Economy Analysis

India inflation as measured by the WPI or Wholesale Price Inflation for the month of August 2011 came in at 9.78% as against a level of 9.22% seen in July 2011. The rise in inflation by 0.58% month on month is accounted for by a sharp rise in primary article inflation over the month of July to August

 Liquidity in the banking system continues to be in deficit with banks borrowing an average of around Rs 50,000 crores from the RBI on a daily basis Credit growth has come off from 23% levels to 20% levels over the last six months. High rates of interest are impeding credit demand Borrowing costs for consumers as well as the industry has gone up by around 250bps to 400bps over the last one year. Lower credit off take is good for inflation as it lowers aggregate demand in the economy.

 Indias exports for August 2011 at USD 24.3 billion was down 17% month on month leading to worries of global economic slowdown weighing on trade. Imports were down by 4.95% leading to the trade balance moving up by 27% month on month. Slowing exports may weigh on the CAD (Current Account Deficit), which closed 2010-11 at 2.6% of GDP from earlier estimates of over 3% of GDP.

India GDP Growth Rate

Index of Eight Core Industries (Base: 2004-05=100) June 2011

The Index of Industrial Production (IIP)registered a growth of 5.2% compared to 4.4% registered in June 2010. During April-June 2011-12, eight core industries registered a growth of 5.0% as against 6.8% during the corresponding period of the previous year 2010-11. Coal Coal production (weight of 4.38% in the IIP) registered a growth of (-) 3.3% in June 2011 compared to growth of 0.8% in June 2010. Crude Oil Crude Oil production (weight of 5.22% in the IIP) registered a growth of 7.7 % in June 2011 compared to a growth of 6.8% in June 2010 Natural Gas Natural Gas production (weight of 1.71% in the IIP) registered a growth of (-) 11.7% in June 2011 compared to growth of 25.4% in June 2010

Petroleum Refinery Products Petroleum refinery production (weight of 5.94% in the IIP) registered a growth of 4.7% in June 2011 compared to growth of 2.9% in June 2010. Fertilizers Fertilizer production (weight of 1.25% in the IIP) registered a growth of (-) 2.4% in June 2011 compared to (-) 6.7% in June. Steel Steel production (weight of 6.68% in the IIP) registered a growth of 12.5% in June 2011 compared to 4.3% in June 2010 Cement Cement production (weight of 2.41% in the IIP) registered a growth of (-) 0.8% in June 2011 compared to 3.7% in June 2010. Electricity Electricity generation (weight of 10.32% in the IIP) registered a growth of 8.2% in June 2011 compared to a growth of 3.8% in June 2010.

India Inflation Rate

India Exports

India Imports

India Stock Market Index

INDUSTRY ANALYSIS

Indian Sugar Industry

In India, it is classified under essential commodities which makes it vulnerable to regulatory policies by the regime. The Sugar Year (SY) is from October to September. Generate employment for 5,00,000 people directly and indirectly. 453 Sugar mills in country currently operational. Around 315 of total installed mills are in co-operative sector,189 in private sector , 62 in public sector . Sugar is a cyclic industry which follows a three year cycle.

Contd
The quantum of sugar produced by a mill is determined by the factors like daily crushing capacity, duration of crushing season and percentage of sugar recovery. [Tones Crushed per Day (TCD), 180 days and 10-12%]. At present, sugar mills are required to provide 10 per cent of their total production as levy sugar (Rs 13 / kg) for the Public Distribution System (PDS). SMP is the Govt. determined price at which sugar manufacturers purchase cane from farmers whereas SAP is the price at which sugar manufacturers sell sugar in the free market.

Indian Sugar Industry

India is the second largest producer of sugar cane after Brazil. India is the second largest producer of sugar (23 million ton production ), it ranks 15th in export rankings as India is the largest consumer of sugar in the world. On the domestic front, the Indian sugar industry has a turnover of Rs. 700 billion per annum (US $ 14.6 billion). India ranks 6th in per capita consumption with Brazil being the highest per capita consumer of sugar at 57.6 Kg per capita. India contributes about 12 per cent of world sugar production

Contd
There are 553 installed sugar mills in the country with a production capacity of 180 lakh MT of sugar. These mills are located in 18 states of the country, with Maharashtra contributing over one-third of it. About 60% of these mills are in the co-operative sector, 35% of the total are in the private sector and rest in the public sector. Almost 75% of the sugar available in the open market is consumed by bulk consumers like bakeries, candy makers, sweet makers and soft drink manufacturers. The crushing season in the country starts from October and reaches its peak in January before finally ending in March or April of the next year

Raw Material (Sugar cane)

In India, sugarcane is the key raw material, planted once a year during January to March. About 60% of the crop in India is grown in sub-tropical region (Uttar Pradesh) while 40% of the crop is grown in tropical region (Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh). Maharashtra and Uttar Pradesh together produce about 60% of the sugarcane grown in India with both states producing almost equal amounts. On average, crop yields are better in the sub-tropical region due to less variability in the mean monthly temperatures.

