Dwarikesh Sugar Industries Ltd

There comes a time in the existence of a company when it is extensively tested, when its operating realities are disrupted and there is a haziness about the Company's prospects.

The year under review was one such at Dwarikesh Sugar.

The 2024-25 sugar season began with uncertainty, with Indian Sugar and Bio-energy Manufacturers Association (ISMA) indicating production estimates trending downwards. India's sugar output fell sharply by 18%, with ISMA's revised net sugar production at 264 lakh tonnes after diverting 35 lakh tonnes for ethanol.

The year gone by has been one of the most testing in our industry's recent memory. The sugar season (SS) 2024-25 arrived with formidable headwinds — a sharp decline in cane availability, lower recovery rates and erratic weather patterns across our key growing regions. Through it all, Dwarikesh found itself called to draw on reserves of optimism, readiness, and collective resolve, building on strategic preparation and foresight. The 2024-25 season concluded earlier than usual, primarily due to a reduced supply of sugarcane. Crushing operations at all three units began in early November 2024. This underperformance contributed to a decline in revenues, EBITDA, and profits.

The Company encountered a 20.53% decline in revenues, 45% decline in EBITDA, and a 72.62% decline in profit after tax. This decline was caused by an unexpected outbreak of the dreaded red rot disease across the Company's command areas. The effect of this disease was immediately evident in the quantum of cane crushed during the sugar season 2024-25 when compared with two seasons ago.

Despite a sharp decline in crushed cane volume—an event that would typically impact the Balance Sheet of most sugar companies—I am pleased to report that your company demonstrated financial resilience.

It achieved cash accruals of Rs.91.79 crore, saw only a marginal decline in net worth of Rs.15.87 crore, and experienced a modest increase in the debt-to-equity ratio from 0.55 to 0.62 (considering long-term and shortterm debt). The Company repaid Rs.67.22 crore in long-term debt and executed a share buyback program amounting to approximately Rs.39 crore.

The focus of the Company when it commenced operations in the mid-Nineties was a commitment to farmer welfare above all else.

This commitment was well before the words ‘stakeholder value' had been employed in active currency.

We recognised that in a relatively under-industrialised region, if we increased farmer incomes, this would be a license to remain in business, be accepted by the rural community and create the basis for mutual benefit.

This singular commitment translated into a number of positives: we paid farmers on a weekly basis —each Monday—for cane delivered; we introduced a pioneering cane variety (CO 0238) for the first time in Uttar Pradesh that was replicated by other sugar manufacturers; we collaborated with farmers to help them enhance yields through superior growing cum harvesting practices; we grew our crushing capacities that inspired farmers to grow incremental cane.

The result was that we created a culture: ‘Dwarikesh stands first for the farmer.'

It is ironic that the setback we encountered in the last two seasons originated at the farmer end. The red rot disease affected the champion CO 0238 variety. This was as unexpected as it was unprecedented; never in the last decade-and-a-half had this variety appeared remotely vulnerable; in fact, this variety had been singularly responsible for increasing cane yields, enriching farmers and transforming Uttar Pradesh's agrarian economy.

The devastation of the last two sugar seasons brought one reality to the fore: the days of a profitable deployment of the CO 0238 variety are over. The variety has fatigued; it will be increasingly vulnerable to disease; it cannot be planted any- longer.

This reality was communicated to thousands of farmers across our three command areas during the last two seasons. We added that we would need their assistance to completely replace this variety - uproot and replace. Their first reaction was one of disbelief: some felt that this variety would stage a rebound in the coming seasons.

We differed; we stood our ground on varietal replacement. This is where the longstanding trust in our company was manifested.

Most farmers agreed to switch; they co-operated, and I am pleased to communicate that what was a complete 100% coverage by the CO 0238 variety until the 2022-23 sugar season had declined by 13% in the 2023- 24 season and by 37% in the 2024- 25 season. By the completion of the coming 2026-27 sugar season, we expect that the CO 0238 coverage of our command areas will have declined to nil. The replacement speed of the diseased cane variety in our command areas ranked with the best industry standards.

Once this replacement has been completed in the 2026-27 sugar season, we will have built a stable foundation for multi-year growth.

Our present cane yields may be lower than what we achieved at peak with the CO 0238 cane variety but we are optimistic that as the variety settles, yields will improve. Besides, the Company will continue to explore new, stable and remunerative cane varieties in its quest to generate attractive value for those associated with our company.

The performance of our company during the current financial year may be muted when one compares it with what we achieved at peak. However, we are optimistic that we have seen the worst. We moved with speed, inspired farmer trust to change varieties and now possess a new cane foundation.

Our focus remains on our determination to be the best. Shifting government policies on ethanol blending and sugar exports offer opportunities. We have optimised distillery operations despite cane availability challenges, reinforcing our commitment to the National Bioenergy Programme.

I will take this opportunity to communicate that such a disruption in one's growth journey transpires once a decade; how we respond to this occasion determines how we eventually enhance stakeholder value. We are at just such a point and I am optimistic that we face an attractive future where we return the Company to its former glory.

Our sustainability journey continues, with 99.93% renewable energy usage, zero liquid discharge at distilleries, water cum energy savings, and CSR programs positively impacting over 23,500 individuals. We stand aligned with Uttar Pradesh's vision to boost sugarcane production by 7% and contribute to a US$ 1-trillion economy by 2030.

Executive Chairman.