💰 Financial Performance

Revenue Growth by Segment

Total revenue from operations declined 29.5% YoY to INR 134.73 Cr for the half-year ended September 30, 2025, from INR 191.21 Cr. Annual revenue fell 17.6% from INR 609.61 Cr in FY23 to INR 502.23 Cr in FY24. In the distillery segment, sales volume decreased by 14% and production fell by 15% due to raw material shortages. The power segment saw an 85% decline in grid exports due to lower crushing volumes.

Geographic Revenue Split

Operations are concentrated in Tamil Nadu, India, with manufacturing plants located in Kattur and Sathamangalam villages. Specific percentage split by region is not disclosed, but revenue is heavily influenced by the Government of India's domestic quota mechanism implemented in February 2024.

Profitability Margins

Net Profit Margin declined from 5.87% in FY24 to 3.36% in FY25. Operating Profit Margin turned negative at -0.78% in FY25 compared to 5.98% in FY24, driven by higher sugarcane costs and lower yields. Profit before tax for H1 FY26 was a loss of INR 9.15 Cr compared to a profit of INR 8.90 Cr in H1 FY25.

EBITDA Margin

Operating profit before working capital changes for H1 FY26 was negative INR 5.28 Cr, a sharp decline from positive INR 12.51 Cr in H1 FY25. This deterioration is linked to a 29.5% drop in revenue and increased cost of materials consumed relative to sales.

Capital Expenditure

Capital expenditure for the half-year ended September 30, 2025, was INR 11.49 Cr, significantly higher than the INR 0.27 Cr spent in the corresponding period of 2024, indicating ongoing investment in fixed assets despite subdued performance.

Credit Rating & Borrowing

CRISIL has assigned a 'Negative' outlook with a short-term rating of CRISIL A2. Bank limit utilization averaged 41% for the 12 months ended May 2025. Finance costs for H1 FY26 were INR 3.13 Cr, a marginal increase from INR 3.01 Cr YoY.

⚙️ Operational Drivers

Raw Materials

Sugarcane (primary input), Molasses (distillery feedstock), and Bagasse (fuel for co-generation). Sugarcane costs increased in FY25, contributing to a negative operating margin of -0.78%.

Import Sources

Sourced locally from farmers in Tamil Nadu, specifically around the Kattur and Sathamangalam plant regions. The company maintains relationships with a diverse base of sugarcane farmers.

Key Suppliers

Primary suppliers are local sugarcane farmers in the catchment areas of the Tamil Nadu plants. No specific corporate supplier names are disclosed.

Capacity Expansion

Current installed capacity includes 6,400 tonnes crushed per day (TCD) for sugar, 60 kilolitres per day (KLPD) for the distillery, and 33 megawatts (MW) for co-generation. No specific expansion timeline for these units is provided.

Raw Material Costs

Cost of materials consumed for H1 FY26 was INR 77.83 Cr, representing 57.8% of revenue from operations. This is an increase in cost intensity compared to H1 FY25 when material costs were INR 62.34 Cr (32.6% of revenue).

Manufacturing Efficiency

Manufacturing efficiency was adversely impacted by lower crushing volumes and lower yields in FY25. Distillery production efficiency fell by 15% due to feedstock (molasses) shortages.

Logistics & Distribution

Most sales (excluding Electricity Board dues) are conducted on a 'cash and carry' basis, which minimizes distribution credit risk. Specific logistics costs as a % of revenue are not disclosed.

📈 Strategic Growth

Expected Growth Rate

6%

Growth Strategy

The company is shifting focus toward distillery operations to reduce vulnerability to sugar price volatility. It aims to achieve growth through enhanced sugarcane crushing and improved yields via satellite irrigation monitoring, targeting an operating margin recovery to above 6%.

Products & Services

Sugar, Ethanol (Alcohol), and Cogenerated Power.

Brand Portfolio

Kothari Sugars and Chemicals Limited (part of the H.C. Kothari Group).

New Products/Services

Increased focus on ethanol production within the distillery segment to capitalize on government blending mandates, though specific new product revenue % is not disclosed.

Market Expansion

The company is focusing on stabilizing its Tamil Nadu operations and improving sugarcane availability in its command area to restore crushing to optimal levels.

Strategic Alliances

The company operates as part of the H.C. Kothari Group; no specific external JVs or alliances are mentioned in the provided documents.

🌍 External Factors

Industry Trends

The industry is shifting from pure sugar production to integrated 'sugar-ethanol-power' models. The government is using quotas and export bans to manage domestic supply, while promoting ethanol blending to support distillery margins.

Competitive Landscape

KSCL is a significant player in the Tamil Nadu sugar industry, competing with other regional integrated sugar mills.

Competitive Moat

Moat is based on integrated operations (sugar, distillery, co-gen) and long-standing (70+ years) relationships with farmers. Sustainability is challenged by heavy government regulation of both input (cane) and output (sugar) prices.

Macro Economic Sensitivity

Highly sensitive to agricultural output and monsoon patterns. A 20% decline in revenue is cited as a downward rating sensitivity factor.

Consumer Behavior

Demand for sugar remains stable as a commodity, but there is increasing industrial demand for ethanol for fuel blending.

Geopolitical Risks

Minimal direct impact due to domestic focus, but global sugar price trends influence government export/import policies.

⚖️ Regulatory & Governance

Industry Regulations

Subject to the Essential Commodities Act, government-fixed Fair and Remunerative Price (FRP) for cane, and monthly domestic sugar release quotas. Ethanol pricing is also government-regulated.

Environmental Compliance

The company operates distilleries and co-generation plants which are subject to environmental norms; however, specific ESG compliance costs in INR are not disclosed.

Taxation Policy Impact

The company noted a higher tax provision in FY25 which contributed to lower net profit margins. Specific tax rate % is not disclosed.

Legal Contingencies

No instances of non-compliance or penalties from SEBI or Stock Exchanges were reported. Specific pending court case values for labor or tax disputes are not disclosed.

⚠️ Risk Analysis

Key Uncertainties

Regulatory changes in sugar quotas and ethanol pricing pose significant risks. A decline in revenue by 20% or more is identified as a key risk to the credit profile.

Geographic Concentration Risk

100% of manufacturing operations are concentrated in Tamil Nadu, making the company highly vulnerable to regional monsoon variations and state-specific sugarcane pricing (SAP).

Third Party Dependencies

High dependency on local farmers for sugarcane supply; shortages in cane lead to underutilization of distillery and power capacities.

Technology Obsolescence Risk

Low risk for core commodity production, but the company is adopting digital tools like satellite monitoring to prevent agricultural yield obsolescence.

Credit & Counterparty Risk

Exposure to the state Electricity Board for power sales; other sales are primarily on a cash-and-carry basis, mitigating general trade receivable risk.