MIRA
INFORM REPORT
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Report Date : |
07.04.2008 |
IDENTIFICATION
DETAILS
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Name : |
GODAVARI SUGAR MILLS LIMITED |
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Registered Office : |
45-47, Fazalbhoy
Building, 3rd Floor, M G Road, Fort, Mumbai – 400 001, Maharashtra |
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Country : |
India |
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Financials (as on) : |
31.03.2007 |
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Date of Incorporation : |
01.06.1939 |
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Com. Reg. No.: |
002945 |
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CIN No.: [Company
Identification No.] |
U74999MH1939PLC002945 |
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TAN No.: [Tax
Deduction & Collection Account No.] |
MUMT05976F |
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Legal Form : |
A Closely Held
Public Limited Liability Company |
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Line of Business : |
Manufacturing
Sugar, Chemicals, Alcohol, Ethylacetate, Acetic Acid and Generates Power. |
RATING &
COMMENTS
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MIRA’s Rating : |
A |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
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Maximum Credit Limit : |
USD 3920000 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well
established and reputed company. The company is progressing well. Directors
are reported as experienced and respectable businessmen. Trade relations are
fair. Business is active. Payments are reported as usually correct and as per
commitments. Fundamentals are strong and healthy. The company can be
considered normal for business dealings at usual trade terms and conditions.
The company can be regarded as a promising business partner in a medium to
tong-run. |
LOCATIONS
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Registered Office : |
45-47, Fazalbhoy
Building, 3rd Floor, M G Road, Fort, Mumbai – 400 001,
Maharashtra, India |
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Tel. No.: |
91-22-22048272/
22858430/40/50 |
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Fax No.: |
91-22-22047297 |
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E-Mail : |
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Website : |
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Unit 1 : |
Sameerwadi
At Post
Sameerwadi, Taluka Mudhol, District Bagalkot - 587 316, Karnataka, India |
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Tel. No.: |
91-8350 – 260046
/ 47 /48 |
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Fax No.: |
91-8350-260037 |
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Unit 2 : |
Sakarwadi
Somaiya Organo
Chemicals (Unit of The Godavari Sugar Mills Limited), At Post Sakarwadi,
District Ahamednagar, Maharashtra - 413 708, India |
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Tel. No.: |
91-2423-279396/97/08 |
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Fax No.: |
91-2423-279339 |
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Marketing
Office: |
Mr.
Mukashi Warden House 3rd
Floor, PM Road, Fort, Mumbai 400 001, Maharashtra, India |
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Tel. No.: |
91-22-22884635/5631/4294 |
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Branch
Offices: |
New Delhi Bangalore |
DIRECTORS
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Name : |
Mr. Shantilal
Karamshi Somaiya |
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Designation : |
Chairman and
Managing Director |
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Address : |
Padmanabh, 10,
Carmichael Road, Mumbai – 400 026, Maharashtra, India |
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Date of Birth/Age : |
29.12.1927 |
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Qualification: |
B.Sc., LLB, D.Sc.
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Date of Appointment : |
01.06.1999 |
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Name : |
Mr. Samir Shantilal
Somaiya |
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Designation : |
Executive
Director |
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Address : |
Padmanabh, 10,
Carmichael Road, Mumbai – 400 026, Maharashtra, India |
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Date of Birth/Age : |
28.02.1968 |
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Qualification: |
B.E.[Chem] MBA
[Finance] |
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Date of Appointment : |
29.09.2000 |
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Name : |
Ms. Indubahi C
Patel |
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Designation : |
Director |
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Address : |
P-68, South
extension, Part III, New Delhi – 110 049, India |
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Date of Birth/Age : |
24.11.1928 |
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Date of Appointment : |
04.08.1993 |
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Name : |
Mr. Kailash
Pershad |
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Designation : |
Director |
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Address : |
Flat No. 304,
Silver Spring, B Wing, Opp Film Studio, Sizer Road, Amboli, Andheri (West),
Mumbai – 400 053, Maharashtra, India |
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Date of Birth/Age : |
01.02.1940 |
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Date of Appointment : |
17.09.1988 |
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Name : |
Mr. Badrinarayan
Ramulal Barwale |
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Designation : |
Director |
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Address : |
72-B, Urvashi,
Petit Estate, Nepean Sea Road, Mumbai – 400 006, Maharashtra, India |
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Date of Birth/Age : |
13.08.1931 |
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Date of Appointment : |
04.08.1993 |
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Name : |
Mr. Navinchandra
Chunilal Sayta |
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Designation : |
Director |
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Address : |
Vallabh Terrace,
