The sugar market could see another year of depressed selling prices before demand picks up in 2020-21, said Murugappa Group executive chairman, MM Murugappan, in an exclusive chat with CNBC-TV18.
“The sugar market will face a country and worldwide surplus until next year,” said Murugappan, “So the sugar-year after next should see some increase in demand.”
For several months, the sugar market has been reeling under falling demand, which has resulted in a surplus. EID Parry, the 225-year-old sugar-producing arm of the Murugappa Group, reported a consolidated net sales of Rs 3,283 crore in FY19, registering a de-growth of 28 percent. While revenues went up marginally in Q4 of FY 19, the company’s de-growth comes on the back of a sustained fall in demand.
‘Cane sugar shortage in Tamil Nadu adding to woes’
Exacerbating the situation was a short-supply in cane sugar in Tamil Nadu last year, which saw the Murugappa Group shut EID Parry’s Puducherry plant on account of the shortage. The closure notwithstanding, Murugappa announced that it had successfully commissioned its back-end sugar refinery at Haliyal, Karnataka.
“Our future sugar consolidation strategy will depend on future cane availability,” said Murugappan, “Cane production is in short-supply only in Tamil Nadu on account of drought conditions. With a good monsoon, this could improve.”
‘Timely steps ensured liquidity in Cholamandalam Finance’
While the sugar crisis may have caused the 119-year-old Murugappa Group some strife, the conglomerate is riding high on its impressive liquidity situation in Cholamandalam Investments and Finance. “We have taken timely steps to ensure liquidity, which is holding us in good stead,” said Murugappan.
The company has acknowledged that its credit management and collections have reduced its GNPA (Gross Non-Performing Assets) to 2.7 percent in FY19 from 3.4 percent the previous fiscal. “We are hoping to see changes over the next 12 to 18 months in the liquidity situation across the country,” Murugappan added.
Cholamandalam Investments and Finance is now awaiting approval from the National Housing Bank (NHB) to launch its housing finance subsidiary. “We have applied for a license and are hoping that it gets cleared in the next three to six months,” said Murugappan.
'Rs 1,200 crore capex for FY20'
Capping off an impressive FY19 on the capital expenditure front, the Murugappa Group has announced that it invested a total of Rs 753 crore towards multiple projects across group companies, this year. The group has said it will increase capex to Rs 1,200 crore for this fiscal.
“This amount will be invested in our manufacturing companies this year,” said Murugappan, “Coromandel International’s phosphoric acid plant at Vizag, for one, will be completed this year.” Coromandel International has registered a growth of 19 percent in FY 19, with net sales clocking Rs 13,159 crore.
"Carborundum Universal’s coated maker plant will be launched in Sriperumbudur, while Tube Investments of India is also looking at capacity expansion to de-bottleneck,” added Murugappan, “Our capex of Rs 1,200 crore for FY20 is a good mix of new capacities, capabilities, pilot plants and IT infrastructure."