DCM Shriram bullish on sugar business; chalks out Rs 6.6 bn expansion plan

Diversified group DCM Shriram has contracted around 40,000 tonnes of sugar exports so far and will undertake shipments of entire 92,000 tonnes quota assigned to it by April-May next year, its Chairman Ajay Shriram said.

He appreciated the central government's various measures, especially on ethanol side, in the last one year to deal with the problems faced by the millers on account of surplus production and low sales realisation.

Shriram demanded that the minimum selling price of sugar needs to be enhanced from the current Rs 29 per kg to cut losses incurred by the millers with ex-mill rate being lower than the production cost.

 

DCM Shriram is bullish on sugar business and has chalked out a Rs 6.6 billion expansion plan, which includes addition of cane crushing capacity by 5,000 tonnes per day, setting up a 200 kilo litres per day capacity distillery and addition of co-generation power capacity by 30 MW.

"We are soon adding 5,000 tonnes per day of cane crushing capacity to produce premium refined sugar. We are also setting up a 200 kilo litre of distillery (ethanol) capacity which will be operational from 2019-20 sugar season starting October next year," Shriram told PTI.

That apart, he said the co-generation power would also be added next year. The company would be able to sell 76 MW of surplus power to the grid post expansion.

Asked about sugar production, he said the company is likely to produce 70-75 lakh quintal of sweetener in 2018-19 marketing year (October-September) as against 66 lakh quintal in the previous year.

On exports, he said: "We have got an export quota of 92,000 tonnes. We have already contracted about 40,000 tonnes for exports and will soon complete the contracts for the entire quota. We will complete shipments by end of the cane crushing season."

The losses in undertaking exports would be compensated from financial assistance offered by the government.

The Centre has announced a financial assistance of Rs 13.88 per quintal cane crushed in 2018-19 marketing year to offset the cost of cane. That apart, it is providing support to mills by compensating expenditure towards internal transport, freight, handling and other charges to facilitate 5 million tonnes (MT) export during 2018-19.

Interest subsidy is also being offered for creating ethanol capacity.

in 2017-18 marketing year India had an all-time high sugar production of 32.5 million tonnes and expects similar output this year or little less.

On arrears, Shriram said the company owes about Rs 2.5 billion to farmers for the cane purchased during 2017-18 marketing year and the same would be cleared soon.

Apart from sugar, DCM Shriram is into fertilisers, seeds, chemicals, cement and UPVC windows businesses.

In the chemical business, the company is expanding capacity by 560 tonnes per day at its Bharuch and Kota plants with project cost of Rs 3.5 billion. Another Rs 2.4 billion is being spent on 66 MW captive power plant at its Kota plant in Rajasthan.

In plastic business, Rs 320 million has been earmarked for adding capacity of 40 tonnes per day.

"Our expansion projects in different businesses are getting operational in phases and will be fully completed in next 12 months," Shriram said.

Out of proposed Rs 13 billion total capex on expansion, he said the company has already invested about 5-6 billion and the rest amount would be put in over the next one year. "The expansion will help in future growth of the company".

DCM Shriram is also strengthening its product portfolio in bio-seed, farm solutions and 'Fenesta' window businesses to achieve sustained growth.

Last week, DCM Shriram reported a 2 per cent decline in its consolidated net profit at Rs 1.68 billion for the second quarter of this fiscal on higher finance cost. Total income rose to Rs 17.17 billion in the July-September period of 2018-19 fiscal from Rs 16.20 billion in the corresponding period of the previous year.