ANALYSIS OF

ANNUAL REPORT
OF

BALRAMPUR CHINI
MILLS LIMITED.

SUBMITTED TO: SUBMITTED BY:

 TABLE OF CONTENTS

 Industry Outlook

 Shareholding Pattern and promoters

 Auditors Report

 Accounting Policies

 Analysis of Profit and Loss Statement

 Analysis of Balance Sheet

 Contingent Liabilities

 Segmental Reporting

 Executive Summary
 INDUSTRY OUTLOOK
WORLD SUGAR INDUSTRY
Global production for 2017-18 is forecast to rise by 12 million tonnes to a record 195
million tonnes, up around 8.4% over the last cycle. Consequently, production could be
20 million tonnes higher than the five-year low registered two years ago. Higher than
expected production in India and Thailand, end of production quotas in European Union
(EU) and area expansion in China were contributing factors.

INDIAN SUGAR INDUSTRY

The Indian sugar industry is the second largest agro-based industry in India and
contributes significantly to the socioeconomic development of rural population.
A number of factors impacted sugar production in FY 15-16 and FY 16-17, resulting in
one of the lowest closing stocks during the past decade. However, abundant monsoons
and high yields in Maharashtra, Karnataka and Uttar Pradesh led to a bumper sugar
production in FY 17-18 (32 billion approx). This led to a decline in ex-factory sugar
prices (25 per kg). Logically one would expect that this surplus in cane production
would’ve led to a decline in its prices. However, the prices of cane in India increased
even though the cane output touched unprecedented levels. The combination of high
raw material prices and record output led to a higher cost of production.
PERFORMANCE
Balrampur Chini Mills too bore the brunt of this sectoral decline. During FY18, it earned
revenues worth 4,400.72 crore (up by 20.87 % from FY17), reported a PBIT of 384.21
crore (down by 51.33% from FY17). Even as the Company suffered a sharp decline in
profitability in the sugar sector, the decline was partially offset by the performance
reported by the other business sectors (distillery and co-generation). Revenues and
PBIT from the distillery and co-generation sectors stood at 643.50 crore and 280.27
crore during FY18 respectively (grew by 6.8% and 1.69% as compared to FY 17
respectively). The result was that the non-sugar proportion of profitability for the
Company increased from 32.92% to 66.88%.

ISSUES & CONCERN

 There is declining ground water availability for irrigation

 Weakening soil quality through prolonged fertilizer and pesticide use is a threat
 High input costs make the industry uncompetitive
 Unstable long term government policies at central and state level.
 SHAREHOLDING PATTERN
The main promoters of the Company are The Saraogi family, wherein Mr. Vivek Saraogi
holds the greatest percentage of shares. There are 11 promoters of the firm, namely,
Vivek Saraogi, Kamal Nayan, Saraogi HUF, Vivek Saraogi HUF, Meenakshi Saraogi,
Sumedha Saraogi, Stuti Dhanuka, Karan Saraogi, Avantika Saraogi, Udaipur Cotton
Mills Co. Ltd, Meenakshi Mercantiles Ltd., and Novel Supplies Pvt. Ltd.
Shareholding Pattern as on 31st March, 2018 is as follows

CATEGORY % OF HOLDING
Promoters’ Holding (A) 39.84
Public Shareholding (B)
Financial Institutions, Insurance Companies, Banks, 8.15
NBFCs and Mutual Funds
Foreign Institutional Investors & Foreign Financial 0.14
Institution
Corporate Bodies (including Buyback Escrow Account) 7.38
NRIs 0.78
Trusts 0.03
Foreign Portfolio Investor 20.47
Indian Public (Including Unclaimed Suspense Shares and 21.17
IEPF)
Clearing Members 2.04
Total (A) + (B) 100.00

Large financial institutions/ mutual funds do hold shares in the company (8.15% of total
shares). Some of these are L and T Mutual Fund Trustee Ltd, LIC of India, IDFC
Premier Equity Fund etc.
The firm is a family run business and the promoter, Mr. Vivek Saraogi is the Managing
Director of the firm.

