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Directors Report of Simbhaoli Sugars Ltd.

Mar 31, 2016

The directors have pleasure in placing the fifth Boards'' report together with management discussion and analysis report for the financial year ended on March 31, 2016.


International Sugar Industry

Global sugar balance is expected to enter into a sizable deficit of 7.6 million metric tons (mmt) in 2015-16 season, after 5 years of consecutive surplus. Sugar production globally has stagnated in the recent years with reduction in Brazil, India, the European Union, and Ukraine more than offsetting gains in Australia, Russia, and Turkey. On the other hand, sugar consumption is seen rising 1.5% per year in 2015 and 2016.

During the year 2015-16, in Thailand and India, sugarcane production was hit by dry weather, which is associated with the El Nino effect. Thai sugar production may reach to an aggregate 10.0 mmt in 2015-16 season, which is 11.5 per cent lower than record 11.3 mmt of sugar produced in the 2014-15 season. Indian production is also being seen lower by 3.2 mmt to 25.1 mmt playing a pivotal role in influencing the global market. Adverse weather conditions triggered production downgrades for China with total output now expected at 9.4 mmt.

Sugar prices in New York have rebounded by nearly 43% since reaching a seven-year low in August 2015, after El Nino cut the sucrose contents in sugar cane grown in Brazil as well as yields in Thailand and India.

Domestic Sugar Industry Scenario

India, the world''s biggest consumer of sugar, is likely to produce 25.1mmt of the sweetener in the 2015-16 sugar year ending on September 30, down 11.3% from a year ago. A few sugar mills were continuing their crushing operations, while most of the sugar mills have closed the operations in April 2016. The Country''s sugar production data is given hereunder:

(fig. in mmt)

Particulars /Sugar Year

2014-15 (P)

2015-16 (E)

Change %

Opening Stock as on 1st Oct




Production during the Season







Total Availability











Closing Stock as on 30th Sept




Stock as % of Off-taker




Source: ISMA estimates

Considering the number of sugar mills, which are in operation as on April 30, 2016, and cane availability in these states, sugar production in the current season is expected to be just above 25.1 mmt by the end of September 2016. However, with the carry forward of 9.1 mmt from previous season and estimated domestic consumption of 25.6 mmt and exports of 1.5 mmt, sugar mills would have a carry-over stock of 7.1 mmt at the end of the current season. Hence, the Indian sugar industry has been turning around with effect from the second half of FY 2015-16 with increase in sugar prices and lower cost of production due to higher sugar recovery in U.P., where the sugar mills have produced 6.8 mmt till April 30, 2016 as compared to 7.0 mmt last year.

Maharashtra/Karnataka (high yield states) received below normal rains in 2015 with consequent yield losses in sugar production. Maharashtra mills produced 8.4 mmt of sugar till April 30, 2016 as compared to 10.4 mmt last year and Karnataka mills produced 4.0 mmt compared to 4.8 mmt last year.

Government of India notified MIEQ (Minimum Indicative Export Quota) of 3.2 mmt to be exported during 2015-16 sugar season. Against this, 1.44 mmt of sugar have been exported till April, 2016. Since, sugar prices in the domestic market have improved and exports from India at the current global prices are not viable, it is expected that total export for the current season will be 1.5 mmt.

Price Trend

A mix of factors, such as better recoveries, government''s mandatory export quota, successful ethanol blending programme and lower production forecast for the next season have led to better business prospects for the sugar industry and improvement in domestic prices starting from January, 2016.

The drier than normal weather conditions seen so far in 2016, although positive for the progress of the harvest, is exacerbating water shortages (particularly in central/ western regions) with potential negative impact on new crop planting. The projected fall in output by 8-10% in next season will reduce the sugar stock, which may result in the improvement and a constant demand for consumption, of sugar prices in subsequent year.


The fair and remunerative price (FRP) of sugarcane for sugar season 2015-16 is fixed at Rs.230 per quintal, linked to basic recovery at the rate of 9.5%, subject to premium of Rs.2.42 per qtl. for every 0.1 percentage point increase in recovery above that level.

Major producers such as Uttar Pradesh, Tamilnadu, Haryana, Punjab and Uttarakhand continued with their sugarcane pricing policies as per the past practices of announcing State Advised Prices (SAPs), whereas states like Maharashtra and Karnataka are considering rationalization of their sugarcane pricing by linking it to the sugar prices.

As compared to the cane price arrears of 2015-16 sugar season of over Rs.21,800 crore as on April 2015 last year, cane price arrears during the current season are lower at about Rs. 13,300 crore. With the improvement in domestic market, it is expected that cane price payments to the farmers will improve and arrears will come down substantially further in the next few months.

As per the agriculture ministry''s second advance estimates, sugarcane production is estimated to decline to 346.39 mmt in 2015-16 crop year (July-June), which is lower by 15.95 million tonnes than its production during 2014-15. This is primarily due to deficient monsoon rainfall during Kharif crops and Rabi crops due to shortage of water in reservoirs and relatively warmer winter.

Domestic Ethanol Industry

Government decided to boost ethanol production by making 10% mandatory blending with petrol from October 2015. To boost the supply, Government replaced procurement of ethanol based on a benchmark price decided by Oil Marketing Companies (OMCs) by a new mechanism of uniform price of ethanol declared for each sugar year. The delivered price of ethanol has been fixed in the range of Rs.48.50 to Rs.49.50 per litre, depending upon the distance of sugar mill from the depot/installation of the OMCs. The government has removed the excise duty on ethanol supplied for blending for 2015-16 onward. This would increase in net realization by around Rs.5/litre of ethanol.

