Dwarikesh Sugar Industries

The Directors take pleasure in presenting their Fifteenth Annual
 Report together with the audited accounts for the year ended 30th
 September 2008.
 
 1.  FINANCIAL RESULTS
 
                                               INR in lacs   INR in lacs
                                               Year ended    Year ended
                                               30.09.2008    30.09.2007
 
 Gross profit before depreciation, interest & 
 tax                                            4,957.51      1,890.42
 Less: Depreciation                             2,943.15      1,330.99
 Interest                                       4,947.21      1,846.11
 Profit / (Loss) before tax and exceptional 
 items                                         (2,932.85)    (1,286.68)
 Less: Provision for taxes (including 
 previous year)                                     3.72         61.69
 Fringe Benefit Tax                                10.04         10.64
 Deferred tax liability                          (468.57)      (730.76)
 Profit after tax                              (2,478.04)      (628.25)
 Add: Deferred tax liability relating to 
 earlier period                                        -        574.74
 Less: amount transferred from general reserve         -       (574.74)
 Add: Balance brought forward from previous year   806.24     1,470.20
 Amount available for appropriation             (1,671.80)      841.95
 Appropriations:
 Proposed Dividend
 - On equity Shares                                     -            -
 - On preference Shares                                 -        31.28
 Additional tax on dividend                          0.89         4.43
 Transfer to general reserves                           -            -
 Balance carried forward to next year           (1,672.69)      806.24
                                                (1,671.80)      841.95
 
 2.  DIVIDEND
 
 In view of losses incurred during the year, your directors do not deem
 it appropriate to recommend payment of dividend on equity shares of the
 Company. Your directors are also compelled to skip dividend on 12% & 8%
 Cumulative redeemable preference Shares.
 
 3. YEAR IN RETROSPECT
 
 OPERATIONS:
 
 Metrics of sugarcane crushed, sugar produced and recovery achieved
 during the year is given herein under:
 
 Units                                  Cane crushed in MT
 
 Dwarikesh Nagar (DN)                       721,911
 Dwarikesh Puram (DP)                       712,989
 Dwarikesh Dham (DP)                        504,217
 
 Total                                    1,939,117
 
 Sugar produced          Recovery in %
                         in quintals
 
 768,075                   10.64
 736,265                   10.33
 517,759                   10.27
 2,022,099                 10.42
 
 This was the maiden year of crushing and production for Dwarikesh Dham
 unit. It commenced production on the 17th December, 2007.
 
 Your Directors are pleased to inform that the recovery of 10.64%
 recorded during the crushing season of 2007-08 at the DN plant was the
 second highest in the State of Uttar Pradesh. The recovery clocked at
 all the units of your company figures among the top 10 recoveries
 recorded in the State of Uttar Pradesh.
 
 During the year 5,684,611 Litres of Industrial Alcohol (previous year
 7,625,121 Litres) and 4,075,725 Litres of Ethanol (previous year
 3,677,066) was produced at Dwarikesh Nagar Unit of the Company. In
 value terms the sale of rectified spirit was Rs. 294.13 lacs (previous
 year Rs 816.06 lacs) and sales of ethanol was Rs. 994.24 lacs (previous
 year Rs 936.32 lacs).
 
 Expansion Plan-status:
 
 During the year the following projects were successfully executed and
 commissioned.
 
 Units                           Capacity added
 
 Dwarikesh Puram (DP)                24 megawatts
 Dwarikesh Dham (DD)         7,500 TCD expandable
                                    to 10,000 TCD
 Dwarikesh Dham (DD)                 24 megawatts
 
 Date of commencement               Date of grid
 of production                      synchronisation / power
                                    evacuation
 
 NA                                  03-02-2008
 17-12-2007                               NA
 NA                                  09-02-2008
 
 The sugar project at Dwarikesh Dham commenced production as per
 schedule. However there was delay on the part of UPPCL in laying lines
 for transmission of power from Companys switch yard to their
 Sub-station.  The power evacuation therefore at both DP and DD was
 delayed. In the coming years your company expects to reap the full
 benefit of the investment made. The sugar plant as DD is an engineering
 marvel with state of art machinery and most modern infrastructure.
 
