💰 Financial Performance

Revenue Growth by Segment

The company experienced a dip in revenue in FY24 due to macroeconomic factors and government restrictions on sugar syrup diversion for ethanol. For H1 FY26 (ended September 30, 2025), the company reported a net loss before tax of INR 45.80 Cr, compared to a loss of INR 22.11 Cr in FY25, reflecting a significant deterioration in profitability.

Geographic Revenue Split

Operations are concentrated in Karnataka, with primary units in Ugar Khurd (Dist. Belagavi) and Jewargi (Dist. Kalburgi). Revenue is derived from these regions, serving local power Escoms and national Oil Manufacturing Companies (OMCs).

Profitability Margins

Profitability has been severely impacted by high raw material costs and lower crushing volumes. Net profit before tax margin is negative, with a loss of INR 45.80 Cr on total assets of INR 783.79 Cr in H1 FY26. PBDIT for FY24 was estimated to be 20% lower than original projections due to underutilization of the grain-based distillery.

EBITDA Margin

Core profitability (PBDIT) is under pressure due to a 30% utilization rate of the grain-based ethanol plant and increased Fair and Remunerative Price (FRP) for sugarcane. The company reported a net loss of INR 42.34 Cr in H1 FY24 despite a healthy cash flow from operations of INR 203 Cr.

Capital Expenditure

The company has invested in a debt-funded ethanol plant expansion. Capital Work-in-Progress (CWIP) stood at INR 108.35 Cr as of September 30, 2025, while Property, Plant & Equipment (PPE) was valued at INR 275.43 Cr.

Credit Rating & Borrowing

CARE Ratings downgraded the company from CARE BBB-; Stable to CARE BB+; Negative in May 2025. This reflects significant under-achievement of profitability. Long-term bank facilities are rated for INR 700 Cr and Fixed Deposits for INR 80 Cr.

⚙️ Operational Drivers

Raw Materials

Sugarcane (primary), Maize, and Rice (sourced from FCI) are the critical raw materials. Sugarcane costs are dictated by government-fixed FRP, which recently increased, squeezing margins.

Import Sources

Sugarcane is sourced locally from a command area of 76,000 acres across 80 villages in Karnataka. Grains like rice and maize are sourced from the Food Corporation of India (FCI).

Key Suppliers

Primary suppliers include local farmers in the Ugar-Khurd and Jewargi regions and the Food Corporation of India (FCI) for grain-based ethanol production.

Capacity Expansion

The company operates a 4,200 TCD sugar unit at Jewargi and a larger unit at Ugar Khurd (crushing ~20 lakh MT over 3 seasons). Ethanol capacity includes a 250 KLPD grain-based plant (part of a 400 KLPD plan) and a juice-based distillery.

Raw Material Costs

Raw material costs are high due to government-mandated FRP increases. In H1 FY24, the company recorded old settlements of INR 7 Cr, further impacting the cost structure.

Manufacturing Efficiency

Capacity utilization for the grain-based ethanol plant was sub-optimum at 30% in H1 FY24. However, the sugar units benefit from being in a high-recovery zone in Karnataka.

Logistics & Distribution

Distribution is focused on OMCs for ethanol and state Escoms for power. Sugar is sold through established wholesale channels, though specific logistics costs are not disclosed.

📈 Strategic Growth

Expected Growth Rate

Not disclosed in available documents

Growth Strategy

Growth is driven by the expansion of distillery capacity to 400 KLPD and alignment with the government's Ethanol Blending Programme (EBP). The strategy involves utilizing grain-based ethanol during the sugar off-season (April to October) to ensure year-round revenue.

Products & Services

White crystal sugar, Ethanol (juice and grain-based), and Co-generated Power.

Brand Portfolio

The Ugar Sugar Works Limited (UGARSUGAR).

New Products/Services

Expansion into grain-based ethanol (maize/rice) to supplement traditional molasses/syrup-based production.

Market Expansion

Targeting increased ethanol supply to OMCs to meet national blending targets. The company operates two units in Karnataka to maximize regional cane procurement.

Market Share & Ranking

Not disclosed in available documents

Strategic Alliances

The company maintains supply contracts with Oil Manufacturing Companies (OMCs) for ethanol and state electricity companies (Escoms) for power.

🌍 External Factors

Industry Trends

The industry is shifting toward ethanol-heavy models due to the Ethanol Blending Programme (EBP). Current trends show a move toward multi-feed distilleries (grain and syrup) to counter sugar seasonality.

Competitive Landscape

Key competitors in the Karnataka region include Athani Sugars Limited and Shiraguppi Sugars Works Limited.

Competitive Moat

The moat consists of a 76,000-acre command area and established relationships with farmers in a high-recovery zone. This geographic advantage is sustainable but vulnerable to local competition from factories like Athani Sugars.

Macro Economic Sensitivity

Highly sensitive to agro-climatic conditions affecting sugarcane yield and government fiscal policies regarding sugar export and ethanol pricing.

Consumer Behavior

Increasing national demand for green fuels (ethanol) is shifting the company's production focus away from pure sugar.

Geopolitical Risks

Trade barriers on sugar exports and national food security policies (e.g., FCI grain allocation) directly impact operational viability.

⚖️ Regulatory & Governance

Industry Regulations

Operations are heavily regulated by the Essential Commodities Act, with government control over sugar release quotas, export limits, and cane pricing (FRP/SAP).

Environmental Compliance

The company is subject to pollution norms for its distillery and sugar units. Ethanol production is a key part of its ESG positioning.

Taxation Policy Impact

Not disclosed in available documents

Legal Contingencies

The company recorded old legal/operational settlements amounting to INR 7 Cr in H1 FY24.

⚠️ Risk Analysis

Key Uncertainties

Raw material availability (sugarcane and FCI grain) and government policy shifts regarding ethanol feedstock are the primary uncertainties, potentially impacting PBDIT by 20% or more.

Geographic Concentration Risk

100% of manufacturing assets are located in Karnataka, making the company highly vulnerable to regional monsoon patterns and state-specific cane pricing.

Third Party Dependencies

High dependency on the Food Corporation of India (FCI) for grain supply and local farmers for sugarcane.

Technology Obsolescence Risk

The shift to grain-based ethanol requires ongoing technical optimization, as seen in the initial sub-optimum 30% utilization of the new plant.

Credit & Counterparty Risk

Receivables are generally healthy, with OMCs paying within 20 days and Escoms within 30 days. Trade receivables stood at INR 121.55 Cr in September 2025.