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Case study on EID PARRY

Prepared by:(Group 7) Jatin Arora- PG120013 Ankit Dani PG120012 Ankita Medhi PG 120014 Mihir Ambardekar PG120011 Rutika Kasat- PG120015

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INDEX

Introduction....2 Sugar Industry in India...... 5 EID PARRY Report 2008- 09 .. 6 EID PARRY Report 2009- 10 .. 9 EID PARRY Report 2010- 11...................................................................................11 EID PARRY Report 2011- 12 ......14 Key events of 2011-12..20 Risks & Mitigation of Risks..22 Future Prospects25 Finances 26 Ratios 27 Conclusion 30 Bibliography..31

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Introduction

EID Parry Limited is a public company headquartered in Chennai, South India that has been in business for more than 200 years. It was established in 1788, is engaged in the business of manufacturing and marketing of sugar and bio products. The company was incorporated in 1975. Later in 1981, the company became part of Murugappa group. E.I.D Parry(India) Limited now is part of the Tamil Nadu-based Rs.22,314 Crores - USD 4.4 Billion Murugappa Group and the largest sugar producer in South India and one of the top five sugar producers in the country.

Vision "Enrich life by creating value from agriculture"

KEY PERSONNELS: Chairperson - A Vellayan MD - Ravindra S Singhvi Directors - A Vellayan, Anand Narain Bhatia, B N Rao, G Jalaja, K Raghunandan, M B N Rao, R A Savoor, Ravindra S Singhvi, S B Mathur, S Viswanathan, Sridhar Ganesh, Suresh Krishnan, V Manickam, V Ravichandran Company Secretary Suresh Krishnan FINANCIALS: Total Income - Rs. 17121.7 Million ( year ending Mar 2012) Market cap - 39425.007231 ( Rs. in Millions )

BUSINESSES The company is currently engaged in the manufacture and marketing of sugar, bio-products and nutraceuticals Sugar EID Parry set up India's first sugar plant at Nellikuppam in 1842. It was India's first private sector company to perform Research & Development. The sugar division contributes to over 65% of EID Parrys turnover, and around 20% of the sugar production in Tamil Nadu is from EID. EID Parry has 7 plants in the country situated at Nellikuppam in Cuddalore district, Pugalur in Karur district, Pudukottai in Pudukottai district, Pettavaithalai in Trichy district,
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Pondicherry, Haliyal in Karnataka and Sankili in Andra Pradesh. The combined crushing capacity of all seven plants is 32,500 (TCD) Metric Tonnes of cane per day.

Bio-products The bio-products business makes eco-friendly products from natural resources. Currently, the core of this business is the Neemazal range of products made from neem seed kernel at the Company's production facility at Thyagavalli near Cuddalore, Tamil Nadu. The Bangalore R & D group supports the business by developing new formulations and delivery mechanisms for the application of the Neemazal range of products. New products from this company include AbdA, SpreadMax, Yieldsmor, and Beemax.

Nutraceuticals Parry Nutraceuticals is the world leader in micro algae technology comprising organic spirulina, natural Beta Carotenoids-Dunaliella Salina and Haematacoccus pluvialis (Astaxanthin). Algae manufacturing is an intensive science and Parry's plant at Oonaiyur, with its raceways for organic spirulina, and the marine algae manufacturing facility at Chittarkottai are unique and the first of their kind in the world. EID Parry is India's largest manufacturer of tomato lycopene. Nutraceutical products are exported to 38 countries and certified for major International Food and Safety standards.

SUBSIDIARIES Sadasiva Sugars Acquired from Ugar Sugars, it is now a 100% subsidiary of EID Parry. Parry Sugar Industries Acquired from GMR group, EID Parry holds a 65% stake. It merged with EID Parry on April 1, 2012. Coromandel International Limited EID Parry holds 62.69% of the company.

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JOINT VENTURES The Silk Road Refinery is a JV between Murugappa Groups EID Parry and global company Cargill.

PARTICIPANTS IN THE INDUSTRY


Bannari Amman Group Dwarikesh Sugars Rajshree Sugars Rana Sugars Shree Renuka Sugars KK Birla Group of Companies Balrampur Chini Mills Ltd. Bannari Amman Sugars Ltd. Andhra Sugars Dhampur Sugar Mills, Ltd, Bijnor. Dwarikesh Sugar Industries Ltd Dharani Sugars & Chemicals Ltd KM Sugar Mills Ltd.

ACHIEVEMENTS Sugar Division: Nellikuppam has been recognized as a zero-waste plant with a strict adherence to quality and high productivity. They have been the recipients of several awards and certifications in the course of time. ISO 14001 certification in Pudukottai and Nellikuppam The recipients of the Green Tech Award on Safety Nutraceuticals: Parry's Nutraceutical is the only producer in the world to get the prestigious US Pharmacopeia certification, for consistent product quality and the first and only one in India to get USP certification in the entire dietary supplement / herbal product category.

