Sorry my mistake! I will remove it

A lot of positives have been captured already in this thread, so I do not want to repeat them here.

But I am skeptical of the promoter quality. Performance of both Taneja Aerospace and ISMT has been poor. There was this aircraft accident in 2020 after which they shut down the business, and there was a bird hit earlier in FY17. This reflects poorly on the management. Accounting quality also needs to be scrutinized closely. When the aircraft accident took place in FY20, the losses were shown as Exceptional Item in the P & L, but when insurance claim was received, it was accounted as Other Income:

This inflates the PBT for FY21. More importantly this amount has not been deducted from PBT while calculating the CFO and so the CFO also stands inflated to that extent. Meanwhile, the aircraft continues to appear in the Gross Block under Right of Use Asset even today. I am not fully sure how this accounting works; but something doesn’t seem right here.

Salil Taneja has maxed out his remuneration at 10 % of PAT already which seems too high too early. I am also curious why a software company (Taal Tech) with a Gross Block of Rs.8 crores has Rs.1.42 crore of vehicles in it.

(Disc: Tracking, no positions)

Let’s try to understand the practicality of this news. Currently 50% (approx) of the ethanol demand is met by sugar industry. If they stop procuring all of this (Ethanol made from B molasses, C molasses and sugarcane juice) they won’t be able to meet targets of even 15% blending forget 20% blending of 2025 which anyways will 1000 crore litres (approx) from sugarcane. Lets think of the feedstocks demand in this case. All the feedstocks apart maize is already in short supply. Price rise of wheat and rice which already has happened will happen more and create inflation.

Let’s come to the news government will procure only ethanol made from C molasses. It will result in 20% less ethanol production to the sugar mill compared to B molasses and sugarcane juice. Anyway, given the current sugar price scenario sugar mills were anyway going to use the C molasses way. Even if they stop in the long run the fundamental impact of the sugarmills will be optionality of their 20% revenues of the % of the ethanol produced will be lost. So net net not a major impact in the long run. Currently there is no impact at all.

Currently given the feed stock shortage and price rise in other commodities achieving this target of blending is already ambitious (without changing the dynamics of supply of all rice, sugar and wheat) If they want to keep a balance they wont practically stop sourcing of B molasses and Sugarcane Juice. I think its just to create a hype and this will help in keeping sugar prices in control and even hoarders will be cautious in hoarding sugar.

Sugar scrips bounced back from Today’s low levels. Uncertainty persists. Price levels may be struck at this level and range bound until firm clarity emerges from Govt.

Discl: Invested in Uttam Sugar and Triveni from lower levels.

This article argues that given better margins and high sugar prices, “cane-based distilleries are more likely to process ethanol from B-heavy and C-heavy molasses, and not directly from cane juice or sugar syrup”.

Govt policy may simply be going with the market flow or at least trying not to obstruct it.

Prerna Sharma Singh, the author of the article, and director of a policy research firm, suggests removing controls on sugar. She says

• artificially cheap sugar has health consequences

• sugar has little weight in inflation, unlike cereals and horticulture.

• larger future output requires higher capex. Denying access to profitable export markets will reduce the capex ramp-up. And will make price management harder in future.

• export curb announcement signals shortages and leads to hoarding and higher sugar prices.

• frequent export curbs create complications for foreign buyers and make India an unreliable supplier.

• export curbs will not improve the supply for ethanol processing.

Therefore, export curbs have negative short-term and long-term implications.

Removing curbs will improve price realisation and ensure timely payment to the farmers

Link to article: Why India needs to relax curbs on sugar export