OUR STRATEGY:

Our corporate vision is to be the most efficient processor of sugarcane and the largest marketer of sugar and ethanol in the country. Our strategies for meeting these objectives are as follows:

1. Bio-fuels strategy: To consolidate its leadership position in the fuel-ethanol market, Shree Renuka Sugars took the following steps:

• Consolidate leadership in Fuel ethanol market - We are the market leaders in the fuel-ethanol market in the India. During the tenders which were brought out by the oil marketing companies (OMCs) for the blending 5% ethanol with petrol, we were able to garner 20% market share in the process. This meant that we would be supply 217 mn. litres of ethanol to the OMCs over a period of 3 years at a fixed price of Rs. 21.50 per litre. We intend to consolidate our leadership position in the fuel-ethanol market, when the blending increases to 10%, which the government is planning to introduce shortly. As part of this plan, we have also announced new capex which would take our production capacity to 900 KLPD from 450 KLPD over the next two year and we would become the largest player in the domestic market in terms of production capability.

• Acquisition of ethanol manufacturing assets: It also acquired a standalone distillery with a capacity of 100 KLPD which could be expanded to 250 KLPD. The distillery will help the Company in cutting down transportation costs for supply of its Ethanol contracts to the Oil Marketing Companies (OMC) located in coastal States of Goa, Karnataka and Kerala and for export purpose. The Company has firm orders from Oil Marketing Companies for supply of ethanol over the next 3 years. The Company also plans to increase the capacity of this unit from 100 KLPD to 250 KLPD, in the near future to cater to the fuel ethanol market in Maharashtra and other States

• Acquisition of ethanol EPC & equipment manufacturing capability - Shree Renuka Sugars Ltd. has acquired a majority share of KBK Chem-Engineering Pvt. Ltd. (KBK) for a consideration of $ 9 million. KBK is an engineering Company, primarily engaged in providing turnkey solutions (EPC Contracts) in the field of Distilleries, Ethanol plants and Bio-fuels and about 50% of its revenues are from overseas projects.

• Overseas acquisitions and/or acquisitions: The Company is also evaluating potential overseas acquisitions and/or investments in the Biofuels space to take advantage of the fast growing global Biofuels market.

2. Expand our installed capacity in a capital efficient manner –

• Phase I –

SRSL embarked on a Rs. 700 Crore expansion plan over the last 24 months during which we enhanced out crushing capacity to 25,250 TCD from 7500 TCD earlier. Out of the 25250 TCD, 7500 TCD is from our leased mills while the rest is owned capacity. The ethanol capacities were increased from 60 KLPD to 450 KLPD and power generation was increased from 20.5 MW to 103.5 MW.

Athani Plant: As part of the expansion plan, we set up a Greenfield plant at Athani with a crushing capacity of 6000 TCD, with a alcohol capacity of 120 KLPD and a power generation capacity of 38 MW.

Leasing of existing mills: We actively look out for loss making sugar mills, which we can take on lease and run efficiently. This not only increases our capacity but also helps us in getting more sugarcane from the command areas of those mills. We have recently taken on lease a sugar mill at Mohannagar in Maharashtra in June, 2005. We propose to increase the capacity of this mill from 2,500 to 4,000 TCD in FY 2006.

• Phase II –

During the last board meeting SRSL also increased its focus on power by announcing plans to increase the power capacity by 25.5 MW to 129 MW. Out of this total capacity we would be able to export around 70 MW of power using the open access mechanism.

3. Sugar Refineries: SRSL has refining capacities of 4000 tons per day (TPD)

• SRSL is setting up a state-of-the-art 2000 tons per day (TPD) port-based refinery in Haldia, West Bengal. This refinery would use raw sugar and convert it into European grade sugar which fetches a premium in the world market. This refinery is strategically placed for servicing domestic and export markets and can operate round the year on combination of domestic and imported raw material. The facility can process up to 700,000 tons of sugar per year.

• In phase II of the expansion plans, SRSL announced the setting up of another refinery of 1000 TPD capacity. This refinery would be integrated with its plant in Athani and would also be able to produce European grade sugar.

• SRSL also has another refinery of 1000 TPD capacity at its plant in Munoli, Karnataka and has been operating the same for the last three years.

4. Achieve greater raw material security.

We pursue cane development initiatives and facilitate crop loans to increase cane production in our reserve area. Our acquisitions / leasing of other sugar mills allow us to cover more cane areas. We provide quality seeds and other agri-inputs to farmers. We have also taken steps to educate the farmers about the economics of growing cane as compared to other crops. We have taken initiatives for development of irrigation sources as well as taking up land development to bring additional acreage under cultivation, which is either barren or unsuitable for growing cane. We have involved SDF and commercial banks for long-term soft loans for sugarcane farmers.