The total quantity of ethanol procured by the OMCs for the sugar season 2014-15 (December 2014 to November 2015) is approx. 67 crore litres. This is against the contracted quantity of 80 crore litres, which works to 82.5% and the country achieved 2.5% ethanol blending with petrol.

During the current season 2015-16 (till November 2016), OMCs have finalized total ethanol quantity of 135 crore litres against the total requirement of 265 crore litres to meet the 10% blending. It means that the country will be able to achieve 5% blending for the first time in the history of ethanol blending with petrol programme.

Government Policies

Policy related decisions taken during the year under review are:

April 2015: In order to improve the price sentiments relating to sugar, the Government decided to take the following steps:

(i) The duty on import of sugar under the Open General License (OGL) is increased from 25 to 40%.

(ii) The Duty Free Import Authorization Scheme (DFIA), for sugar is withdrawn to prevent flow of sugar made from such duty free imports in the domestic markets.

(iii) The period for discharging export obligations under the Advanced Authorization Scheme for sugar is reduced to six months.

(iv) Removal of excise duty on ethanol supplied for blending, which was exempted and the price benefit is passed on to the sugar mills/distilleries.

June 2015: Provisions for the assistance from banks as soft loans to the extent of Rs.6000 crore to the sugar industry with a one year moratorium towards clearance of arrears of cane dues, to those units, which have cleared at least 50 percent of their outstanding arrears before June 30, 2015.

September 2015: Notification for factory-wise allocation of 40 lac tons of sugar for exports during 2015-16 sugar season.

December 2015: Production subsidy at the rate of Rs.4.50 per quintal of cane crushed to offset cane cost, which shall be paid directly to the farmers on behalf of the mills and be adjusted against the cane price payable to them towards FRP including arrears relating to previous years. This incentive will be available to those mills, which have exported at least 80% of the targets notified under the MIEQ and in case of mills having distillation capacities to produce ethanol have achieved 80% of the targets notified by the Department under the Ethanol Blending Proramme (EBP).

April 2016: States are allowed to impose and enforce stock limits to check the price rise in sugar to regulate supply, distribution, storage and trade of sugar, which may bring down sugar prices to reasonable levels.

Business description: Operating capacities

Simbhaoli group has three sugar complexes located at Simbhaoli (Western Uttar Pradesh), Chilwaria (Eastern Uttar Pradesh) and Brijnathpur (Western Uttar Pradesh), having an aggregate sugarcane crushing capacity of 19,500 tons crushed per day (TCD) including a refining capacity of 2,000 tons per day (TPD) for raw sugar processing, Interchangeable with cane crushing capacities while, the sugarcane is not available during off seasons.













Simbhaoli (Western UP)





Brijnathpur (Western UP)





Chilwaria (Eastern UP)










$Simbhaoli Power Private Limited, subsidiary company

The sugar business is integrated with alcohol and power. The power co-generation units of SPPL located within the Simbhaoli and Chilwaria complexes and capable to generate bio-mass based power aggregating 100 mwh for supplying the power for the captive consumption of the sugar plants and sale of surplus power to the UP State grid under the power purchase agreements.

Business Restructuring and Scheme of Amalgamation

The Scheme of Amalgamation between erstwhile Simbhaoli Sugars Limited (''Amalgamating Company'' or ''ESSL'') and Simbhaoli Spirits Limited (''Amalgamated Company'' or ''the Company'' or ''SSL'') and their respective shareholders and creditors under Section 391 to 394 of the Companies Act, 1956 (''the Scheme'') was sanctioned by Hon''ble High Court of Judicature at Allahabad pursuant to its order dated October 15, 2015 (''Order''). The Order was filed with the Registrar of Companies, Uttar Pradesh Kanpur, and then the Scheme became effective on November 13, 2015 with effect from the appointed date, being April 1, 2015 and consequent thereto, the entire business undertakings of ESSL, stand transferred to and vested in the SSL, as going concern. In this regard, November 26, 2015 was fixed as the Record date to determine the shareholders, who would be entitled to the shares of the Amalgamated Company and accordingly, 3,74,79,020 equity shares were issued and allotted in pursuance to the Scheme.

Change of Name

Pursuant to the Scheme, the name of the Company stands changed to "Simbhaoli Sugars Limited" from "Simbhaoli Spirits Limited" with effect from November 13, 2015.

Sugarcane price arrears

Over the last few years, the Company and erstwhile SSL have been incurring cash losses affecting their liquidity. The Uttar Pradesh based sugar companies have been facing financial difficulties on account of high sugar cane prices, lower realization of sugar and high finance cost. However, with various initiatives by the management, including business and financial restructuring of the business and steps being taken by the State and Central Governments to strengthen the sugar industry, the Company would turnaround this situation in the near future and the business operations of the Company are sustainable and viable.

Impact of the industry scenario on the business

In the situation of constrained working capital, the Company has completed 8386 tonnes white sugar export out of total 20,000 tonnes export obligation required against the import of raw sugar made by the Company during previous years. The Company has applied for extension of time to complete its obligation.

The sugar industry in the state of Uttar Pradesh had been passing through a very difficult phase and had incurred heavy cash losses consistently for the last four years on account of fixing of high State Advised Price (SAP) for sugarcane without giving due consideration to the cost of production/ price of sugar/ paying capacity of the sugar mills. On the other hand, the sugar prices did not increase in the same proportion resulting in negative margins as much that sugar prices were not sufficient enough for cane payment alone. The coercive actions by the local administration often affect the operations, dispatches of sugar and inconsistency in cash flows.

