Your Board is pleased to present its 27th Annual Report and the audited
financial statements for FY 2022/23.
|
2022-23 |
2021-22 |
Physical Performance |
|
|
Cane crushed (tonnes) |
921849 |
646407 |
Sugar recovery (%) |
9.94 |
9.84 |
Sugar produced (tonnes) |
91326 |
63555 |
Power produced (lakh kwh) |
1213 |
875 |
Financial Performance (Rs crores) |
|
|
Total Income |
450 |
295 |
Profit Before Interest, Depreciation &Tax |
56 |
43 |
Profit Before Tax |
48 |
36 |
Profit After Tax |
38 |
29 |
Dividend
Your Board has recommended a dividend of Rs 6.50/- (Rupees six and
paise fifty only) per equity share of Rs 10 each for the financial year ended 31st March
2023, subject to the approval of shareholders at the ensuing Annual General Meeting.
Transfer to General Reserves
Your Board has proposed to transfer Rs 25 crores to General Reserve.
Company performance
The company, thanks to its fervid focus on fresh planting and fervent
thrust on cane variety and quality, has been able to achieve steady and stupendous surge
in cane crushing over the last five years. Our cane volume this year pierced the 9 lakh
tonne mark only for the second time since inception that just missed the peak by a
whisker. Sugar recovery stayed buoyant that is blissfully the best amongst private mills
in the State. Power production and sales zoomed to zenith, though on the flip side our
power production in excess of normative PLF gets penalized by a lower tariff rate. Several
of our key operating parameters this year were the best in over a decade. Turnover
transcended to a crescendo, convincingly crossing Rs 400 crores marks for the first time.
Our operating performance for FY 2022-23 was thus healthy and heart-warmingly on a high
sounding note.
We did have our share of problems and were confronted with host of
headwinds that in regular and recurring occurrence impeded our plans and operations.
Harvest labour challenge both in terms of availability and affordability is ever
escalating and fast threatening to pose existential crisis. While mechanization is the
sure shot way forward, its pick up is slow and penetration narrow owing to fragmented land
holding, undulated terrain, rocky subsoil and huge share of ratoon crops that were planted
earlier in narrow rows. This vexatious issue has since taken centre stage with ISMA
focussing on macro level challenges. It is all the more relevant and pressing for Tamil
Nadu to take the lead, meet the challenge head on and double down efforts to bring in
30-40% of its cane area under mechanical harvesting in the next couple of years.
Government, industry research institutions and other stakeholders must act in unison and
with unitary focus to resolutely resolve the imbroglio.
Sugar prices hovered around Rs 3500/ qtl till Nov ?21 but
thereafter crashed by Rs 100-150/ qtl. Restricting exports when the world market was
bullish and prices ruling at a premium to local market proved party pooper, feeding to the
bearish sentiments in the domestic market. As against all round cost escalations, we were
to reconcile to a near static sugar price and negative correction in both molasses and
power prices. Under such an adverse turn of market, it is all the more creditable for the
company to come out with dazzling results for the year.
Our cogen operations encountered egregious cost pressures with
rollicking rise in the price of every species of fuel. As if to add fuel to fire, the
extended monsoon this time decidedly disrupted the daily flow of external bio-fuel and
distorted fuel efficiency norms due to higher moisture, escalating our steam cost. While
so, the power tariff revision due from 1st April ?22 is yet elusive and
excruciatingly evasive, with the Regulator not acting on its own consultation paper issued
for this purpose more than a year ago. Further, our power tariff for Feb & Mar
?23 denuded by 34% by dint of our annual production crossing the normative PLF. All
these have contrived to capriciously cripple our power margin.
REC entitlement and trading through regulatory interventions has been
receiving periodical shocks, of late. The latest Rules now seek to disqualify captive
consumption of renewable energy from saleable REC entitlement. While the capital
investment in cogen project was incentivised on the premise of a premium pricing for the
renewable energy plus REC benefits, mid-course corrections like these are unarguably
unjustified and patently opposed to the principle of promissory estoppel. For the present,
our future revenue prospects from this source would appear a mirage.
