Nivesh Case Company Information

Sugar!
Sweet or Bitter
INTRODUCTION
A prominent American Investor, Ms. Jane is very keen on investing in India. Preliminary research on her
part indicated that sugar is a sector in India which is on the rise. Within the sector, she found many
attractive targets.
She still has a few questions in his mind of which she needs the answers before putting in a considerable
amount of money. She wants your help in the same. Following are the details of the target companies and
also please find attached the sector research on which her analysis is based.
DRACHITCO SUGARS
Drachitco Sugars is a conglomerate engaged in the manufacture of sugar and allied products (bagasse and
industrial ethanol). They have three plants with a total capacity of 21500 TCDs. TCD stands for tons of
sugarcane consumed per day.
Other than manufacturing the company has a dedicated cane department to supervise cane development
and procurement. Additionally, has on-going focus on cane development through educating farmers on
best farming practices, high yield/sugar content seeds, pesticides etc. It also makes timely payment to
farmers to incentivize increase in the area under sugarcane.
A small share of the companys revenues is through captive power, industrial ethanol (a by-product of the
process), and bagasse used by the paper industry.
Key Performance Indicators

KPI 2011 - 12 2012 - 13 2013 - 14 2014 - 15 2015 - 16 2016 17
Total Sugarcane Crushed
(Lakh MT) 23.71 24.26 20.87 23.31 21.05 26.10
Sugar Bagged (Lakh MT) 2.29 2.38 2.13 2.51 2.47 3.00
State No. of Mills Crushing Capacity (TCD)

Uttar Pradesh 3 21500
GRANSHUL SUGAR:
Granshul Sugar is a key sugar producer in India. Started off in Maharashtra, it has 14 sugar mills across
Western, Central, and Eastern India. It has a total installed capacity of 136000 TCDs.
Following are some salient features of the company

KPI 2011 - 12 2012 - 14 2014 - 15 2015 - 16 2016 - 17
(Lakh MT) 127.56 248.38 121.07 109.22 125.09
Sugar Bagged (Lakh MT) 11.65 22.73 11.38 11.36 12.72
Key Performance Indicator 2015 16 2016 - 17

Cane Crushing (Metric Tonnes) 10,922,000 12,509,000
Sugar Production (Metric Tonnes) 1,136,070 1,272,424
Zone No. of Mills Crushing Capacity (TCD)

West 5 48000
Central 5 48000
East 4 40000
A small share of the companys revenues is through captive power, industrial ethanol (a by-product of
the process), and bagasse used by the paper industry.
KALYAN SUGARS:
Kalyan Sugars is a company based out of Karnataka, close to the border of Karnataka & Maharashtra. The
company has 4 sugar mills in southern India with a total installed capacity of 18000 TCDs.
Following are some salient features of the company

KPI 2011 - 12 2012 - 13 2013 - 14 2014 - 15 2015 - 16 2016 - 17
(Lakh MT) 16.89 14.75 17.25 20.07 18.16 9.93

Karnataka 3 12000
Maharashtra 1 6000
FRAYUSHK SUGAR:
Frayushk Sugar is a company based out of UP and Maharashtra. The company has 4 sugar mills acros the
aforementioned states with a total installed capacity of 29250 TCDs.
Following are some salient features of the company:
2
KPI 2011 - 12 2012 - 13 2013 - 14 2014 - 15 2015 - 16 2016 - 17
(Lakh MT) 23.61 27.90 27.80 30.90 30.98 31.97

Uttar Pradesh 3 22500
Maharashtra 1 6750
QUESTIONS
Ms. Jane needs your help in finding the answers to the following questions:
1. From the information provided:

a. What are the key factors that will drive the industry? Support it with data given
b. What is the demand & supply picture of the industry going forward from data provided?
2. Draw the comparative analysis of the companies given across various financial metrics
3. Identify economic moats, if any, for all the four companies provided. Justify the same
4. Which company would you invest in and why?
NOTE: For you analysis, assume a WACC of 10% if needed
3
APPENDIX A: FINANCIAL STATEMENTS OF KEY PLAYERS
DRACHITCO SUGARS:
Income Statement
Particulars (in Rs. Cr.) 2009 2010 2011 2012 2013 2015 2016 2017 TTM
Sales 462 555 593 699 928 1128 794 1190 1395
Expenses 337 492 519 605 869 1043 686 919 1082
Operating Profit 124 63 74 94 59 86 108 271 313
Other Income 2 2 0 2 13 10 14 13 13
Interest 62 46 60 79 71 75 52 42 38
Depreciation 33 32 33 33 33 47 31 30 30
Profit before tax 31 -13 -18 -16 -32 -27 39 212 259
Tax 6 -4 -5 -4 -13 -10 0 54 73
Net Profit 25 -9 -13 -11 -19 -17 39 158 186
Balance Sheet
Particulars (in Rs. Cr.) 2009 2010 2011 2012 2013 2015 2016 2017
Share Capital 32 32 32 32 47 47 47 50
Reserves 126 117 104 93 73 56 70 267
Borrowings 449 453 467 525 392 624 656 503
Other Liabilities 183 216 66 216 280 397 342 207
Total Liabilities 774 803 653 850 761 1094 1084 996
Fixed Assets 555 525 496 470 440 399 356 331
CWIP 0 1 5 0 0 0 0 1
Investments 0 0 0 0 0 0 0 0
Other Assets 219 277 153 380 321 696 727 664
Total Assets 774 803 653 850 761 1094 1084 996
Cash Flow Statement

