Balrampur Chini Mills Ltd
NSE:BALRAMCHIN
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Balrampur Chini Mills Ltd
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Ladies and gentlemen, good day, and welcome to Balrampur Chini Mills Limited Earnings Conference Call. [Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Good afternoon, everyone, and thank you for joining us on the Balrampur Chini Mills Q2 and H1 FY '23 Results Conference Call.
We have with us today, Mr. Vivek Saraogi, Chairman and Managing Director; Ms. Avantika Saraogi, Business Lead; and Mr. Pramod Patwari, Chief Financial Officer of the company. We will introduce the call with opening remarks from the management, following which we have the floor open for a question-and-answer session.
Before we begin, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now like to invite Mr. Saraogi to make his opening remarks.
Good afternoon, everyone, and thank you for joining us on Balrampur's Q2 FY '23 earnings conference call. I trust you've all had the opportunity to go through our results presentation providing details of our operation and financial performance. I will initiate the call with an update on the current development in the sugar sector, followed by our company's key highlights for the period [ half year ended ].
According to response estimates, India is expected to produce 36.5 million tons of sugar after accounting for a diversion of 4.5 million tonnes. So a more visibility on this probably would be available after a month where mills have all got into full swing and we get the first evidence of the yield of [ sugarcane ] growth. The growth is likely to be on account of higher acreage and the sugarcane in the country given our consumption of 28 million tonnes and inventory of 6 million tonnes, we remain in a surplus situation.
So it is expected that we would need to export around 8 million tonnes this season with [ sugar sticking ] prices while safeguarding the availability for sugar in the domestic market. Pragmatic export policies have been followed by the government in the past, which have ensured sugar prices remained [ within ergetic ]. So in a welcome move, the government has already allowed an export of 6 million tonne, and the industry is hopeful that we should get further extended as the season progresses, and we have more clarity of the production.
So assume the production is not 33.5 and it's 35. The government would probably recut the export from 6 million to 7 million.
Moving to the ethanol sector. As most of you are aware, the government has increased the procurement price of ethanol for the ethanol supply year 20 to [ 23 ]. This should provide impetus to the country's plan to achieve 20% blending of ethanol with petrol this year.
As the third largest importer of oil and petroleum in the world, India is making efforts to double the ethanol blending program to 20% from the current level of 10% by '25, '26. Maybe it could happen a year earlier. On the business front, the company reported subdued results during the quarter include lower cane availability and lower recovery witnessed during the season '21-'22. This impacted the sugar division performance in this nonproductive quarter.
While we witnessed some unseasonal rains in Uttar Pradesh the effect is expected to be marginal as the crop was already had achieved attained a certain level of maturity. So there will be some delay in packing [ of themes ] by 5 to 7 days. However, [ cane related activity ] show us in the current year is estimated to be 15% to 20% higher than last year in the range of INR 10.25 crores to INR 10.5 crores against INR 8.88 crores last year.
We will get further better clarity on this within a month as I indicated, both at the company level and at the country level. This estimated level of claim will enable us to deliver our healthier operational financial performance in the next year going to better availability, not only to make sugar, but for the byproducts as well.
Coming to our distributor business, our CapEx plan for the distributor segment is on schedule and will significantly augment our capacity to 1,050 KLPD by November '22. It is acting in the total technology distillation of the capacity INR 35 crore liters annually, including INR 5 crores from grain.
This includes our cutting-edge distribute project in Maizapur, it should be 1 of its kind in the country.
This would work on juice B-heavy grains as and when whatever feedstock is provided.
To conclude, BCML is always aspire for optimal investments in its operations as well as creating value for the shareholders. To that extent, we're pleased with the Board of Directors has approved 6th consecutive buyback program of equity shares of 40.4 collections, at a maximum price of [ INR 145.44 ]. This -- I would now like to hand the floor over to Pramod to take the call forward, Pramod.
Thank you, and good day, everyone. We can straight away move into the Q&A session as the detailed presentation has already been shared. Thank you.
[Operator Instructions] The first question is from the line of Lokesh Maru from Nippon India Mutual Fund.
