vehicle for the growth of the sugar
business for the Bajaj Group
Currently: (2003-2004)
Sugar Plants: 2 units
Sugar Capacity: 24,000 Tonnes Crushing per Day (TCD)
Sugar Production: 0.27 million Tonnes
Distillery Capacity: 140 Kilolitres (KL)
After Expansions: (2005-2006)
Sugar Plants: 6 units
Sugar Capacity: 52,000 TCD
Sugar Production: Approximately 1 million Tonnes
Distillery Capacity: 140 KL
ABOUT US
Sustainable volume based business model
BHL’S BUSINESS MODEL
BHL’s business model is essentially volume and
low cost based rather than price based
More sustainable
Lowest conversion cost
Since there is no pricing power, only volumes and
efficiency determine the winners
Core competencies
OUR STRENGTHS
Stick to our knitting
Strong financials
Size and economies of scale
Operational expertise
Strong second line of management
Clear succession plan at all levels
Farmer relations
Strong Balance Sheet
BHL’S FINANCIALS
Most of capital expenditure funded through internal
accruals Capital expenditure borrowings prepaid Adequate provisions for contingencies made F1+ (highest) short term debt rating A+ rating for long term debt (Highest in the sugar
industry)
Profitable even in the worst years
PROFIT & LOSS ACCOUNTParticulars
2000-01 2001-02 * 2002-03 CAGR
TOTAL REVENUE 335.01 416.31 466.25 14%
EBIDTA 39.30 35.91 56.55 16%EBIDTA% 11.73% 8.63% 12.13%
Interest 19.34 11.11 6.74 Interest % 5.77% 2.67% 1.45%
Profit Before Tax 8.72 8.41 34.86
Profit After Tax (PAT) 8.28 6.78 28.35 64%PAT % 2.47% 1.63% 6.08%
Earnings Per Share (Rs.) 9.5 7.8 32.5
Dividend % 25% 25% 30%
* Annualized
(Rs. Crore)
Strong Financials
BALANCE SHEET
Particulars2000-01 2001-02 * 2002-03
Equity 8.73 8.73 8.73 Reserves & Surplus 115.59 87.77 113.17 Deferred Tax 24.51 28.47 Loan Funds 213.90 86.56 179.84
TOTAL 338.22 207.57 330.21
Net Block 114.13 110.80 189.25 Investments 3.96 2.15 1.33 Net Current Assets 220.13 94.62 139.63
TOTAL 338.22 207.57 330.21
(Rs. Crore)
Healthy
RATIOS
(*Annualized )
RATIOS 2000-01 2001-02 * 2002-03
EBIDTA / Turnover 11.73% 8.62% 12.13%
ROCE 9.04% 9.06% 17.76%
ROE 6.66% 7.16% 23.26%
Long Term Debt / Net Worth 0.15 0.02 0.48
Total Debt / Net Worth 1.72 0.90 1.48
Net Cash Accruals / Total Debt 0.09 0.22 0.23
Net Cash Accruals / Long Total Debt 1.00 8.67 0.71
Current Ratio 1.03 1.08 1.11
Inventory Turnover (Days) 358 208 124
Sustained performance
NINE MONTH 2003-04 - RESULTS
Particulars Current Yr Previous Yr Current Yr Previous Yr3 Months 3 Months 9 Months 9 Months
30.06.2004 30.06.2003 30.06.2004 30.06.2003Net Sales /Income from Operations 106.27 96.88 303.55 274.67 Other Income 0.41 2.44 3.36 6.31
106.68 99.32 306.91 280.98
Total Expenditure 75.93 90.31 237.92 257.26 a) (Increase)/Decrease in Stocks 56.32 (48.86) (122.10) (149.60) b) Materials 7.53 107.73 275.13 312.54 c) Staff Cost 4.56 5.06 18.42 17.80 d) Excise Duty 0.77 13.44 26.37 36.49 e) Other Expenditure 6.75 12.94 40.10 40.03 Interest 4.36 2.53 10.98 5.95
26.39 6.48 58.01 17.77 Depreciation 4.96 3.94 14.11 11.05
21.43 2.54 43.90 6.72 - 0.48 - 0.48
21.43 2.06 43.90 6.24 Provision for Taxation 3.38 0.18 7.12 1.16 Provision for Deferred Tax (Asset)/ Liability 4.30 0.74 8.55 0.06 Provision for Taxation 7.68 0.92 15.67 1.22
13.75 1.14 28.23 5.02
Profit before Tax
Profit before Tax & Extraordinary Item
Gross Profit after Interest but before
Profit after Tax
Unaudited (Rs. Crores)
Total Revenue
Extraordinary item - Compensation under
Where growth is an ethos
GOING FORWARD
MORE THAN DOUBLE CAPACITY IN 2 YEARS
– Mergers and Acquisitions
– Green field projects
Speedy project execution
GREEN FIELD PROJECT
Setting up a 7,000 TCD sugar plant near Meerut, UP Investment of Rs. 155 crore (US$ 34 million) to be
funded by Rs. 50 crore (US$ 11 million) internal
generations and Rs. 105 crore (US$ 23 million) debt
and Completion within 11 months against industry norm
of 15-18 months Competitive capital cost per ton – Rs. 221,500
GREENFIELD PROJECTS
Meerut plant is on schedule and is expected to
start crushing by December 2004
BHL intends to set up 3 new green field plants in
Uttar Pradesh (2 in Muzzafarnagar district and 1 in
Bijnor district in West U.P.) each of capacity of
132,000 tonnes of sugar at a cost of Rs. 125 crore
With this expansion BHL will have a total sugar
capacity of approx. 1 MMT of sugar
PROJECT COST COMPETITIVENESS
New projects at lower capital cost due to: New projects have no refinery Better negotiations and longer gestation
compared to Kinnouni wherein delivery criteria was of utmost importance
Single vendor responsibility for project execution
Multi location operations in Uttar Pradesh
PRESENCE
Palia KalanDist: Kheri
11,000 TCDDistillery:60 KLPD
GolagokarnathDist.: Kheri13,000 TCDDistillery:85 KLPD
BilaiDist: Bijnor 7,000 TCD
KinnouniDist: Meerut7,000 TCD
ThanabhawanDist:Muzzafarnagar
7,000 TCD
Lucknow
BhaisanaDist: Muzaffarnagar
7,000 TCD
CANE GROWING AREAS IN UP
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LOCATIONAL ADVANTAGES
Yields are the highest in Western U.P. High recovery cane varieties Proximity to sugar markets Adequate cane to double capacities
CANE AVAILABILITY AND POTENTIAL
Year Production Crushed Drawal %(Lac Qtls) (Lac Qtls) (before BHL) Year 1 Year 2 Year 3
2004 1,396.69 580.84 41.59 53.04 55.91 58.77 2003 806.47 382.37 36.14 2002 761.18 378.74 49.76
Year Production Crushed Drawal %(Lac Qtls) (Lac Qtls) (before BHL) Year 1 Year 2 Year 3
2004 1,326.22 479.31 36.14 42.17 43.68 45.19 2003 1,349.38 553.30 41.00 2002 1,070.31 510.75 47.72
Drawal % (after BHL)
Drawal % (after BHL)
MUZZAFARNAGAR DISTRICT - WEST U.P.