However, the Company''s current sugar operations have improved over the previous seasons and are expected to improve further in the next season on account of the development initiatives taken. Further, sugar industry has started moving in the positive directions and alcohol business is also growing positively. The ethanol industry is also expecting to take advantage of the world ethanol demand with the increase in production and supply to outside India. The domestic sugar industry has started showing signs of improvement with the implementation of various measures taken by the Central and State governments having a direct impact on the business of the Company, which includes:

a. Mandatory blending of ethanol with petrol to be doubled from 5 to 10%. Current year prices are ''48.50 per litre.

b. Increase in import duty to 40% to discourage import of sugar.

c. Export duty of 20% on export of white sugar owing to limited supply in the country.

In addition, the Company has improved its operational efficiencies with the increase in the recovery vis-a-vis last 2 sugar seasons. It has emerged as one of the largest sellers of Specialty Sugars, which includes sachets, consumer packets, pharma sugar etc under its flagship brand TRUST, which commands substantial premium over and above the bulk sugar prices. Further, in current situation, the Company has rationalized its administrative, processing and procurement costs.

Outstanding dues of the financial institutions

The Company has proposed a Debt Realignment Scheme under the Corporate Debt Restructuring (CDR) mechanism of the Reserve Bank of India (CDR Scheme) with the lenders of the Company in consortium under which it has been able to restructure the outstanding liabilities comprising of conversion of loans to term loans including restructuring of the farmer financing and infusion of funds through fresh term loan. The Empowered Group, has approved the said Scheme. The management is confident that implementation of the Scheme with the lenders will be completed within stipulated time. Accordingly, the Company has accounted for all its debts obligations, including classification of current and non-current liabilities giving effect to the approved Scheme in these financial statements. The auditors have drawn attention to this in their audit report on the financial statements for the year ended March 31, 2016, without modifying their opinion.

Further, the CDR package, inter alia mandates for infusion of long term funds by the Promoters. Accordingly, the promoters have commenced the process for infusion of funds in the Company and have approached the Company to initiate the procedure for issuance and allotment of securities in compliance with the applicable laws.

Distillery Operations

The Hon''ble National Green Tribunal, New Delhi (NGT), upheld a complaint against the Simbhaoli Distillery alleging non-fulfillment of certain conditions on pollution and effluent discharge. Accordingly, the operations of the Simbhaoli distillery plant were closed since February 20, 2014. The Company has taken the mitigation steps in this regard and after obtaining the consent from the Central Pollution Control Board (CPCB) and Uttar Pradesh Pollution Control Board (UPPCB), the distillery resumed its operations after 20 months of shut down.


The Company has been consistent in developing its sugar brand, ''Trust''. The sales and marketing infrastructure development exercises for distribution through modern retail and wholesale trade channels have been further strengthened during the year. The market area of ''Sipp'' fruit drink mix has been further expanded. Trust branded sugar sachets have created vast acceptability and leadership in the hospitality industry. Appropriate brand communication investment was carried out to spread brand awareness, and consumer trials. Due to the intervention of the State administration in selling and dispatch of the sugar and liquidity constraints, there has been a mismatch in the supply commitments to the specialty sugar customers, which has affected the expected growth of the specialty sugar business.

In addition, the potable spirits products of the Company includes the following range: Board''s Verdict Premium Whisky, Hunters Matured Rare XX Rum, Xing Vodka, Seven Knights Whisky, XXX Rum. However, during the year, the distillery operations were remain suspended due to the order passed by Hon''ble NGT and the Management has decided to discontinue the production and marketing of these products for the time being.

International Trading

During the year, the international trade was limited due to weak international prices vis-a-vis domestic market. However, the Company has continued trade with selected markets like Nepal, Canada, Hong Kong, Dubai and US. Trust branded sugar has been receiving favorable response from the destinations like Canada and Pacific Islands. L-Grade sugar has established unique place in Canadian market and its volume is growing every year. During the year, the Company has exported 5500 MT sugar under Open General License Scheme. The Company is also exporting Extra Neutral Alcohol (ENA) to various African destinations to generate additional income.

Human resources

The Company follow the fundamental principles of human and workplace rights in all its businesses, which has led to managing a committed and motivated work force. A number of employees'' participation and welfare programs have been carried out during the year. Keeping the philosophy of continuous training and job improvements, the Company has imparted 615 man days of training apart from the regular on the job trainings to its employees. The relation between the management and employees continued to remain cordial at all the locations. The manpower has also been rationalized with the transfer of employees to diversified businesses. The Company has always been vigil against the sexual harassment and a system is in place under which, the employees can make their complaint in this regards. No such complaint has been received during the year.


The areas of operations of the Company and its subsidiary companies are well diversified, with multi products and services spanning over a number of geographical locations. Each of the business segments has its own strengths and weaknesses and is subject to a variety of opportunities and threats. The management is consistently strategizing and planning about the re-structuring exercises for the business revival. The group has the following SWOT attributes broadly:


1. Sugar units are located in the sugarcane-rich state of Uttar Pradesh, North India

2. Well irrigated sugarcane area, which is not much dependant on weather pattern

3. Integrated facilities to produce white sugar using sugarcane and refining of raw sugar

4. High quality of premium range of sugar products with improved yields; attracting a mark-up in domestic and global markets

5. Producing all varieties of sugars including pharmaceutical-grade and specialty sugars

6. Presence in branded and packaged segment which has large growth

7. Refined sugar business through a port based refinery under an associate company Uniworld Sugars Private Limited near Kandla Port, Gujarat under joint venture arrangement with ED & F Man Sugar, UK, London

8. Power Generation capacity under the subsidiary Company Simbhaoli Power Private Limited up to 100 mwh, under joint venture arrangement with Sindicatum Captive Energy Pte. Ltd, Singapore.