5. Increase our focus on corporate and high-value customers

We intend to be the supplier of choice for our industrial buyers. We are actively looking to enhance our presence within industrial buyers in the FMCG sector by continually upgrading our processes and quality systems. We supply to all the big names in the FMCG sector like Coke, Pepsi, Nestle, Cadbury, HLL etc. We are the preferred supplier to all these corporates. Shree Renuka Sugars is a market leader in the fuel-ethanol market and would be supplying 217 mn litres of fuel-ethanol over a period of 3 years to the oil marketing companies like IOC, HP and BP on a nation-wide basis.

6. To reduce price risk in sugar by hedging

We intend to use our large trade flow, which consists of our sales of manufactured and traded sugar to manage price risk. We have membership at the National Commodities and Derivatives Exchange (NCDEX). We will actively utilize NCDEX and international commodity exchanges to fix the prices of a proportion of our sugar for forward sales. The percentage of forward cover is decided by our internal risk management team and is driven by our perception of trends in the market. In our last three quarterly results we have shown how this strategy is paying off, by having a higher sugar realization as compared to anyone in the industry. In 2006-07, we got a realization which was 15% more that the prevailing prices in our part of the country by our excellent hedging strategies.

7. Maintain a strong presence in the export markets

We have been the single largest exporter out of India during this recent export campaign from India. We have exported around 20% of all the sugar that has gone out of the country. We intend to be a prominent supplier of high quality sugar within Asia where we will be in a position to supply not only our in-house manufactured sugar but also traded sugar.

8. We have excellent relationships with sugarcane farmers.

We believe that we have excellent relationship with sugar cane farmers. Unlike other privately owned sugar companies, we have approximately 9000 farmers as our shareholders. As shareholders, the farmers enjoy benefits of sharing profits of our Company. In FY 2003-’04 the Statutory Minimum Price advised by the Government of India was Rs. 968 per MT while our average price paid to the farmers was Rs. 1117 per MT which was higher by 15.39% (both these numbers are for an average recovery of 10.75%). We also make sure that payments to sugarcane farmers are made in a timely manner. To further increase the goodwill between the farmers and our Company, we formed a trust, Shree Renuka Sugars Development Foundation, which mainly focuses on promotion of education, healthcare and overall betterment of the farmers and the local community. We believe this strong relationship is a significant competitive advantage because farmers have no obligation to grow sugarcane and may switch to crops that may be more profitable. However, our track record of paying higher sugarcane price to farmers on a timely basis provides an incentive for farmers to cultivate sugarcane. The number of farmers growing sugarcane in our command area has increased from 3,325 in 1998-99 to 11,686 in FY 2003-’04 as per our registration records. We also coordinate and manage the harvesting and transportation of cane, which saves the farmers effort, time and money. This also enables us to get fresh and mature sugarcane, which increases the yield of sugar.

9. We have an elaborate sugarcane collection network.

In order to carry out cane development & cane procurement activities effectively and smoothly, we have a dedicated cane department, which is headed by Executive Director – Cane, who is supported by five Cane Managers. The Cane Managers control and supervise the cane development and procurement activities. Our area of operation is divided in to 7 circles headed by Assistant Cane Development Officers / Cane Procurement Officers, who report to the Cane Managers. The Assistant Cane Development Officers are assisted by 40 Cane Supervisors.

We purchase sugarcane directly from the farmers without involvement of any intermediaries. Based on the age of the crop, variety and maturity, a harvesting program is chalked out for desired quantity and quality of cane to be procured on a day-to-day basis. The Cane Managers issues cutting orders / harvesting permits based on date-wise cum pre-harvesting maturity survey. Accordingly cane transporting vehicles along with harvesting groups are allotted for harvesting and transporting cane to the mill.

10. Eligibility for carbon credits in the Cogeneration plant

Our plant at Munoli is the first bagasse based cogeneration plant in the world, which has qualified as a Clean Development Mechanism (CDM) project which entitles SRSL to generate Carbon Credits. The project is eligible for Carbon Credits based on the units of power sold from our Munoli cogeneration plant and we have already sold some credits in 2006-07. We have also applied for the other projects at Athani and Havalgah to be eligible as a CDM project and are expecting to receive the eligibility certificates soon, which would help us sell carbon credits from all the units on an ongoing basis.