Market Research Report : Sugar industry in india 2014 - Sample

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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


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


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


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


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


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


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


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



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


11

Increasing sugarcane acreage has resulted in rising sugar production…

Sugarcane – Area and Production

Haryana– Production Volume*

Gujarat – Production Volume*

No. of Factories


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 Production

Sugarcane – Area and Production

No. of Factories


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



Area Production


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


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


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



Bargaining Power of Buyers • Texttext texttext texttext



Threat of Substitutes • Texttext texttext texttext



Threat of New Entrants • 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 --/--/----


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


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


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--


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)


20

Public: Domestic Company – Company 1 – SWOT Analysis (4/4)

• Texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext texttext








T O

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