1. Highly volatile market prices of sugar in domestic and international markets

2. Cyclical nature of the industry, which is subject to natural and economic cycles

3. Highly leveraged with high interest and fixed costs

4. Lack of parity between cost of production and sale values of sugar resulting in un-paid sugarcane price position

5. Brijnathpur sugar unit is not an integrated sugar complex

6. Continued legal cases/litigation and adverse orders from the Court/Tribunals


1. To command high sugarcane recovery and yields in its reserved zone

2. To further improve sugarcane productivity and quality by varietal changes and development program

3. To be flexible in the refining of raw sugar for improving capacity utilization throughout the year

4. To be a regular trader in the commodities on account of quality, brands and product mix whenever there is a viability


1. Adversities in agro-climatic conditions may impact the sugarcane production

2. Volatile commodity markets have a bearing on international and domestic operations

3. Regulated environment may pose adversities for business decisions

4. Un-hedged positions in sugar and currency markets

5. Directions/coercive actions by the State administration

6. Adverse action by the lenders in case of repayment defaults

Quality management system

The sugar units of the Company are compliant with internationally recognized quality, environment and food safety standards and are ISO 9001, ISO 14001 and FSSC 22000 certified. Management systems are applied to develop a systematic work culture that emphasizes process ownership across all levels of the organization.

Risk assessment and mitigation policy

The sugar industry faces constant pressure from the evolving marketplace that impacts important issues in risk management and threatens profit margins. The business is exposed to several kinds of risks from time to time which include the following:

1. Strategic Risks: These risks are relating to the flux and movement of money and capital in the Company. This will include cash flow management, investment evaluation and credit default. These risks emanate out of the decisions, the Company takes in the markets, resources and delivery of services.

2. Industry and Competition Risks: The risks relating to the sugar and alcohol industry, including competition in the industry, technical landscape, risks arising out of volatilities of the manufacturing lines, and those relating to brands of the Company.

3. Risk of Theft, Pilferage and Non Delivery: The risks relating to theft or pilferage, when the goods manufactured are failed to be delivered to the buyers. The risk of non-delivery concerns a situation where the whole cargo is not delivered to the consignee.

4. Risk of Clash and Breakage: The risk of clash and breakage is mainly referred to the risks associated with the manufacturing output caused due to quiver, bump, squeezing, lacquer desquamation, nick and so on, in transit. Fragmentation is mainly referred to fragile substances and includes loss including breaching and smash in transit due to careless loading and unloading and bumping of conveyance, and may also occur during warehousing.

5. Operational Risks: Most common, and often combatable in all situations, these risks related to business operations such as those relating to determination, identification and procurement of vendors, services delivery to vendors, security and surveillance, labour issues, blocking of funds and business activity disruptions.

6. Currency Risks: The Company, on account of international trading activities, deals in various foreign currencies and is exposed to fluctuations in the currency markets from time to time.

7. Resource Risks: The Company may at times, become susceptible to various risks associated with the procurement of talent, capital and infrastructure, as may be specific to the industry.

8. Risks relating to regulatory and compliance framework: The risks due to inadequate compliance of regulations, contractual obligations and intellectual property violations leading to litigations and related costs and effect on brand value and image.

9. Technological Risk: The business of the Company, particularly potable alcohol and speciality sugar, is subject to frequent and revolutionary technology changes as new products are being developed in this segment. This also leads to risk of obsolescence of machinery as well as inventory.

The Company has formed a policy on the risks affecting the business and operations, towards risk prevention and management. The key objective of this policy is to ensure sustainable business expansion with stability, and to promote an upbeat approach in risk management process by eliminating risks. In order to achieve this key objective, this policy provides a pro-active and well-organized approach to manage various types of risks associated with day to day affairs of the Company and minimize adverse impact on its business objectives.

Environmental Compliances

With reference to the operations of the Company, the mechanism to control the effluent treatment at zero discharge levels is in place under the prevailing policies as per industry norms.

Internal control system - Implementation of Internal Financial Controls and Internal Audit processes The Company has been following-up the systems and control to safeguard the assets and interest of stakeholders against loss from any unwarranted action. All business transactions are authorized, recorded and reported accordingly. During the year, the Company has formulated and implemented a formal system of internal financial controls under the Companies Act, 2013 read with relevant Indian Accounting Standards (AS) etc. Under the system, certain Standard Operating Procedures/Policies with reference to the delegation of authorities, material procurement and management, accounting processes and systems, payment authorization, capex monitoring, insurance, and employee welfare etc. have been adopted. Review systems have been established and implemented to ensure the adequacy of control systems and their monitoring.

These policies, procedures and controls adopted by the Company are ensuring the orderly and efficient conduct of its businesses, including adherence to the Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The internal financial controls over financial reporting are adequate and operating effectively. An independent internal audit process has been established with reference to the business operations of Company. The internal audit reports along-with management comments are regularly being placed before the audit committee of the Board.

The legal matters with the former director/ senior executive employees due to irregularities/misappropriation of inventory of the Company are pending before the appropriate forum. The management is confident that any financial implications of the aforesaid would be ably handled without significant financial/ legal consequences on the Company.