SISSTA Awards: The South Indian Sugar and Sugarcane Technologist's Association (SISSTA) presents awards during its annual conventions to promote, recognize and acknowledge best scientific development and technical performance in the field and factory in South India.

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TS Rajam Memorial Rolling Trophy: TS Rajam Memorial Rolling Trophy for the Best Employer - Employee relations was awarded on 23.10.2004 to E.I.D-Parry by Rotary Club of Madras, Southwest. State Safety Award: On 4th March 2005, three divisions of E.I.D-Parry namely, Nellikuppam, Pugalur and Pettavathalai bagged the prestigious State Safety Awards.

Sugar Industry-India
Indian sugar industry is the 2nd largest agro-industry after Brazil with approximately 50 million sugarcane farmers, 4 million hectares of land under sugarcane with an average yield of 70 tonnes per hectare and a large number of agricultural labourers (7.5% of the rural population). Though consumption of sugar in India has been growing at a steady rate of 3%, and is currently at 23.1 million tonnes, per capita consumption at 18 Kg (lower than world average of 22 Kg) indicates potential upside from a demand standpoint. Raw Material (Sugarcane) In India, sugarcane is the key raw material, planted once a year during January to March. It is the major cost driver for the production of sugar. It being an agricultural crop is subject to the unpredictable vagaries of nature, yielding either a bumper crop or a massive shortfall. The sugarcane growing areas may be broadly classified into two agro-climatic regions subtropical and tropical.

Sub- Tropical zones Uttar Pradesh (UP) Uttaranchal Bihar Punjab Haryana

Tropical zones Maharashtra Andhra Pradesh (AP) Tamil Nadu (TN) Gujarat Karnataka

About 50% of the sugar capacity is controlled by Cooperatives & Public sector mills. There are 566 sugar mills installed in the country, of which about 100 (mostly cooperatives) are not in operation. Though most private players have been moving towards larger and integrated complexes, most cooperatives are still much smaller in capacity, and are standalone sugar mills. This has resulted in their becoming uncompetitive as compared to private mills.

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Sugar Industry cycle Like any other agricultural product, cane production follows a cycle. This impacts the sugar industry which has a typical of 4-5 year cycle. Higher sugarcane production results in a fall in sugar prices and non-payment of dues to farmers. This compels the farmers to switch to other crops causing a shortage, which in turn results in increase in sugarcane prices and extraordinary profit. Taking into account the higher prices for cane, the farmers switch back to sugarcane, which completes the cycle.

EID Parry Report for 2008-09

1) Sugar industry

Sugar Industry in 2008-09 witnessed a rapid shift in Sugar cycle signifying reversal of high supply - low prices scenario. With the trend reflecting falling production in the current and next Sugar year, sugar prices firmed up in the second half of the year. The year 2008-09 started with high sugar surplus, low prices and higher inventories. During the year, Government dismantled the Buffer stock, withdrew the Export benefits that were initiated to arrest the fall in prices.

The shift in the cropping pattern from cane to other crops resulted in lower production and hence lower supply of sugar. The year ahead was thereby projected to be a sugar deficit year.

The prices crossed Rs.20/ Kg towards the end of the year. The revenue growth was 21% over the previous fiscal. The increase was due to higher prices that prevailed during the year compared to the previous year. Co-generation facilities and distillery continued to contribute significantly to the bottom-line. The Company achieved 19000 TCD with completion of the capacity expansion in all its existing units.

The 20 MW Co-generation facility in Pettavaithalai was completed and power generated used for captive purpose. The 60 KLPD Distillery plant in Sivaganga was commissioned. This was in line with the long term de-risking strategy of maximising the crushing capacities in existing units and converting these units into integrated sugar complexes to extract value

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from all parts of the cane stick. With this, the total sugar capacity stood at 19000 TCD, Cogeneration at 85 MW and Distillery at 100 KLPD.

The Sugar units after capacity expansions along with new cogeneration unit at Pettavaithalai and new distillery unit at Sivaganga was expected to operate at optimal levels in the next year. This contributed substantially to the topline and provide stability and growth to the bottom line of the Company. During the financial year ended 31st March, 2009, Company invested Rs. 3550 lakhs in the equity of the Joint Venture entity viz. Silkroad Sugar Private Ltd.

2) Nutraceuticals:

The Nutraceuticals division registered a turnover of Rs. 2911 lakhs for the current year, compared to Rs.1690 lakhs in the previous year, a growth of 72%. Sales of Organic Spirulina were higher at 134 MT as against the previous year sales of 104 MT. During the current year, the Organic Spirulina also received GRAS (Generally Recognised As Safe) status in the US market, thereby enabling increased use in functional foods and beverages. Tomato lycopene extraction facility of the Companys subsidiary Parry Phytoremedies at Boisar, Maharashtra was upgraded to a rated capacity of 1000 kg per month.