Sardar V Patel Road, Mumbai – 400 004, Maharashtra, India |
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Date of Birth/Age : |
01.01.1927 |
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Date of Appointment : |
15.04.1976 |
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Name : |
Mr. Kondapuram
Vijaya Raghavan |
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Designation : |
Director |
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Address : |
Chairman /
Recruitment and Assessment Centre, Defence Research and Development
Organisation, Ministry of Defence, Lucknow Road, Timarpur, Delhi – 110 054,
India |
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Date of Birth/Age : |
01.10.1943 |
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Date of Appointment : |
28.09.2002 |
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Name : |
Mr. Rooshikumar
Vasudev Pandya |
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Designation : |
Director |
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Address : |
6A, Akashganga,
89, Warden Road, Mumbai – 400 026, Maharashtra, India |
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Date of Birth/Age : |
27.03.1940 |
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Date of Appointment : |
28.09.2002 |
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Name : |
Mr. K H
Viswanathan |
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Designation : |
Director -
Nominee |
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Address : |
E-61, Maker
Kundan Garden, Juhu Road, Santacruz (West), Mumbai – 400 049, Maharashtra,
India |
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Date of Birth/Age : |
19.09.1943 |
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Date of Appointment : |
07.06.2004 |
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Name : |
Mr. Puroshottam
Mavji Kavadia |
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Designation : |
Whole Time
Director |
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Address : |
9B, Giriraj,
Altamount Road, Mumbai – 400 026, Maharashtra, India |
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Date of Birth/Age : |
17.06.1918 |
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Date of Appointment : |
17.09.1988 |
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Name : |
Mr. Parmeshwaran
Keshavan Ravindran Nair |
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Designation : |
Whole Time
Director |
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Address : |
Post Sakarwadi,
Station Kanhegaon, District Ahmednagar, Maharashtra, India |
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Date of Birth/Age : |
24.05.1934 |
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Date of Appointment : |
28.09.2002 |
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Name : |
Mr. Viney Kumar |
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Designation : |
Director –
Nominee |
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Address : |
E-61, Maker
Kundan Garden, Opp Lido Cinema, Juhu Road, Santacruz (West), Mumbai – 400
049, Maharashtra, India |
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Date of Birth/Age : |
04.06.1956 |
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Date of Appointment : |
21.05.2005 |
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Name : |
Mr. Shivaprakasam
Veersamy Nainar |
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Designation : |
Director |
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Address : |
At Post
Sameerwadi, District Bagalkot – 587 316, Karnataka, India |
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Date of Birth/Age : |
15.04.1945 |
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Date of Appointment : |
21.09.2006 |
KEY EXECUTIVES
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Name : |
Mr. Sanjay
Baubhai Desai |
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Designation : |
Company Secretary
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Address : |
B-401, Bhoomi
Utsav, M G Road, Kandivali (West), Mumbai – 400 067, Maharashtra, India |
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Date of
Birth/Age : |
22.12.1957 |
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Date of
Appointment : |
28.09.2002 |
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Name : |
Mr. Prasad Gupta |
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Designation : |
Company Secretary
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Address : |
Flat No. 602, EMP
– 65, Sector 1, Evershines, Millennium Paradise, Thakur Village, Kandivali
(East), Mumbai – 400 101, Maharashtra, India |
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Date of Appointment
: |
12.12.2005 |
BUSINESS DETAILS
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Line of Business : |
Manufacturing
Sugar, Chemicals, Alcohol, Ethylacetate, Acetic Acid and Generates Power. |
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Products : |
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PRODUCTION STATUS
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Particulars |
Unit |
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Licensed
Capacity |
Installed
Capacity |
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Sugar Units at Sameerwadi, Lease Units at Tambale and Songaon |
M.T. |
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15000 |
11800 |
GENERAL
INFORMATION
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No. of Employees : |
About 1500 |
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Bankers : |
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Facilities : |
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Banking
Relations : |
Satisfactory |
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Auditors : |
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Name : |
Desai Saksena and
Associates Chartered
Accountants |
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Address : |
Laxmi Insurance
Building, 1st Floor, Sir P M Road, Fort, Mumbai – 400 001,
Maharashtra, India |
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Associates: |
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Subsidiaries : |
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CAPITAL STRUCTURE
Authorised Capital :
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No. of Shares |
Type |
Value |
Amount |
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42000000 |
