The Ugar Sugar Works Limited (UGARSUGAR) announced on 22 May 2025 that CareEdge has revised its credit ratings, downgrading both its long-term bank facilities and fixed deposits.

• The rating for long-term bank facilities, amounting to ₹700.00 crore (enhanced from ₹600.00 crore), has been downgraded from CARE BBB-; Stable to CARE BB+; Negative.
• Similarly, the rating for fixed deposits of ₹80.00 crore has been downgraded from CARE BBB-; Stable to CARE BB+; Negative.

CareEdge's revision reflects a significant under-achievement of profitability by the company in FY25 (1 April 2024, to 31 March 2025). This was primarily due to lower sugarcane crushing, an increase in the Fair and Remunerative Price (FRP) on sugarcane, and unchanged Minimum Selling Price (MSP) for sugar and ethanol prices from sugar syrup. The lower profitability, combined with increased debt levels, led to a deterioration in the company's capital structure and debt coverage indicators. The company’s liquidity is expected to remain under stress in the near term due to high upcoming debt repayments and inherent agro-climatic and regulatory risks associated with the sugar industry.

Key financial indicators for FY25 (abridged) compared to FY24 (audited) are as follows:

• Total operating income increased to ₹1,329.83 crore in FY25 from ₹1,149.73 crore in FY24.
• Profit Before Interest, Lease Rentals, Depreciation, and Taxation (PBILDT) declined significantly to ₹40.43 crore in FY25 from ₹70.57 crore in FY24.
• Profit After Tax (PAT) turned negative at ₹-16.25 crore in FY25, compared to a profit of ₹21.14 crore in FY24.
• Overall gearing deteriorated to 2.83 times in FY25 from 2.42 times in FY24.
• Interest coverage worsened to 0.83 times in FY25 from 1.59 times in FY24.

The company's working capital borrowings increased from ₹365 crore on 31 March 2024 to ₹444 crore on 31 March 2025, with inventory stock at approximately ₹526 crore as on 31 March 2025.

Despite these challenges, CareEdge positively factors in the company's diversified revenue streams from sugar, ethanol, and co-generation, which helps mitigate risks related to the cyclical and seasonal sugar industry. For FY26, The Ugar Sugar Works Limited plans to operate its 400 KLPD multi-feed distillery unit on maize, which is expected to reduce losses or achieve break-even in H1FY26, potentially improving profitability. The company also benefits from cordial relations with local farmers, ensuring adequate cane procurement, and its presence in a high recovery zone.

The outlook remains 'Negative', reflecting the expected liquidity stress. CareEdge notes that the outlook may be revised to 'Stable' if the company is able to generate estimated profitability for FY26.