Ponni Sugars (Erode) Ltd is a sugar maker that exists because a paper company needed a reliable supply of bagasse - the fibrous leftovers from crushed sugarcane. It was promoted by Seshasayee Paper and Boards Ltd (SPB) in 1984 with a unique deal: the sugar mill would send all its bagasse to SPB, and SPB would pay enough to cover the cost of alternative fuel plus an incentive, a structure that convinced banks to fund the whole project. That same symbiotic logic - turn a sugar by-product into a second business - now runs through everything the company does, from its cogeneration power plant to its tentative steps into jaggery. # Business segments Three engines built around a single sugarcane crush - a regulated sugar commodity business, a bagasse-fired power plant that sells to the state grid, and a tiny jaggery unit acquired from a bank auction. ## 1. Sugar: the core that feeds everything else **A single-mill sugar operation in Tamil Nadu’s Erode district that crushes cane, sells white sugar as a domestic commodity, and generates the bagasse that fuels the company’s second business.** - **Cane crushed, sugar sold** - the mill crushed 705,576 tonnes of sugarcane over 250 days in FY26 at an average rate of 2,822 tonnes per day, producing sugar with a recovery rate of 9.79%, which the company says is “well above the State average”. Sugar is sold mostly in bulk 50 kg bags on the spot market, because India’s sugar futures market is too thin to hedge effectively. - **A seasonal factory with a fixed catchment** - more than 90% of production happens between November and March, and all the cane comes from farmers in the Erode command area whose water depends on the Mettur reservoir and the Cauvery river. The factory itself is “squeezed for land,” so major expansion is physically difficult. - **Regulated at every turn** - the government sets a Minimum Selling Price for sugar (₹31/kg, unchanged since February 2019), limits how much sugar can be sold each month through release quotas, and even mandates that 20% of sugar be packed in jute bags. The Fair and Remunerative Price for cane is also fixed by the Centre, at ₹355 per quintal for the 2025-26 season. - **Tamil Nadu is a tough place to make sugar** - harvest labour costs are two to three times higher than in other sugar-producing states, the state government stopped a transport subsidy in 2020-21 so mills now bear the full cost of moving cane, and recurring droughts have pushed several private mills into a moribund state. The company says it copes by staying debt-free and investing surplus cash in bank deposits. - **Branded sugar is a tiny side bet** - the company now sells small retail packs (1 kg down to 100 grams) and has tweaked its process to make brown sugar for a niche market, but branded sugar accounts for only about 3% of Indian household consumption, so this remains a nascent effort. ## 2. Cogeneration: turning bagasse into a second revenue stream **A power plant that burns the sugarcane waste from the mill to generate electricity, uses what it needs, and sells the surplus to the Tamil Nadu grid under a long-term contract.** - **Bagasse is the fuel, the state grid is the customer** - the cogeneration unit burns bagasse and other bio-fuels to produce power, exporting the surplus to TNPDCL (TANGEDCO) under a Power Purchase Agreement at a tariff set by the state electricity regulator. In FY26, it sold 893 lakh units of power to the grid. - **A hedge against sugar cycles** - the cogeneration business was conceived three decades ago specifically to diversify revenue and counter the cyclicality of sugar, so when sugar prices are weak the power business provides a steadier income. The plant has run above the normative 60% Plant Load Factor since FY 2022-23. - **Tariff fights are a constant** - the company has been in legal battles over tariff revisions, Parallel Operation Charges that it pays under protest to TANGEDCO, and changes to Renewable Energy Certificate rules that it calls a “lethal blow” to its renewable energy project because captive consumption no longer counts toward saleable RECs. A September 2025 tribunal judgment opened the door to a tariff revision dating back to 2012, but the final number still awaits the state regulator’s redetermination. - **Fuel flexibility keeps it running** - when bagasse from the sugar mill is scarce, the company buys external bio-fuel so it can keep generating power and curtail fossil fuel use. Steam and power move between the sugar and cogen segments at internal transfer prices: bagasse and power at market price, steam at cost. ## 3. Jaggery: a tiny toehold bought from a bank **A 50-tonne-per-day jaggery unit acquired at a bank auction for ₹4.6 crores, meant as a learning experiment rather than a material contributor.** - **A launch pad, not a profit centre** - the company describes the unit as a way to “gain experience in the market” and says that at its current tiny capacity it “may have no material bearing on overall production or turnover”. # Group structure and partners **Ponni Sugars is an associate of Seshasayee Paper and Boards Ltd, which owns 27.45% of its shares and is the reason the company exists - the two are bound by a long-term bagasse supply contract that defines the economics of the sugar mill.** - **SPB is both parent and customer** - Seshasayee Paper and Boards Ltd promoted the company to secure a committed supply of bagasse for its paper mills, and a comprehensive MoU (dated 05.02.2016, with amendments approved in July 2021) now governs the sale of bagasse, purchase and sale of other products, and sharing of common expenses, with a cap of ₹60 crores per financial year. - **Bagasse pricing is cost-based, not market-based** - SPB pays based on the cost of the actual fuel used by the sugar mill, not a notional coal price, and the arrangement exempts the company from daily supply commitments during low-crushing periods or when bio-fuel is hard to procure. A 2015 shareholder resolution requires that any structural change to this MoU that increases the financial burden by more than 10% must go to a general meeting for approval. - **A web of group investments** - the company holds significant quoted stakes in Seshasayee Paper and Boards Limited (88.4 lakh shares) and High Energy Batteries (India) Ltd (5 lakh shares), plus smaller unquoted investments in other ESVIN Group entities. It has no subsidiary of its own.