KM Sugar Mills is an integrated sugar company that turns a single crop - sugarcane - into three products under one roof: sugar, ethanol and electricity. Founded in 1942 as a family partnership in Kanpur and now operating from Ayodhya, Uttar Pradesh, the business has spent eight decades layering new capabilities onto its original sugar mill, each one designed to extract value from what the previous step left behind. That recurring logic - crush cane, ferment the molasses, burn the leftover fibre - is what makes the company more than a sugar mill: it is a closed-loop agro-industrial complex where one division’s waste becomes the next division’s fuel. # Business segments Three businesses fed by the same cane - a sugar mill that is the foundation, a distillery that runs on its by-product, and a power plant that burns the dry residue - each selling to a different customer under a different government price regime. ## 1. Sugar: the anchor that feeds everything else **A 9,500-tonne-per-day cane crusher whose real job is to supply molasses and bagasse to the other two divisions - sugar itself is a regulated, low-margin commodity.** - **Cane in, crystal out** - the plant at Motinagar, Ayodhya, crushes up to 9,500 tonnes of sugarcane every day, producing white crystal sugar and raw sugar for domestic sale and export. The capacity was built in steps from just 1,800 tonnes per day in 1971, with the last expansion to 9,500 tonnes completed in 2020. - **Price set by the government** - the Central Government fixes a minimum sale price for sugar, last set at ₹3,100 per quintal in February 2019, which means the company cannot freely price its largest product. On top of that, the government controls how much each mill can export, and in FY26 the company simply sold its export quota to another mill in exchange for domestic quota rather than shipping sugar abroad. - **Cane costs more here than anywhere** - Indian mills pay roughly ₹2,890 per tonne for sugarcane, compared with ₹1,732 in Brazil and ₹1,842 in Thailand, so the cost of making sugar in India sits above international prices. The industry runs a structural surplus - producing 340-350 lakh tonnes against domestic consumption of 270-280 lakh tonnes - which keeps pressure on margins. - **Upgrading to refined sugar** - the company converted its process from double sulphitation to a defeco-melt phosphoflotation plus ion-exchange system to make double-refined sugar, and in 2022 approved a refinery project to produce 45 ICUMSA sugar, the bright-white grade that commands better prices. - **The farmer relationship is the supply chain** - all sugarcane is sourced from local growers, and the company runs cane-development programmes that distribute high-sugar variety seeds and promote inter-cropping, because a mill’s real constraint is not factory capacity but how much cane walks through the gate. ## 2. Distillery and ethanol: the molasses-to-fuel engine **A 50-kilolitre-per-day ethanol plant that sells to government oil companies on decade-long contracts - and is now being carved out into a separate listed company.** - **Molasses becomes alcohol** - the distillery takes molasses, the sticky by-product left after sugar crystallisation, and ferments and distills it into rectified spirit, extra-neutral alcohol (ENA), country liquor and fuel-grade ethanol. It started in 1995 with 45 kilolitres per day of rectified-spirit capacity and added ethanol in 2003, reaching 50 kilolitres per day by 2020. - **One customer, fixed prices** - ethanol is sold almost entirely to government-owned oil marketing companies under 10-year agreements at prices the government sets, which for the 2019-20 season ranged from ₹43.75 per litre (from C-heavy molasses) to ₹59.48 per litre (from sugarcane juice). That makes the business a policy play: the government’s target of 20% ethanol blending in petrol by 2025 under the National Biofuels Policy creates demand, but also makes the division dependent on regulatory decisions. - **Country liquor fills the local market** - in October 2024 the company rearranged its distillery licence, boosting country-liquor capacity from 25 lakh to 60 lakh litres while reducing industrial-alcohol capacity, keeping the overall licensed volume unchanged at 1.75 crore litres. A bottling unit that once served Bihar was shut down after that state’s government changed its rules, and the equipment was moved back to the main distillery. - **Seven columns, multiple pressures** - the distillery uses multi-pressure distillation across seven columns and molecular-sieve dehydration technology to produce absolute alcohol, a setup that squeezes more ethanol from the same molasses. - **Demerger in motion** - the board has approved a scheme to spin off the entire distillery division into a wholly owned subsidiary, KM Spirits and Allied Industries Ltd., with an appointed date of 1 April 2026 and a share ratio of one new share for every five held in KM Sugar Mills. Shareholders approved the scheme in May 2026, and the new entity is designed to pursue its own strategy - including IMFL, beer, wine and packaging - once it lists on the BSE and NSE. ## 3. Co-generation power: burning what the mill cannot eat **A 25-megawatt power plant that runs on bagasse - the dry cane fibre left after crushing - and sells electricity to the state grid under a fixed-price contract.** - **Bagasse in, electrons out** - after the cane is crushed and the juice extracted, the fibrous residue called bagasse is fed into high-pressure boilers that produce steam at over 40 bars and 440°C, which spins a turbine to generate electricity. The plant was commissioned in 2008 and sits at the same Motinagar site as the sugar mill, so there is no transport cost for the fuel. - **Multi-fuel so it runs year-round** - the boilers are designed to burn not just bagasse but also procured biomass, coal and fossil fuels, which means the plant can export power to the grid even outside the 4-5 month crushing season. - **Sold to the state utility** - all power is supplied to Uttar Pradesh Power Corporation Limited under a power purchase agreement at regulated tariffs, which were in the range of ₹6.19 to ₹6.75 per unit, though the state regulator has proposed cutting that by roughly ₹2.25 per unit, or about 35%. - **Technology that could go further** - the plant uses a bagasse drier to reduce moisture to 40-42% and a moisture control unit, but the industry is moving toward higher-pressure boilers at 87 bars and 510°C that can lift power exports by 7-10% for the same quantity of bagasse. Gas turbines running on gasified biomass are another option the company has noted as promising. - **Stays with the sugar mill** - under the demerger plan, the power plant remains with the sugar division in the original company, because its fuel comes from the crushing operation and the two are physically and commercially inseparable. # Group structure and partners **A family-controlled company with a web of related-party investments, guarantees and a subsidiary being readied to house the distillery business.** - **The demerger vehicle** - KM Spirits and Allied Industries Ltd. was incorporated in February 2018 as a wholly owned subsidiary with an investment of just ₹5 lakh and has not yet commenced operations; it will receive the entire distillery division once the NCLT gives final approval to the scheme. - **Promoters hold just over half** - after a reclassification in September 2022 that moved three promoter-group shareholders to the public category, promoter holding fell from about 64.6% to 56.5%, with L.K. Jhunjhunwala personally holding 15.55% and his HUF another 10.94%. - **Investments and guarantees to related parties** - the company holds preference shares in Sonar Casting Ltd. (₹5,135 lakhs) and has given it corporate guarantees of ₹6,174 lakhs, even though Sonar Casting ceased to be a subsidiary after a brief re-acquisition and disposal in 2020. It also holds optionally fully convertible debentures of KM Strategic Investments & Holdings Pvt. Ltd. (₹2,350 lakhs) and preference shares in Brahma Properties and KM Energy. - **Land shared with a group entity** - three hectares of the company’s leasehold land from the UP Government were sub-leased to KM Particle Boards Pvt. Ltd. under a deed registered in February 2024.