EID PARRY made a strategic investment of Rs. 4519 lakhs for a 48% stake in U.S. Nutraceuticals LLC (DBA Valensa International) headquartered in Florida, USA (near Orlando).

Valensa International is a leading science-based developer and provider of high quality botanically sourced products for nutritional supplements and functional foods. The Division benefitted by having access to Science based product patents, extraction technology and market access to the US and EU countries.

3) Bioproducts:

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The Bio Pesticides division of the Company is the world leader in the plant extract based bio pesticides business. The divisions Azadirachtin based product range NEEMAZAL is registered in over 35 countries across the globe.

During the year, new registrations were achieved in the Home & Garden segment in the US and the business entered into exclusive distribution arrangements to propel sales from this segment. The business operations in the new markets of Spain and Italy in Europe and in rice belts of S.Korea got stabilised with the sales prospects improving steadily from these markets. In the current year, the division registered a turnover of Rs. 3636 lakhs.

4) Dividends

During the year, the Company paid a special dividend of Rs.4 per equity share (200%) in October, 2008 and an interim dividend of Rs.10 per share (500%) in March, 2009.

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EID Parry Report for 2009-10

1) Sugar Industry The downturn in sugar production witnessed in 2008-09 Sugar Season slated to continue into the next two sugar Seasons (2009-10 and 2010-11) as production was expected to be significantly lower than consumption, leading to the possibility of sugar imports to meet domestic demand. As part of the growth strategy for the Sugar business, in October, 2009 the Company acquired a 76% stake in the Equity of M/s Sadashiva Sugars Limited , Bangalore having its factory at Nagaral Nainegali, Bagalkot District, Karnataka. The factory has a capacity to crush sugarcane of 2500 TCD and Cogen capacity of 15.5 MW. During the financial year ended 31st March 2010, EID invested Rs. 1430 lakhs in the equity of the Joint Venture entity viz. Silkroad Sugar Private Ltd. During the year, the Company incurred a sum of Rs. 357.90 lakhs towards the revenue expenditure on account of Research and Development at the Approved In-House R & D units at Bangalore and Nellikuppam. The Sugar business, being the predominant business of the Company, accounted for 92% of the total revenue at Rs. 1134 crores. Namadhu Parry Mayyam, a unique concept of a 'service hub' for farmers introduced last year, was extended to cover a larger rural base. Deregulation of sugar business in developed countries lead to reduction of import restriction. Sugar being an essential commodity and having a high weightage (3.62%) in the Wholesale Price Index (WPI), is regulated by the Government through control on cane pricing, sale quantities and thus indirectly prices that can be sold in the open market. The commodity market regulator, Forward Markets Commission (FMC) banned sugar trading futures in May 2009 and it has been extended upto September 2010 The Central Government announced the stocking limit for the bulk consumers of sugar to 10 days To tide over the sugar shortage, the government extended by 15 months, setting a deadline till the end of March 2011, for meeting re-export obligation of white sugar against prior dutyfree raw sugar imports made between September 2004 and April 2008.

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2) Bioproducts

Co-generation of electricity from bagasse, a by-product of sugar, offered an excellent opportunity to EID to expand its earnings potential. Invested in equity shares OF COROMANDEL INTERNATIONAL LIMITED.& PARRY PHYTOREMEDIES PRIVATE LIMITED Global environmental concerns favoured use of renewable fuels like ethanol. Consolidation of mills lead to increase in scale and lower production cost. Thus it increased its presence beyond Tamil Nadu and Puducherry. Many state Government also chalked out the plans to increase the tariff for off season production. The Tamil Nadu Electricity Regulatory Commission (TNERC) came out with its latest order on pricing of power, purchased from bagasse based cogeneration units commissioned after 19th September 2008 Dependence on single product - A substantial proportion of the products sold by the division is made from Aza (taken from neem seed). The risk of high dependence on a single molecule was mitigated by proposed introduction of new biological products Raw material price and procurement - Neem seed trade remains unorganized, with no government support, no new plantations and unlawful felling of trees. Increase in neem seed price was a cause of concern. Dependence on weather - The micro algae production is weather dependent and changes in the weather patterns have an adverse impact on productivity and cost of production.

3) Nutraceuticals Market presence in towns and operational zones was slated to double from existing levels, while shelf space in retail outlets was targeted for an upward coverage to about 33000 in the current year. Dependence on Overseas markets - Recession in Europe and America had an impact on is exports.