BIJNOR DISTRICT - WEST U.P.
BHL New Projects Capacity Utilization: Year 1-65%, Year 2-80%, Year 3-100%
Total culturable area in UP 9,250,000 Lac HectaresCulturable area for BHL's 6 Plants 341,050 Lac HectaresPercentage 3.69 %
Area Under Cane CultivationTotal area under cane cultivation in UP 2,450,000 Lac HectaresArea under cane cultivation for BHL's 6 plants 232,000 Lac HectaresPercentage 9.47 %
Number of FarmersTotal number of farmers in UP 3,200,000Number of farmers for BHL's 6 plants 323,000 Percentage 10.09 %
CULTURABLE AREA, CANE AREA & NO. OF FARMERS – UP & BHL’S 6 PLANTS
PROJECT FINANCIALS
Funding PatternRs. Crore
Project cost 400
Equity infusion 100 Internal accruals 100 Total equity funding 200 External debt funding 200 Project Debt : Equity Ratio 1.00
Rewards not commensurate with the risks
Power being commoditized
Economies of scale
Lower realization per unit in UP
SEBs and PPA issues
Inverse correlation between bagasse and sugar
Bagasse economics
Capital allocation sugar v/s power
WHY NOT POWER FOR BHL
Rewards not commensurate with the risks
WHY NOT POWER FOR BHLBagasse Cost (Rs./MT) 500 600 700 Bagasse Cost/Unit of Power 1.25 1.50 1.75 Bagasse handling 0.10 0.10 0.10 Repairs & Maintenance 0.25 0.25 0.25 Employee Costs 0.10 0.10 0.10 Capex Interest @ 8% 0.47 0.47 0.47 Depreciation @ 10% 0.59 0.59 0.59 WCC 12% (3 month delay payment) 0.07 0.07 0.07 TOTAL 2.83 3.08 3.33 Present Power Realisation (Rs./Unit) 2.61 2.61 2.61 Cash Profit/(Loss) 0.37 0.12 (0.13) PBT (0.22) (0.47) (0.72)
20MW Power Plant - 9MW for saleIncremental Investment (Rs. Crore) 29 ROCE 15% 11% 7%PBT (Rs. Crore) (1.08) (2.30) (3.53) Current Bagasse Realisation Rs.800-Rs.1,200 / MT
Rewards not commensurate with the risks
WHY NOT POWER FOR BHL
Bagasse Cost (Rs./MT) 800 1,000 1,200 Bagasse Cost/Unit of Power 2.00 2.50 3.00 TOTAL COST 3.58 4.08 4.58 Present Realisation 2.61 2.61 2.61
Cash Profit/(Loss) (0.38) (0.88) (1.38) PBT (0.97) (1.47) (1.97) ROCE -7% -16% -24%TOTAL LOSS (Rs. Crore) (4.75) (7.20) (9.65)
Power economics at current bagasse realisations
Bagasse availability and cost depends on cane availability and will be cyclical. Thus, power earnings cannot be linear.
Better returns in sugar than power
WHY NOT POWER FOR BHL
Asset allocation sugar versus power
Capital cost for 7,000 TCD 140 Equivalent power plant MW for Rs. 140 crore investment 43 Units for sale (Crore) 23 Sugar profit - PBT (Rs. Crore) 15 Bagasse cost (Rs. / MT) 200 250 300 400 Power profit - PBT (Rs. Crore) 12 9 7 1
Sugar Versus Power
Timely and transparent
OUR FINANCIAL CALENDAR
EVENT Time Frame
Financial Year End * September 30
1st Quarter Results Last week of January
2nd Quarter Results Last week of April
3rd Quarter Results Last week of July
4th Quarter and Annual Audited Results End November* Changed from March to September to reflect performance of a full sugar season and for greater transparency
Leader
# 1 in India
# 3 in Asia
# 3 in any one Country
Amongst the top 15 in the World
BHL - AFTER NEW PROJECTS
SUMMARY
Huge potential
Summary
Consumption growing at 4.14% p.a. on a base of 19
million tonnes
Demand to double in 18 years
Investments of over Rs. 30,000 crore (US$ 6.7 bn.)
will be needed at current cost, to meet demand
Bajaj Hindusthan views this as a growth
opportunity
Thank you for your time