Market Research Report : Sugar industry in india 2014 - Sample

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Sugar Industry – India October 2014


Executive Summary  India’s sugar industry has exhibited a rapid growth and development over the past years

Market

 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 & Challenges

Drivers:

Challenges:

- Growing Population and Rise in Income

- Oversupply Situation and Rise in Sugarcane Prices

- High Demand from Food and Beverage Industry

- Impact of Cyclicality

- Opportunity from by-products

- Pricing Challenge

- Growing Pharmaceutical Market - Untapped Market Potential  Remove the 10% levy sugar quota  Implement tax incentives

Government Initiatives

 Cenvat Credit on Bagasse  Tax deduction under section 35 AD  Exemption from service tax  No VAT on sugar  Decontrol of the sugar sector

Major Players

Competition

Company 1

Company 2

Company 3

SUGAR INDUSTRY IN INDIA 2014

Company 4

Company 5

Company 6

2


•Macroeconomic Indicators •Introduction •Market Overview •Regional Distribution

•Export-Import •Drivers & Challenges •Government Initiatives

•Competitive Landscape •Strategic Recommendations •Appendix SUGAR INDUSTRY IN INDIA 2014

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Economic Indicators (1/3) GDP at Factor Cost: Quarterly INR tn 15

13

d1 c1 b1

12

a1

14

c4 b4 a4

c3 b3 a3

d2 c2 b2 a2

11

Q1

Q2 2010-11

2011-12

2012-13

Q3 2013-14

Q4

Inflation Rate: Monthly % 2 1

p

r q

s

0 -1

t

-2

Jul 2013 - Aug 2013

Aug 2013 - Sep 2013

Sep 2013 - Oct 2013

SUGAR INDUSTRY IN INDIA 2014

Oct 2013 - Nov 2013

Nov 2013 - Dec 2013 4


Sugar industry in India, exhibiting rapid development with annual double digit growth through 20-- - -Growth of Sugar Production

Sugar Industry – Overview (1/2) • 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

mn tonnes

y%

30

a3

a4

a5

20-- - --

20-- - --e

20-- - --e

a2

20

a1

10 0 20-- - --

20-- - --

Growth of Sugar Consumption mn tones 35 30

x%

b5

b1

b2

b3

b4

20-- - --

20-- - --

20-- - --

20-- - --e

25 20 15 10 5 0

SUGAR INDUSTRY IN INDIA 2014

20-- - --e 5


Sugar industry had generated INR t bn in revenue in 20-- - -Growth of Sugar Factories

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

Units z%

800 600

Sugar Industry

a1

a2

20-- - --

20-- - --

a3

400 Segment 1

Segment 2

Example 1

Example 2

200 0 20-- - --

Sugar Industry Scenario – 2010-11 No. of Sugar Mills

p

Installed Sugar Production Capacity

q mn tonnes/year

Sugarcane Crushed

Sugar Production

Industry Revenue

Cane Payment

r mn tonnes

s mn tonnes

INR t bn

INR u bn

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Growing cane production will support the consistent growth in sugar output, benefiting the Indian sugar industry Growth of Sugarcane Production

Sugarcane – Overview • 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

mn tonnes

x%

400 a1

a2

20-- - --

20-- - --

300

a3

a4

20-- - --

20-- - --e

200 100 0

Growth of Sugarcane Acreage ‘000 hectares y%

6,000 5,000

b1

b2

20-- - --

20-- - --

b3

b4

20-- - --

20-- - --e

4,000 3,000 2,000 1,000 0

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Sugar – Value Chain (1/2) COGENERATION z c

b y

x

P L A N T

u

a

S U G A R Step 1

Step 2

Step 3

Syrup Step 5 Boiling

Step 4

Step 6

h

d

f

e i

g

SUGAR INDUSTRY IN INDIA 2014

Step 7

D I S T I L L E R Y 8


Sugar – Value Chain (2/2)

SAMPLE

Factory Raw Sugar S U G A R R E F I N E R Y

Step 8

Step 9

Step 10

Syrup Step 11 Boiling

Step 12

Step 13

Imported Raw Sugar

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Sugar industry in Maharashtra is one of the major and largescale sugar producing sector in India Production Volume*

Maharashtra – Overview • 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

No. of Factories

Sugar Production ( mn tonnes)

Avg. Sugarcane Production (mn tonnes)

u

v

w

 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

Major Players

Sugarcane – Area and Production

Top Sugar Factories in 20-- - -Sugarcane Crushed (mn tonnes) Company 1

a1

Sugar Production (mn tonnes) Company 4

b1

100

a2

Company 5

b2

c1

Area

c2

80

c5 c3

Area ‘000 hectares c6

d1

d2 d3

20

d4

800

d5

d6

a3

Company 6

b3

600 400 200

0

Company 3

1,200 1,000

c4

60 40

Company 2

Production

Production mn tonnes

0

20-- - --

20-- - --

20-- - --

20-- - --

20-- - --

20-- - --e

Note: Sugar Season refers to Oct-Sep SUGAR INDUSTRY IN INDIA 2014

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Increasing sugarcane acreage has resulted in rising sugar production… Sugarcane – Area and Production