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EID Parry Report for 2010-11

2010 was a important year for EID Parry due to consolidation of major acquisitions, commissioning of the raw sugar processing plant at Kakinada capacity expansions, introduction of new products in Bio and Nutraceuticals and a change in Leadership.

1. Sugar Industry Sugar Industry rode a cyclical see-saw, a glut in world market and lower sugar prices impacted profit margins. Division still came up with its haul of positives which saw integration of new plants and capacity expansions which led to volume growth. Highlights: Acquisition of Sadashiva Sugars (65% stake) at Bagalkot, Karnataka and GMR industries enlarged the companys sugar operations and its increase in Cane Belts besides increasing its throughput capacity from 21,500 to 32,500 TCD. Company continued to pursue its Farmer centric module catering to one lakh plus farmer base with introduction of large scale mechanisation and farming methodologies. Joint Venture with Cargill Asia Pacific (sugar refinery).With a 2000 ton capacity of refined sugar production per day and with cogeneration plant 35mw this will be one of the largest plant in south Asian region. Newgen milling technologies improved the process efficiencies. Cogen integration indulged in de risking and energy conservation optimisation.

Demand and Supply outlook Domestic sugar prices had shown a hardening trend since F.Y 2008 in anticipation of continued depressed sugar production in 2009-10.This resulted in Uptrend in prices, which reached a peak of R.s 40,000/MT by end of January 2010.However there was a decrease in price in 2010 September to 25,000/MT. Fall is attributed for a number of factors. Upward revision in Production estimates for sugar season ending. Significant drop in international prices of sugar due to increased production in Brazil the highest sugar producer in the world as well as India. This resulted in lower dependence on India for Imports.

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In addition to this Indian Government took several decisions to curb a price which includes zero import duty, import sugars freely and inventory restrictions imported by the government on buyers. However after Mid-September there was an increase in prices which may include the above reasons. Festive Season led to an increase in demand. Rise in International Prices improved the sentiments of the domestic sugar industry.

2. Nutraceuticals Division capitalised on the burgeoning global demand for natural healthcare and Wellness products by expanding its Product Portfolio and market reach.

Highlights Company consolidated its market leadership in Organic Spirulina whereas lycopene products recorded a robust growth. Across Market segments the Product differentiation addressing health conditions helped to garner a larger growth volume. Company has drawn strategies to leverage EID Parry in the wellness space of nutraceutical market by launching OTC products for Health Management. Nutraceutical Division Turnover was around 4368 lakhs which represents 3% of the Company revenue, 82% is Exports. Company acquired a further 3% stake in US Nutraceuticals increasing its stake from 48 to 51%. Launching of New products such as Pro9 and Pro9D as Protein drinks for general public and diabetics respectively.

3. Bioproducts Process Optimization strategic channel expansion and new market penetration where the operating strategies of the Bio pesticides division as it pursued its mission to develop cost effective and environmentally sustainable plant wellness products to support the growing, global organic and reduced agro chemical crop market. Capitalising on the surge in demand for naturala range of new formulations and total crop protection a range of new formulations and total crop protection solutions. While the sales of
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Abda and Abda Gold posted a robust growth in the domestic market, sales of Azadirachtin doubled in the US Home and Garden segment and in the agricultural segment in Brazil. During the year, the Yieldsmor brand of micro nutrients targeting the horticultural market was also successfully.

4. Dividends During the year, the Company had already paid an interim dividend of Rs. 2 (200 %) per equity share of Re. 1 each in March, 2011.

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EID Parry Report for 2011-12

At E.I.D. Parry 2011-12 was a milestone year. Across the company, the year was marked by a peak in performance and process efficiencies, product innovation and people capabilities. The Sugar Division redefined industry trends, reset benchmarks and emerged a clear winner. While the Bio-products business registered robust growth with a range of plant and crop vitalisers. The Nutraceuticals business enlarged its presence in the OTC segment with a slew of health and body care products. Each of the three businesses cracked the code and reinvented sustainable strategies.

Net worth The Networth as on 31st March 2012 was Rs. 121,223 Lakhs (net of fixed assets revaluation reserve of Rs. 540 Lakhs) as against Rs. 114,474 Lakhs (net of fixed assets revaluation reserve of Rs. 554 Lakhs) in 2010-11 contributed by profit made during the year and premium received on issue of shares under ESOP. During the year, 464,276 Equity shares were issued to the employees on exercise of Employee Stock options for an aggregated premium of Rs. 360 Lakhs.