Materiality of Related Party Transactions

After taking effect of the Scheme of Amalgamation, the Company (SSL) has prepared financial statements for the first year, therefore the figures for the year ended March 31, 2015 represents the financial figures of the unamalgamated entity having only one distillery operation. As per section 188 of the Companies Act, 2013 and Regulation 23 of SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015, a transaction with a related party shall be considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity as prescribed in the said provisions of law.

Since, the said Scheme of Amalgamation has become effective from April 1, 2015 and, therefore, to consider the materiality as per the aforesaid manner, the combined value of turnover of both the entities has been taken into account to determine the materiality of transactions.

Further, the Company''s transactions with the related parties are executed on arm''s length basis and have been entered into in the ordinary course of business and there are no material related party transactions under Regulation 23 of Listing Regulations read with the Company''s policy on materiality of related party transactions during the year. Therefore, the details of the Company''s disclosure of particulars of contracts/arrangements entered into by the Company for the financial year 2015-16 in the prescribed form AOC-2 have not been given.

Corporate social responsibility (CSR)

The Company does not fall under any of the criteria''s prescribed under the provisions of Section 135 of the Act to conduct the activities under corporate social responsibility (CSR) framework. However, Company has a CSR policy indicating the guidelines for social welfare activities to be undertaken at its own and implementing programs in the fields of education, healthcare, clean water, social welfare, village infrastructure development in reserved areas of its sugar mills. The Company is meeting its social responsibility obligations by encouraging cleaner surroundings, improving village level infrastructure, unclogged drains and encouraging the awareness and providing necessary training and learning process for the value of good hygiene and sanitation. A Charitable trust named Simbhaoli India Foundation (SIF), has also been working to ensure social obligations of Company. The employees are also important stakeholders and have been contributing to the foundation at their own.

The Company has been disseminating information on its CSR policies, activities and progress to all their stakeholders and the public at large through its website, annual reports, and other communication medium. It has constituted a committee of directors to review the activities under its CSR policy.

Information Technology

The information technology system of the Company is operating on SAP based enterprise resource planning (ERP) environment, optimizing the performance of its businesses as well as the business network. The initiatives taken to bring operations of newly formed subsidiary/joint venture companies into SAP environment have implemented and the business units of the Company are now integrated through SAP modules.

Operations of Subsidiary/ Associate Companies

1. Simbhaoli Power Private Limited

Simbhaoli Power Private Limited (SPPL) is a 51% subsidiary, with a joint venture (JV) with Sindicatum Captive Energy Singapore Pte Limited (SCES). In the year 2013, Simbhaoli Sugars Limited had transferred its Power business to SPPL at an aggregate consideration of Rs.159.79 crore under the Business Transfer Agreements (BTA). During the financial year 2015-16, the entire balance outstanding BTA consideration has been discharged as stipulated in the Joint Venture agreements. The capacity expansion project of Simbhaoli cogeneration plant has been completed from existing 34 mw to 62 mw. Now, total power generation capacity of SPPL has reached to 100 mwh. The gross revenues earned by SPPL during the year was Rs. 69.97 crore (Previous year Rs.59.49 crore) with a pre-tax profit after exceptional item Rs.2.95 crore (Previous year loss Rs.3.10 crore).

2. Uniworld Sugars Private Limited

Uniworld Sugars Private Limited (USPL) is a joint venture company between Simbhaoli Sugars Limited and ED&F Man Sugar Ltd, UK, having a 1000 TPD (300,000 mt per annum) capacity sugar refinery near Kandla Port, Gujarat. The share capital has been subscribed equally by the Company and ED & F Man, UK along with their affiliates. The refinery started commercial operations in August 2014 and is producing the international quality sugars for export. Quality has been consistent and appreciated in overseas markets under the brand name ''Tiger''. The gross revenues earned by USPL during the year was Rs.564.48 crore (Previous year Rs.236.22 crore) with a pretax loss of Rs.44.44 crore (Previous year Rs.41.09 crore).

3. Integrated Casetech Consultants Private Limited Integrated Casetech Consultants Private Limited (ICCPL), is an 85% subsidiary and the technology vertical of SSL to provide consultancy services in the fields of sugarcane, alcohol, sugar, energy and organizational structure etc. It is providing expert assistance in technical know-how to various domestic and international companies for setting up and maintenance of sugar plants and resultant increase in sugarcane recovery and production efficiency. It has executed various Operation & Maintenance assignments in domestic areas. It has earned gross revenues of Rs.12.73 crore (Previous year Rs.24.06 crore) with a pre-tax profit (loss) of Rs. (1.27) crore (Previous year profit of Rs.1.05 crore) for the year 2015-16.

4. Simbhaoli Global Commodities DMCC

Simbhaoli Global Commodities DMCC, Dubai, is the wholly owned subsidiary. No major activities have been carried out in this Company during the year.

5. Simbhaoli Speciality Sugars Private Limited

The name of ''Resham Packaging Private Limited'', a wholly owned subsidiary company, has been changed to ''Simbhaoli Speciality Sugars Private Limited''. It owned a premise at Noida, where the Corporate offices of all group companies are situated. No major business activities have been carried out in this Company during the year.


A summary of the physical operations of all the business units of the Company for the year 2015-16 is stated as under:



















Sugarcane crushed

Lacs mt









Sugar recovery










Raw/ below gade sugar refined










Net Sugar produced*

000'' mt









Gross season for sugar plant










Date of start of the Sugar plant









Date of closure of Sugar plants









Days of operations of distillery *









Alcohol/Ethanol produced *










* As per financial years

*including conversion of raw and below grade white sugar, into refined sugar

During the year, 19.72 lacs qtl (previous year 23.97 lacs qtl) of white sugar was produced and 25.11 lacs qtl (previous year 23.15 lacs qtl) of sugar from both sugarcane and refining of raw sugar, was sold at an average price realization of Rs.2,883 per qtl (previous year, in ESSL Rs.2,980 per qtl). The average realization of sugar was lower by Rs.100 per qtl on account of depressed market scenario.


