Chairman’s Message

Dear Shareholders,

We are continuing on our journey of creating a world class cascading biorefinery. Our strategy is to add value to our feedstock, and its related biomass. To convert biomass into value added product, chemically, physically or biologically. This year, sugar as a percentage of our business has reduced, as we have made larger quantities of ethanol.

Your company participated in the expanded ethanol blending programme of the Government of India. This enabled us from diversifying away our risk on sugar. The Indian economy is producing more sugarcane and consequently, more sugar than it can consume. The new Ethanol Blending Programme (described in detail below), enables us to divert some of our sugar to ethanol - on the lines of the Brazilian policy. We were among the first few companies in India to participate in this program, and the first in Karnataka to make deliveries ethanol based on B – Heavy Molasses.

A year ago, the sugar prices in India were falling dramatically. This was caused by the announcement of high cane prices, leading to higher cane plantation in the country and leading to a structural sugar surplus. To stem the fall in the Indian market, and to enable the country to pay the farmers the FRP, the Government has announced many measures to help the sugar industry bridge the gap between the sugar prices and the cane costs. It did this by:

1. Announcing a policy to encourage a sugar export of 5 million tons, and announcing a payment to the farmer provided this export quota is fulfilled.

2. Announcing a buffer stock of 3 million tons.

3. Announcing a minimum price of sugar ( Rs. 31 per kg ) and creating stock limits to ensure that this happens.

4. Creating a larger ethanol programme, for conversion of B molasses to ethanol. This they have done by announcing an ethanol price of about Rs.52.40 per litre for the B molasses diverted. The Government has also announced soft loans for this purpose.

By announcing that the Government will guarantee a price of ethanol converted under the B Heavy programme, the Government is changing a volatile business into a stable price system. For us, this created an opportunity to add ethanol capacity at Sameerwadi. For an agricultural economy like India, it makes sense for India to meet its energy security via biofuels. And this conversion will help us keep lower inventories, generate cash flow from operations and also, mitigate against a price fall of sugar.

The Government has now added a new market for sugarcane based by-products. The Government of India has invited expressions of Interest for making Bio-CNG. This is made by purifying the biogas that comes out as a byproduct of our waste treatment of ethanol fermentation. The biogas needs to be treated by removing the H2S, and the Carbon Dioxide, and then compressing the same. The Government is giving a fixed price for the same, much like they have done for bio-ethanol. By this policy, the Government has created one more market and opportunity for the renewable resources that are made via the manufacture of ethanol and sugar.

Our production of ethanol from B Heavy molasses is moving smoothly. The Indian Government issued a tender for ethanol from B Heavy molasses. The total tender for about 3+ billion litres of bioethanol, of which 2.59 billion litres were awarded. Of this, ethanol from B heavy was about 0.5 billion litres.

We bid for 40 million litres, but were awarded about 35 million litres for this ethanol at Rs. 52.4 per litre. We were also awarded a tender for about 12.5 million litres from C molasses. We were one of the first in the country to supply ethanol under this programme (certainly the first in Karnataka). The ethanol is being sold as it is made. This helps keep our inventory low, and also mitigate the need for holding higher sugar stocks, that we would have had to do, had we not participated in this programme. We will make more Alcohol from C molasses and supply to our markets for ENA, pharmaceutical, and perfumery. In this past year, we made about 52 million liters of rectified spirit (that was then converted to ethanol, ENA etc)

To further expand our capacity to meet the demand of ethanol under this program, we moved the Sakarwadi fermentation section to Sameerwadi. This saved time and money, and brought an idle asset into use.

With the expansion of ethanol capacity at Sameerwadi, we will be targeting to manufacture about 70 million litres of ethanol in the coming season.

The chemical division is performing well and is backed by strong demand from customers. The Company has been a pioneer in the use of Sustainable and Renewable Resources to produce chemicals. Our close cooperation with many of the large companies to develop and produce products for them is helping us sustain and grow our pipeline for new products. Customers have expressed renewed and strong interest in sourcing products that are renewable, sustainable, and adhering to the ‘green chemistry’ principles. Further, they are setting targets of lowering Carbon emissions, and understanding a Life Cycle Assessment (LCA) for the chemicals they make and consume.

We commissioned our new plant to make Bio-Acetic Acid from ethanol. We received the Bio-preferred certification from the USA that gives us an added advantage in that market. We are also seeing a market for Bio-Ethyl Acetate. We have commenced sale of this product globally, and are receiving good interest for the same.

Your company is planning to make bagasse based chemicals. Diversion of sugarcane juice to ethanol will reduce our steam needs, and will result in more bagasse savings. We are building a pilot plant for biocomposites, based on bagasse and are hoping for trial orders in the coming year.

Currently your company manufactures over 20 products from sugarcane, and has many more products in the pipeline.

We continue to work closely with the farmer. We are inextricably linked together. Our aim is to see that the farmer and the farm are healthy. To do this, we continue to work on introducing drip irrigation, intercropping, soil testing, subsequent supply of quality inputs, supply of tissue culture plantlets, and agronomic practices for achieving high yield. We collaborate with KIAAR to demonstrate new techniques, that would improve productivity, optimize resource use, and maintain soil fertility. Our experiments on using older and traditional techniques and modern science with KIAAR have shown good results.

I am delighted to say that your company won FKCCI Award for “Best Exporter Bagalkot District” for the year 2018, competing against all industries in the Bagalkot district.Your company has also received Runner- up “India Green Energy Award - 2018” in the category of Outstanding Renewable Energy Generation - Bioenergy by Indian Federation of Green Energy New Delhi and “VTPC Export Excellence Award” from Vishweswaraya Trade promotion Center Govt of Karnataka.

Samir S. Somaiya
Chairman and Managing Director
(2018-2019)