Raw Material (Sugar cane)

India's sugarcane yield is estimated at 65,000 kgs per hectare, higher than the global average of around 63,000 kgs per hectare. Sugar cane prices comprises more than 70% of the total costs of Sugar production. Of the total sugar sold in the free market (non-levy), around 61% is accounted for by the industrial and small business segments, also referred to as indirect consumption. Household segment accounts for the rest 39%. Low income household account for 25% of the total non-levy market.

Demand-Supply
Demand Drivers
30% of total consumption is directly used by households, while 70% is used indirectly. The Sugar consumption is expected to grow at rate of 44.5% because of-steady growth in population of 1.31.p.a. -growth of peer capita income by 6.5-7.5 p.a.

Supply Constraints
Reduction in cultivation area by about 17% during SY 200809,would result in reduction in production of sugarcane to 280 MT. The farers are shifting to alternate crops like weat , jowar, bajra which are more profitable

Indias Sugar Scenario(mn tonnes)

Sugar yr. Oct-Sep Opening stock 1 st Oct 2006-07 3.7 2007-08 10.2 2008-09 9.9 2009-10 3.5 2010-11E 5.0

Production
Imports Total Availability

28.3
0 32.0

26.3
0 36.5

14.6
1.3 28.1

18.92
6.0 28.42

25
0 30

Domestic consumption
Exports Total off take +consumption

20.2
1.7 21.9

21.7
4.9 26.6

22.3
0.0 22.3

23.42
0 23.42

23
1.5 24.5

Closing Stock as on sep 30

Closing stock/Domestic consumption(%)

10.2
50.5

9.9
45.62

3.5
15.7

5
21.3

5.5
23.9

Government Policies and Interventions

Statutory Minimum Price (SMP) and State Administered Price (SAP) As sugar falls under essential commodities, it is being regulated by the state government in coordination with the Center. For the season 2009-10, the regime is under tremendous pressure for declaring SMP as this crop has fallen from surplus to deficit category. Subsidies The Govt. has given transportation subsidy to sugar exporters in order to release excess stocks piled up at millers end. Levy sugar The govt. is planning to increase levy quota (for BPL under PDS) from current 10% to 20-25% due to concern of increasing sugar price. Stock limits Sugar may be subject to stock limits in a year, which are being imposed in essential commodities in India. Indian government heavily discourages import of white sugar and slaps 60% duty on the import

CONTD.
Govt of India has asked sugar mill companies to sell a part of their monthly non-levy quota every week, failing which the unsold quantity will be converted into levy sugar and sold at subsidised rate through the public distribution system. Govt. looks to partially relax the norms for millers to sell nonlevy sugar quota for this year(2011 )in the open market by giving them seven more days to sell the allocated quantity, the government said in a order. The price has fallen by nearly a quarter since hitting a record high of 3,972.3 rupees on Jan 7.

MAJOR PLAYERS
Bannari Amman Group One of the largest Industrial conglomerates in South India, Bannari Amman Group does manufacturing and trading of sugar, alcohol, liquor, granite, cotton, and yarn. The service sector includes wind power energy, education, health care, and real estate. Dwarikesh Sugars Dwarikesh Sugars is aiming to be the market leader of the sugar industry. They also plan 10,000 environmentally friendly trees on the premise as well as in surrounding areas, winning them many laurels. Rajshree Sugars Listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), Rajshree Sugars has interests in sugar, distillery, power and biotechnology. Rana Sugars Since its beginnings in 1993, Rana Sugars has established itself in the sugar industry. Today, its business spans sugar, alcohol, power generation and textiles. Knowing that sugar is a vital part of the rural economy, Rana Group is actively involved with the farming community. .