Investments The total investment of the company as at 31st March, 2012 was Rs. 68,278 Lakhs against Rs. 43,414 Lakhs in 2010-11. During the year the Company made investment in equity shares of Silkroad Sugar Private Ltd. for Rs.11,250 Lakhs and equity shares of Sadashiva Sugars Ltd. for Rs.1,834 Lakhs. Other investments include amount of Rs.2,230 Lakhs in US Nutraceuticals LLC, an overseas subsidiary of the company

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1) Sugar Division

Highlights Sugar business as it cracked the code of cyclicality and did exceedingly well despite it being a challenging year for the overall industry The sugar divisions made a strategic shift in marketing sugar from a commodity product to a customer driven, value add variant, thereby increasing its institutional sales and earning higher revenue. The business also leveraged the potential of its co-products and converted its residual potash waste to Kash, a fertilizer used in agriculture. In the global market, the division expanded its market space with export sales recording a new high. The cane crushed for the year exceeded 48 lakh MT as against 28 lakhs MT for the same period last year which was enabled due to 296 days of operations. Consequently, sugar production touched 4.34 Lakh MT, registering a 72% increase over the previous year. This was possible due to increased usage of mechanical harvesters thereby reducing the dependence on manual labour, encouraging farmers to plant High Yielding Varieties of sugar cane, increased area under drip irrigation, soil fertility improvement activities etc. Also tied up with New Holland Fiat (India) Pvt Ltd, a wholly owned subsidiary of USbased agricultural and construction equipment manufacturer Case New Holland, to implement farm mechanization among sugarcane farmers who supply to the company The recovery of sugar from sugar cane was at 9.04% as against 8.90% in the previous year owing to better quality of sugarcane crop and certain other favorable factors. Sale of sugar rose to 4.04 lakh MT compared to 3.21 lakh MT during the previous year registering an increase of 21%. While domestic sales were dependant on market trends, sales of export sugar touched a new high. Sugar divisions sales increased from Rs. 118,889 Lakhs in 2010-11 to Rs. 144,771 Lakhs in 2011-12 driven by increased Sugar and Alcohol sales. Sales to institutional customers like Pepsi, Coke Cadburys, Britannia, Rasna also increased from 27% in 2010-11 to 30% of total sugar sold in 2011-12.

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With the aid of a strong cane team, additional acreage was brought under sugar cultivation which aided in the running of the plant beyond the normal season.

Comparative information year on year is given below:


(Acres under cultivation)

(2009-10) 89,214

(2010-11) 105,061

(2011-12) 137,999

Reasons for increase in sugarcane production Through its cane extension team with focus on applications of appropriate technologies for the cane growers, following initiatives were taken: a. Increasing the usage of mechanical harvesters to reduce dependence on farm labour and to achieve the same, farmers were encouraged to go for 4 feet and 5 feet planting during the year. Further, farmers were given awareness about the capabilities of mechanical farming & harvester to do land preparation, ridging, intercultural operations (weeding, earthing up) & cane harvesting operations. b. Encouraging the farmers to plant High Yielding Varieties of sugarcane by educating them about the disease resistance properties, availability of better returns to them etc. c. Increased areas under drip irrigation (both surface & non-surface) were achieved through farmer awareness and financial support. The drip facility is being used by the farmers to save water and power usage at the same time addressing yield improvements. d. Sustainable sugar initiative was popularized this year amongst the farmers which would help them to get better yield and quality of cane. e. Toll free access system was extended across all the factories to cater to farmers queries and infuse confidence in them in relation to sugarcane cultivation. f. Continuous soil fertility improvement activities (including cane trash mulching) were promoted during the year. g. Provision of generators on free of rent to enable farmers to plant cane in power starved situations. h. Concept of usage of cell phones to reach out to farmers in respect of cane supply and cane payments and other common messages for their benefit was initiated.

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2) Bio products Division

At the Bio Products division, Neemazal continued to garner new accreditations and expand its global presence in the Agri, Home and Garden segment. Organic spirulina produced by E.I.D. Parry became the first and only spirulina in the world to qualify as per the proposed USP monograph. Capitalising on the growing trend in organic cultivation, the division launched its Abda, Abda Gold and Abda Foliar brand of liquid plant vitalisers for new crop segments. Customer driven demand for the vitalisers, helped to ramp up a 42% increase in domestic sales and contributed to an upward growth graph.

3) Nutraceutical Division

New product lines, focused market penetration and visibility promotion marked the winning strategy of the Nutraceuticals division. In line with its strategic intent to consolidate its presence in the US market and increase its global footprint, the company acquired a 100% voting right in Valensa International. This increase in holding provides the platform for company to move up the value chain by manufacturing value added formulations from its ingredients, apart from cross selling opportunities in the US and in the rest of the world for both your company and Valensa The division also forayed into the OTC segment, expanding market base with a range of Health and Body care products such as GreenT, Rejuveneyes and Pro9 brand of dietary supplements. Changing lifestyles and increasing health concerns of an ageing population, offer an emerging opportunity for the business. New products that are market ready and poised for a commercial breakthrough include, Fenupower clinically proven for its efficacy in diabetic care and Spiriblu a research based, natural blue colorant.
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Nutraceuticals divisions sale has marginally reduced to Rs. 4,359 Lakhs as against Rs. 4,393 Lakhs in 2010-11, representing 3% of the Companys Revenue. About 78% of this represents exports.

