Ugar Sugar Works

The Directors have pleasure in presenting their 68th Annual Report
 together with the Audited Financial Statements for the period ended
 31st March, 2008.
 
 PADMABHUSHAN TO SHRI. B. N. KALYANI:
 
 The Board of Directors are pleased to inform that Shri. B. N. Kalyani,
 member of our Board has received the prestigious Padmabhushan Award
 at the hands of President of India in the year 2008 for his
 contribution to the industrial development in India.
 
 GENERAL:
 
 All India Production of sugar for the season 2007-08, has slightly
 reduced to 270 Lakh MT as compared to earlier year production of 283
 Lakh MT. The sugar production is further likely to go down in the
 season 2008-09 to approximately 245 Lakh MT. The Government of India
 has announced transport subsidy for export and created Buffer Stock for
 the year 2006-07 to help the Sugar Industry and stabilize the sugar
 prices. As much as 40 Lakh MT sugar has been exported by Sugar Mills in
 this period.
 
 Our total crushing at Ugar (includes Tasgaon 9,613 MT and Phaltan
 32,455 MT), during the season 2007-08 was 19.49 Lakh MT of sugar cane
 with bagging of 22.11 Lakh Qtls. of sugar with a recovery of 11.52%.
 The ratio of Levy to Free has remained the same i.e. 10% Levy and 90%
 Free sale.
 
 FINANCIAL RESULTS:
 
 The financial results of the Company are as shown below:
 
 Particulars                               31.03.2008       31.03.2007
                                           Rs. in Lakh      Rs. in Lakh
 
 Profit before Depreciation & Amortisation     2,846.20        982.54
 Depreciation & Amortisation                   1,401.38        655.89
 Profit Before Tax                             1,444.82        326.65
 Provision for Tax,
 (including deferred tax adjustment, 
 short/excess provision for tax and
 provision for FBT)                                5.40       (150.11)
 Profit after Tax / Net Profit                 1,439.42        176.54
 Balance of profit brought forward from 
 previous year                                   418.24        241.70
 Profit available for appropriation            1,857.66        418.24
 Appropriation to General Reserve              1,000.00          0.00
 Proposed Dividend                               180.00          0.00
 Corporate Dividend Tax                           30.59          0.00
 Balance Carried in Profit and Loss Account      647.07        418.24
 Earning Per Share (EPS)                           1.60          0.20
 
 Note: The Financial Year ended 31.03.2007 (FY 2006-07) was of 6 months
 only hence Comparison between FY 2007-08 and FY 2006-07 is not
 possible.
 
 DIVIDEND:
 
 Your Directors are pleased to recommend a dividend @ 20% i.e. Rs. 0.2
 per share.
 
 OPERATIONS:
 
 SUGARAT UGAR:
 
 Particulars                  Accounting Year and   Accounting Year and
                              Season 2007-08         Season 2006-07
 
 Date of beginning of crushing 
 season                              17.10.2007        27.11.2006
 Date of ending of crushing season            -                 -
 Number of Working Days                     167               124
 Sugar Cane Crushed (Lakh MT)             19.07             11.40
 Recovery                                 11.58%            11.88%
 Sugar Produced (Lakh Qtls.)              21.66             13.55
 
 DISTILLERY. IML PRODUCED & ELECTRIC TY GENERATED:
 
 Particulars                 Accounting Year and   Accounting Year and 
                                  Season 2007-08      Season 2006-07
 
 Rectified Spirit Produced (Lakh BL)      139.61           69.86
 Potable Alcohol Produced (Lakh BL)        67.64           28.44
 Denatured Spirit Produced (Lakh BL)       29.32            4.16
 Arrack (Lakh BL)                          12.95            9.39
 Electricity Generated (Lakh KW )       1,821.93          862.62
 Electricity Exported (Lakh KW )        1,049.76          476.54
 
 Your Directors expect to procure about 17 Lakh MT sugarcane at Ugar and
 Jewargi Unit during 2008 - 09 crushing season.
 
 ENVIRONMENTAL SAFETY:
 
 Our Company continues to pursue its environmental friendly approach
 towards Industrial growth. It enjoys good safety record. Constant
 improvements are being made in the process and equipments, to minimize
 the discharge of effluents and emissions. The combined Effluent
 Treatment and Evaporator and Dryer System for Distillery, Sugar Factory
 and Domestic waste are running satisfactorily. As already informed one
 more Evaporator and Dryer System is set up during this year and trials
 are in progress.
 
 FIXED DEPOSITS:
 
 The number of Deposit-holders, who have not claimed their deposits
 after maturity as on 31st March, 2008 were 9 and the amount outstanding
 as on that date was Rs. 4.52 Lakh.
 
 COST AUDIT:
 
 Cost Audit in respect of manufacture of Sugar and Industrial Alcohol
 has been made compulsory for every year.  Your directors have appointed
 Shri. V.V. Deodhar, Cost Accountant, Mumbai, as Cost Auditor for the
 Financial Year 2007 - 08. Approval of Central Government is received
 for his appointment.
 
