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. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. [ Anut ] Pajari from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on Balrampur Chini Mills Q4 and FY '22 Results Conference Call. We have with us Mr. Vivek Saraogi, Chairman and Managing Director of Balrampur Chini Mills; and Mr. Pramod Patwari, Chief Financial Officer of the company. We will initiate the call with opening remarks from the management, following which we'll have the forum 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.
Thank you, and good afternoon, everyone, and thank you for joining us on our quarter 4 conference call. I will initiate the call by giving you an update on the current developments of the sector, followed by company's key highlights for the period under review, post which we are open for a Q&A session.
On 15 May, India production has grown nearly by 14% to 31.9 million, up from 30.4 million in the previous year. In the current year, Maharashtra production has increased on account of abundant water availability, higher exit, leading to higher yields. The final figure of Maharashtra is estimated at 13.8 as compared to 10.6 in 2021.
Maharashtra going to be 13.8% this year. Karnataka is going to be 6.1%. Uttar is going to be 10.2%. Rest of India will be about 5.6%. So we are expecting a production of 355 lakh tonnes or 35.5 million. This is after the diversion of about 3.1 million -- 3.4 million...
3.4 million.
This is after diversion of 3.4 million sugar into ethanol, which is also a record. Coming to India's exports and we'll answer all the questions at one go, I'll just give you the current status. [ Tianjin ] exported about 7.2 million tonnes, physically dispatched throughout?
Yes.
And contracted about 8.5 million?
We will go to 9 million.
Some people say 9 million. So between 8.5 million and 9 million have been contracted. 7.2 million has been delivered -- sorry, 8.5 million is expected to go out by April, May. So contract, 7.2 million. Physical acquisition of 8.5 million by May. Does that put us in?
Yes. Yes.
And contracts of about 9 million. So despite higher production, the closing stock should be lower or improve ethanol diversion, robust exports and strong domestic conversion. This has led to form realizations of sugar during -- even during the season.
In terms of ethanol, against ethanol quantity of INR 48.56 crores representing 10%, about 4.5 million to retail have been contracted so far and INR 186 crores of ethanol have been delivered up to 1st May. The sugar sector has supplied more than 88% of the contracts done so far, and -- which has enabled India to be the 9.9% current lending. So we are hoping in the overall year, 10% lending is equal to INR 4.8 crores, right? Currently, 4.15 has been contracted. There are tenders which come up periodically, so we may be able to deliver close to 10%. Moving to our -- this has led to a sizable foreign exchange savings of INR 9,000 crores. And currently, if you see the crude price, I think everybody is again in this program -- via this program.
Moving to our company's performance, BCM concluded the year on a healthy note assigned by high realization in our Sugar and Distillate segment. While we were expecting crushing to be higher by 5% to 7% in the season, wind, weather and probably that is the main reason that we were only able to record about 2%.
1 point-something.
1-point -- less than 2% increase in production. Further, the recovery is also lower on to climate condition. Just to give you an idea, 2 of our factories received 90 inches of rainfall, where the normal figure is about 35 to 40 inches. So this -- in this condition, it is very tough to perform if it were 90 inches of rainfall.
On the operational front, since the successful commencement of our expanded capacity of distillate, immediate, working with grain. We are now -- which we are running at full capacity. We are on time, and we should be able to commission our Maizapur distillery distill and expand our Balrampur distillery, commence commercial production in both by November or during the month of November.
On full capacity, as informed earlier, we should be able to deliver about 35 crores liters of ethanol, including 5 crores on [ grain ] and about 2 crores of ENA. We are also making healthy progress in the modernization and update-ation of all the balance factories and certain refineries also coming up.
And all our expansion program, which was in results, earlier when we commissioned including November online. To conclude -- over the past few years, we have been maintaining our profitability in the sugar surplus season going to various structures in the industry and our integrated model. So as the demand and supply scenario improves, we expect to do, going ahead, with growth in grain volumes and expansion, both in sugar and distillery segments. We hope to take our performance in the next level. Thank you.
Sir, should we open up for questions?
Right.
Yes, open up the questions, please.
Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Manish Ostwal from Nirmal Bank.
And I have one question on the recent announcement by the government. So I mean, what is the implication we see for the industry per se, in terms of sugar realization? And secondly, in particular, Balrampur Chini, your comment, please.
Okay. So as we said, let me put this in perspective. Government has done only one thing. They have said, you cannot export more than 10 million of sugar in this year, which begins from 1st October to 30th. Correct, Pramod? They had, therefore, in order to ensure that not more than 10 million moves out, in a scenario where 9 million plus has already been contracted, laid out certain rules. So that is all they have done.
This is a move, to my mind, which is very scientific and very welcome. So they are saying that we are comfortable till you have a closing stock of about 6 million, which as a sugar factory owner, must be even we all agree. And not from now, from decades that minimum 2.5 months consumption should be available on 1st of October. The reason being, by the time new sugar comes into the market, it becomes December. Hence, the country should be able to have stocks in its go-downs. Factories should have stocks that's going to go down to feed the country during those festival months and during those 2, 3 months.
So what they have also indicated, to my mind, that in the coming years, the policy will be tweaked in a manner export quantity, whereby you are required to keep about 6 million closing stock. That, to my mind, is a very transparent and a clear cut mechanism and a communication, which is very responsible.
So if everybody -- if the country has to carry 6 million and beyond that, you are allowed to export. I see this as a positive. So what I also heard is people who are reading from this -- mainly from the steel duty, which came on the weekend and imagining what else can happen. So just to put it on the call, there has been no cap ever put on sugar prices. There will be no cap on sugar prices in our far view. History stands and agrees to that. [ Grain ] payment has to be done. Currently, the price is around INR 35.5. Any commodity can fluctuate by 1%. If that happens, one should not read more than a normal fluctuation.
If people want to destock and prices come down by 1%, 1.5%, it is very possible. If you start in June, July when the prices will be higher from today, maybe yes, should be yes. So there is no other move one should worry about. This is a move which we're in the offering. It is rational. Had it not come within this atmosphere, I don't think they would have been so [ motivated ] about it, right? There is no fear to be -- there is no need to fear. Rather, there is need to rejoice with the clarity given by the government. This is our view.
Yes. The second thing on the Slide #20, the group of Minister recommendation to revise MSP from 31 to 33 per cases awaiting cabinet approval. Any timeframe we can expect this week?
So obviously, that won't happen at this point of time. And if the market is at 35.5%, 36%. Why should we even look at it today?
And lastly, sir, in the government press release, they said that they want to check the prices and the wholesale retail prices. So how do you read that thing, sir?
So as I told you, these are market forces that when a government does something, when inflation is staring globally the way it is and export is sort of -- they put a cap of 10 million again, which I say very responsible, it will be accompanied with some statement. The rationale behind it is to say that India's healthy in our stocks.
We'll move on to the next question. That is from the line of [ Pat Gala ] from GM Financial.
Sir, my first question is regarding the same Russian volume. So this year, we've seen it has been impacted due to this issue. But it maybe a little early to give any indication, but can you please elaborate a little bit more as to what is the exact issue here? Is it anything to do with the variety and probably could be a longer-term issue in nature? Or can it be reversed in the coming season itself, especially the decline in the yields in our catchment area? And also, what measures we have taken to compensate for this? That is my first question, sir.
That is a very valid question. So what I will do, I will hand the floor over to Avantika, and she will take you through our clean initiative and how things look today. Avantika, on to you.
Good morning, and good afternoon, everyone. I just want to reiterate already what my father has mentioned, that it was weather conditions this past year which has illustrated that the lesson recently, it is no other reason.
Rain started all the way in May and then went until October, which is unforeseen. And these rains were extremely untimely and they were very dumping. Now 90 inches, which was mentioned, is no small figure. And for us to be able to crush INR 8.88 crores in that scenario is absolutely -- I think it is very good.