A summary of the standalone financial results of the Company for the year ended March 31, 2016 is stated as under:

(Rs. in lacs)


Year ended Mar 31, 2016

Year ended Mar 31, 2015

Net Sales/Income from operations



Other Income



Profit/(Loss) before Interest, depreciation and exceptional items



Interest expense






(Loss) before tax & exceptional items



Exceptional Gains/(Loss)


Tax expense

Net (Loss) after Tax



During the year, the business of the Company has been affected adversely on account of, high sugarcane prices, low sugar prices, high finance and other fixed costs. In view of the absence of distributable profits, and substantial carried forward business losses, your directors express their inability to recommend any dividend for the year.

Since there was no unpaid/unclaimed dividend declared and paid in the previous years, the provisions of Section 125 of the Companies Act, 2013 do not apply.

The Company has implemented the Scheme of Amalgamation with Simbhaoli Spirits Limited, having appointed date as April 1, 2015 (the Scheme). The financial figures of the amalgamated entity (SSL, previously known as Simbhaoli Spirits Limited, SISPL), after implementation of the Scheme significantly vary with the erstwhile Simbhaoli Sugars Limited, particularly with reference to the share capital structure, reserves and surplus, and net worth and are not directly comparable with the figures of previous year in any manner. The following is the summary of financial review for the year:

Share Capital: The Company has recorded amalgamation in its books under purchase method. Accordingly during the year, 3,74,79,020 equity shares of Rs.10 each at a premium of Rs.62 per share were issued and allotted in discharge of the purchase consideration and cancellation of then existing equity share capital.

Reserves and Surplus: The following movement has taken place during the year:

(i) Molasses Storage Fund: Addition during the year, Rs.4.92 lacs as adjustment on amalgamation.

(ii) Capital Reserve: Addition during the year Rs.229.80 lacs as adjustment on amalgamation and utilized during the year, Rs.229.80 lacs for write off the existing goodwill.

(iii) Securities Premium Account: Addition during the year, Rs.23,236.99 lacs as premium of ''62 per share issued as purchase consideration.

Long term borrowings: Long term borrowings are at Rs.50,656.55 lacs as on March 31, 2016 as there was no long term borrowing in SISPL during the year 2015-16, prior to the amalgamation. The Company has submitted a proposal to its lenders for rescheduling its loan accounts as per details mentioned elsewhere in this report.

Short term borrowings: Un-secured short term borrowings are at Rs.51,316.17 lacs against the previous year short term borrowings in SISPL of Rs.4,270.28.

Fixed assets: Addition to the fixed assets aggregating to Rs.1,18,813.59 lacs (previous year Rs.5.81 lacs) includes the following:

i) Rs.1,18,269.55 lacs of Fixed Assets of erstwhile SSL

ii) Rs.544.04 lacs for other addition during the year.

The Company has deducted Rs.671.30 lacs (previous year

Nil) from the value of the fixed assets on account of:

i) Goodwill written off Rs.447.09 Lacs (Unamortized amount of Rs.245.90 lacs has been adjusted against capital reserve of Rs.229.80 arising out of amalgamation and balance of Rs.16.10 lacs has been charged to statement of Profit and Loss).

ii) Rs.224.21 lacs on account of miscellaneous assets.

Investments: In pursuance to the Scheme the Company has following investments as on March 31, 2015:

(Rs. in lacs)


Opening balance as on April 1, 2015

Additions during the year

(as per Scheme of Amalgamation)

Balance as on March 31, 2016

(i) 2,00,800 equity shares of Rs.10 each in Integrated Casetech Consultants Private Limited




(ii) 2,90,11,770 Equity shares of Rs.10 each in Uniworld Sugars Pvt. Ltd




(iii) 300 Equity Shares of AED 1000 each in Simbhaoli Global Commodities DMCC




(iv) 55,38,734 Equity shares of Rs.10 each in Simbhaoli Power Pvt Ltd




(v) 48,92,941 debentures of Rs.100 each of Simbhaoli Powers FM. Ltd.




(vi) 19,000 equity shares of Rs.10 each of Simbhaoli Specialty Sugars Pvt. Ltd




(vii) Others




Investments at the end of the year



Inventories: Inventory amounting to Rs.29,658.99 lacs (previous year Rs.1,070.87 lacs) includes finished goods, raw material, process stocks, and store items. The sugar at the end of the year is valued at net realizable value of Rs.3,150 per qtl (previous year Rs.2,600 per qtl).

Sundry debtors: Sundry debtors (net) amounting to Rs.6,009.99 lacs (previous year Rs.956.88 lacs), are considered good and realizable. Provisions are generally made for all debtors outstanding for over 360 days subject to their scope of realization, industry trend and management''s perception. Debtors are at 7.65% of gross revenues, representing an outstanding of 28 days.

Cash and Bank Balance: Cash and bank balance of the amalgamated entity Rs.2,107.79 lacs (previous year Rs.228.48 lacs) includes fixed deposits of Rs.1,255.121 lacs out of which fixed deposit for the amount of Rs.232.96 lacs are pledged with banks for securing certain loans, letters of credit, guarantees and other short term facilities.

