Gayatri Sugars is an agro-processing company that turns sugarcane into sugar, fuel-grade ethanol, and electricity - a classic Indian sugar mill that has survived a near-collapse of its balance sheet and is now clawing its way back. Founded in 1995 in Hyderabad and run by the Reddy family, it operates two mills in Telangana’s Kamareddy district, where it buys cane directly from local farmers and runs a distillery and power plant on the waste those mills produce. The recurring approach is simple: use every part of the cane - the juice becomes sugar, the leftover molasses becomes ethanol sold to oil companies, and the fibrous bagasse is burned to generate power for the mill and the grid - so that nothing is wasted and every by-product earns a cheque. # Business segments Three businesses, one raw material - sugar is the foundation that feeds the distillery and power units, each turning a different part of the sugarcane into a separate revenue stream. ## 1. Sugar: the mill that feeds everything else **Two factories crush cane for four months a year, producing sugar for the domestic market while generating the molasses and bagasse that the company’s other two businesses run on.** - **Cane is the real constraint** - the company’s biggest risk is simply having enough sugarcane to crush, because farmers can switch to other crops or be lured away by competing mills, so it locks in supply by giving growers seed, technical advice, subsidised harvesting, and even corporate guarantees for their crop loans. - **Price is set by the government at both ends** - the Centre fixes the minimum price the company must pay farmers (the Fair and Remunerative Price, or FRP) and the minimum price at which it can sell sugar (Rs 3,100 per quintal), which means the mill’s margin is squeezed between two regulated numbers it cannot control. - **Scale moves with the monsoon** - in a good year like FY23 the two mills crushed 8.47 lakh tonnes of cane and produced 9.53 lakh quintals of sugar at an 11.27% recovery rate; in a leaner year like FY21 they managed only 5.04 lakh tonnes and 5.25 lakh quintals, showing how tightly output tracks the harvest. - **Recovery rate is the efficiency scorecard** - the percentage of sugar extracted from each tonne of cane has held steady between 10.90% and 11.30% across the last six seasons, and a higher recovery means more sugar from the same cane and a premium paid to farmers on top of the FRP. - **By-products are not an afterthought** - the 30,000-38,000 tonnes of molasses produced each season are the sole feedstock for the distillery, and the bagasse fuels the power plant, so the sugar mill is effectively the raw-material factory for the other two segments. ## 2. Distillery: the government’s ethanol blending programme, in a bottle **A single distillery turns molasses into ethanol and sells every litre to state-owned oil companies at a government-fixed price - a captive buyer with a national mandate to hit 20% blending.** - **One customer, one price list** - Oil Marketing Companies (OMCs) buy the entire output through tenders at rates set by the government, which in FY25 ranged from Rs 57.97 per litre for ethanol from C-heavy molasses to Rs 65.61 per litre for ethanol from sugarcane juice. - **Output is steady but policy can flip overnight** - the distillery produced between 82 and 90 lakh litres annually over the last six years, but in December 2023 the government abruptly banned using sugarcane juice for ethanol to protect domestic sugar stocks, forcing mills back to molasses-only production. - **The blending target is the demand anchor** - India’s push to achieve 20% blending by 2025 has driven banks to offer soft loans for distillery expansion, creating a policy tailwind that turns a sugar by-product into a national fuel feedstock. ## 3. Co-generation: selling green power from cane waste **Bagasse - the dry fibre left after crushing - is burned in a 25 MW power plant that runs the mills and exports the surplus to the Telangana grid under a 25-year contract.** - **Captive first, surplus sold** - of the 25 MW capacity, 9 MW covers the company’s own electricity needs, and the rest is exported, with the Nizamsagar unit contributing the bulk (229.71 lakh units in FY25 versus Kamareddy’s 39.39 lakh units). - **A long-dated government contract** - the power purchase agreement with the Telangana government locks in the sale of surplus electricity for 25 years, giving the segment a utility-like revenue stream that is insulated from market price swings. - **Small enough to sit inside sugar** - because power revenue has never crossed 10% of the company’s total, it is reported as part of the sugar segment rather than as a standalone business, making it a quiet contributor rather than a visible third leg. # Group structure and partners **A family-run, single-entity company with no subsidiaries, recently recapitalised through a warrant issue to outside investors after its accumulated losses wiped out its net worth.** - **No corporate layers** - Gayatri Sugars has no subsidiaries, joint ventures, or associate companies; it is a standalone operating entity within the broader Gayatri Group, whose related parties include construction, hospitality, and paper businesses controlled by the Reddy family. - **A balance-sheet rescue in two acts** - first, a Sugar Development Fund loan default of Rs 45.36 crore was restructured in 2022 with a two-year moratorium and a 4.65% interest rate, turning a default into a regularised loan repayable over 60 monthly instalments starting May 2024. Second, a Rs 41.50 crore preferential warrant issue to 54 non-promoter investors in FY23 brought in fresh equity, diluting the promoters to a projected 36.42%.