Equity Shares |
Rs. 10/- each |
Rs. 420.000 Millions |
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1800000 |
Redeemable Preference Shares |
Rs. 100/- each |
Rs. 180.000 Millions |
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Total |
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Rs. 600.000
Millions |
Issued, Subscribed & Paid-up Capital :
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No. of Shares |
Type |
Value |
Amount |
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27482500 |
Equity Shares |
Rs. 10/-
each |
Rs. 274.825
Millions |
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1800000 |
12% Redeemable Cumulative Preference Shares |
Rs. 100/-
each |
Rs. 180.000
Millions |
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Total |
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Rs. 454.825 Millions |
FINANCIAL DATA
[all figures are in Rupees Millions]
ABRIDGED BALANCE
SHEET
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SOURCES OF FUNDS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
454.825 |
454.825 |
429.825 |
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2] Share Application Money |
0.000 |
0.000 |
0.000 |
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3] Reserves & Surplus |
527.027 |
492.238 |
385.093 |
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4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
981.852 |
947.063 |
814.918 |
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LOAN FUNDS |
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1] Secured Loans |
2541.831 |
2346.219 |
2344.505 |
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2] Unsecured Loans |
803.721 |
417.221 |
526.786 |
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TOTAL BORROWING |
3345.552 |
2763.440 |
2871.291 |
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DEFERRED TAX LIABILITIES |
85.990 |
65.393 |
25.799 |
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TOTAL |
4413.394 |
3775.896 |
3712.008 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
2010.376 |
1994.122 |
1966.334 |
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Capital work-in-progress |
143.445 |
125.185 |
136.117 |
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INVESTMENT |
3.092 |
3.093 |
2.385 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
2254.984
|
1807.023 |
1506.613 |
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Sundry Debtors |
355.031
|
432.381 |
248.289 |
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Cash & Bank Balances |
58.745
|
85.085 |
54.501 |
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Other Current Assets |
0.000
|
0.000 |
0.000 |
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Loans & Advances |
391.768
|
186.495 |
280.046 |
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Total
Current Assets |
3060.528
|
2510.984 |
2089.449 |
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Less : CURRENT LIABILITIES & PROVISIONS |
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Current Liabilities |
811.703
|
875.724 |
484.094 |
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Provisions |
14.435
|
15.644 |
15.164 |
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Total
Current Liabilities |
826.138
|
891.368 |
499.258 |
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Net Current Assets |
2234.390
|
1619.616 |
1590.191 |
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MISCELLANEOUS EXPENSES |
22.091 |
33.880 |
16.981 |
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TOTAL |
4413.394 |
3775.896 |
3712.008 |
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PROFIT & LOSS
ACCOUNT
|
PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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Sales Turnover |
4636.780 |
4647.319 |
4024.792 |
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Other Income |
83.002 |
47.369 |
0.000 |
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Total Income |
4719.782 |
4694.688 |
4024.792 |
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Profit/(Loss) Before Tax |
71.739 |
159.093 |
41.070 |
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Provision for Taxation |
36.950 |
56.594 |
0.000 |
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Profit/(Loss) After Tax |
34.789 |
102.499 |
41.070 |
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Earning in Foreign Currency |
143.931 |
208.447 |
90.589 |
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Total Imports |
4.579 |
378.516 |
341.059 |
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Expenditures : |
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Lease Rent |
71.553 |
16.128 |
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Manufacturing Expenses |
1186.053 |
926.599 |
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Raw Material Consumed |
3021.580 |
3595.816 |
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Purchases made for re-sale |
43.350 |
57.558 |
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Increase/(Decrease) in Finished Goods |
[136.063] |
[548.936] |
3983.722 |
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Interest |
282.515 |
279.437 |
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Extra Ordinary Items |
28.844 |
68.266 |
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Depreciation & Amortization |
150.211 |
140.727 |
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Total Expenditure |
4648.043 |
4535.595 |
3983.722 |
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KEY RATIOS
|
PARTICULARS |
|
31.03.2007 |
31.03.2006 |
31.03.2005 |
|
PAT / Total
Income |
(%) |
0.73
|
2.18 |
1.02 |
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Net Profit Margin (PBT/Sales) |
(%) |
1.54
|
3.42 |
1.02 |
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Return on Total Assets (PBT/Total Assets} |
(%) |
1.41
|
3.53 |
0.98 |
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Return on Investment (ROI) (PBT/Networth) |
|
0.07
|
0.16 |
0.05 |
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Debt Equity Ratio (Total Liability/Networth) |
|
4.24
|
3.85 |
5.16 |
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|
Current Ratio (Current Asset/Current Liability) |
|
3.70
|
2.82 |
4.18 |
LOCAL AGENCY
FURTHER INFORMATION
Fixed Assets
- Land
- Live Stock
- Buildings
- Plant & Machinery
- Agricultural Machinery
- Office Equipments
- Motor Vehicles
ECONOMICS AND
POLITICS DO NOT MIX!!!
