Oudh Sugar Mills

The last six months have witnessed a lifetime of dramatic twists and
 turns and the next few months also promise more turbulent times. The
 global economy is in turmoil with commodities taking a huge hit on the
 face of a looming global slowdown. These are indeed testing times but I
 am confident that the Indian economy will bounce back and return to its
 high growth trajectory.
 
 I would like to share with you the highlights of your Company, The Oudh
 Sugar Mills Limited for the year 2007-08. Let me begin by saying that
 your Company has come out stronger from its experiences, faced during
 the down turn of the sugar industry. The industry has weathered a
 severe recession, and your Company came out better placed,
 competitively.
 
 WHAT CHALLENGES DID WE FACE, AND HOW DID WE RESPOND ?
 
 While the macro economic fundamentals of the sugar industry continue to
 strengthen with the global sugar surplus slowly disappearing, the
 Indian economy witnessed a marked change in its growth pattern: GDP
 growth rate of only 8.7 per cent and falling, was comparatively lesser
 than projections. That, of course, impacts the whole economy.
 
 The sugar industry was trapped between high sugarcane prices and low
 sugar prices and the absence of a stable and comprehensive sugar
 policy, made things tougher. But we were successful in turning the
 constraints into enablers. We took advantage of the cyclicality of the
 industry. Your Company used this downturn to streamline operations,
 augmented capacities and widened the business base, thus abstaining
 from any relapse in the long term.
 
 The astronomical rise in the crude prices, marked its presence on every
 economy and the world woke up to the urgent call, for a substitute
 fuel. The volatility in the crude prices had a positive impact on the
 sugar industry. Ethanol from sugarcane, blended with gasoline, helped
 to soften the impact on fuel costs, while opening up a timely new
 product line for the sugar industry and consequently weathering its
 cyclicality.
 
 Brazil, the world’s leading sugar producer, has been diverting its
 attention to ethanol production. This translates into a cut down on the
 global sugar output, resulting into attractive sugar prices.
 
 Brazil and USA, have already mastered ethanol technology and economics.
 The Indian Government too, has taken the initiative to introduce
 progressive blending of petrol with ethanol. This has boosted the
 importance of ethanol in an increasingly fuel-peaking scenario. The
 Government’s push to the ethanol programme is a big help for sugar
 companies: besides lifting profitability, it will help reduce
 dependence on the industry’s cyclicality.
 
 Meanwhile, your Company has, as I said earlier, distributed its
 business, thus minimising risks.  Today, your Company’s main business
 focus remains on what it does best, manufacture of sugar and at the
 same time, it is paying adequate attention to the canes derivatives
 industrial alcohol to name one. Your Company has built up on its
 captive power generation capacity, utilising the crushed canes waste
 product bagasse, as a revenue generating stream.
 
 The global market called for a new protocol as Brazil began to shift
 focus to ethanol. But the situation had the upside of speeding up the
 end of the sugar surplus phase and leading to the next one.
 
 WHAT IS THE OUTLOOK FOR OUDH SUGAR ?
 
 Your Company has completed an aggressive expansion plan, parts of which
 are already visible. Putting our strategy into practice, with
 imagination and sustained effort, it should help us compete effectively
 in the foreseeable future. With technology upgraded, your Company has
 made a strategic shift upwards on the value chain.
 
 Our expansion strategy entails both green field and capacity
 augmentation projects. A new sugar mill will start production in the
 current season and a Rs. 100 crore expansion of our Hargaon plant with
 zero effluent discharge technology will facilitate an increase in
 distillery capacity.
 
 While we were always energy independent, in the sense that we are
 generating power from bagasse, we have become an exporter of surplus
 power. This has become an important source of revenue for us which will
 continue to grow.
 
 Our partner in our progress has always been and will continue to be our
 large family of farmers. They are the backbone of the sugar industry
 and with emphasis on Research & Development on better varieties and
 yields of sugarcane and more efficient farming techniques we will be
 able to both upgrade and upscale the cane crop. Only that will make a
 sustainable product portfolio for us, and the sugar industry as a
 whole.
 
                                                   With warm regards,
 
                                                        C. S. Nopany
                                        Chairman & Managing Director