CONTD..
Shree Renuka Sugars With its focus on sugar, bio-fuels, and allied products of renewable energy, SRSL is the largest sugar and ethanol producer in coastal India. Its main operations are located in Maharashtra and Karnataka KK Birla Group of Companies, Kolkata, that own Upper Ganges Sugar & Industries (UGSIL), The Oudh Sugar Mills Ltd & Gobind Sugar Mills Ltd Indias largest sugar and ethanol manufacturer company, Bajaj Hindusthan Ltd., Mumbai, has many plants in Uttar Pradesh. Balrampur Chini Mills Ltd, of Kolkata, West Bengal Bannari Amman Sugars Ltd., Coimbatore, Tamil Nadu Andhra Sugars, West Godavari district, Andhra Pradesh Dhampur Sugar Mills, Ltd, Bijnor, Uttar Pradesh Dwarikesh Sugar Industries Ltd .

Name

Last Price

Market Cap. (Rs. cr.) 3,853.64 3,749.25 2,730.01 1,193.47 697.82 569.92 264.84 218.32 166.68 146.25 138.81

Sales Turnover Net Profit Total Assets

EID Parry Shree Renuka Bajaj Hind Balrampur Chini Bannariamman Triveni Engg Andhra Sugar Dhampur Sugar KCP Sugar Ugar Sugar Work Dalmia Sugar

222.15 55.85 39.85 48.35 610 22.1 97.7 40.5 14.7 13 17.15

1,278.72 5,454.70 3,008.78 2,987.45 826.76 2,262.22 519.44 2,360.11 269.76 444.63 687.31

79.26 410.9 51.76 164.41 53.06 90.84 35.38 8.68 11.83 -20.04 3.09

1,803.77 3,495.34 8,680.09 3,296.04 1,246.85 1,925.11 704.83 1,404.71 223.07 401.32 4,228.05

Comparision.

BEST AND WORST PERFORMER

Company Analysis COMPANY ANALYSIS

Bajaj Hindustan Limited:

Bajaj Hindustan ltd. A part of the Bajaj group , is India s largest sugar and ethanol manufacturing company headquartered in Mumbai They have 14 sugar plants in different parts of the state of Uttar Pradesh and their production capacity of 136000 tonnes of crushed sugar per day. Currently the company has the largest sugarcane crushing capacity in India of over 56000 tonnes crushed per day. The company is slated to undertake huge expansion plans to take its current crushing capacity of 56000 tcd to about 100000 tcd

Contd
BHL is Indias largest ethanol producer. It is the pioneer of Indias fuel ethanol programme. BHL is currently producing 38 million liters of ethanol in a year. In anticipation of emerging market demand, the Company has increased its ethanol manufacturing capacity to nearly 218 million liters per year.

BUSINESS OVERVIEW: The company is operating in only one segment i.e. production of sugar. Currently the company also plans to enter ethanol production in domestic as well as overseas market looking forward for growth in demand for ethanol blended fuel. BUSINESS RISK: Demand and supply gap in domestic as well as international market which leads to fluctuations in commodity price. MARKET RISK: There is very little market risk in this segment, considering sugar as a necessity commodity, every household requires sugar in their daily cooking

VOLUME BASED BUSINESS: The sugar prices on the other hand are controlled by the government authorities as it is a basic necessity for the household. Therefore, the profits of the company are totally based on the volume of their business. The more sugar they produce, their turnover will increase accordingly and thereby adding additional profits to the company s account.

Dividend Smmary
For the year ending September 2010, Bajaj Hindusthan has declared an equity dividend of 70.00% amounting to Rs 0.7 per share. At the current share price of Rs 39.40 this results in a dividend yield of 1.78%.
The company has a good dividend track report and has consistently declared dividends for the last 5 years.

MANAGEMENT OVERVIEW:
NAME POSITION Promoter/Executive AGE(Years) 58 Directorship Tenure (Years) 19

Mr. Shishir Bajaj

Mr. Niraj Bajaj

Promoter/NonExecutive
Non-Promoter/NonExecutive Independent Independent Independent

51

Mr. D.S. Mehta

69

19

Mr. M.L. Apte

Mr. R.V. Rula Mr. D.K. Shulka MR. I.D.Mittal

73
45 63 60

35
4 6 3

NonPromoter/Executive

MF Holding this Scrip

Scheme Asset(%) Market Value

IDFC Arbitrage Fd A (G)

1.34

0.87

IDFC Arbitrage Fd B (G)

1.34

0.87

SBI MagArbitrageOppr (G)

0.80

0.34

SHARE HOLDING PATTERN:

Promoters Mutual Funds FI s FII s PCB s Indian Public NRI s/OBC s 38% 6% 3% 36% 4% 12% 1%

Bajaj Hind

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