4) People Synergy At E.I.D. Parry, the year 2011-2012 ushered in a totally new direction to people and human resource management. Driven with zeal to excel, teams across plants demonstrated a cohesive oneness in cracking the efficiency code and making stretch goals easy and effortless. 5) Dividend During the year, the Company had already paid an interim dividend of Rs. 4 (400 %) per equity share of Re.1 each in March, 2012. The Board has not recommended final dividend for the year ended March 31, 2012. 6) Marketing E.I.D. - Parry has developed several alternate channels to market in order to avoid dependence on the wholesaler network and provide a degree of independence from the commodity cycles governing sugar prices. Customer centric innovations and retail sales form an integral part of this strategy 7) Leveraging Co-products The company also converts bagasse into electricity in its cogeneration units and processes molasses into various types of alcohol, thus completing the value chain. The Company further converts Press mud into a value added product by establishing necessary infrastructure and facilities.

Quarterly performance- Jun 12

EID Parry (India) Limited, one of the largest manufacturers of Sugar in India, posted robust financial and operating performance for the Quarter ended 30th June 2012. The standalone turnover of EID Parry for the Quarter was Rs. 576.46 Crore (Corresponding quarter of Previous Year: Rs. 397.13 Crore), with an EBITDA of Rs. 65.35 Crore (Corresponding quarter of Previous Year: Rs. 24.33 crores)

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1) Sugar Division

EID Parry crushed 16.44 lakh MT of sugarcane during the quarter, registering a growth of 27%. EID Parry exported Power of 1,111 lakh units for the quarter registering a growth of 10% over the previous quarter. As a standalone entity, the Companys Sugar Division reported a PBIT of Rs. 45.36 Crore (Corresponding quarter of Previous Year: Loss of Rs. 0.25 Crore)

2) Bio-products Bio-products Division (comprising of Bio-Pesticides and Nutraceuticals) at a consolidated level registered a loss of Rs. 0.57 Crore (Corresponding quarter of Previous Year: Loss of Rs. 1.06 Crore) for the quarter. Farm Inputs During the quarter, Farm Inputs Division registered a gross income from operations of Rs. 1842.76 Crore as against Rs. 1790.11 Crore in the corresponding quarter of the previous year. The Farm Inputs Division reported a profit (PBIT) of Rs. 212.20 Crore for the quarter as compared with Rs. 254.53 Crore in the corresponding quarter of the year 2011-12. Exports The company also capitalized on the export opportunity by exporting 94337 MT of sugar during the quarter. The current surplus of sugar production in India has opened a window of opportunity for exports and E.I.D. - Parry emerged as one of the larger sugar exporters from India in the last year. Exports will continue into the first half of fiscal 2012-13 and the company will continue to leverage such opportunities by virtue of the geographical location of its factories close to

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Events of 2011-2012

Government Policies & Regulations Sugar industry is regulated in India. On the raw material front regulations are established by the Central and the State Governments by setting a price support for sugarcane. The Central Government advises Fair & Remunerative Price (F&RP) which the State Governments raise to account for differences notably in productivity and transportation cost. The second area of intervention is through restrictions on sugar quantities to be sold on the market, as well as imposing on the sugar factories sugar levy, by which they are required to sell at below market price to the public distribution centers. In addition, the Government regulates sugar trade via export limitations and marketing restrictions. The Government introduced these policies to sustain the income of sugarcane farmers while at the same time protecting consumers from sugar price inflation. On 28th March, 2012, on recommendations of Rangarajan committee, the Government relaxed the rules of export by scrapping the system of allocating export quota to every mill based on its production during the previous three years and instead making it shipment on first come first basis.

Sugar releases The free sugar release by the Government showed an increase of 16% from 157.4 lakh MT in FY 2010-11 to 182.7 lakh MT in 2011-12. In addition, the government allowed export of 2 million MT during the year with the last tranche of 1 million MT being announced on February 23, 2012. The Monthly release mechanism for selling Sugar has been changed to Quarterly release mechanism commencing this financial year, providing flexibility in managing sales volume

Allied Products provided a cushion to Cash Flow

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Despite cost pressures, increased profitability (EBIT) has been due to high margin allied products which provide a cushion to cash flow. During the year 2011 - 12 because of increased sugarcane availability, allied products profitability increased compared with the previous season. The change in the product mix lends greater stability and predictability to the financial performance of the company. With the completion of new investments in co-products, the share of profitability from coproducts is slated to increase substantially in the coming years, thus de-risking from Sugar cycles Sugar production As per ISMA, sugar production for the country was 23.2 million MT in Sugar Season (SS) 2011-12 upto March 2012, a rise of 13 per cent as compared to the production in corresponding period in SS 2010-11; on account of higher cane area and recovery. According to ISMA, Maharashtra, the countrys largest sugar producer, produced 8.01 million MT sugar till March 12, followed by UP at 6.63 million MT and Karnataka at 3.8 million MT.