Government of India in June ?22 brought in a legislative change to
tackle power sector woes and perpetuating payment crisis. It inter alia contemplates
liquidation of old outstanding dues from State Discoms to the power producers. While the
underlying intent and ultimate objective is for sure unexceptionable, its remedial
prescription would seem painfully perverted. In allowing a long tenure of 48 EMIs for
paying the past dues, it has instantaneously chocked the liquidity of power producers.
Much worse, it permits such long tenure for debt servicing at zero interest. In the
process, the defaulting party stands to gain, while the gullible power producer, for no
fault of him, is saddled with instant liquidity stress and implicit financial loss. In
this bargain, TANGEDCO dues of Rs 48 crores to our company has been made payable in 48
EMIs. On the positive side, we now receive these EMI dues in time, besides our current
dues for monthly power supplies getting settled with short delay.
Our financial performance during the year was bolstered by one-time
gains in the form of interest credits for past power dues and swapping our export quota.
In the end, both our PBT and PAT strikingly shot up by over 30% year on year. For the
record, PBT is the second best in the annals of the company while our PAT has scaled to an
all-time high. Indeed, the company that operates in a seasonal industry has shown positive
results for the past 17 successive quarters that per se is praiseworthy.
The company completed phase-1 of the Energy Efficiency Project on a
capital outlay of Rs 12 crores. This has helped us realise the targeted reduction in
energy consumption. It has now planned to embark on phase-2 of the project that involves
capex of Rs 5 crores. This would be completed by Nov 23. These projects are in
entirety financed out of internal accruals.
Ethanol Project
Ethanol Blended Petrol (EBP) programme has been a great success story
in India and a gainful game changer for the sugar industry. The country has achieved 10%
blend in quick time and is well poised to reach 20% blend by 2024-25. The Government is
encouraging new capacities simultaneously from scores of feed stocks including damaged
food grains.
Our company was one of the early movers to conceive a 45 KLPD
Distillery-cum-ethanol plant in June 2019 and obtain interest subvention support therefor.
However, we continue to encounter obstacles in obtaining environment clearance. Ethanol
production is increasingly coming from B-heavy molasses and sugarcane juice as opposed to
earlier production entirely emanating from C-molasses. It is hence imperative that our
ethanol plant is housed within the sugar mill complex as an integral part thereof.
Further, the project for its long term sustainability shall in its configuration have a
flexible product mix compatible with market dynamics. While Government of Tamil Nadu in
Oct ?21 relaxed the locational restriction for ethanol, it was not explicitly
extended to cover the production of other allied products like ENA and RS.
It is gratifying to observe that the Ethanol Blending Policy
2023? of the TN Government released in March ?23 seeks to comprehensively
address the multifarious issues involved in ethanol projects. In particular, it mandates
the consent to operate? issued by the pollution authority to specifically cover
ENA, RS etc. It is hoped that in sync with this policy, our project should now be able to
get requisite environment clearance.
While so, the interest subvention support granted by GoI for a term
loan component of Rs 58 crores has since expired. We remain uncertain on its continuance
that in turn will have a major bearing on the ethanol project viability. When once
requisite environment clearance is secured, we should be able to take a call on the
ethanol project based on extant viability assessment.
Outlook for FY 2023-24
Monsoon forecast has been varyingly assessed by IMD and the other
private player. There is growing concern and consensus that El Nino factor would more
likely impact the southwest monsoon, both for its adequacy and efficacy, after the country
received four successive years of bountiful monsoon. This would have a considerable
bearing on all India sugar production outlook for the next season and Government policy
stance, in particular, on sugar exports.
Sugarcane area and yield have been showing decent uptick in Tamil Nadu
and sugar production would nearly double this season compared to the trough it touched
five years ago. High cost of sugarcane cultivation stemming from an abominable rise in
farm labour cost coupled with the re-emergence of competing crops enjoying better
remunerative prices has thrown a spanner in works to halt this progress. Fresh cane
planting has taken a severe beating throughout the State, though the ratoon support should
for now come as a good buffer to guard against a steep fall in State?s next year
sugar production. Adverting to and aligning with this adverse trend, our company too is
faced with muted growth in fresh cane planting. Considering overall cane availability in
Tamil Nadu, it looks more likely that our sugar production next year would suffer a
decline, though the degree of decline may not be too deep.
