Ponni Sugars (Erode) Ltd

Your Board is pleased to present its 29th Annual Report and the audited financial statements for FY 2024/25.

Dividend

Your Board in sync with the dividend distribution policy has recommended a dividend of ' 3.00/- (Rupees Three only) per equity share of ' 10 each for the financial year ended 31st March 2025, subject to the approval of shareholders at the ensuing Annual General Meeting.

Transfer to General Reserve

Your Board has proposed to transfer ' 15 crores to General Reserve.

Sugar

As feared in the Board's Report last year, the water stressed conditions owing to failed monsoon in our command area proved a clear dampener to and poured cold water on fresh cane planting, besides escalating the egregious pest and disease attack on standing crops. As a result, both quantity and quality of sugarcane available for crushing this year suffered serious erosion. It is little solace that the extent of setback on this score in our case is far less and fairly contained compared to the enormity of sufferance witnessed throughout the State. In this bargain, our cane crushing contracted by over 20% while

sugar recovery capsized to 9.17% as against the base recovery of 9.5% on which the fair and remunerative price for cane is payable. Following this, our sugar production fell by a quarter while power production and sale could achieve near parity, thanks to aggressive mobilization of external fuel.

Minimum Sale Quota (MSQ) that became applicable to our company from Jan '24 has had its full year effect this time, lowering sugar offtake by about 30%. Sugar prices stayed firm in the first half but scornfully slided down in the third quarter by dint of Government intervention through clamping sugar exports and curbing ethanol production out of sugar diversion. Mercifully the Government opened a small export window for 10 lakh tonnes of sugar in Jan ‘25 that at once lifted up market sentiments, aided further by successive downward revisions in current season's production estimates. Besides the direct gain by selling our export quota for a premium, the late upsurge in domestic sugar prices in the last quarter eventually ensured that our sugar segment's bottom line stayed positive for the year. This would doubtless not have been possible but for the buoyancy in molasses price that benevolently prevailed all through the year.

The company took a conscious call to pay the additional cane price under Clause 5-A of the Sugarcane Control Order for the past seasons without enforcing its contractual right for adjusting the advances cumulatively paid to individual farmers against the final liability. Our company has been singularly proactive on this as a goodwill gesture to its committed farmers who were all in distress due to drought-driven depleted crop yield. This for sure has boosted their morale to pledge their continuing support to our mill.

Cogeneration

Defying the discernible decline in sugarcane supply and concomitant crunch in bagasse availability, the company could largely sustain its power production and export backed by higher external bio-fuel mobilisation. While operating efficiencies continued to remain optimal, higher cost of external fuel muted our margins.

Power sector is impregnated with litany of litigations on m?ltiple issues. Appeals pertaining to revisi?n in power tariff since 2012 and parallel operation charges since 2014 have been before APTEL for long that has since completed the hearings and reserved its judgement. Further, TNPDCL has challenged the order of TNERC on the issue of plant load factor that came last year in our favour. Details are furnished in MDA. Final outcome of these appeals may have a material bearing on our company.

Govt's focus on bagasse based cogen of late would appear to be on a low voltage and there is little incentive at present to attract fresh investment in this sector. Given the nature of green energy and its availability in far off villages, ISMA has initiated steps to present a white paper to the Ministry of Power to reinvigorate this sector.

Corporate

CARE in the course of annual surveillance has now moved our credit ranking one notch up. Our rating for long term is ‘A-‘ and short term ‘A2 + '. The company has currently no borrowing and it invests its temporary surplus in Bank deposits.

The company is now a ‘medium enterprise' effective Apr ‘25 under the Micro, Small and Medium Enterprises Development Act, 2006 pursuant to the revised criteria that sizeably scaled up the eligibility criteria for this purpose.

Higher cost of cane and lower capacity use in FY 202425 outpaced and eclipsed the increase in product prices, denting net operating margin in the process. The bitter performance in sugar with subdued profits was however buttressed by a relatively stronger and sublime show in cogen, that in the end helped stem the slide.

In all, there is a perceptible decline in our PBT this year. The downfall is sharper in PAT due to higher rate of tax and the absence of write back unlike in the last year. No doubt these are disheartening, but given the overwhelming external adversities the company's overall performance would appear convincing.

