Insert Cover Image using Slide Master View Do not distort
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
3
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
SUGAR INDUSTRY IN INDIA 2014
6
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
SUGAR INDUSTRY IN INDIA 2014
7
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
SUGAR INDUSTRY IN INDIA 2014
9
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
10
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
12
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
13
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
14
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
15
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
SUGAR INDUSTRY IN INDIA 2014
16
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
17
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
18
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
19
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
20
Thank you for the attention Sugar Industry – India report is part of Netscribes’ Retail and Services Industry Series. For any queries or customized research requirements, contact us at: Phone: E-Mail:
+91 22 4098 7600 info@netscribes.com
About Netscribes, Inc. Netscribes, Inc. is a knowledge-consulting and solutions firm with clientele across the globe. The company’s expertise spans areas of investment & business research, business & corporate intelligence, content-management services, and knowledge-software services. At its core lies a true value proposition that draws upon a vast knowledge base. Netscribes, Inc. is a one-stop shop designed to fulfil clients’ profitability and growth objectives. Disclaimer: This report is published for general information only. Although high standards have been used in the preparation, “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes and prior permission is required for guidelines on reproduction. SUGAR INDUSTRY IN INDIA 2014
21