 METRICS OF PRESENT PLANT CAPACITIES:
 
 Units                           Sugar capacity        Distillery
                                    (TCD)               (KLPD)
 
 Dwarikesh Nagar (DN)              6,500                   30
 Dwarikesh Puram (DP)              7,500                   -
 Dwarikesh Dham (DD)               7,500                   -
 
 Total                            21,500                   30
 
 Co - generation      Supply tostate
 capacity (MW)        Grid(MW)
 
 17                       8
 33                      24
 36                      24
 86                      56
 
 4. Convertion of 7.50 lacs of Warrants into Equity Shares
 
 During the year 2006-07 your company had issued 15 Lac Warrants
 convertible into 15 Lac Equity Shares to Promoter group at a price to
 be determined as per SEBI formula in accordance with DIP Guidelines. A
 sum of Rs. 119.73 Lacs was accordingly received as 10% deposit towards
 allotment of Warrants.
 
 During the year, promoters have exercised their option for conversion
 of 7.50 lacs warrants & the same have been converted into equity shares
 w.e.f 1st February, 2008. The necessary approvals have been obtained
 from BSE & NSE for listing of converted shares on the stock exchanges &
 these shares are now listed on stock exchanges, subject to applicable
 lock in restrictions.
 
 The proceeds of the aforesaid allotments is utilised for augmenting
 long term working capital requirements of the Company.
 
 5. FINANCIAL PERFORMANCE:
 
 The year 2007-08 was an extremely difficult year. Not only have the
 margins shrunk, they have become negative. Ruthless attack on costs and
 focus on operating efficiency were primarily responsible for your
 Company posting cash profits, albeit the company could not help but
 post net loss.
 
 The year in which most adverse factors were at play coincided with the
 company executing a major expansion plan involving increase in
 sugarcane crushing capacity of 7,500 TCD and incremental co -
 generation capacity to export 48 megawatts of power.
 
 The main factors responsible for the loss are:
 
 - Lower realisation on sale of sugar: The year started with high
 inventory. At the start of the season it was widely perceived that the
 year would be yet another year of record production. The prices of
 sugar during the first 7 to 8 months of the year therefore reached
 abysmally low levels. The prices started firming up towards the later
 part of the year. However the average price realised during the year
 was far from remunerative.
 
 - Higher inventory levels: Higher carried forward stock from earlier
 year and higher production during the year resulted in sugar mills
 carrying large inventories thereby incurring additional interest costs
 and warehousing costs.
 
 - The fall in the price of sugar coincided with the Companys execution
 of its capacity expansion plan. Since the DD plant commenced sugar
 production from January 2008 and incremental power capacity became
 operational from February 2008, full benefit of the expansion was not
 harnessed during the year where as the costs incurred are already
 reflected in the numbers.
 
 During the year your Company sold 1,528,961 quintals of sugar as
 compared to 1,283,847 quintals of sugar sold in the previous year, a
 year on year growth of 19%. Sales (net of excise duty) in value terms,
 at Rs. 272.65 crores was 20 % more than the sales of Rs. 226.93 crores
 recorded in the previous year. Volatility in the selling price of free
 sale sugar was pronounced as the selling price oscillated between Rs.
 1,300 per quintal in December, 2007 to Rs. 1,725 per quintal in August,
 2008. The average selling price though during the year was marginally
 lower at Rs. 1,428 per quintal as compared to Rs. 1,441 per quintal in
 the last year. The selling price of sugar during the year was far from
 remunerative.
 
 6. CANE & SUGAR POLICY:
 
 The main policies of the government in relation to the sugar industry
 during the year were
 
 1.  The ratio of levy and free sale sugar was 10:90.
 
 2.  The price of levy sugar for Central U.R for the year continued to
 be Rs. 1,330.77 per quintal.
 
 3.  The statutory minimum price (SMP) of sugar cane for the year was
 Rs. 81.18 per qtl. linked to sugar recovery of 9% with premium for
 higher recovery.
 
 4.  The minimum statutory price announced by the Central Government on
 the basis of recovery are given below:
 
 Season                            SMP Rs. / Qtl.
 
 2000-01                              59.50
 2001-02                              62.05
 2002-03                              64.50
 2002-03 (Revised)                    69.50
 2003-04                              73.00
 2004-05                              74.50
 2005-06                              79.50
 2006-07                              80.25
 2007-08                              81.18
 2008-09                              81.18
 
 5. During the year 2007-08, the State Government of Uttar Pradesh
 announced State Administered Price (SAP) of Rs. 125 per quintal of
 sugarcane of the general variety to be delivered at the factory gate.
 However most of the sugar mills in the State, in pursuance of a Supreme
 Court order paid and accounted for a price of Rs. 110 per quintal.
 
 What is galling is that unmindful of the plight of sugar mills, the
 State Government has for the crushing season of 2008-09 announced SAP
 of Rs. 140 per quintal for general variety of sugarcane to be delivered
 at factory gate, a whopping increase of Rs. 15 per quintal over the SAP
 of previous year. The industry has challenged the SAP for the year
 2008-09 as well.
 