The past year has
been a roller coaster ride. Sugar prices fell just as quickly as they had gone
up. The year saw Government interference in the trade of sugar &
implementation of open access policy in co-generation of power.
The reduction of
the European Union sugar exports from the world market had increased
International sugar prices to all time highs. This price increase enabled
Indian sugar producers to export sugar at good prices. However, this honeymoon
was short lived. The Government of India banned the export of sugar in June
2006 even though the sugar crop for season 2006-07 was supposed to be a record
high. Higher cane prices of the previous year had encouraged farmers to plant
more cane and a good monsoon had created good yields. Further, high sugar
prices had spurred large investments in sugar capacity in India and Brazil.
The ban on sugar
exports compounded the supply surplus. As a result, Indian sugar prices fell
from 17 Rs./kg. to less than 11 Rs./kg. International prices fell from 20 c/lb
to 10 c/lb, in less than 6 months. The crisis was real and unprecedented. The company foresaw the price fall, and
requested its cane growers to accept a lower sugarcane price. The leaders of
farmers association in Maharashtra & North-West Karnataka including those
at Sameerwadi, insisted on higher prices and were supported by external forces.
The standoff between farmers and sugar mills affected working of sugar
factories in Maharashtra and N. Karnataka. The company alone embarked on a
public relations campaign, aimed at convincing the farmers to accept lower
price. After 76 days of standoff, the large majority of farmers convinced their
association to accept, the Source ground realities of depressed sugar prices
and abundant cane, and that cane would deteriorate if the factory was not
allowed to operate. The export ban was lifted in January 2007 due to buoyant
production during the season.
Exit from Indira
Sugar Factory
The company had
acquired Indira Gandhi B.M.V. SSK Sugar factory on lease in the year 2005 which
was a standalone Sugar factory. The lessor of Indira Sugar Cooperative wanted
the sugar mill back, and cancel the lease arrangement. Due to difficulties in
working with their lessor, the company agreed
to the termination
of the lease subject to its interests and concerns being addressed. Although
initially the negotiations were difficult both parties mutually decided the
final settlement.
Ethanol Policy
Due to limited
domestic crude oil reserves, India meets about 72 percent of its crude oil and
Petroleum products requirement through imports. India’s import expenditure has
nearly doubled due to the escalation in global oil prices.
The increase in
oil prices has fueled the demand for Ethanol. Efforts to produce ethanol from
other feed stocks like sweet sorghum, sugarbeet, sweet potatoes, etc. are at an
experimental stage.
The government’s
ethanol Policy (EBP) has led to over 110 distilleries modifying their plants to
include ethanol production with the total ethanol production capacity of 1.3
billion liters per year.
The Government has
now plans for third phase i.e. to introduce 10 % EBP. However to meet this
requirement capacity additions and sugarcane juice based Ethanol needs to be
implemented. Ethanol has been used in India as a feedstock for the production
of chemicals and in the manufacture of potable liquor. In the recent past, much
has been written about ethanol as a fuel for the purposes of transportation.
Brazil has been a pioneer in the use of ethanol in car engines, and cars in
Brazil today can use hydrous ethanol (rectified spirit), anhydrous ethanol, and
petrol, in any combination.
India is the
second largest producer of sugarcane in the world after Brazil) and the natural
question is whether India too can meet its energy needs from ethanol. Indian
sugarcane is processed into sugar, and the molasses is used for fermentation to
ethanol. Sugarcane is currently used to produce sugar for domestic consumption,
some exports (when Government policy allows and the prices are favorable) , and
the by-product molasses is used to produce ethanol.
India is producing
more sugar than it needs, by about 10 million tons, and most of this will be
stored in the warehouses. The resultant oversupply is creating a downward
pressure on the market price of sugar, affecting the economics of the sugar
industry, and consequently on the livelihoods of the millions of sugarcane
farmers that the industry supports. The Government has attempted to address
this oversupply by means of a buffer stock of 5 million tons, and has recently
mandated the 5% blending of ethanol as a fuel effective October, 2007. This
will be raised to 10% from 1 October, 2008.
This policy
attempts to treat sugar and ethanol also as substitutes. It is the only way of
consuming cane, providing remunerative prices to farmers, and a new product to
make and market to the millers. Finally it addresses the nation’s energy
security by replacing part of its petrol consumption.