 DIRECTORS :
 
 Sarvashri. A. B. Kage, B. S. Patil and D. B. Shah, retire by rotation
 and being eligible offer themselves for re-appointment.
 
 DIRECTORS RESPONSIBILITY STATEMENT:
 
 We confirm :
 
 i] that in the preparation of the annual accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to material departures.
 
 ii] that the directors have selected such accounting policies and
 applied them consistently and made judgment and estimates that are
 reasonable and prudent so as to give a true and fair view of the state
 of affairs of the Company at the end of the financial year and of the
 profit or loss of the Company for that period.
 
 iii] that the directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities.
 
 iv] that the directors have prepared the annual accounts on a going
 concern basis.
 
 CORPORATE GOVERNANCE:
 
 Our Company has been following good Corporate Governance since its
 inception. Our shares are listed on Bombay Stock Exchange Ltd., and we
 are regularly and timely complying with the filing requirements as per
 listing agreement.  As required under Listing Agreements, SEBI
 Guidelines, a Corporate Governance Report is annexed.
 
 CO-GENERATION:
 
 Our Co-Generation project is first of its kind in Karnataka State,
 using non-conventional energy source i.e. Bagasse as fuel. During this
 year electricity generated was 1,821 Lakh KW of which we have exported
 1,049 Lakh KW through Tata Power Trading Company by consuming 6.40 Lakh
 MT of Bagasse which consists of purchased quantity of 0.3 Lakh MT from
 neighbouring sugar factories.
 
 ETHANOL(ABSOLUTE ALCOHOL):
 
 The Oil Companies have recently finalised the tenders for purchase of
 ethanol during current year. The demand for the same has gone up
 substantially and further it is likely to go up as the international
 oil prices are touching all time high and that is likely to create huge
 increase in demand for Ethanol. Our Company has received annual orders
 for supply of 20.10 Lakh Ltrs., Ethanol from Indian Oil Company, Bharat
 Petroleum Co. Ltd., and Hindustan Petroleum Corporation Ltd., for
 various depots in South India.
 
 DEMATERIALIZATION OF SHARES:
 
 Our Company has provided connectivity with NSDL & CDSL for
 dematerialization of its shares for trading in electronic form. The
 Company has been allotted ISIN-NO.INE071 E01023 for this purpose. So
 far 5.95 Crore shares have been dematerialised by the shareholders,
 i.e. 66.09% of total shareholding. As per SEBI requirement a common
 agency M/s. Big Share Services Pvt. Ltd. has been appointed w.e.f 03rd
 July, 2007 as Registrar and Share Transfer Agent for handling the work
 relating to physical and dematerialized form of shares and all the
 shares data, members registers, etc. is transferred to them.
 
 EXPANSION AND DIVERSIFICATION: Greenfield Projects:
 
 1.  Jewargi Unit:
 
 The civil work and machinery installation work has been completed at
 this unit and trial crushing has started w.e.f. 29th April, 2008. This
 unit is expected to produce good results from sugar season 2008-09
 onwards.
 
 2.  Joint Venture Sadashiva Sugars Ltd.
 
 The civil work and machinery installation work has been completed at
 this unit and trial crushing has started w.e.f. 7th April, 2008. This
 unit is expected to produce good results from sugar season 2008-09
 onwards.
 
 Leased Units
 
 1.  Tasgaon Unit:
 
 The Maharashtra State Co-operative Bank Ltd., has taken over the
 Tasgaon Palus Taluka Sahakari Sakhar Kharkhana Ltd., Tasgaon under the
 Securitization and Reconstruction of Financial Assets and Enforce- ment
 of Security Interest Act, 2002 on 30th August, 2007 and they have given
 this unit on lease to Shri.  Ganapati Zilla Krishi Audyogik Sarva Seva
 Sahakari Society Ltd., w.e.f. from 08th October, 2007. This acquisition
 has resulted in automatic termination of lease between The Ugar Sugar
 Works Ltd., and Tasgaon Palus Taluka Sahakari Sakhar Kharkhana Ltd.
 
 2.  Phaltan Unit:
 
 In view of the non-viability and non-profitable working of this unit
 our Company has terminated the lease agreement with New Phaltan Sugar
 Works Ltd., Phaltan w.e.f. 31st October, 2007.
 
 Packaging Unit:
 
 Considering the packaging need of our 100% EOU, the Company has decided
 to set up a joint venture packaging unit named as Ugar Quality
 Packaging Pvt. Ltd., at Ratnangiri with Shri. Jitendra Joshi, who has
 technical expertise in packaging industry and is already having a
 packaging unit at Ratnangiri, named as Quality Screen. The machinery
 installation work is completed and the Commercial production has
 started at this unit from December 2007. This unit is working
 satisfactorily.
 
