­Experienced management, along with integrated business model and diversified revenue stream
The entity was established in 1970 and has an established operational track record of over five decades. Its founding members were Late Mr. Dattajirao Kadam, Late Mr. Dinkarrao Yadav, Late Mr. Vishwasrao Ghorpade and Late Mr. S R Patil. Currently Mr. Ganpatrao Patil is its Chairman and day to day operations are managed by MD Mr. MV Patil. The extensive experience of the management has helped to forge healthy customer and suppliers relationships. The entity has partially mitigated risks associated with its core sugar operations by diversifying into distillery and cogeneration operations, though the co-generation segment is managed through a separate subsidiary (USDPCL). Acuite believes that with presence in distillery and ethanol divisions, minimum support price policy for sugar supported by government and assured offtake from Oil Marketing companies (OMC’s) provide a stable revenue stream, partly mitigating volume linked revenue loss.

Stable revenue and sugar recovery:
The society operates in an agro based business which is susceptible to seasonal volatility in sugar production and overall demand for sugar. Currently, SDSSSKL is operating sugar plant with a capacity of 12000 TCD, which has shown a steady sugar recovery percentage at 10.74 percent in FY2023, 10.68 percent in FY2024 and 10.84 percent in 11MFY2025. The society’s revenue stood at Rs.611.06 Cr. in FY2024, compared to Rs.526.44 Cr. in FY2023 and Rs.548.81 Cr. in FY2022. The fluctuation in the revenue is driven by irregular sugar production, which is influenced by the availability of sugarcane. The sugar contribution to total revenue stood at 84 percent in FY2024 against 78 percent in FY2023 and 92 percent in FY2022. Further, the society also generates revenue from its distillery unit from sale of rectified spirits and ethanol whose contribution was in the range of 15-22 percent over the past three years. However, the operating profit margins remained thin at 2.62 percent in FY2024 as against 2.92 percent in FY2023 and 0.11 percent in FY2022, primarily due to higher raw material costs. However, due to other income by way of rents and royalty the society was net profitable over the last three years. In the current year till February 2025, the society registered revenue of ~Rs.528.22 Cr.
Acuite believes that the society’s revenue is susceptible to sugarcane availability across Maharashtra. However, early cane procurement planning and integration with ethanol production, supported by guaranteed offtake from oil marketing companies, is expected to ensure stable revenue, partially mitigating the impact of fluctuations in sugarcane supply.

Moderate financial risk profile:
The financial risk profile of the society is moderate with moderate networth, debt protection metrics and moderately leveraged capital structure. The society's networth stood at Rs.272.64 Cr. as on March 31, 2024 against Rs. 255.32 Cr. as on March 31, 2023. The improvement in networth is due to issue of additional equity and increase of depreciation reserve fund during the year. The society’s total debt as on March 31, 2024 stood at Rs.730.08 Cr. comprising ~Rs.325 Cr. in long term debt and ~Rs.405 Cr. in working capital debt against the networth of Rs.272.64 Cr. resulting in gearing of 2.68 times as on March 31, 2024. The total outside liabilities to tangible networth stood at 3.31 times as on March 31, 2024 compared to 3.02 times as on March 31, 2023. The debt protection metrics remained moderate with interest coverage ratio (ICR) and debt service coverage ratio (DSCR) of 1.10 times as on March 31, 2024 compared to 1.14 times of ICR and 1.13 times of DSCR as on March 31, 2023. Debt to EBITDA stood high at 16.11 times as on March 31, 2024 against 19.32 times as on March 31, 2023.
Acuite believes, that the financial risk profile of the society will remain moderate on account of high debt levels due to seasonal working capital needs.

Working capital intensive nature of operations:
The society’s working capital operations are intensive in nature as reflected through the gross current asset days (GCA) of 341 days in FY2024 against 326 days in FY2023. The elongation in GCA days is due to higher inventory days due to seasonal nature of the business which has a crushing period of ~120 days during which the society builds significant inventory, leading to higher inventory days of 308 days in FY2024 compared to 263 days in FY2023. The inventory also includes the sugar, by-product stock such as molasses, press mud and ethanol, which further takes the inventory to elongated levels. Additionally, under the monthly release quota mechanism the government restricts the quantity of sugar allowed for sale, leading to high inventory levels. The society sources cane from member farmers and typically settles the payments within 21 days funded through internal accruals and working capital limits. Receivables primarily arise from ethanol sales to OMC’s, with a realization period of 21 days. The society has fund based working capital limits of Rs.600 Cr, with an average utilization of 44 percent over the past 11 months ending February 2025. Acuite believes that the working capital operation of the society will remain intensive due to the seasonality and regulated nature of business.

­Cyclical and regulated nature of sugar industry
The sugar industry is cyclical by nature and is vulnerable to the government policies for various reasons like its importance in the Wholesale Price Index (WPI) as it classifies as an essential commodity. The government on its part resorts to various regulations like fixing the raw material prices in the form of State Advised Prices (SAP) and Fair & Remunerative Prices (FRP). All these factors impact the cultivation patterns of sugarcane in the country and thus affect the profitability of the sugar companies.