Other Current Assets: Other current assets of Rs.3,413.95 lacs (previous year Rs.57.95 lacs) comprise a receivable of Rs.376.88 lacs (previous year ''Nil) against Finance lease receivable from Simbhaoli Power Private Limited.

Trade payables, other current liabilities, and provisions:

Previous year figure represents the financial figures of unamalgamated entity having only one distillery operation. a) Trade payables at Rs.52,162.84 lacs (previous year Rs.4,338.85 lacs). b) The other current liabilities of Rs.16,173.96 lacs (previous year Rs.1,679.49 lacs) reflect amount payable against finance charges and other miscellaneous liabilities. c) The liability includes amount payable against sugarcane supply, other raw materials, stores and services.

Sales and other income: Sales and other income (net of excise) is Rs.79,305.53 lacs (previous year Rs.1,060.08 lacs). These segment figures also include the turnover in ESSL prior to Scheme of Amalgamation. The segment wise allocation of revenues for the year 2015-16 and for proceeding two accounting years is as under:

(Rs. lacs)
























The other income of Rs.2,415.23 lacs (previous year Rs.84.01 lacs) comprises interest, rent, from subsidiary companies, foreign exchange fluctuation, liabilities/provisions which are no longer required and written back and miscellaneous earnings.

Raw Material Consumption: Rs.57,113.68 lacs include Sugarcane, molasses and raw sugar as the principal raw materials purchased by the Company.

Employees cost: The employee cost at Rs.4,724.31 lacs (previous year Rs.427.12 lacs). The previous year figure represents the financial figures of un-amalgamated entity having only one distillery operation.

Finance cost: Finance costs of Rs.11,334.74 lacs (previous year Rs.470.41 lacs). The previous year figure represents the financial figures of un-amalgamated entity having only one distillery operation.

Other Expenses: Other expenses at Rs.8,007.37 lacs (previous year Rs. 1308.45). The previous year figure represents the financial figures of un-amalgamated entity having only one distillery operation.

Accounting policies

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 133 of the Companies Act, 2013. The financial statements have been prepared on accrual basis under the historical cost convention method as modified to include the revaluation/ business valuation of certain fixed assets as indicated in Notes to account. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

The Board of Directors of the Company accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates/ judgments used in preparation of these statements. The estimates and/or judgments have been made on a consistent, reasonable and prudent basis to reflect true and fair view of the state of the affairs of the Company.

Loans, Guarantees, and investments under Section 186

The particulars of Loans, guarantees or investments made under Section 186 of the Companies Act, 2013 and rules made there under are furnished in Note 9 in the Notes to accounts forming part of the Annual Report.

Particulars of contracts or arrangements made with related parties

The particulars of contracts or arrangements made with related parties made pursuant to Section 188 SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 and Accounting Standards 18 issued by the Institute of Chartered Accountants of India are furnished in Note 10 in the Notes to accounts forming part of the Annual Report.

Debt servicing and public deposits

During the year, the Company has not been able to meet its obligations towards the lenders for principal and interest, in terms with the respective letters of sanction/approvals. The proposal for realignment of the debt structure of the Company has been, in principle, agreed to by the lenders under Corporate Debt Restructuring framework of the Reserve Bank of India, the details of which are mentioned elsewhere forming part of the Annual Report. As there are delays in repayment of the loans, and the cane price arrears have mounted high, the Company''s credit rating has been downgraded.

The Company has not accepted any public deposits and no deposits are unpaid in any previous year.

Explanation or comments on qualifications, reservations or adverse remarks or disclaimers made by the Secretarial Auditors in their reports

The Comments/Remarks in the Secretarial Audit Report are self explanatory and explained at the appropriate section of the Annual Report.

Material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year and the date of report

The Company has been facing financial difficulties on account of high sugarcane price and lower sugar realization. The detail has been reported elsewhere in this report.


The comments on the statement of accounts referred to in the report of the auditors are self-explanatory, and explained in the appropriate notes to accounts, the details of which are mentioned elsewhere in this report.


At the ensuing Annual General Meeting of the members of the Company, Mr. Gurpal Singh is retiring by rotation on completion of term under the provisions of Section 152 of the Companies Act, 2013.

During the year, the State Bank of India has nominated Mr. Sangeet Shukla as the Nominee Director on the Board of the Company. Mr. R K Singh has resigned from the directorship on November 9, 2015.

Mr. Sanjay Tapriya and Mr. S N Misra were appointed as additional directors on the Board of the Company on November 9, 2015, whose period of appointment shall expire at the ensuing Annual General Meeting of the members of the Company.

Mr. B K Goswami, Mr. S K Ganguli, Mr. S C Kumar, Justice (Retd) C K Mahajan and Lieutenant General D S Sidhu (Retd) were appointed as Independent Directors under Section 149 of the Act and SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 during the year and they shall hold office for a period of 5 (five) consecutive years subject to the approval of the members at the ensuing Annual General Meeting of the Company.

Declaration of independent directors

The Independent Directors have submitted their disclosures to the Board that they comply with all the requirements as stipulated under Section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015.

Company''s policy relating to directors appointment, payment of remuneration and discharge of their duties

The Company''s policies relating to appointment of Directors, payment of Managerial remuneration, Directors'' qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013 has been disseminated at the Company''s website at the link-http://www.simbhaolisugars.com/ company policies.asp.

Number of board meetings conducted during the year under review

Details of Board Meetings held during the year are furnished in Report on the Corporate Governance forming part of this Annual Report.