Sir, I have just 1 question. After Q4, it is quite evident that if we have 15%, 20% higher cane, the next season is going to be quite upbeat. My question is only on the next quarter, which is Q3, given that the inventory valuation that we have taken for sugar at 35 inventory at 10.9 lakh quintal compared to 18 before. And again, our inventory on alcohol side, ethanol side -- so how would you portray Q3 as in would the pain from Q1 or the loss of Q1 continue in Q3 and then Q4 is actually going to be really good? Or just for Q3, how do you see Q3 assets?
Pramod?
Q4 will always be our best quarter in terms of the seasonality. As far as the Q3 goes, we have mentioned the presentation as well. We've got an export quota of 1.98 lakh tonnes. Out of that, 1.4 lakh tonnes has already been contracted for physical exports and we have sold our total of 56,000 tonnes. Some portion of gain will accrue in quarter 3.
Yes, and the crushing begins in quarter 3, so 3, 4 days late. So that's not a big deal. So I don't think we give a quarter-to-quarter forward-looking statement. But yes, quarter 3 will not look like this at all.
The next question is from the line of Shailesh Kanani from Centrum Broking.
Sir, a couple of questions. One, on the sugar export front, what we have contracted would be shipping now in the third quarter or the fourth quarter, how would that turn out and what will be the bifurcation between raw sugar and refined sugar in that term?
So Shailesh, we cannot meet the exact quantity, which will be shipped in the third quarter or fourth quarter. But we [ will work to ship ] as quickly as possible.
But shipment, some part would happen.
Yes, some part will definitely happen in the third quarter also. So out of 1.4 lakh tons, INR 35,000 is [ around manageable ].
Out of 1.4, 35, so your 1.05 is financial right.
So it is 25%, 75%.
Okay. Sorry.
This should be shipped by the financial year end? that is March '23. Largest 90% plus model, 90% is SP-2 Okay. SP-3 Only volume.
Okay. Fair enough. Sir, second point on the distillery front, we have seen a decline of volume from the [ feedstock ] business. So can you share some light on that? Also, our Maizapur plant is, it's operational. Are we planning to run for the next couple of months on a given the ability of molasses is less -- would be less. So can you just highlight something on the [ sugar cane ].
So distributing gets its feedstock from sugar cane. So sugarcane is less, molasses is less, distillery volume will be less, right? There now -- yes. So since sugar business will also begin, our base adjust around the corner. And obviously, as and when the distillery starts, we will intimate the exchange.
So you will get with that together. So sugar cane is coinciding with commencing of distillery, probably a very little portion of time could be done on grain to just test out the plant and then you switch to sugar in Maizapur. Thereafter once the season closes, you can go full on in there. That is the basic program.
Okay. And just to give the numbers of Maizapur will be running for, say, 30, 40 days in this quarter for the quarter 3?
So I repeat myself. As and when we are able to -- as and when we commission Maizapur, we have to inform the exchange. So it's unfair to sort of preempt that announcement.
Sure, sure. Okay, sir. Sir, a couple of more questions. Sir, have crushing started in any of our plants as of now? Or any contribution you can share today? And any timeline for when we plant?
So progressively from [ light ] 15, then 18, like that, plants will begin and probably everything should begin on the 1st December.
Fair enough. Okay, sir. Sir, last question from my side. Sir, what would be the vision from the management side from a growth perspective on the long term, not only from, say, 2 years down the line when, when a new [ capex be ] downstream and in general, how would you vision Balrampur Chini to be, say, 3 years, 5 years up the line? What is the vision for the company on the management side?
So we continue to explore related businesses and be sort of pre-to-date and light in terms of our balance sheet for any good opportunity of acquisition. Having said that, we will not only be waiting for acquisition, we would be looking at other projects, should they make commercial sense and should we more be convinced, management and the board, you will hear about it. But right now, it's on the drawing board stage. It's a little hectic, everything is being carefully [ differed ].
