Primarily, we worked with a deeper passion than most; this made it possible to generate an incremental gain over the sectoral average; when you aggregate the improvements (whether in-plant availability or the speed with which we brought in the cane for onward crushing, or the way we maintained the road network within our command area to smoothen logistics), the result was that we generated a recovery that was usually among the highest in Uttar Pradesh.
At Dwarikesh, this junoon was complemented by some standing rules that we applied to ourselves.
We would seek to be the best, never the biggest. The result is that we invested more in enhancing operating efficiency than taking large loans to set up new factories that may have stretched our management bandwidth.
We selected to focus on becoming the best mid-sized sugar plants in the country because this is the scale that we would be the best at managing, as opposed to scaling our business to a size where we would have compromised precisely what we prided and sought to protect the most our passionate micro-management in a business that warrants effective micro-management.
We would seek to create an optimal package of core and byproduct businesses within a manufacturing location. The result was that the size of our cane crushing capacity was directly influenced by the size of the command area and the quantum of cane that could be drawn from it; the size of our distillery was influenced by the quantum of molasses that could be generated from within; the size of our cogeneration capacity would, in turn, follow the same principle, it would be sized in line with the quantum of bagasse that could be generated from within. We believe that this optimal package makes it possible to maximise (or progressively maximise) the consumption of what we produce within, enriching our value-addition and enhancing our outperformance.
In addition to these standing rules, we added some precious learnings derived from the last sectoral slowdown.
One, we will never leverage our balance sheet in the agri-commodity business where price swings can occasionally be so severe that only companies that have less debt on their books would be able to survive.
Two, we will expand but only to the extent that can be sustained by our balance sheet and desired risk appetite.
Three, we will seek to maximise revenues from our non-sugar business as a hedge against sugar price declines.
Four, we will enhance process automation and asset modernisation with the objective to strengthen operating efficiencies.
At Dwarikesh, we are at an attractive point in our existence.
We made a qualified institutional placement of 2,515,471 equity shares at ₹ 236.11 each, mobilising an aggregate ₹ 59.39 crores. We used this mobilisation in accelerated repayment of our debt. Following this net worth infusion and accruals generated from 2016-17, the company’s debt-equity ratio has strengthened from 2.58 as at 31.03.2016 to 0.46 as at 31.03.2017.
We expect to take our business ahead through the following initiatives:
We believe that these initiatives will graduate our company from a focus on cyclical profitability to long-term sustainability.
Gautam R. Morarka