Chairman’s Message

Dear Shareholders,

The Coronavirus has dramatically affected lives and livelihoods. It would not be wrong to say that the world has changed around us, and there is great degree of uncertainty in what confronts us. The coronavirus has brought the world economy to its knees, and there is a demand fall. Some of our customers have signalled that their indications of purchases will not be met, and that the current uncertainty does not allow them to clearly know what the effect of this virus will be.

We have started making hand sanitizers at both of our locations. In Karnataka, we were the first distillery to get the permission to make the sanitizer. Similarly, in Maharashtra, we requested that we be allowed to use our imported ethanol for the purpose. We have started selling these under the name "Paavan". We have also started selling our ethanol to producers of sanitizer.

There are many global efforts underway to combat the pandemic. We do hope that this is soon behind us and life returns to some normality.

We are continuing on our journey of creating a world class cascading biorefinery. Our strategy is to add value to our feedstock, and its related biomass. To convert biomass into value added products, chemically, physically or biologically.

The Indian economy continues to produce more sugarcane and consequently, more sugar than it can consume. This past year, the Government further changed the policy to include the making of ethanol from sugarcane juice/syrup. Sugarcane as a feedstock and its conversion to ethanol as a biofuel mitigates climate change and helps India meet its climate security needs. To incentivize this, the Government announced a better price of about Rs. 59 per liter for ethanol made via this route. The Government continues to push for a larger ethanol blending programme. They had also earlier announced that ethanol prices will be linked to the FRP for cane.

Your company was one of the first companies in India to start the manufacture of sugarcane juice/syrup to make ethanol. The Government has also made it easier to get regulatory approval for expansion of ethanol capacity. Last year, we had increased our capacity of ethanol from 200,000 lpd to 320,000 lpd in the last season. In light of the new policy, we have got approvals and will be further expanding our ethanol capacity to 400,000 lpd in the coming season beginning November. This will be the largest ethanol capacity at one location in India at this time. We expect to divert over 40% of our sugar to make ethanol (up from 26% in the last season). This degree of optionality is only with Brazilian mills.

This has benefited your company by reducing the inventory. Your company has also brought in equity capital via a rights issue. The reduction in inventory and the capital raise have reduced the debt in the company.

As a result of our efforts, sugar as a percentage of our business has reduced. The pie chart below shows the distribution of our business by product in 2015 and in 2020.

 

We are further exploring ways to further expand our production of ethanol.

The chart below shows our production of ethanol/ENA/RS every year for the last few years, and the expected production in the coming year.

 

Last season, we delivered 37.8 million litres of ethanol to the blending programme. In the coming season, we expect to deliver more than 70 million litres to the Oil marketing companies (OMC's). We hope that in the coming few years, we will cross 100 million litres of ethanol production.

The floods of the last monsoons have had a great impact on the cane availability of Maharashtra and Karnataka last year. Maharashtra lost over 40 % of the Sugar production compared to Season 2018-19, whereas Karnataka lost about 25 % . This adversely affected the sugarcane cane yield by 13% and lowered recovery for your Factory too. Farmers continued to support your company with cane as reflected in the degree of reduction of cane crushed when compared with the Karnataka and Maharashtra average. Rains in the current monsoons have been good, and we hope to have a better season this year.

 

(In lakh Tons)2018-19 SS2019-20 SS% Reduction
Maharashtra (Sugar Production)1076142
Karnataka (Sugar Production)443325
Combined1509437
Godavari (Crushing)17.2715.2613

* Source : ISMA

COVID has impacted the chemical division in different ways. Some chemicals have faced reduced demand and a fall in prices. Other chemicals are performing well and are backed by strong demand from customers.

Godavari Biorefineries has been a pioneer in the use of Sustainable and Renewable Resources to produce chemicals. Our close cooperation with many of the large companies to develop and produce products for them is helping us sustain and grow our pipeline for new products. Customers have expressed renewed and strong interest in sourcing products that are renewable, sustainable, and adhering to the 'green chemistry' principles. We are continuing our dialogue with them.

Your company has also received the prestigious Bonsucro certification. The Bonsucro certification is for good sustainability practices around sugarcane. We are one of seven Indian sugar companies that have been certified in this manner. Many of our global customers prefer that we have such a certification. We have also received the Responsible Care re-accreditation for our company from the Indian Chemical Council for a period of 3 years. We are one of only about a hundred chemical companies in India (out of more than a few thousand) who have this certification.

Your Company plans to implement the production of SOP (Sulphate of Potash) which is a valuable fertilizer to the farmer as it improves the quality and crop yields. SOP is considered a premium-quality potash makes plants more resilient to drought, frost, insects and even disease. It contains two key nutrients for growing crops: potassium and sulfur. Most often SOP is used on high-value crops like fruits, vegetables, nuts, tea, coffee and tobacco. The fertilizer works better on crops that are sensitive to chloride, which can be toxic to some fruit and vegetable plants.Our researchers working with a technology provider have been able to extract potash from the waste of the incinerator boiler. A successful commissioning of the same will result in a circular economy in Potash. Farm, process, extract, recycle and so on.

The making of SOP will add to the range of products that your company currently manufactures from sugarcane, and there are many more products in the pipeline.

We continue to work closely with the farmer. We are inextricably linked together. Our aim is to see that the farmer and the farm are healthy. To do this, we continue to work on introducing drip irrigation, intercropping, soil testing, subsequent supply of quality inputs, supply of tissue culture plantlets, and agronomic practices for achieving high yield. We collaborate with KIAAR, K J Somaiya Institute of Applied Agriculture Research, to demonstrate new techniques that would improve productivity, optimize resource use, and maintain soil fertility. Our experiments on using older and traditional techniques and modern science with KIAAR have shown good results.

I am delighted to say that your company won the FKCCI Award for Best Exporter Bagalkot District” for the year 2019, competing against all industries in the Bagalkot district. We have also received "India Green Energy Award - 2019" in the category of Outstanding Renewable Energy Generation - Biofuel by Indian Federation of Green Energy New Delhi. Godavari Biorefineries Ltd ( GBL) Sakarwadi was awarded “The First Prize (PLATINUM AWARD) in ENVOSAFE EHS Excellence award" conducted by Dy. Director of Industrial Safety and Health, Ahmednagar, Maharashtra.

In closing, these are difficult times. We have created optionality by participating in the ethanol blending programme announced by the Government of India. This optionality allows us to better manage risk. We are also trying to add value by working on value added chemistry. Finally, we continue to be working on creating a circular and cascading biorefinery. Our proposed SOP project is a step in that direction. We hope that we set an example of creating a sustainable and innovative enterprise that adds value to all stakeholders.

Samir S. Somaiya
Chairman and Managing Director
(2019-2020)