Sugar prices have significantly strengthened in the global markets of
late that have an indirect influence on our domestic prices. We expect sugar realization
to meaningfully move up that should help neutralize the impact of lower sugar production.
Understandably, there could be no repeat of the one off? gains that boosted our
ultimate bottom-line in FY 2022-23. In all, we expect a correction and climb-down in our
profits in FY 2023-24 from the current peak; yet it would be satisfyingly strong on a
normative scale, barring the unforeseen.
Management Discussion and Analysis Report
A detailed discussion on the industry structure (dealing with world
sugar and Indian sugar) as well as on the financial and operational performance of the
company is contained in the Management Discussion and Analysis Report? that
forms an integral part of this Report (Annx-1).
Corporate Governance
Pursuant to Regulation 34(3) of SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (SEBI- LODR), Corporate Governance Report
together with the certificate from the company?s auditors confirming the compliance
of conditions of Corporate Governance is given in Annx-2. The Corporate Governance Report
also includes contents and disclosures required under Section 134(3) of the Companies Act,
2013 at relevant places that forms an integral part of this report.
Disclosures / Confirmation
In deference to Section 134 of the Act read with Rule 8 of the
Companies (Accounts) Rules, 2014, disclosures / confirmation are made as below:
(i) Annual Return
A copy of annual return for FY 2021-22 has been placed on the website
of the company www.ponnisugars.com. The same will be done for FY 2022-23 after conclusion
of the 27th AGM.
(ii) Directors? Responsibility Statement
Pursuant to Section 134(3)(c) of the Companies Act,2013 (the Act) with
respect to the Directors
Responsibility Statement, your Board confirms that:
(a) in the preparation of the annual accounts, the applicable
accounting standards have been followed and there are no material departures from the
same;
(b) the directors have selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable and prudent so as
to give a true and fair view of the state of affairs of the company at the end of the
financial year and of the profit of the company for that period;
(c) the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the provisions of this Act
for safeguarding the assets of the company and for preventing and detecting fraud and
other irregularities;
(d) the directors have prepared the annual accounts on a going concern
basis;
(e) the directors have laid down internal financial controls to be
followed by the company and that said internal financial controls are adequate and were
operating effectively; and
(f) the directors have devised proper systems to ensure compliance with
the provisions of all applicable laws and such systems were adequate and operating
effectively.
(iii) Particulars of Loans, Guarantees or
Investments
The company did not give any Loan or Guarantee or provide any security
or make investment covered under Section 186 of the Companies Act, 2013 during the year.
(iv) Particulars of contracts or arrangements with
Related Party
The Corporate Governance Report contains relevant details on the nature
of Related Party Transactions (RPTs) and the policy formulated by the Board on Material
RPTs. During the FY 2022-23, the aggregate of RPTs with one of its promoters viz.
Seshasayee Paper and Boards Limited (SPB) exceeded the materiality threshold as stipulated
under the SEBI-LODR. Anticipating same, prior approval was obtained through ordinary
resolution passed by shareholders through postal ballot on 30.12.2022 wherein all the
related parties abstained from voting as per the mandate.
Particulars of contracts or arrangements with related parties referred
in Section 188(1) of the Companies Act, 2013 is furnished in accordance with Rule 8(2) of
the Companies (Accounts) Rules, 2014 in Form AOC-2 is given in Annx-3.
(v) Material changes and commitments
There is no change in the nature of business of the company during the
year.
There is no material change or commitment affecting the financial
position of the company that has occurred since 31st March 2023 to the date of this
report.
(vi) Conservation of Energy etc.
Information relating to conservation of energy, technology absorption
and foreign exchange earnings and outgo as required under Section 134(3)(m) of the
Companies Act,
2013 read with Rule 8 of the Companies (Accounts) Rules,
2014 is given in Annx-4.
(vii) Corporate Social Responsibility (CSR)
The company is covered under the mandate of Section 135 of the
Companies Act, 2013 for FY 2022-23. The CSR report in the prescribed form as amended is
given in Annx-5 that forms part of this report.
(viii) Public deposit
The company does not accept public deposits and there is no amount
outstanding at the beginning or end of the year.
(ix) Adverse orders
No significant or material order has been passed by the regulators or
courts or tribunals impacting the going concern status of the company and the
company?s operations in future.