Okay. Sir, actually, if I can just explain that one. Actually, I was thinking more from derisking our business model or the way we have kind of [ mitigated ] bills by enhancing our capacity on the distillery front. Are we thinking something on semi like little long term, but are we thinking on similar lines from one segment of sugar to another segment?
Currently, the INR 1,050 crores distillation at 1,050 KLPD distillation, we will be able to handle INR 11.5 crores to INR 12 crores winter of gain, which we hope to get next year itself. In the process, one would keep revisiting and seeing if there is scope for more distilleries or for more expansion and therefore, internal debottlenecking, if some can be expanded and it can go up further and some distillation needs to be agreed for that. So today, the distillation business, which you are asking for, we already would have the distillation capacity in the current year to crush 11.5 crore quintals against which we are expecting 10.5 crore quintals this year, which is 18% higher than last year's 888.
The next question is from the line of Nishant Sharma from Edelweiss Wealth.
Sir, 2 questions from previous participants. Just to reconfirm, on the distillery side, you said whenever it will start, we first started the grain, post which basis the sugar season starts. So we'll switch to sugar. And once the sugar season gets done we'll again get back to grain. Am I correct on this, sir?
Absolutely right.
Sir, then how we will be switching, I mean is there a time lag which would be required for switching from grain to sugar and it's absolutely in a day or 2, I mean, how that transition takes place?
In a day or 2. In a day.
Okay. So it's nothing major, we will be able to lose because like for Q3, it's already 45 days are over. And so I'm just trying to understand that we won't be able -- we won't be losing out much in terms of the production day.
Absolutely not. Absolutely not. Sugar, juice will take predominance over anything else. Having said that, as we -- as you understood and your initial remarks on the call were absolutely correct.
Okay. Second, in terms of the export, again, EBITDA, a little bit of clarification, we had that out of whatever 1.4 lakh tonnes that we got on quota. This is out of the entire quota? Or this is just for the time -- I mean, we may get more allotment out of quota going forward?
As and when the 60 lakhs tonne to 6 million tonne enhances on the country level, when 6 million goes up, we'll get more quota.
Okay. So currently, if you can just once again elaborate what exactly quota that we got it out of the 60 lakhs then?
1.98 lakh tonnes.
And of that 1.98, we have already contracted 1.4, which we are planning to complete it by March.
Most of it by March.
Okay. So most of 1.98.
Yes.
Second, sir, in terms of the export policy with respect to dropping of quota. So here, this dropping between [ means 2 ] mills or it will happen through government? And how do you foresee this change from a sector per se as well as from our company bursar.
I don't understand the relevance of your question, if I may understand a little more what you're trying to ask.
Okay. So before asking questions, possibly, I may require that understanding that, if I'm not wrong, in the recent sugar export policy, government has stated that the mill owners were unable to do exports or who are not interested in doing exports, so they can submit their quota of export, either with the government or they can also swap it with the other companies.
I understand your question. Don't worry, he can sell his quota so there's no problem. Nothing will be affected.
So I'm asking more from a perspective that I'm pretty sure that we can sell it. Is there an opportunity that we can have a more export sales with that shipping or we should -- is there any, I mean, particular point or that where we would be thinking whether we should take excessive export or we should more focus on the domestic side. So just wanted to understand that what could be the factors that would be affecting that stepping or considering those stepping?
As far as Balrampur Chini is concerned, we will continue to reduce our strategy on this exports and domestic. It is a fungible policy, which the government has put in place and at a relevant point in time, we will take the decision.
The next question is from the line of Richard D’souza from SBI Mutual Fund.
So I just wanted to ask on the internet remarks, it was mentioned that cane availability could be about 15% to 20% higher in the current sugar year. So what gives us this confidence, sir?
Yes. Avantika, can you take that question?
Yes. Thank you so much for the question. Basically, even though this untimely November rain has sort of -- sorry, October rain has scared people. As mentioned by the Chairman, it was quite late in the cycle when the crop had already reached a certain maturity. If I may give you a bit more technicalities, at the time of the initial growth, that is the main time frame where the weather was very, very conducive.