To meet the
opportunity created by this policy, the company is planning to more than triple
the ethanol capacity at its location at Sameerwadi. It plans to increase sugar
capacity from 60,000 liters/day to 200,000 liters per day. This capacity will
not only exhaust all the molasses produced by the company, but also enable the
company to optimize between sugar and ethanol.
The company early
planned this in anticipation of the opportunity, beginning in May 2007.
Environmental clearances take time and the company hopes that the enhanced
capacity is operational by mid 2008.
Ethanol can do
much more!!
In their opinion,
with the right public policy, biology, extension services, micro finance and
product distribution, the country can produce more than enough ethanol to
substitute all the current petrol consumption in India. The chart above shows
how a future world may look.
There will be
plenty of skeptics who will find these results impossible. However, they are
planning for the nation’s future and not simply for the next one year. The
chart demonstrates that incremental changes can make a large impact on resource
availability. There is a need to bring together a common will and diverse
expertise. The results cannot be achieved nationally if approached
independently. Governments, research institutions, universities, companies,
bankers, NGOs and farmers have to work together to achieve the goal. It is in
their best and long term interest.
Chemicals
The Company has
successfully enhanced the capacity of Ethyl Acetate Production and is one of
the largest Manufacturer & Exporter of the product from India. The product
quality has been widely accepted, and considering the increasing demand
internationally, the company is evaluating further expansion.
Cogeneration
Electricity, Open
Access and Carbon Credits
The company
successfully started selling electricity under the ‘open access’ provisions of
the New Electricity Act of the Government of India, that was implemented in
Karnataka. The company is being paid much better rates of power by Tata Power
Trading Company Ltd and the money is paid within seven days.
The company has
also managed to recover about 50% of its outstanding dues from the Karnataka
Power Transmission Corporation Ltd. However, it still has a balance outstanding
and is pursuing a legal recourse to recover its dues.
Carbon Credits
relating to the company’s 24 MW cogeneration project have been registered at
the UNFCCC. The company is awaiting the issuance of 170,000 tons of
retrospective credits for the period April 2002 - March 2007, and is further
eligible to receive credits until 2009. The company can then reapply for
credits for a further period of 7 years.
At the current
capacity of 24 MW per hour, the company exports about 40 units per ton of cane
crushed at its Sameerwadi location. The company is planning to expand this
capacity by 20 MW per hour, to bring the export power to 80 units per ton cane
crushed. The project will result is the further creation of green power,
mitigating climate change, and will be eligible for further Carbon Credits.
Future Outlook
Keeping in view
the emerging trend in the energy sector the company envisions a focused
approach on Ethanol and Power. They have outlined investments to encash this
opportunity. The company has the following projects in the pipeline
1. Distillery
capacity expansion (Continuous Fermentation) up to 200 KLPD
2. Optimization
& Modernization of Sugar capacity to 9800 TCD
3. Increase in
Cogeneration capacity from 24 MW per hour to 44 MW per hour.
4. Expansion in
value based solvents, based on chemicals & diversification of products
5. Increase in
Productivity of finished products & utilities
Balancing act to
optimize the revenue mix
- The Sameerwadi Sugar factory started
its crushing season late on 16th December 2006 instead of October 2006.
This was due to their refusal to accept the unreasonable cane price
demands of the cultivators’ association, as they had anticipated in
advance, the fall in sugar prices.
- Following the Ban on Sugar exports in
June 2006, Sugar Prices drastically declined without a corresponding
decline in the cane price affecting the company’s performance.
- The company, however to mitigate this
impact introduced for the first time in its history, Differential Cane
Price fixation strategy.
- Exit From Indira Gandhi B.M.V. SSK
Ltd., Kolhapur
Differential Sugar
Cane Pricing Strategy
The year 2006-07
was a difficult year for the Indian Sugar Industry. As sugar prices went bottom
low, there was a need to balance the reversing economics. For the first time in
the history of the company, as well as that of the Industry, “Cane price
differentiation” was coined as a strategy to link the cane cost to recovery,
thereby offering different cane price to different varieties of cane. 76 days
after the standoff, the farmers accepted, and the company finally succeeded in
reducing cane prices, and with farmer acceptance. At the end of the season, all
the farmers that supplied cane to the company have been paid, and there are no
cane arrears while the sugarcane price arrears of Indian sugar industry are
around Rs. 35000 Millions,. In the case of the other mills, where higher cane
prices were promised, a large number of farmers received no money at all.
Accordingly high
recovery cane variety was awarded more of cane price as compared to lower
variety cane varieties. This broke the age-old rigidity of cane cost and linked
the same to yields.