Product diversification

Sugar as a commodity is largely sold in the domestic market in bulk, packed in 50 kg bags. Of late, there is an emerging trend, albeit at snail's pace, with select

retail customers preferring sugar in small packs of 1 - 5 kg. Taking cue, our company took baby steps to invest in additional facilities and started producing white crystal sugar during the year in smaller packs. Further, the company also tweaked its manufacturing process to produce brown sugar that appeals to a select market segment. The company's endeavour is aimed at broad- basing its product offering and strengthening value addition over time.

The company during the year acquired the assets of a 50 tcd jaggery unit that was put on auction by the lending bank under SARFAESI Act, 2002. The company emerging as the sole successful bidder was transferred all the immovable and movable assets of this unit by the bank in Mar ‘25. The plant and equipment largely remain in good stead. With minimal repairs and debottlenecking, it is planned to commence production in this unit before end of current sugar season. This is perceived as an additional and diversified revenue stream to our company. After testing the market and establishing our product, we would be able to plan for additional capacities in the same or other locations.

Outlook for FY 2025/26

While southwest monsoon for 2024 was above normal for the country as a whole, our command area was contrarian to record a pronounced shortfall in rainfall. Thankfully, northeast monsoon for us was near normal. Further, storage level in the Mettur reservoir that supports a large part of our command area is also comfortable. Despite these, our early plans for shoring up sugarcane area were put paid by lamentable lack of enthusiasm on the part of most farmers. Our concerted efforts including the extension of munificent subsidies and myriad of support measures met with muted success.

Undoubtedly, increasing agro-climatic risks and ever escalating cost of farm labour, including that for harvest, have demonstrably become clear depressant and demotivating factors demoralising farmers from fresh cane planting. Sugar worldwide is intrinsically cyclical but the travails of TN sugar mills would rather seem structural. Static cane yield and emaciated sugar recovery in the State have come to decisively erode its cost competitiveness in cane cultivation as well as sugar production.

In such a context, there is an urgent and dire need to bring in new cane varieties that promise both increased sucrose content and improved yield so as to reassure remunerative returns from cane crop. Of course, R & D in agriculture isn't a sprint but a marathon. As such, there is no quick-fix solution for varietal development in an annual crop like sugarcane. Indeed, SISMA-TN's collaborative efforts with ICAR-SBI for over the past eight years commendably continue with zeal, but results are enigmatically elusive yet.

While so, Artificial Intelligence (AI) technology is now looked upon as a game changer. It is directed towards continuous and real time crop monitoring through remote sensing. It seeks to ensure timely and optimal irrigation and fertilizer application besides early intervention to combat pest attacks. Our company has initiated steps to engage with experts and experiment on trials in using AI in select plots so as to test its efficacy and economic viability before large scale expansion.

As if to add to our bagful of woes, IMD has forecast a normal SW monsoon for India in 2025 with the rider that it could be sub-par for Tamil Nadu. Based on current estimates, our cane volumes may modestly go down in FY 2025/26, while sugar recovery should hopefully rebound from its abysmally low level. Sugar prices are expected to stay neutral and price buoyancy in molasses should persist. Higher cost of cane including the additional cost of our support measures may however not get fully neutralised by commensurate spurt in end product prices that would expectedly exacerbate our margin pressures.

In overall reckoning, the company foresees persistent pressures to its bottom line but within bounds in FY 2025/26. It's pretty premature at this juncture to predicate upon the positives to come out of APTEL's ruling on the power tariff. Meantime, the company will steadfastly stay focussed on cost optimisation and operational excellence. Together with its strong finances, the company is well placed to weather the storms and stay on course.

Management Discussion and Analysis Report

A detailed discussion on the industry structure (dealing with world sugar and Indian sugar) as well as on the financial and operational performance of the company is contained in the ‘Management Discussion and Analysis Report' that forms an integral part of this Report (Annx-1).

Corporate Governance

Pursuant to Regulation 34(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI-LODR), Corporate Governance Report together with the certif?cate from the company's auditors confirming the compliance of conditions of Corporate Governance is given in Annx-2. The Corporate Governance Report also includes contents and disclosures required under Section 134(3) of the Companies Act, 2013 at relevant places that forms an integral part of this report.

Disclosures / Confirmation

In deference to Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, disclosures / confirmation are made as below:

(i) Annual Return

A copy of annual return for FY 2023-24 has been placed on the website of the company www.ponnisugars.com and it will be done for FY 2024-25 after conclusion of the 29th AGM.

