The Ugar Sugar Works Limited — Credit Ratings, 03-01-2025: Credit Rating- New

In FY24, The Ugar Sugar Works Limited reported a significant decline in total operating income (TOI) of 36%, down to ₹1,150 crore from ₹1,795 crore in FY23. This contraction was largely driven by decreased sugar crushing and sales, influenced by macroeconomic factors and restrictions on sugar syrup diversion for ethanol production. The firm posted a net profit of ₹21.14 crore, a sharp drop from ₹103.05 crore the previous year.

Earnings Per Share (EPS) reflects these challenges, showing negative performance in the first half of FY25 with a loss of ₹71.85 crore, following ongoing high raw material costs and operational inefficiencies related to alternative feedstock for ethanol. Operational costs rose significantly, contributing to the pressure on profitability; the PBILDT margin was reported at -3.06% in H1FY25.

Despite these challenges, USWL's strategic focus on ethanol, backed by a robust supply chain and government initiatives, positions the company for potential recovery. The recent credit rating reaffirmation from CARE Ratings (CARE BBB-; Stable) is underpinned by expected improvements due to favorable weather conditions and operational efficiencies anticipated in the latter half of FY25.

Given these dynamics, investors should approach USWL with caution, monitoring its operational recovery and cost management strategies closely. A hold stance is advisable until signs of sustained improvement materialize.