Increase in
Crushing:
The company
increased its Crushing from 18 Lac MT in Season 2005-06 to 19 Lac MT in Season
2006-07. This marginal increase was due to the lease factories operating during
the year. They would have achieved higher production numbers had there not been
loss of crushing operations at Sameerwadi Sugar factory to the extent of 76
days due to Sugar Cane price agitation.
Export Ban on
sugar
To address what it
felt was a high price of sugar, the Government of India banned the export of
sugar in June 2006. The resulting collapse of sugar prices both in local &
international markets resulted in a fall in cane price and cane payment arrears
in the country. The Government has since re-opened the exports of sugar, and is
finding ways and means of incentivizing sugar exports.
The highest Indian
sugar production was recorded in the season 2006-07. Indian mills were well on
their way to producing over 28 million tons of sugar, well over the demand of
20 million. Sugar prices continued to slide, and the Indian Government, who had
banned exports now lifted the ban.
The company immediately
targeted the export of 50,000 tons before the monsoons. India would triple its
opening stock in October 2007, but the company would endeavour to keep its
opening stock the same. I am proud to say, that in the past six months, since
the lifting of the export ban, the company has exported about 60,000 tons of
sugar.
Exit from Indira
Sugar Factory
The company had
acquired Indira Gandhi B. M. V. SSK Sugar factory on lease in the year 2005
which was a standalone Sugar factory. The lessor of Indira Sugar Factory
desired to have the sugar mill back, and cancel the lease arrangement. Due to
difficulties in working with their lessor, the company agreed to the
termination of the lease subject to its interests and concerns being addressed.
Although initially the negotiations were difficult both parties mutually
decided to cancel the lease agreement & hand over the factory back to the
lessor.
Increase in
Turnover
The Company’s
Turnover of the Distillery & Chemical Division increased from Rs. 1347.200
Millions for the previous year 2005-06 to Rs. 1473.200 Millions during the year
ended March 31st 2007.
Ethanol has been
used in India as a feed-stock for the production of chemicals and in the
manufacture of potable liquor. In the recent past, much has been written about
ethanol as a fuel for the purposes of transportation. Brazil has been a pioneer
in the use of ethanol in car engines, and cars in Brazil today can use hydrous
ethanol (rectified spirit), anhydrous ethanol, and petrol, in any combination.
India is the
second largest producer of sugarcane in the world (after Brazil) and the
natural question is whether India too can meet its energy needs from ethanol.
Indian sugarcane is processed into sugar, and the molasses is used for
fermentation to ethanol. Sugarcane is currently used to produce sugar for
domestic consumption and exports (when Government policy allows and the prices
are favorable), and the by-product molasses is used to produce ethanol.
India is producing
more sugar than it needs, generating surplus of about 10 million tons, and most
of this will be stored in the warehouses. The resultant oversupply is creating
a downward pressure on the market price of sugar, affecting the economics of
the sugar industry, and consequently on the livelihoods of the millions of
sugarcane farmers that the industry supports. The Government has attempted to
address this oversupply by means of a buffer stock of 5 million tons, and has
recently mandated the 5% blending of ethanol as a fuel effective October, 2007.
This will be raised to 10% from 1 October, 2008.
This policy
attempts to treat sugar and ethanol also as substitutes. It is the only way of
consuming cane, providing remunerative prices to farmers, and a new product to
make and market to the millers. Finally it addresses the nation’s energy
security by replacing part of its petrol consumption.
To meet the
opportunity created by this policy, the company is planning to more than triple
the ethanol capacity at its location at Sameerwadi. It plans to increase distillery
capacity from 60,000 liters/day to 200,000
liters/day. This capacity will not only exhaust all the molasses produced by
the company, but also enable the company to optimize between sugar and ethanol.
The
company planned this in anticipation of the opportunity, beginning in May 2007.
Environmental clearances take time and the company hopes that the enhanced
capacity is operational by mid 2008.
Ethanol can do
much more!!
In their opinion,
with the right public policy, biology, extension services, micro finance and
product distribution, the country can produce more than enough ethanol to
substitute all the current petrol consumption in India.
They are planning
for the nation’s future and not simply for the next one year. Incremental
changes can make a large impact on resource availability. There is a need to
bring together a common will and diverse expertise. The results cannot be
achieved nationally if approached independently. Governments, research
institutions, universities, companies, bankers, NGOs and farmers have to work
together to achieve the goal. It is in their best and long term interest.
Reduction in
Turnover:
The Company’s
Turnover of the Co-generation Division reduced from Rs. 3710 Lacs for the
previous year 2005-06 to Rs. 3058 Lacs during the year ended March 31st, 2007.
