Our strategic objective is to improve and consolidate our position as a sugar manufacturer with a continuous growth philosophy. The diagram below represents our continuous growth philosophy being implemented on a day-to-day basis.
Our continuous growth philosophy is being driven with the strategic levers of operational excellence, strengthening existing services, customer satisfaction, ecosystem development, innovation and marketing.
Increasing operational efficiency
Our product portfolio consists of sugar and various other products manufactured by processing its residual products. Hence operational efficiency for each product is related to its previous product’s efficiency and quality. We continue to invest in increasing our operational efficiency throughout the organisation. We are addressing the increase in operational output through continuous process improvement, increasing recovery rate through timely sugarcane crushing, technology development throughout the products, consistent quality and customer service. We also strive to achieve alignment of our people towards ‘process improvement’ through change management and upgrading of skills for latest technology and as required for customer satisfaction is a continuous activity. Awareness of this quality commitment is wide spread among all the employees.
Expansion of manufacturing capacities by setting up an additional production unit
Our Company intends to set-up another unit for manufacturing of sugar. For this purpose, our Company has identified a location situated in Navage village in the Belgaum district. Our Company has also acquired a small portion of land of approximately 3 acres and 33 Gunthas at the identified location, for details please see the section “Properties – Our Business” on page no. ___ of this Draft Red Herring Prospectus. Further, our Company is in the process of acquiring other nearby plots of land for setting up the 2nd unit. Once the required land parcels are acquired, our Company will apply for all necessary approvals and begin construction of the unit building along with purchase and installation of new machineries.
With the decreasing sugarcane supply at the current unit over that last 3 years, our Company identified the location based on strategic internal research and we believe that this area has ample sugarcane growth. The expansion in intended in three phases, wherein the first phase will consist of setting up of a sugar manufacturing unit for approximately 5,500 TCD and a Co-Generation unit of 14 MW electricity for captive consumption and third party sale. Our Company estimates that the second unit will substantially increase our presence in the Belgaum area and also increase our capacities to cater to the need of existing national sugar demand. We currently have approximately 49 villages allotted in the location of our existing manufacturing unit. Setting up of another unit in the Navage area, will increase the overall villages under our allotment thus providing us greater quantities of sugarcane during the crushing season.
The second and third phase of expansion is intended by setting up a distillery unit with approximately 30 KLPD capacities for various spirits and setting up IML, Vinegar unit and also other by-products, respectively.
Addition of new IML products
Our IML products currently consist of only whisky which is mainly sold under our brands “Our Choice” and “Your Choice”. Besides, we also have whisky brands like “District – 1” and “VSL Black”. With the success of our “Our Choice” and “Your Choice” whisky brands, our Company intends to launch other products like Rum, Gin and Vodka under the same brand. Our Company has already obtained the relevant approvals for these products and currently in the testing stage of these products.
Our IML products currently contribute approximately 15% of our total revenue from operations. We believe that the addition of these new products will enable us to cater to a bigger market and also enable us to cater to customers of larger demographic base. Further, different products with the existing brand name will allow us greater brand recognition and also enable us to enter different markets with a large product portfolio.
Augment our fund based capacities in order to scale up business operations
The sugar industry is characterised by high debtors and advance payments to farmers and harvesting & transportation agents. Also, the credit period enjoyed by us is considerably short due to creditors being mainly farmers with whom we need to maintain cordial relations in order to ensure they sell the sugarcane produce to us. However, our customers, mainly being entities in the food, petroleum, beverages, and also government agencies, we generally offer substantial credit period to them. Further, during the crushing season, we have to make advance payments for various minor raw materials, utilities and other services so as to carry out the un-interrupted crushing. Thus our operations are working capital intensive.
It is hence our strategy to raise funds from this issue and augment our fund based working capital capabilities. We believe that companies with high liquidity on their balance sheet would be able to better negotiate with sugarcane suppliers. With the de-regulation of the sugar industry, farmers are free to sell their produce where they like and are not obligated to sell any portion of the same to us. Better liquidity will also provide us with sufficient incentives to ensure the farmers prefer us for selling their sugarcane produce in each season. Also, we invest a portion of our working capital to provide some of our farmers with high quality seeds for better crop quality. Additional working capital will enable us to offer such high quality seeds on larger quantities and to a large farmer base. Funding this working capital requirement from the proceeds of the Fresh Issue will also enable us to save a considerable interest cost due to lower working capital borrowings. For further details regarding the working capital being raised through this Offer, please refer to section “Objects of the Offer” on page no. ___ of the Draft Red Herring Prospectus.
Increase our penetration of our IML business into other markets
Until the financial year 2016-17, the IML market was regulated by the Karnataka State Beverages Corporation Limited (KSBCL). Accordingly, all our sales were routed through KSBCL and we are unable to see our IML products directly in other states. Due to this, our market for IML was restricted to the state of Karnataka. However, currently the regulation is under the central government and we believe that this will give us an opportunity to enter other markets in India. Since our IML products are economical brands we intend to target the farmer population in nearby states. Also, with the expansion of our IML product base, we believe that other markets in India will provide us a bigger platform for sale of our IML products.