So we were able to attain many more pillars, which increases the quantity right off the bat. After this it's just a matter of obtaining height. So it has impacted very marginally. We have been reviewing time and time again. Cane availability the yield is higher per acre. Also our area and the cane is 8% higher. So therefore, we are quite confident on the 15% to 20% increase in cane. I think it should not be a problem.
Just to continue on this, Ma'am. Last year, we had some issues with the CO 0 238 seeds, and we were planning to replace it with the new variety of seeds or with a different variety of seeds. So how is the transition fractified?
So thank you again for remembering. It's definitely on the up and up, our planning, our projection has happened, whatever we were planning. So we are down by 15%, 20% on 238. So here steadily, it's reducing plus we have gotten much more aware of the disease and how to control it and not bring it to our [ minegate ] -- so that procedure has been airtight almost, I would say, through these few months, we have been added. I think the recoveries will also be much better because of the better varietal balance also plus within [ 2 trees ] also, it will be cleaner, there's less incidents in terms of each plot. So less spread because we were able to control.
There is another evidence that there is a testing done before the start of season. It's for the [ handbill ] analysis, even if that shows recovery to be better, trend will be better -- much better than last year.
Okay, okay. So can we assume a recovery rate of what was there a couple of years back?
Yes. One will definitely hope for that.
The next question is from the line of Achal Lohade from JM Financial.
Sorry, I joined a little bit late if you would have addressed it. Sir, if you could clarify on the lower sales volume for Distillery in terms of the target what we had earlier we had indicated, are we on track to achieve that FY '13 distillery sales volume target?
Yes, Achal. We are on track as far as FY '23 since so.
Which is somewhere around INR 15.5 crore liter, if I recall right, sir?
Total alcohol supply would be around INR 33 crores to INR 34 crores liter.
That is for next year, you see, right?
FY '23.
This year, cane [ ability ] was lower. Distillery, if cane is lower, the molasses is lower, distillery capacity will be lower in the year gone by. In the year 2 comp [ from other giving to paser ].
And for FY '24, it should be around [ 35% ].
Understood. Actually for 35 per liter. Sir, if you could help us with the realization for the second quarter in terms of the E&A and also the quantity. And is there any inventory write-down in the distillery segment to [ part on ] into E&A?
There is no inventory write-down as far as E&A is concerned, and we won't separate the figures of E&A that I can share at a net. I don't have the figure as of now in front of me.
E&A is insignificant.
Okay. Because if I look at the production number, the [ BB ], the balance is substantially large number. While in the sales volume, it is substantially lower number. If you could help us understand that in the second quarter.
[ The sales was ] ...
Production during the second quarter was around INR 3,487 crores ...
Yes. And sales was around INR 4.11 crores liter.
No, sir, what I'm saying is ex of BNC ethanol, the production was 3.87, and the sales was 6.2, if I have got the numbers right.
3.87 is the total production, including ethanol and nonethanol productions.
Okay. Okay. Got it. And if I may ask, what is the impact of this wage revision you have quantified for the total impact. But on a recurring basis, what is the cost impact of this wage revision?
Maybe INR 1, 1.5 crore annually?
Okay. And if you could also clarify on this molasses quota part as to what is the quantum now and what is the impact of that in the September quarter with respect to that?
So as far as molasses policy revisit is concerned, we don't sell molasses, Normally, we don't send malate, but we are converting that into [ P&A ] for discharging the obligation. So as and when the P&A gets sell now, the impact is already in the accounts.
And just to clarify the current molasses policy which has come out, the current [ liquid ] policy is a lot friendlier than the previous one.
Would it be possible to elaborate a bit on that?
No, we are under reading while it will require more vetting, but it is seeming to be sent here. That's all one can say now.
Got it. And with respect to the cane crushing, you said 10.5 million tonnes for the current season, sugar season '23. Would it be possible to give some idea in terms of fiscal year, sir? How it will look like?
90 plus...
We start discussing. We do see [ some light ]...
Sure. If I may ask a couple of more questions?
It will be around INR 10 crores.
Okay. 10 core quintals in FY '23.