This was due to loss of operations pertaining to the month of October, November
and half of December. However the benefit was captured in the form of Open
access & Carbon Credit, which mitigated the downside.
The company has
also managed to recover about 50% of its outstanding dues from the Karnataka
Power trading Corporation. However, it still has a balance outstanding and is
pursuing a legal recourse to recover its dues.
Open Access –
Competitive Strength:
Under the
Electricity Act 2003 & subsequent notifications & clarifications from
time to time, Open Access for sale of power to third parties has been made
possible.
Third Party Sale
of Power
Under Open Access
the company has started selling Power to Tata Power Trading & Corporation
Limited at lucrative rates. thereby improving the profit margin, the average
selling rate was Rs. 4330/MWH for the F.Y. 2006-07.
Clean Development
Mechanism (CDM Project)
The alarming
increase in global warming has led to the Kyoto Protocol whereby the
signatories have committed to contain the emission of Green House gases.
Developed countries are increasingly looking for the use of renewable energy
sources. The opportunity for India arises from the demand for carbon credits
that developed countries can buy to honor their commitments.
United Nations
Framework Convention of Climate Change (UNFCCC) has formulated a rigorous and
transparent system by which CDM project reports submitted by organizations are
validated and verified by designated independent international agencies.
Following the satisfactory completion of all formalities and submission of
validating and verification other way reports by the designated agencies,
UNFCCC issues CER‘s (Certified Emission Reduction), which can be traded on the
international exchanges.
The Board takes
immense pleasure in informing that the Company’s Cogeneration Power project has
been registered under Clean Development Mechanism (CDM) on 4th May 2007 with
United Nations Frame-work Convention of Climate Change (UNFCCC), as approved
project to avail the CDM.
Going forward they
shall be entitled to approximately 90000 CERs per annum till F. Yr 2008-09
depending upon extent of their accomplishments as verified and validated by the
designated agencies.
The Company is in
the process of obtaining the necessary approvals (certification from the
designated agencies) to get its cogeneration project registered with United
Nations Framework Conversion on Climate Change (UNFCCC). This will enable it to
see verified Certified Emission Reduction CER’s)
They believe that
apart from financial and economical benefits arising out of this project, the
approval of their CDM project denotes ample testimony of their efforts in
enriching their environment and conserving resources.
Future Outlook
At the current
capacity of 24MW per hour, the company exports about 40 units per ton of cane
crushed at its Sameerwadi location, the company is planning to expand this
capacity by 20MW per hour, to bring the export power to 80 units per ton
crushed. The project will result in further creation of green power, mitigating
climate change, and will be eligible for further Carbon Credits, apart from
improving the competitiveness of the Company‘s operations at Sameerwadi.
Contingent Liabilities [Not Provided For]:
[Rs. In Millions]
|
a)
Claims against the Company not acknowledged as Debts: |
|
|
Particulars |
As on 31.03.2007 |
|
Sales tax
liability that may arise in respect of matters in appeal |
12.992 |
|
State Excise
liability that may arise in respect of matters in appeal |
1.081 |
|
Central Excise /
Service Tax Liability that may arise in respect of matters in appeal |
30.709 |
|
Income Tax
Liability (Including Interest that may arise in respect of matters in appeal) |
1.012 |
|
b)
Arrears of Cumulative Preference Share Dividend |
86.400 |
|
EXTRA-ORDINARY
ITEMS: |
|
|
Certified
Emission Reduction Credit |
84.737 |
|
Cane Price of
Previous years [Pertaining to
seasons 2002-03, 2003-04 and 2004-05, as the final price of the cane was
settled during the year 2005-2006. Pertaining to
seasons 2005-06 as the matter finalized during the year 2006-2007 Pertaining to
years 2002-03 to 2005-06] |
113.581 |
1) Estimated amount of contract remaining to be executed on
capital account and not provided for Rs. 34.000 Millions (Previous Year – Rs.
11.200 Millions.]
2) For the Financial year, Company is entitled for the rate
of Rs. 4.02 per KW for the energy exported as per the Power Purchase Agreement
(PPA) executed with Karnataka Power Transmission Corporation Limited (KPTCL) on
8th October 1999. However during the year under review KPTCL has paid at the
rate of Rs. 2.80 per KW as per interim order dated 22nd July 2004 of Honorable
High Court of Karnataka.
The Company has contested the unilateral action of KPTCL in
reducing the tariff before The Honourable High Court of Karnataka and the
matter is subjudice. In the meantime Karnataka Electricity Regulatory
Commission (KERC) has declared that PPA approved by them before 10th June 2004,
are eligible for tariff as per the approved PPA rates. Further a Senior Counsel
has also opined that the Company is entitled for tariff as per PPA rate.