Gujarat – Production Volume* No. of Factories

Sugar Production ( mn tonnes)

Avg. Sugarcane Production * (mn tonnes)

Production mn tonnes 20

a1

Production a2

250

a5 a4

v1

w1

b1

b2

b3

b4

Sugar Production ( mn tonnes)

20-- - --

100

20-- - --

20-- - --

20-- - --e

Sugarcane – Area and Production

Avg. Sugarcane Production * (mn tonnes)

Production mn tonnes c1 10

Production

4

w2

Area ‘000 hectares 150

c3 d1

Area

c2

6

v2

b6

0

20-- - --

8

u2

b5

0

Haryana– Production Volume*

200

50

20-- - --

No. of Factories

a6

150

5

u1

Area ‘000 hectares

a3

15 10

Area

c6 c4

c5

d2

d3

2

d4

d5

100

d6

0

50 0

20-- - --

SUGAR INDUSTRY IN INDIA 2014

20-- - --

20-- - --

20-- - --

20-- - --

20-- - --e

11


Indian sugar industry has witnessed inconsistent trade balance over the past years Sugar Industry – Exports (Value-wise) Country-wise Exports (20--) INR bn x%

80 60 40

Country 1

14.4%

a2 a1

a4

Country 2

3.8% 1.1% 6.2%

Country 3 Country 4

6.3%

20

a3

68.2%

0

Country 5 Others

20--

20--

20--

20--

Sugar Industry – Imports (Value-wise) Country-wise Imports (20--) INR bn 60

y%

9.6% b3

40

b4

20 0

b1

b2

20--

20--

Country 1

4.3% 5.2% 3.2%

Country 2

9.2%

Country 4

Country 3 68.5%

20--

20--

SUGAR INDUSTRY IN INDIA 2014

Country 5 Others

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Drivers & Challenges – Summary

Drivers Growing Population and Rise in Income High Demand from Food and Beverage Industry

Challenges Oversupply Situation and Rise in Sugarcane Prices Impact of Cyclicality Pricing Challenge

Opportunity from by-products Growing Pharmaceutical Market Untapped Market Potential

SUGAR INDUSTRY IN INDIA 2014

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Porter’s Five Forces Analysis Threat of New Entrants • Texttext texttext texttext texttext texttext texttext • Texttext texttext texttext texttext texttext texttext Impact Low

Bargaining Power of Suppliers • Texttext texttext texttext texttext texttext texttext • Texttext texttext texttext texttext texttext texttext

Impact Low

Impact High Competitive Rivalry • Texttext texttext texttext texttext texttext texttext • Texttext texttext texttext texttext texttext texttext

Impact Low Bargaining Power of Buyers • Texttext texttext texttext texttext texttext texttext • Texttext texttext texttext texttext texttext texttext

Impact Low Threat of Substitutes • Texttext texttext texttext texttext texttext texttext • Texttext texttext texttext texttext texttext texttext

SUGAR INDUSTRY IN INDIA 2014

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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

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SAMPLE

Competitive Benchmarking (1/4)

Key Ratios of Top 3 Companies – Operational Basis (FY 20--) (1/3) Operating Margin

%

Net Margin q3

10 0

p1

q1

-10 -20

q2

p2

-30 Player A

Player B

Player C

•X •X

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SAMPLE

Public: Domestic Company – Company 1 (1/4) Company Information 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)

Offices and Centres – India

Noida Lucknow

Mumbai Head Office Other Offices

Products and Services 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

Key People Name

Designation

Person 1

Executive Chairman

Person 2

Vice Chairman

Person 3

President

Person 4

Chief Finance Officer

SUGAR INDUSTRY IN INDIA 2014

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SAMPLE

Public: Domestic Company – Company 1 (2/4) Financial Snapshot

Key Ratios

Total Income

Particulars

Net Profit/Loss

INR mn

INR mn x2

60000

x3

1,000

x4

40000

0

x1

y4

20000

y1

y2

-1,000

y3

0

-2,000

20--

20--

20--

20--

Financial Summary

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

• The company incurred a net profit of INRx4 mn in FY 20--, as compared to net profit of INR x3 mn in FY 20--

Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales)

• 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

Liquidity Ratios Current Ratio Cash Ratio

Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio

Key Financial Performance Indicators Indicators

Value (22/05/2012)

Market Capitalization (INR mn) Total Enterprise Value (INR mn) EPS (INR) PE Ratio (Abs) (30/05/2012)

a b c d

Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover

Improved

SUGAR INDUSTRY IN INDIA 2014

Decline

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SAMPLE

Public: Domestic Company – Company 1 (3/4) Key Business Segments

Key Geographic Segments

Others

Segment 2

Segment 1

Segment 3

Segment 4

Country 1 100%

100% 50%

14%

1% 5%

4% 6% 4%

4% 5% 5%

6% 4% 3%

50% 80%

86%

86%

87%

20--

20--

20--

20--

100%

Country 1 is the only geographic segment in which the company has been operating for the last five years

0%

0%

20--

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 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

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

S

W

O

T

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

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

SUGAR INDUSTRY IN INDIA 2014

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+91 22 4098 7600 info@netscribes.com

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