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RISKS

Business Risks- Sugar The major risks affecting the sugar business are cane availability, Government Regulations and Spread (Difference of Sugar and Sugar cane price). Sugarcane is the key raw material and any scarcity shall have an adverse impact on production. The various factors which determine cane availability are:-

1) Yield: Yield affects the availability of sugarcane. Yield generally depends on the climatic conditions, water availability, soil fertility, power cuts hindering water supply to cane and quality of seeds. Efforts by EID Parry to mitigate the risk The risk is being addressed by focusing on drip irrigation in drought areas, providing genset in areas encountering longer power cuts, nursery seeds and application of nutrients to enrich the organic content in the soil.

2) Cane Harvesting Labour: Availability of cane harvesting labour has become challenge in recent scenario. The shortage of labour has been due to various reasons including availability of lesser effort jobs elsewhere. Efforts by EID Parry to mitigate the risk To mitigate the risk, more focus is given on mechanical harvesting and company has successfully found out entrepreneurs who were able to invest on harvesting machines. Demo plots are laid in all divisions to create awareness among farmers about wider row planting (favourable for mechanical harvesting) and hassle free cultivation.
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3) Government Regulations: The following policies of both central and state governments have an effect on the sugar industry. Import Export Policy- Export release order based on the surplus availability of sugar Levy Quota- Levy quota remains at 10% same as last year and price has increased by Rs. 650 per Ton of sugar.

4) Spread (Difference between Sugar price and Sugarcane price) Fluctuating sugar prices and increase in sugarcane prices have an effect on profitability. Sugarcane prices have been increased from Rs. 1901 per MT to 2001 per MT. Sugar prices dropped to Rs. 27.50 per kg in the month of February 2012 from Rs. 28.03 per kg in the month of November 2011

Efforts by EID Parry to mitigate the risk Reducing fixed cost and production losses, generating more profits from Cogen and Distillery by sweating assets for extended period (more than 275 days) and increasing the sales to institutional and retail customers are the de-risking strategies adopted for mitigating the risk.

5) Capacity Utilization: Utilization of plant depends on cane availability. Non availability of cane leads to under utilization of sugar plant and co-generation plant.

Efforts by EID Parry to mitigate the risk The risk is mitigated by running the plant for extended period. In FY 2012-13 EID is planning to run the plant for 275 days keeping in mind higher cane registration and expanded crushing capacity in some of the plants. Unregistered cane will be drawn whenever required to ensure 100% capacity utilization.

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Business Risks- Bio Pesticides The major risks faced by Bio- Pesticides division are availability of neem seed at viable price and currency risks. 1. Availability of Neem seed at viable price: Neem seed is an unorganized market and procurement of neem seed at viable price is a real concern. Efforts by EID Parry to mitigate the risk The risk is mitigated by exploring new areas for procurement and buying small quantity of neem fruits as an alternate strategy. It is proposed to form a dedicated team to contact pickers and motivate them by providing incentives, schemes etc.

2. Currency risks: Part of the bio pesticide sales is exported and hence currency fluctuations shall have an impact on the income. The risk is mitigated by implementing hedging policies.

Business Risks- Nutraceuticals The major risks in Nutraceuticals division are depending on climatic conditions, availability of water and currency risks. 1. Dependence on Climatic Conditions: The micro algae production is weather dependant and changes in the weather pattern can have an adverse impact on productivity and cost of production.

Efforts by EID Parry to mitigate the risk The risk is mitigated through continued and focused initiatives taken to manage the controllable factors.

2. Availability of Water: Water is very critical and any scarcity of the same shall have an impact on the production.
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Efforts by EID Parry to mitigate the risk The risk is mitigated by storing the required water in water lagoons. It is proposed to install water treatment facility.

Future prospects

Demographics As Indias population is set to exceed Chinas in the next ten years, with current population of 1.2 billion, total consumption in India looks set to continue to rise. It has been observed that Indias per capita consumption of sugar exceeds that of China by 60%. This gives high scope for the Indian sugar mills to find markets and grow. Based on the past ten years' growth in consumption and estimates from various independent sources, it is expected that in 2017, the domestic sugar consumption would be approximately 28.5 million MT. Given the high cost of imports and the strategic importance of food security, India would need to target its production in excess of domestic consumption. Given the past trend in production cyclicality, sugar equivalent to 1.5 months of consumption i.e. an additional 3.5 million MT of sugar would need to be produced by 2017. Therefore the sector has huge investment potential

Emerging trends The new plants which are being constructed are integrated complexes. This would help in derisking from sugar downturns and benefit from untapped potential of ethanol and cogen. For instance, while sugar capacities are set to grow by 58%, Cogen and ethanol capacities are planned to grow by 175% and 217% respectively.