The next question is from the line of Nitin Awasthi from InCred Equities.
I would like to understand, sir, what were the expectations of the revised rates of ethanol that you had? And how do you perceive the rates given by the government as of now, you as the company and you as the representative of the industry, how do you foresee these rates? Do you think it's fair? Do you think there's a revision required?
So let's be clear as to what the thinking going around is: There was a special incentive given for 4 to -- 4 months now, July onwards, from July to November, something like that, from July to November -- August to November, so that if you supplied more than your -- if you supplied during that period, you would get something higher in terms of [ rupee cost ]...
Yes. So that was done to incentivize during those 4 months. One cannot expect that to be a part of the rate. Hence, the rate which has been announced by the government is a function of increasing FRP as a percentage. I would be hopeful and this is just again a very personal remark, absolutely personal, as to the same incentive might come around during those 4 months in the current year. So if I'm to see repetition of [ where the current ] government does not get its quantity, maybe that incentive comes in the next 4 months. Thirdly, what Pramod has been saying, it is even in the [ TV ] today, the additional capacity now has to come from sacrifice of juice rather than B-heavy, for which you need new capacity addition. If for the attracting new capacity and giving the new capacity of decent IRR, you need a price which is higher than this current price of [ 65 an ounce ]. Yes. So these are specific remarks to your questions.
Sir, the second question following relating to the first one is that given that currently we have capacity of molasses, grain and juice, and you would do the math better than anybody else, would you still go for the juice route in the current season, or the molasses route is more profitable?
Juice.
Even at the current rate juice is more profitable.
Yes. I think the investment's already been set up. This is juice in 1 year. So we will do it and do the juice.
The next question is from the line of Anupam Goswami from B&K Securities.
Sir, my first question on the -- what is your aim on the distillery mix? So where do we see how much cane diversion happening towards A? And how much B -- and what would be the rest of the grain liters in this? And let's say, on FY '24 this is INR 35 crore liters, if we are targeting.
So we will answer your questions on the sugar season perspective. Okay. So to be diverting around 6% to 7% -- 6%.
Maybe 7...
It might be 8%, 8% in Juice and 20% for ENA and the rest will go to.
Okay. And rest would be for grain. So our endeavor mostly still lies on B-heavy mode. And because of the higher margin still now, sir?
It's all a very related business. So it's -- let us run the juice, it has been done for the first time. Let us see the return. We hope to get a very good return. Once we establish everything, the juice capacity is limited. So one will deal with all these mathematics the moment we have stabilized and run it. So as someone said, we know our numbers well, trust us with that.
Okay. Okay. And sir, do you have any chance of SAP again being hiked because last year, we had a hefty hike. And this year, what's the probability...
Hoping for [ no hike ]
Okay. Okay, sir. And sir, last question, we are heading towards, let's say, of 6 million tonnes next season diversion. So where do we see 6 million tonnes and how much liters we can produce as an industry out of that? And going beyond, where do you see, are any government support required for going beyond that?
Like this season pass at 4.5%. You're saying next year 6 million, it's too early to comment today.
The next question is from the line of Nikhil Gada from Abakkus Asset Management.
Sir, my first question is regarding the exports where you said that it's going to be in the ratio of 25 to 75. Would it be possible to even share the realization what we would be garnering over here?
So yes, we are still in the process of pricing it. We'll get back to you. Yes. See, we are going to sell refined sugar as a major part of it. 75% refined sugar. It is very good realization.
Understood.
We'll give you the figure during the call Monday.
Okay, sir. Sir, my second question is just when you mentioned that for the distillery breakup, 8% juice 20% E&A, that may basically C-heavy, right, through C-heavy route.
Yes. That is the liability to be discharged as per the policy for country liquors. If you give molasses, we get a poorer realization, you give E&A [ for a better realization ].
Understood. Got it. Right, sir. Understood. And sir, lastly, any comments on the global prices? And how do you see them because in last, I think, a month or so, we have seen a very sharp spike in sugar prices globally? And how do you see the situation with expectations of Brazil and Thailand are coming back to normalcy in terms of their production?
