Mawana Sugars: Sugar scenario bad for next 18 months

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Mawana Sugars: Sugar scenario bad for next 18 months

CMD at Mawana Sugars, Siddarth Shriram says, in our company we are projecting that if we can continue balancing our line so that we stay in the Black rather than the Red and have stability for the company.

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Excerpts from Closing Bell on CNBC-TV18 Watch the full show » RELATED NEWS Mawana Sugars: Net sales down, posts net loss Mawana Sugar Q1 net loss at Rs 4cr Mawana Sugars posts sedate set of numbers Mawana Sugar Q4 net loss at Rs 11.4cr ALSO READ See latest News about Mawana Sugar See previous management interviews See what other Experts & Brokerages are saying about Mawana Sugar Mawana Sugar BSE | NSE 01/01/70 Are Mutual Funds betting on Mawana Sugar?

CMD at Mawana Sugars , Siddarth Shriram says, the reason for their amalgamation with SIEL Ltd is due to the sugar industry looking bad for the next 18 months and also due to the fact they were one company but then they demerged.However now the BoD feels that the merger will be beneficial for the investors and the processes.

He feels that sugar looks bad for the coming months as production is more but consumption is less.

So the company believes that if they can continue balancing their line so that they stay in the Black rather than the Red and have stability for the company, it will be extremely useful.

Excerpts from CNBC-TV18's exclusive interview with Siddarth Shriram:

Q: What exactly is the plan? How soon will this amalgamation happen?

A: The reason for the amalgamation is firstly, sugar is looking extremely bad for the next 18 months and secondly, three years ago SIEL Ltd and Mawana were one company; we separated out to two companies mainly because we were in CDR and we needed to separate the businesses.

But now the merger of the two companies is taking it back to where it was originally, will be beneficial for the company for the processes and also for investors and this is what the Board of Directors have determined and they have agreed for the merger to take place - Mawana and SIEL - three shares of SIEL for two shares of Mawana, Mawana will be merging into SIEL.

Q: You said sugar would be bad for the next 18 months. What is conclusively telling you that the cycle may not turn in the next quarters at all?

A: This year, which goes up to September end for us, before the next season starts in November or December is going to produce 24 million tonne of sugar. India's consumption is only about 18.5-19 million tonne and this is going to then be laid off on the export market and the export prices are lower than the domestic market and looking like remaining lower for the foreseeable future.

So that's why in our company, we are projecting that if we can continue balancing our line so that we stay in the Black rather than the Red and have stability for the company that will be extremely useful by the time cycle domestically and internationally undergoes a change.

Q: Do you think the consolidated entity now post merger will be able to report profits despites the pull down from sugar?

A: All our projects, we have invested Rs 650 crore, will also be on line in the next two-three weeks. Some have already started performing and some will start imminently everyday something is improving, something is going up that's the way our project works. I think things are looking better for our company with that respect.

Q: For the sugar industry itself, how much more downward pressure do you see in terms of prices?

A: The trouble is that the Government of India has decided to keep the prices low of sugar for various reasons, inflation,or whatever but they have not reduced their excise duties at all, that has remained the same. Second, in the United States there is a purchase tax, the price of sugarcane keeps going up but the purchase tax does not get reduced.

Big anomaly is over here and unless these are also addressed so that the farmers keep getting good price for their cane, the government keeps getting increased revenue, the consumers get a low price and the industry get shafted and these have to be addressed. Right now I do not think anybody is particularly addressing them, it needs to be addressed, we are trying to take this up through the association. All parties have to take a hit when there is a surplus, all parties must gain when there is a shortfall and this is the way life has to be otherwise it's a threat to the industry.