STANDALONE FINANCIAL STATEMENTS

AUDITORS REPORT
The Auditors, Lodha & Co., have raised a concern that there is a pending appeal for
disputed dues of Sales Tax, as at 31 st March 2018. The disputed amount stands at
1,08,000 Rs. Pertaining to the period 2009-10.

ACCOUNTING POLICIES

DEPRECIATION
 Freehold land is not depreciated.
 Lease-hold land and lease hold improvements are amortised over the lower of
estimated useful life and lease term.
 Other items of Property, Plant & Equipment are depreciated on a straightline
basis, except, certain motor vehicles and mobile phones.
 Motor vehicles and mobile phones are depreciated over a period of five years
and three years respectively.
 Computer (Intangible Asset) is amortised on a straight-line basis over its
estimated useful lives.

COMPARISON WITH COMPETITOR

Items Dalmia Bharat Sugar and Balrampur Chini Mills Ltd.
Industries Ltd.
Leasehold land Amortised over the lease term Amortised over the lower of
lease term and estimated useful
life.
Property, Plant & Written Down Value method Straight Line Method
Equipment (except for one plant)

FIXED ASSETS
It is measured at cost less accumulated depreciation and accumulated impairment
losses. The cost of the assets include all expenses incurred in bringing the asset to the
location and condition of its intended use. It includes import duties, nonrefundable taxes
and interest on borrowings used to finance the construction of the asset (until the time
the asset is ready for use). Subsequent costs incurred are capitalized only when such
cost can be reasonably quantified. The costs of regular servicing of property, plant and
equipment are recognised in the Statement of Profit and Loss as and when incurred.

COMPARISON WITH COMPETITOR

Both the companies have same accounting policies as regards to valuation of fixed
assets.

INVENTORY
Inventories are valued at lower of cost and net realisable value after providing for
obsolescence, if any. Borrowing costs are not included in the value of inventories.
The cost of inventories is computed on weighted average basis. By-products and scraps
are valued at net realisable value.

COMPARISON WITH COMPETITOR

Both the companies have same accounting policies as regards to valuation of inventory.

REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or receivable.
Revenue is reduced for estimated customer returns, rebates and other similar
allowances. At the time of sale of goods revenue is recognized net of returns and
discounts when the significant risks and rewards of ownership of the goods have
passed to the buyer for a consideration.

COMPARISON WITH COMPETITOR

Both the companies have same accounting policies as regards to revenue recognition.

IMPACT OF DIFFERENCE IN POLICIES ON THE FINANCIALS OF THE 2 FIRMS

Most of the accounting policies of the 2 companies are along the same lines. The only
difference is, for depreciation of Plant, Property and Equipment Balrampur Chini Mills
Limitted uses Straight Line Method whereas, Dalmia Bharat Sugar and Industries Ltd.
uses Written Down Value method. This difference in method will result in understated
profits of Balrampur Chini Mills Ltd. as compared to the Dalmia Bharat Sugar and
Industries Ltd.

ANALYSIS OF PROFIT AND LOSS STATEMENT

PERFORMANCE OF THE COMPANY

PARAMETERS FY 17-18 FY 16-17 % CHANGE

Revenue from 440072.06 364099.71 20.87
operations
Profit Before Tax 33218.43 73414 (54.75)
Profit After Tax 22112.06 59228.65 (62.67)
EPS 9.41 24.26 (61.21)

MAJOR ITEMS OF EXPENSE

EXPENSES FY 17-18
Cost of materials consumed 306487.53
Employee benefits expense 20400.35
Other Expenses 21225.95