(x) Adequacy of Internal Financial Control with reference to financial
statements
1) The company maintains all its records in ERP system developed
in-house and the work flow and approvals are routed through this system.
2) The company has laid down adequate systems and well drawn procedures
for ensuring internal financial controls. It has appointed an external audit firm as
internal auditors for periodically checking and monitoring the internal control measures.
3) Internal auditors are present at the Audit Committee meetings where
internal audit reports are discussed alongside of management comments and the final
observation of the internal auditor.
4) The Board of Directors have adopted various policies like Related
Party Transactions Policy and Whistle Blower Policy and put in place budgetary control and
monitoring measures for ensuring the orderly and efficient conduct of the business of the
company, the safeguarding of its assets, the prevention and detection of frauds and
errors, the accuracy and completeness of the accounting records and the timely preparation
of reliable financial information.
(xi) Insolvency and Bankruptcy Code, 2016
No application has been made or proceeding pending under the Insolvency
and Bankruptcy Code 2016 in respect of the company.
(xii) Valuation difference
The company has not done any one time settlement with Banks or
Financial Institutions.
(xiii) Particulars of Employees
The Statement of Disclosure of Remuneration under Rule 5 of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014
("Rules") is appended as Annx-6 to this Report.
Directors and KMPs
Mr.N.Gopala Ratnam (DIN:00001945) retires by rotation at the ensuing
27th Annual General Meeting and being eligible, offers himself for reappointment that
would be through Special Resolution. Due disclosure and rationale for his reappointment
are furnished in the statement pursuant to Section 102(1) of the Companies Act, 2013
attached to the AGM Notice.
Dr L M Ramakrishnan (DIN: 00001978), as Vice Chairman and Independent
Director of the Company completed his second term of office and ceased to be a director of
the company from close of 30th September 2022 in accordance with the special resolution
passed by shareholders through postal ballot on 29.03.2019. He was associated with the
company and the Erode sugar mill for close to four decades. The Board places on record the
valued contribution of Dr L M Ramakrishnan to the company?s growth and standing.
Mr P Manoharan (DIN: 09706869) was appointed as an additional director
in the category of independent director from 01.10.2022 by the Board of Directors at their
meeting held on 17.09.2022. Shareholders vide special resolution passed through postal
ballot on 30.10.2022 appointed Mr P Manoharan as an Independent Director of the
Company, not liable to retire by rotation and to hold office for a
fixed term of five (5) years from 01.10.2022 to 30.09.2027.
Mr N Ramanathan (DIN: 00001033) has been reappointed as Managing
Director of the company for a further tenure of 3 years from 01.04.2023 by the Board of
Directors of the company at their meeting held on 27th January 2023. Shareholders in turn
have approved the reappointment of Managing Director and the terms thereof vide special
resolution passed through postal ballot on 12.03.2023.
Mr R Madhusudhan has been appointed as Company Secretary and Compliance
officer by the Board of Directors with effect from 19.07.2022; concurrently Mr N
Ramanathan ceased to be Company Secretary from that date but continues in his role as the
Managing Director of the Company.
Auditors
M/s S Viswanathan LLP (Firm Regn.No.004770S/S200025) were appointed as
statutory auditors for the second term of five years, in the 26th AGM. Accordingly, their
term will expire at the conclusion of the 31st AGM.
Particulars of statutory auditors, cost auditors, internal auditors and
the secretarial auditors have been given in the Corporate Governance Report that forms an
integral part of this report. Secretarial Audit Report as required by Section 204(1) of
the Companies Act, 2013 is attached (Annx-7).
Acknowledgement
We convey our sincere appreciation and thanks to the Central
Government, Government of Tamil Nadu, Banks, customers and suppliers for their
understanding and support. We commend the continuing commitment and concerted cooperation
shown by our extended family of sugarcane farmers who have weathered daunting challenge
and in quick time expanded the area under sugarcane.
Your company has been able to achieve commendable results, thanks to
the committed contribution of its employees in all ranks. The Board, above all, would like
to thank our valued shareholders for their persistent patronage.
|
For Board of Directors |
Chennai |
N Gopala Ratnam |
28th April 2023 |
Chairman |
|
DIN:00001945 |
|