Board Evaluation

The Company has devised the principles for review of the performance of the Non Independent and also the independent Directors, based on certain criterion as considered appropriate by the independent directors of the Company. The Independent Directors reviewed the performance of the non-independent directors based on the criterion such as evaluation of managerial personnel, job profile and market perception, self declaration on the jobs handled/taken up, opinion from peer and sub-ordinates, their performance evaluations, reporting and participation in the Company meetings.

The Independent directors noted the financial difficulties being faced by the sugar business and the critical situation comprising of the new challenges for the management of the Company. They also took note that, the Company has been incurring cash losses and is in continuous liquidity constraints. However, with various initiatives taken by the management including business and financial restructuring of the Company and steps being taken by the State and Central Governments to strengthen the sugar industry, the Company is expected to turn-around from this adverse situation in the near future and the business operations of the Company will become sustainable and viable. Therefore, the efforts made by the management of the Company for strengthening the operations of the Company have been appreciated.

Independent directors also took on record that Mr. Gurmit Singh Mann has been the Chairperson of the Company for several decades. He has experience of over 48 years and became the Managing Director of the Company in 1972 and Chairman and Managing Director in the year of 1989. In the year 2013, he became the Executive Chairman with the change in the management structure of the Company. He has vast knowledge on the sugar and alcohol business with excellent communication skills. He has been instrumental in the decision making at the time, when the Company is facing challenges pertaining to the sugar business in India, which have increased significantly over a period of time.

They also noted that all the independent directors possess the requisite qualifications and experience in the respective areas related to their past experience. They have been discharging their duties to contribute towards the betterment of the Company''s operations and the governance standards as defined in schedule IV to the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Secretarial Audit

M/s Amit Gupta & Associates, Company Secretaries, have been engaged as the Secretarial Auditors of the Company under the provisions of the Companies Act, 2013 for the financial year 2016-17. The Secretarial Audit Report is given as Annexure-1 to this report.

Cost Auditors

M/s Satnam Singh Saggu, Cost Accountants, have been engaged as the Cost Auditors of the Company under the provisions of the Companies Act, 2013 for the financial year 2016-17.


The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 are furnished in Annexure-2 and attached to this Report.


The Company has four subsidiary Companies, viz. Simbhaoli Power Private Limited, Integrated Casetech Consultants Private Limited, Simbhaoli Speciality Sugars Private Limited and Simbhaoli Global Commodities DMCC, Dubai. Uniworld Sugars Private Limited is a joint venture company. The consolidated financial statements presented by the Company include financial information of its subsidiary and joint venture companies prepared in compliance with applicable accounting standards.


No stock options have been introduced during the year.


The Report on Corporate Governance along-with certificate from the Practicing Company Secretary and certificate from Chairman, Directors, Chief Operating Officer and Chief Financial Officer form part of this Annual Report.


The Company has established a vigil mechanism, which overseas through the Audit Committee, the genuine concerns expressed by the employees and other Directors. The Company has also provided adequate safeguards against victimization of employees or Directors, who express their concerns. The Company has also provided direct access to the Chairman of the Audit Committee on reporting issues concerning the interests of co-employees and the Company. The policy on the vigil mechanism comprising of the whistle blower policy, has been disseminated at the Company''s website at link-http://www.simbhaolisugars.com/ company_policies.asp


The equity shares of the Company are listed with the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. Post amalgamation, the shares of the amalgamated entity has been admitted for trading on March 14, 2016 and the annual Listing fee for the financial year 2016-17 has been paid to both the stock exchanges.


The information pertaining to conservation of energy, technology initiatives, Research and Development, Foreign exchange Earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure-3.


The disclosure under the provisions of Section 197 (12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure-4.

There was no employee of the Company, who has been paid remuneration under rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.


The Auditors, M/s Mittal Gupta & Company, Chartered Accountants, (the statutory auditors), have been appointed for a term of 5 years viz. 2015-16, 2016-17, 2017-18, 201819 and 2019-20 subject to the ratification of the appointment at each annual general meeting of the members of the Company.

Your directors have recommended them for the ratification and continuation of appointment for the financial year 201617.


Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, read with the Rules made there under, with respect to the Directors'' responsibility statement, it is hereby confirmed that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the directors had devised proper systems to ensure compliance with the provisions of all the applicable laws and that such systems were adequate and operating effectively.


The Company is preparing the financial statements for the first

year after taking the effect of Scheme of Amalgamation w.e.f the appointed date i.e April 1, 2015 as sanctioned by the Hon''ble High Court of Judicature at Allahabad, therefore, the figures for the year ended March 31, 2015 are not comparable as it represents the financial figures of un-amalgamated entity. Certain statements in this report may be forward looking and represent intention of the management. Actual results may differ materially due to a number of risks or uncertainties associated with the business. Investors/stakeholders, therefore, are advised to make their own judgments before taking any investment, business decisions.


The Board of Directors acknowledge the continued assistance and guidance provided by the Government of India, State Government of Uttar Pradesh, lender banks and institutions and the co-operation and assistance received from all executives, staff and workmen of the Company.

The Directors also express special thanks to the joint venture partners to run the affairs of the respective subsidiary/associate companies, being part of the future growth of the Company. The Directors also wish to emphatically state their gratitude to the Indian Sugar Mills Association, farmers, suppliers and all other concerned persons who have continued their valuable support to your Company.

For and on behalf of the Board of Directors

Simbhaoli Sugars Limited

Gurmit Singh Mann

Place : New Delhi Chairperson

Date : May 30, 2016 (DIN - 00066653)