(ii) Directors' Responsibility Statement

Pursuant to Section 134(3)(c) of the Companies Act,2013 (the Act) with respect to the Directors Responsibility Statement, your Board confirms that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures from the same;

(b) the directors have selected such accounting policies and applied them consistently and made judgements 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 of the company for that period;

(c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

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

(e) the directors have laid down internal financial Controls to be followed by the company and the said internal financial Controls are adequate and were operating effectively; and

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

(iii) Particulars of Loans, Guarantees or Investments

The company did not give any Loan or Guarantee or provide any security or make investment covered under Section 186 of the Companies Act, 2013 during the year.

(iv) Particulars of contracts or arrangements with Related Party

The Corporate Governance Report contains relevant details on the nature of Related Party Transactions (RPTs) and the policy formulated by the Board on Material RPTs.

Particulars of contracts or arrangements with related parties referred in Section 188(1) of the Companies Act, 2013 is furnished in accordance with Rule 8(2) of the Companies (Accounts) Rules, 2014 in Form AOC-2 is given in Annx-3.

(v) Material changes and commitments

There is no change in the nature of business of the company during the year.

There is no material change or commitment affecting the financial position of the company that has occurred since 31st March 2025 to the date of this report.

(vi) Conservation of Energy etc.

Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in Annx-4.

(vii) Corporate Social Responsibility (CSR)

The company is covered under the mandate of Section 135 of the Companies Act, 2013 for FY 2024-25. The CSR report in the prescribed form is given in Annx-5 that forms part of this report.

(viii) Public deposit

The company does not accept public deposits and there is no amount outstanding at the beginning or end of the year.

(ix) Adverse orders

No significant or material order has been passed by the regulators or courts or tribunals impacting the going concern status of the company and the company's operations in future.

(x) Adequacy of Internal Financial Control with reference to financial statements

1) The company maintains all its records in ERP system developed in-house and the work flow and approvals are routed through this system.

2) The company has laid down adequate systems and well-drawn procedures for ensuring internal financial controls. It has appointed an external audit firm as internal auditors for periodically checking and monitoring the internal control measures.

3) Internal auditors are present at the Audit Committee meetings where internal audit reports are discussed alongside of management comments and the final observation of the internal auditor.

4) The Board of Directors have adopted various policies like Related Party Transactions Policy and Whistle Blower Policy and put in place budgetary control and monitoring measures for ensuring the orderly and efficient conduct of the business of the company, 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.

(xi) Insolvency and Bankruptcy Code, 2016

No application has been made or proceeding pending under the Insolvency and Bankruptcy Code 2016 in respect of the company.

(xii) One Time Settlement (OTS)

The company has done no OTS with Banks or Financial Institutions.

(xiii) Particulars of Employees

The Statement of Disclosure of Remuneration under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ("Rules") is appended as Annx-6 to this Report.

Promoters and Directors

Mrs Bharti Chhotubhai Pithawalla (DIN: 00341382) retires by rotation at the ensuing 29th Annual General Meeting and being eligible, offers herself for reappointment that would be through Special Resolution. Due disclosure and rationale for her reappointment are furnished in the statement pursuant to Section 102(1) of the Companies Act, 2013 attached to the AGM Notice.

Pursuant to the approval of shareholders at the 28th AGM and with the approval of Stock Exchanges, Mr Bimal K Poddar was reclassified from promoter to public category effective 8th November 2024.

Auditors

M/s S Viswanathan LLP (Firm Regn.No.004770S/ S200025) were appointed as statutory auditors for the second term of five years in the 26th AGM held on 20.07.2022. Accordingly, their term will expire at the conclusion of the 31st AGM.

SEBI has amended the provisions relating to the appointment of secretarial auditors, aligning same with that of statutory auditors. Accordingly shareholder

approval is being sought at this AGM for the appointment of M/s V Suresh Associates, Practising Company Secretaries as secretarial auditors for five consecutive financial years from 2025-26.

Particulars of statutory auditors, cost auditors, internal auditors and the secretarial auditors have been given in the Corporate Governance Report that forms an integral part of this report. Secretarial Audit Report as required by Section 204(1) of the Companies Act, 2013 is attached (Annx-7).

Acknowledgement

Your directors wish to thank the Central and State Governments, Banks, customers and suppliers for their unequivocal understanding and support. Your directors further wish to thank sugarcane farmers for their committed support and continuing supply of sugarcane braving weather and other challenges.

The Board wish to place on record the credible contribution of its employees all through the year and its valued shareholders for their steadfast support.