 The matter of SAP for 2007-08 & 2008-09 is subjudice and now subject to
 decisions of courts pending at various stages.
 
 7.  PERFORMANCE OF POWER UNIT
 
 During the year 2007-08, 130,806,536 KWH units of Electricity were
 generated, registering a growth of 68.54 % as compared to 77,612,565
 KWH generated in the previous year. From sale of power, your company,
 during the year earned revenue of Rs. 1,875.31 lacs as compared to Rs.
 758.63 lacs, last year, clocking a growth of about 147%. The growth
 would have been more impressive had there not been delay on the part of
 UPPCL in laying lines for evacuation of power. In the ensuing crushing
 seasons, your Company expects to export power at its full capacity
 throughout the duration of the crushing season, if not more.
 
 8.  DIRECTORS
 
 Pursuant to Article 146 of the Articles of Association of the company,
 Mr. M G Diwan, Mr. K P Medhekar and Mr. S K Neotia, retire in the
 ensuing Annual General Meeting and being eligible offer themselves for
 reappointment.
 
 9.  Statement of Directors Responsibilities
 
 As required under the provisions of Section 217(2AA) of the Companies
 Act, 1956, your Directors confirm that:
 
 (i) in the preparation of the annual accounts, applicable Accounting
 Standards have been followed with proper explanation relating to
 material departures, if any;
 
 (ii) Selected such accounting policies and applied them consistently
 and made judgments and estimates that are reasonable and prudent so as
 to give a true and fair view of the state of affairs of your company at
 the end of the financial year and of the profit of your company for
 that period;
 
 (iii) Taken proper & sufficient care for the maintenance of adequate
 accounting records in accordance with the provisions of the Companies
 Act, 1956 for safeguarding the assets of your Company and for
 preventing and detecting fraud and other irregularities; and
 
 (iv) Prepared the Annual accounts on a going concern basis.
 
 10.  CORPORATE GOVERNANCE
 
 As per clause 49 of the Listing Agreement with the Stock Exchanges, a
 report on Corporate Governance together with the Auditors Certificate
 regarding compliance of the conditions of corporate governance,
 Management Discussion and Analysis statement forms part of the Annual
 report.
 
 11.  EMPLOYEES
 
 In accordance with the provisions of sections 217 (2A), read with the
 Companies (Particulars of Employees) Rules, 1975, the names and other
 particulars of employees are to be set out in the directors report, as
 an addendum thereto. However, as per the provisions of section 219(1
 )(b)(iv) of the Companies Act, 1956, the report and accounts, as
 therein set out, are being sent to all members of the company excluding
 the aforesaid information about employees. Any member, who is
 interested in obtaining such particulars about employees, may write to
 the Company Secretary at the Registered Office of the Company.
 
 12.  CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
 EARNINGS AND OUTGO:
 
 Pursuant to section 217 (l)(e) of the Companies Act, 1956, the
 particulars in respect of conservation of energy, technology absorption
 and foreign exchange earnings & outgo are furnished in Annexure -I and
 form a part of this report.
 
 13.  AUDITORS & AUDITORS REPORT:
 
 There are no qualifications in the Auditors report.
 
 The Auditors, S S Kothari Mehta & Co., Chartered Accountants retire at
 the ensuing Annual General Meeting of the Company. You are requested to
 re-appoint the Auditors for the accounting year 2008-09 and fix their
 remuneration. S S Kothari Mehta & Co., Chartered Accountants, being
 eligible, have offered themselves for reappointment.
 
 The observations regarding cane price & funding of long term assets of
 Rs. 54.27 crores through short term loan from a bank have been
 explained satisfactorily in Note no 14 of Schedule B to the Notes on
 accounts and item xvii of the annexure to the Auditors report
 respectively.
 
 14.  PUBLIC DEPOSITS
 
 The Company does not have any fixed deposits at the beginning of the
 year in terms of Section 58A of the Companies Act, 1956. The Company
 did not accept any deposits during the year.
 
 15.  ACKNOWLEDGEMENT
 
 Your directors wish to place on record their sincere gratitude and
 appreciation to its share holders, sugar cane growers, employees,
 bankers, financial institutions, Central & State Government for their
 valuable contribution in the growth of the organisation.
 
                                                   By Order of the Board 
                                  For DWARIKESH SUGAR INDUSTRIES LIMITED
 
                                                             G R MORARKA
                                            CHAIRMAN & MANAGING DIRECTOR
 
 Place: Mumbai                                                 M.G.DIWAN
 Dated: 28th November, 2008                                     DIRECTOR