| Experienced Management and Established track record of operations
PSSKL is one of the pioneering cooperative sugar factories in the Marathwada region of Maharashtra. The promoters have been in the sugar industry since more than four decades. PSSKL has its cane crushing capacity of 2500 tons per day. Apart from this, the society has a co-generation unit with an installed capacity of 18.19 MW for captive consumption, and the surplus is exported to the Maharashtra State Electricity Distribution Company Limited (MSEDCL). Further, the society also has an ethanol plant of 60 kilo litres per day (KLPD). PSSKL has built a long-standing relationship with farmers and undertakes programs like cane development through providing good quality seed on credit, fertilisers, and offers guidance to farmers for modern farming, training for cultivation, etc. Acuite expects the society to continue deriving benefit from the long track of operations and the experience of the management, which has supported the society in building long-standing relationships with farmers, enabling adequate and timely procurement of canes.
|
| Decline in operating profitability margins
The operating income of the society stood at Rs. 239.51 Cr. in FY2025 as compared to Rs. 233.59 Cr. in FY2024. Further, the operating income is estimated at Rs. 223.50 Cr. in FY2026. The society's revenue profile remains dominated by sugar sales. The distillery segment further supports business diversification. However, to an extent, the topline was affected by lower contribution from the cogeneration segment in FY2026 (est.), wherein both sales volumes and realizations witnessed a decline. The operating profitability of the society weakened, wherein the EBITDA margin stood at 9.90% in FY2025 as compared to 10.68% in FY2024 and is estimated to further decline to (1.66) % in FY2026. The decline is primarily attributable to a significant increase in sugarcane procurement costs. Despite the same, the PAT margin stood at 0.61% in FY2025 as against 0.49% in FY2024, supported by incremental income from other sources. Acuite notes that going forward, the ability of the society to improve its margins while maintaining its scale of operations will remain a key monitorable factor.
Below Average Financial Risk Profile
The financial risk profile is marked by high gearing, below-average net worth, and debt protection metrics. The tangible net worth of the society stood at Rs. 43.62 Cr. as on 31st March 2025 from Rs. 41.21 Cr. as on 31st March 2024 on account of the accretion of profits into reserves and infusion of funds in the form of equity share capital. The capital structure is marked by a high gearing ratio at 4.21 times as on 31st March 2025. Further, the coverage indicators moderated as reflected by the interest coverage ratio and debt service coverage ratio at 2.21 times and 0.94 times, respectively, as on 31st March 2025 as against 2.68 times and 1.08 times as on 31st March 2024. The TOL/TNW ratio also continues to remain at a relatively high level and stood at 5.77 times as on 31st March 2025. Moreover, the society has debt-funded capex plans wherein it proposes to set up a compressed biogas plant and a grain-based distillery with a cumulative cost of around Rs. 60.00 Cr. to Rs. 63.00 Cr. The projects are proposed to be funded through a mix of promoter contribution, internal accruals of around Rs. 25.00 to Rs. 27.00 Cr., and external debt of approximately Rs. 35.00 to Rs. 38.00 Cr., to be availed in FY2027. Additionally, the society intends to avail an additional term loan of around Rs. 20.00 Cr. for managing its debt repayment obligations due in FY2027. Acuité expects the financial risk profile to remain under pressure in the near to medium term, and the same will remain a key monitorable.
Intensive working capital operations
The working capital operations of the society remained intensive, marked by GCA days at 308 days as on 31st March 2025 as against 332 days as on 31st March 2024. The inventory days stood at 262 days as on 31st March 2025 against 265 days as on 31st March 2025, given the seasonal nature of the sugar industry, where the inventory level remains high during the peak season, which is November to April. Further, the debtor days of the company stood at 17 days as on 31st March 2025 against 32 days as on 31st March 2024. The credit period provided by a few suppliers is around 30 to 45 days, other than that, the society deals in advance payment. Acuite expects working capital operations of the society to remain in a similar range in the near to medium term owing to the nature of operations.
Cyclical and regulated nature of sugar industry
The sugar industry is cyclical in nature and is vulnerable to agro-climatic conditions and 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.
|