So it is gaining in Brazil and Thailand. So probably the crop might not be as good as one thought. And this price right now is very lucrative. [ ID ] has gone up, and it is a [ holding ] chance for Indian exports to be priced in. We feel more than 4 million must have been done.
The next question is from the line of Dixit [ Mintis ] from [ Eliasi ] Mutual Fund.
So my question is on expected recovery [ receive ] can you give some guidance on that?
So as we said in the beginning, as Avantika mentioned, see understand, let me explain to you a little more about the cane crop. So when the yield is good, the cane is healthier. So when the cane is, each stick is healthy, the recovery sucrose inside is higher. So we are hoping for a better recovery based on the [ handbill ] analysis and based on the weight of the mother food. So that trend is higher definitely. In our area, we've done the mapping. And once we start the crushing, we'll get more and more data as we proceed.
Okay. So can we expect at least 1% higher recovery or is that too much to expect?
So somebody commented that can we expect what we got 2 years back. So that was probably, 3. or .4 higher, .3 higher than the current year. My answer was yes. We can definitely expect that...
The next question is from the line of [ Bhalanchia ]. Mr. Bhalanchia missed the queue. We'll move to the next question, which is from the line of Shailesh Kanani from Centrum Broking.
Sir, just a small clarification. When we guided for INR 23 crores alcohol sale, that is for FY '23, is that right?
Yes.
So that would imply growth of around 65% to 70% [ ERV ] in the second half of the year, which I think we are already -- I think that is basically last balance for [ autumn ], right? So is that achievable? that 60% to 70% just on volume terms.
Yes, we will get full [ level of RT ].
Okay. Because the first half volume is around 9.3 [ is all it takes to fill a calisy ]. So if we are guiding for 23, basically we'll be doing something in the range of INR 40 crores.
23 is the number we are resting on.
Yes. So when you make juice, you may sell up a lot more quantity and the tender should be accepted and the dispatch should be much faster. This is the target, if it's here or there by 1 month, that's the maximum error you can expect.
Because I see the reason I ask is because the operation on are only 4 or 5 months. So if we are off by 1 month, that would be nearly 25%, right? So it would be something in the range of INR 11 crores, INR 12 crores in that case.
So basically, our production, we know. We are hoping for that despite as for the tender freezing. Okay, government body delay is lifting at 10, 15 days, you are talking balance sheet impact and sensitivity thereof. I cannot guarantee that because I'm not the government, I'm not the OMC. But seeing the power effective, it could definitely possible.
Yes, that's what I wanted to know.
Possibility. INR 22 crores to INR 23 crores.
The next question is from the line of Achal Lohade from JM Financial.
Sir, my question was pertaining to the cane development program. What you had mentioned is that for the current season, 10.5 million tonnes for the next season 11.5 million to 12 million tonnes. So the question is, A, how much more scope do we have given our catchment area; B, is that would also that require additional crushing capacity to the [ succas ] ?
I'll take your question. In the East, where 8 of our factories are located, there is a lot of scope for acreage increase. There's no shortage really. And we don't need to set up more crushing capacity to handle up to 11.5 million tonnes.
Beyond that, ma'am. Is there any plan to set up -- is there a plan to increase the acreage further in....
Please stay within the topic.
Understood. The second question I had with respect to the exports for the industry in the last season of the total export 11.2, how much would be white sugar? And how much would be raw sugar -- would there be idea on that? And because why I'm asking because the refined sugar, the current realization appears to be extremely lucrative. So just wondering if most of the sugar exports will be of refined grade.
So I don't have the figures right now visible in front of me, but what I recall off of the [ metric 4 ] million tonnes, 4 lakh or 50 tonnes for refined sugar. And we don't have the breakout of raw and white as of now.
So these are defined export, which we tied up to a little above 38 and raw above 34.
Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you very much. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarification or if you'd like to know more about the company, please feel free to contact us. I again thank you for taking the time to join us on this call.
Thank you.
Thank you, everybody.
Thank you. On behalf of Balrampur Chini Mills, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.