Cash from Operating Activity 212 40 53 8 203 -151 37 155
Cash from Investing Activity -2 -2 -10 -3 -4 -4 -13 -5
Cash from Financing Activity -209 -42 -43 -4 -199 154 -20 -154
Net Cash Flow 2 -5 0 1 1 -1 4 -4
GRANSHUL SUGAR:
Income Statement
Sales 1,584 2,874 4,904 4,263 6,644 4,531 4,683 4,385 4,770
Expenses 1,220 2,415 4,053 3,805 6,722 4,690 3,890 3,529 3,875
Operating Profit 364 458 850 458 -78 -158 793 856 895
Other Income 339 269 141 231 229 190 156 162 167
Interest 295 415 641 661 1,128 889 848 802 803
Depreciation 202 257 331 349 532 240 224 214 210
Profit before tax 206 55 19 -321 -1,508 -1,097 -123 2 49
Tax 50 3 7 -87 25 0 -3 -6 -11
Net Profit 156 52 12 -235 -1,533 -1,097 -120 7 60
Balance Sheet
Share Capital 18 23 23 64 64 81 108 110
Reserves 2257 3099 3117 4030 2495 1726 3849 3833
Borrowings 3075 5543 5197 5708 6275 7284 6911 7007
Fixed Assets 2633 5480 5390 5420 4987 4890 7937 7728
CWIP 131 91 24 7 8 8 19 36
Investments 549 1113 1344 1600 2431 2282 1132 1108
Other Assets 3231 4420 3474 3687 5587 5419 5509 6741
Total Assets 6544 11105 10231 10714 13013 12599 14598 15614
Cash Flow Statement

Cash from Operating Activity 206 -614 1833 -468 1070 -348 377 713
Cash from Financing Activity -70 1323 -1297 1168 -639 475 -388 -707
Net Cash Flow 73 367 103 -404 -52 -66 -19 -11
5
KALYAN SUGAR
Income Statement
Sales 445 737 657 718 642 652 837 585 573
Expenses 419 681 581 650 621 631 787 524 531
Other Income 4 4 6 6 10 3 9 8 4
Interest 24 27 30 29 33 15 29 30 32
Depreciation 34 29 25 25 26 15 16 15 15
Profit before tax -28 4 27 19 -28 -6 15 24 -1
Tax -8 0 10 2 2 -3 4 1 1
Net Profit -20 4 17 17 -30 -3 11 23 -2
Balance Sheet
Share Capital 11 11 11 11 11 11 11 11
Reserves 72 76 90 105 75 72 80 103
Borrowings 349 313 285 357 246 190 278 364
Fixed Assets 194 168 150 172 159 170 158 164
CWIP 3 7 7 5 1 2 3 4
Investments 1 1 0 3 7 7 6 6
Other Assets 429 432 511 481 450 477 599 457
Total Assets 627 609 668 659 616 655 767 631
Cash Flow Statement

Cash from Operating Activity -40 47 53 5 164 75 -38 -9
Cash from Investing Activity 9 -7 -10 -47 -15 -26 -4 -20
Cash from Financing Activity 38 -43 -39 33 -146 -60 38 40
Net Cash Flow 7 -3 3 -10 3 -10 -4 11
6
FRAYUSHK SUGAR:
Income Statement
Sales 2,154 669 713 998 1,192 1,150 1,166 1,686 1,970
Expenses 1,704 604 649 857 1,091 1,044 946 1,312 1,581
Other Income 62 23 29 16 20 16 21 12 17
Interest 176 48 50 66 76 78 87 94 96
Depreciation 132 39 42 73 49 51 113 56 55
Profit before tax 204 0 1 19 3 0 47 238 255
Tax 67 -3 0 1 0 -1 -11 55 65
Net Profit 137 3 1 18 3 1 58 183 190
Balance Sheet
Share Capital 16 16 16 16 16 16 16 16
Reserves 1308 418 419 436 440 439 491 675
Borrowings 2850 659 710 786 812 931 1138 1239
Fixed Assets 2584 596 574 635 767 746 752 773
CWIP 248 7 1 17 13 28 6 2
Investments 801 39 41 61 78 83 92 90
Other Assets 1390 697 866 963 874 1023 1252 1459
Total Assets 5022 1338 1482 1675 1733 1879 2103 2324
Cash Flow Statement

Cash from Operating Activity 259 105 35 98 267 -11 -24 84
Cash from Financing Activity 290 -149 1 12 -61 42 112 10
Net Cash Flow 156 -156 22 -50 21 -13 11 12
7
APPENDIX B: VALUATION MULTIPLES
Valuation Multiples Drachitco Sugars Kalyan Sugar Granshul Sugar Frayushk Sugar
P/E 8.8x 11.0x 7.6x 8.1x
P/B 4.9x 2.3x 4.8x 2.1x
EV/EBITDA 4.7x 10.1x 4.2x 6.1x
EV/TTM EBIT 5.3x 13.1x 4.9x 7.1x

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Sugar!

Key Performance Indicators

State No. of Mills Crushing Capacity (TCD)

Following are some salient features of the company

Key Performance Indicator 2015 16 2016 - 17

Zone No. of Mills Crushing Capacity (TCD)

Following are some salient features of the company

Key Performance Indicators

State No. of Mills Crushing Capacity (TCD)

Following are some salient features of the company:

State No. of Mills Crushing Capacity (TCD)

1. From the information provided:

NOTE: For you analysis, assume a WACC of 10% if needed

Cash Flow Statement

Cash Flow Statement

Cash Flow Statement

Cash Flow Statement

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