COMPARISON OF EXPENSES TO INCOME

Parameters Expenses Total % Expenses Total %

incurred in Revenue (A/B incurred in Revenue (C/D)
FY 17-18 earned in ) FY 16-17 (C) earned in
(A) FY 17-18 FY 16-17
(B) (D)
Cost of 306487.53 440072.06 69.6 257684.56 364099.71 70.7
materials
consumed
Employee 20400.35 440072.06 4.6 18091.13 364099.71 4.9
benefits
Other 21225.95 440072.06 4.8 25232.71 364099.71 6.9
Expenses

ANALYSIS OF BALANCE SHEET

MAJOR COMPONENTS OF ASSETS

 Component % of Total Assets
Property, plant and equipment (Non-Current Assets) 39.45%
Inventories (Non-Current Assets) 49.21%

MAJOR COMPONENTS OF LIABILITIES

Component % of Total Liabilities

Other Equity 42.71%
Borrowings ( Current Liability) 23.63%
Trade and other payables (Current Liability) 21.44%

LEVEL OF BORROWINGS
Total Borrowings of the firm = 87618.97
Total Equity & Liabilities of the firm = 366205.30
Total borrowing as a percentage of Total Equity & Liabilities = 23.92%

COMMENTS ABOUT ASSETS OF THE FIRM

Since the main business of the firm is producing sugar, the Balance Sheet of the firm
consists of an item called “Biological Assets”, which consists of sugarcane plant.
Also, there has been a significant decline (98.61% fall) in the “Loans” head under
Current Assets which indicates that a significant part of the loans advanced by the firm
has been repaid.

INVESTMENT PORTFOLIO
The firm has investment in Equity Instruments (Unquoted) of its associates (Visual
Percept Solar Projects Pvt. Ltd. and Auxilo Finserve Pvt. Ltd.). It also has investment in
Equity Instrument of Asia Sugar Industries Pvt. Ltd. and Fortuna Services Ltd.

INVENTORY TURNOVER RATIO

Inventory Turnover Ratio =Cost of Goods Sold / Average Inventory
Inventory Turnover Ratio of Balrampur Chini Mills Ltd. = 502131.504/2205791.6 =2.44
times
Inventory Turnover Ratio of Dalmia Sugar Industries Pvt. Ltd = 2.56 times
There is hardly any difference in the Inventory Turnover Ratios of the 2 companies
CONTINGENT LIABILITY
The firm has the following Contingent Liabilities-
Claims against the Company for Excise duty demand and Sales tax demand under
appeal is of 181.46 Rs. Lakhs.
Claim against the Company under litigation to the tune of 525.45 Rs. Lakhs.
Claim for acquisition of land at Balrampur and the compensation against it is under
dispute

SEGMENTAL REPORTING
Segments % share in % share in Assets % share in Profits
Revenues
Sugar 85.37% 69.89% 33.11%
Distillery 7.54% 6.9% 25.80%
Cogeneration 7.08% 18.65% 41.04%

EXECUTIVE SUMMARY
Despite FY17 being one of the best years ever for the Indian sugar industry, brightening
prospects of medium term growth, the following year (FY18) proved to be one of the
most challenging. In the face of these challenges the Company undertook a number of
initiatives to generate more from less. The Company sweated assets effectively and
enhanced operational efficiencies. During the year under review, it undertook de-
bottlenecking measures and scaled capacities wherever required. Additionally, as an
initiative to strengthen the Balance Sheet the Company repaid its long term debt upto
the amount of 80.54 Rs. Crore. They also bought back 66 lac equity shares at 150 Rs.
per share, involving a total outgo of 99 Rs. Crore. The Company increased its distillery
capacity by nearly 20% through strategic debottlenecking. During the year under review,
the Company increased its high-yielding cane coverage to~60% of the command area.
The Company is currently in profit. However there has been a decline of 54.75%. The
reason for this sharp fall is increasing prices of raw material.
The Company is adequately de-risked, should be able to resist this sectoral decline and
would be in a stronger position to ride the sectoral recovery thereafter