Exports 1. India is located close to major sugar deficient markets. The Indian Ocean countries of Indonesia Bangladesh, Sri Lanka, Pakistan, Saudi Arabia, UAE and some East African countries are sugar deficient and import sugar regularly. 2. International trade has the potential to enable stability in the domestic market and is promoted by the government.

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Finances of EID PARRY

In Cr

March 2012
1536.65

March 2011
1278.72

March 2010
1,179.43

March 2009
812.27

SALES TURNOVER

TOTAL INCOME

1712.17

1413.36

1288.84

928.00

TOTAL EXPENSES

1437.70

1251.97

941.46

712.33

GROSS PROFIT

274.47

161.39

347.38

215.67

NET PROFIT

137.32

79.26

205.28

691.96

E.P.S

7.91

4.58

23.77

80.37

FACE VALUE

1.00

1.00

2.00

2.00

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Ratios Free reserves per share

March 2012 64.65

March 2011 61.84

March 2010 118.65

March 2009 104.70

Operating profit Margin (%)

6.25

0.31

18.03

9.31

Debt equity ratio

0.65

0.57

0.53

0.56

Dividend Pay-out Ratio to Net Profit

50.58%

36.48%

41.94%

27.28%

Ratios and its explanation.

1. Free reserves per share

It is an investment valuation ratio. It indicates the health of the company.

Free reserves per share = Free reserves in Company / No of equity shares It is an accumulated profit of the company year after year which can be utilised by the company to declare dividends, bonus shares, write off losses and share issue expenses. For e.g. In March 2012 Free reserves per share= 1,194.86/ 17.32 = 64.65 .This can be explained that for every share the company had 64.65 Rs as a reserve. This indicates that the company is healthy.

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2. Debt Equity ratio

It is the Ratio of total debts to the no of equity shares.

When ratio is 1:1, the external lender and owners face the same degree of risk. Ratio when greater than 1:1, then debts are higher than the equity and external lenders face more risk.

Ratio when less than 1:1 the debts are less than equity. External lenders face less risk. Assets are distributed to the shareholder from the equity and not debts. For e.g. Looking at the companys debt equity ratios over the last four years it can be said that the company has had lesser debts and hence possesses lesser risk. Business is Positively geared.

3. Operating Profit Margin (%)

It is a ratio which is used to measure the operating efficiency of a company.

It is a profitability ratio. Given by the formula, Operating Margin = Operating Profits/Net Sales Operating profit margin is what proportion of the companys revenue is left over after paying variable cost for production such as wages, raw materials etc. Healthy operating margin is required by company to pay for its fixed cost such as interest on debt.

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4. Dividend pay-out to Net Profit ratio

It is a ratio which indicates cash flow.

It can be represented as Dividend pay-out/Net profit For example (2012). Company has 137.32cr as net profit and dividend payout as 69.47 cr then the ratio is 0.5058 or 50.58%. This means for 137.32 cr of Net profit the company pays 50.58% of dividend to the shareholder which indicates that the company has good cash flow and good dividend distribution to its shareholders.

5. Earnings Per share. The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability.

EPS = Net profit / No of shares or Equity shares.

For e.g. The net profit after taxation in 2012 is 137.32cr and the no of equity shares is 17.33crores then the EPS will 7.91.This means for every share the company earns 7.91 Rs.

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Conclusion

For the past 5 years EID Parry has developed into one of the largest sugar producers in India. It has not only concentrated on sugars but also has diversified in Bio pesticides as well as Nutraceuticals but also is the only sugar producer in the country to have its own Dedicated R & D. They have given consistent performance in terms of sales turnover. Considering its safe debt levels, generous dividend pay-outs, large market capitalisation and high earnings per share it is certainly an Investor friendly Company. It hence has its vision of becoming a global player in future.

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Bibliography
1) http://en.wikipedia.org/wiki/EID_Parry 2) http://www.eidparry.com/ 3) http://www.parrysugar.in/ 4) http://www.murugappa.com/news_events/press_releases/Q2_2012/EID_ParryReports.htmlpress release 5) http://www.business-standard.com/india/news/eid-parry-to-implement-new-holland-fiatstech/454568/ 6) Investor guide 2011-2012 7) Annual report- 2011-2012 8) Annual report 2010-2011 9) Annual report 2009-2010 10) Annual report 2008-2019 11) http://www.moneycontrol.com/india/stockpricequote/sugar/eid-parry-india/EID

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