 Export Oriented (100% EOU):
 
 The 100% EOU for manufacture of Sugar Ships has commenced its
 commercial production from 1st February, 2008. During the year under
 review we have exported 26.37 quintals of Sugar Ships to M/s Fragies
 (GmbH), Germany, worth nearly Rs. 82.48 Lakh. Although the supplier of
 the machinery M/s. Kloeckner, has assured the production of 75,000
 ships per hour, the machinery has not performed to that extent,
 similarly expected orders from M/s. Fragies are not coming forward as
 assured. We are following up with both of them in this regard.
 
 ONE M. W. BIO-GAS CO-GENERATION PROJECT FROM BIO-GAS PRODUCED FROM
 DISTILLERY EFFLUENT:
 
 The Companys 1 MW Bio-gas Power Generation Plant for utilizing Biogas
 available from Distillery Effluent Treatment plant jointly setup with
 Indian Institute of Science and National Bio-energy Board was running
 for last 8 years. As all the four engines have come for major
 overhauling, we have discontinued the operations and the Bio-gas is now
 being used for Hot Gas Furnace in our Evaporator & Drying plant.
 
 ISSUE OF SHARES ON RIGHT BASIS :
 
 The Draft Letter of Offer for issue Of 2,25,00,000 equity shares of
 Re.1 at a premium of Rs.7 in the ratio of one share for every four
 shares held on the record date is filed with SEBI on 1st February,
 2008, approval from SEBI is awaited.  The company has receivecfin
 principal approval for listing of our shares issued on Rights basis on
 Bombay Stock Exchange Ltd., vide their letter no.
 DCS/PREF/JA/IP-RT/3722/07-08 Dt. 28th March, 2008.
 
 BOTTLING :
 
 We have continued the arrangements to bottle our IML products with M/s.
 K.S. Distilleries, M/s. Kaycee Distilleries and M/s. S. D. F.
 Industries in Kerala State. During the year 2007-08 we have bottled
 5.18 Lakh cases.
 
 During the year we have bottled 0.52 Lakh cases of Tilaknagar
 Industries, at Ugar. Tilaknagar Industries has terminated Bottling
 Agreement for bottling of their products at Ugar w.e.f 1st July, 2007
 and we have also terminated our Bottling Agreement for bottling our
 products at Tilaknagar.
 
 CONSERVATION OF ENERGY AND PARTICULARS OF EMPLOYEES:
 
 Particulars pertaining to conservation of energy, technology absorption
 and foreign exchange earnings and outgo and particulars of employees
 pursuant to sections 217(1 )(e) and 217(2A) respectively of the
 Companies Act, 1956 have been given under Annexure I & II respectively,
 forming an integral part of this Report.
 
 QUALIFYING REMARKS IN AUDITORS REPORT:
 
 Remarks in Annexure to Auditors Report, Point No. (i)(b):
 
 Fixed Assets have been physically verified during the year. However,
 reconciliation of the same with book records is not yet completed.
 
 Management Explanation:
 
 We have conducted physical verification of Fixed Assets and have also
 taken necessary steps to pass the appropriate entries in respect of
 assets those were not found in existence. Now, we are in process of
 reconciliation of the assets with the books of accounts considering the
 volume. We feel that it will take some more time but we will be able to
 complete the work by end of June, 2008.
 
 Remarks in Annexure to Auditors Report, Point No. (xvii):
 
 According to information and explanation given to us, and overall
 examination of the Balance sheet we report that funds raised on short
 term basis have been used for long term purposes to the tune of Rs.
 1,717 lakh out of which Rs. 1,576 lakh has been taken as short term
 loan which the Company intends to repay on issue of Right shares.
 
 Management Explanation:
 
 In order to meet the urgent long term requirement for completing the
 Sugar projects in time we have utilized short term funds for long term
 purpose. The short term loan of Rs. 15 crore taken from Bank of India
 used for long term purpose will be repaid out of the proceeds of Right
 Issue.
 
 AUDITORS:
 
 You are requested to appoint auditors for the ensuing year and to fix
 their remuneration. Present auditors M/s.  P.G. Bhagwat, Chartered
 Accountants, are eligible for re-appointment.
 
 ACKNOWLEDGMENT:
 
 Your Directors wish to place on record their sincere appreciation for
 the continued support received from Managements of Central Bank of
 India, Bank of Baroda, Union Bank of India, The IDBI Ltd., Bank of
 India and ICICI Bank Ltd. for providing working capital finance and
 Central Bank of India, Bank of Baroda, Rabo India Finance Ltd., Axis
 Bank Ltd., Technology Development Board, Sugar Technology Mission, IFCI
 Ltd., for providing long term finance for capital Investments and
 Government of India and Government of Karnataka for sanctioning subsidy
 and Deferment of Cane Purchase Tax and Karnataka Power Transmission
 Ltd., for transmission of energy and Tata Power Trading Co. Ltd., for
 purchasing electricity from us.
 
 Your Directors thank the Government of Karnataka, Government
 authorities, Shareholders, Cane suppliers, workers and staff for their
 co-operation and contribution to the general progress of the Company.
 
                                    By order of the Board of Directors
                                     For The Ugar Sugar Works Limited
 
                                     R. V. Shirgaokar
 Place : Panhala                     Chairman & Managing Director
 Date  : 25-05-2008