Notwithstanding the above, pending the final order of The
Honourable High Court of Karnataka, the Company has conservatively considered
the income of power sales to KPTCL/HASCOM at the rate of Rs. 3.60 per / KW i.e.
less by Rs. 0.42 per/KW as compared to the PPA rate of Rs. 4.02 per/KW. The
amount receivable from KPTCL is considered good. Under the Open Access policy
of the government the company is supplying power to Tata Power.
3) The Co-generation Project has been registered for Carbon
Trading on 4th May 2007 under Clean Development Mechanism (CDM) with United
Nations Framework Convention of Climate Change (UNFCCC) as “approved” project
to avail the CDM benefit. Simultaneously, the Company had also appointed M/s
SGS, Gurgaon, Haryana, as the Verifier for the verification of our “Monitoring
Report” and to verify the estimated accrued Carbon Emission Reduction (CER)
units till 31.03.2007. The Verification reports have been submitted to UNFCCC
on 13.09.07. This report will remain posted on the website of UNFCCC and
thereafter, UNFCCC will be issuing certified CERs. The Company would then be
able to sell the CERs at the prevailing rates for Certified CERs. The current
quoted price for each CER is around Euro 14 (1 Euro = Rs. 57.642). Estimated
accrued CERs till March 2007 is 1,70,102 nos. (Out of which for 2006-07 is
54,713 nos.).
The total value (net of expenses) will be around Rs.
124.900 Millions. On the aforesaid we have credited Rs. 40.179 Millions to
Other Income for the year 2006-2007 and Rs. 84.737 Millions shown as income
under extraordinary items.
4) Certain balances of Debtors, Creditors and loans from
Financial Institutions, Banks and loans & advances are subject to
confirmation.
Form 8
Bankers Charges
Report as per Registry
Name of the Company : Godavari Sugar Mills
Limited
Presented by : -- Godavari Sugar Mills Limited
|
1. Date and
description of the instrument creating or evidencing the charge |
Second
supplemental joint deed of hypothecation dated 09.06.2004 Supplemental
memorandum of entry relating to deposit of title deeds dated 09.06.2004 Both the above
documents constitute single charge. |
|
2. Amount secured
by the charge /amount owing on security of the charge |
Rs. 122.450
millions |
|
3. Gist of the
terms and conditions and extent and operation of the charge. |
To secure due
repayment, discharge and redemption of the credit facilities together with
interest, costs, charges, expenses and other monies payable by the company to
the consortium banks. Rate of Interest
and Margin : as per copies of sanction letter from Bank of Baroda and
Syndicate Bank |
|
4. Names, address
and description of the persons entitled to charge |
Bank of Baroda,
Corporate Financial Services Branch, 10/12, Mumbai Samachar Marg, Fort,
Mumbai – 400 001, Maharashtra, India Syndicate Bank,
Industrial Finance Branch, 10, Homji Street, 3rd Floor, Fort,
Mumbai – 400 001, Maharashtra, India |
|
5. Date and brief
description of instrument modifying the charge |
N A |
|
6. Particular of
modification specifying the terms and conditions or the extent
or operation of the charge in which modification is made and the details of
modification |
N A |
CMT REPORT
(Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts, India Prisons Service,
Interpol, etc.
1] INFORMATION ON DESIGNATED
PARTY
No exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No
available information exist that suggest that subject or any of its principals
have been formally charged or convicted by a competent governmental authority
for any financial crime or under any formal investigation by a competent
government authority for any violation of anti-corruption laws or international
anti-money laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE
GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE
RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs. 39.93 |
|
UK Pound |
1 |
Rs. 79.34 |
|
Euro |
1 |
Rs. 62.55 |
SCORE & RATING
EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
9 |
|
PAID-UP CAPITAL |
1~10 |
7 |
|
OPERATING SCALE |
1~10 |
7 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
9 |
|
--PROFITABILIRY |
1~10 |
6 |
|
--LIQUIDITY |
1~10 |
8 |
|
--LEVERAGE |
1~10 |
8 |
|
--RESERVES |
1~10 |
7 |
|
--CREDIT LINES |
1~10 |
7 |
|
--MARGINS |
-5~5 |
-- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
NO |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
68 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history (10%) Market trend (10%) Operational size
(10%)
RATING
EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Unfavourable & favourable factors carry similar weight in credit
consideration. Capability to overcome financial difficulties seems
comparatively below average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
NR |
In view of the lack of information, we have no basis upon which to
recommend credit dealings |
No Rating |
|