But let us talk about the coming year. I have to say that this May has been much, much better than the previous May, and it's very, very encouraging to see the monsoon predictions being normal. And in this scenario, in the coming year, we should be in a very, very good position. I have to highlight some of the key chain development features -- key chain development activities that we have worked on. We have made herculean efforts in 4 areas. Firstly, in planting. We have increased our area by 10% to 15%. This results in a total cane area increase of 6% to 7%. This is, I mean, no small effort I must add.
Secondly, the tool management is somewhere we have tested a lot this year. UP -- East UP growers are not accustomed to actually working on [indiscernible], and this accounts for 50% of the cane crushed. Now this year, we have made huge awareness campaigns, and we have pushed this activity. Therefore, we have, for the first time, been able to achieve 75% of our lagoon area has come -- it has come, lagoon management activity. This is a very big deal for any East UP region.
The third point is that our varietal balance, as we mentioned last time, is really improving. Now we have the area under 0118, has increased from 13% to 23% for the next year. 0118 is recovery superior to 23, therefore, this is very, very positive for us. Other than this, we have new -- a few new pipeline varieties that are under aggressive multiplication plans. And these are upland, low land areas, both. So the next 2 to 3 years, we might see a whole new plain landscape, which is built to last through a healthy balance in our various efforts.
Lastly, I want to mention, I want to highlight this, red rot was not a major factor this year at all, as it was in the previous year. Going forward, it is becoming less and less of an affecting factor. Growers have become aware. We are working extensively on red rot control in the last 2 years, and we continue to be very, very vigilant about it and any other disease, insect or pest that might affect us badly. So we are looking to be in a very, very healthy position in the coming 2 to 3 years. thank you.
So basically, also, what we can say today, again, we can only give you a much greater figure by October. But as things stand today, distillery and the growth is way, way better than what we have seen in the past year.
Understood, sir. And sir, so is it fair to build a similar kind of a volume, what we had in FY '21 for the crushing volume as well as the recovery rate on a normalized basis?
Absolutely. I would feel very -- again, if 90 inches comes, no nothing can be committed. But if you're talking of that 1,050 we crushed, is that what you're talking about?
Yes, yes, yes, sir.
Okay. With -- our internal targets today are standing at those levels, definitely. Further fees and further sugar crushing season due to BP approval.
Not for FY '23?
No, no, it can't be. No. When I talk clean, we talk -- when we talk clean, we talk for season.
Okay. Understood, sir. And lastly, sir, on the unallocable expenses. We've seen a massive jump. So can you elaborate a little bit on that? So is there any change in any line item? Or -- and if you can provide a breakup for the sales?
Pramod, please answer.
So in the last quarter of last year, there was gain on buyback of shares of associates. So that's the difference, INR 7.5 to INR 8 crores.
So yes, can you quantify that again, sir? I missed that.
Sorry?
Can you quantify that again? I missed the number.
I think it was INR 7.9 crores or something.
Okay. Okay. So this will be the run rate going forward? Is that a fair assumption again? What we've seen in 4Q?
Run rate of what, our allocable expenditures?
Yes. Yes, yes.
Unallocable expenditure, you can assume at INR 75 crores. You can assume at INR 75 crores, put that on unallocable income, INR 2 crores here and there.
We move on to the next question. That is from the line of Shailesh Kanani from Centrum Broking.
I had a couple of questions. One on the production side, I see there has been some change in the crushing capacity as compared to last quarter disclosure from 76,500 to 77,500. Is this as we increase? Or is this -- am I missing something?
Sorry, come again?
So we have upgraded our Maizapur sugar crushing capacity by [ 1,050 ].
Okay. So that hasn't the change since last quarter, right?
Yes. That has resulted into going to 77,500 in comparison to 76,500 at a quarter.
Okay. Okay. Sir, I believe in the fourth quarter, financial year ending, quarter 1, right? Even then, very high levels of operations, like more than 90% -- from 90% of crushing has happened. Is that on a sustainable basis? Or how would that be ahead? I'm little worried on the crushing part. We have seen a real decline in the last 2 years. Earlier, there were problems on record as we had seen with the issues. So I know you have already gathered it, but care to throw some light on this?
Significant portion of crushing happens only in the last quarter. So January to March is the period when we get entire 90 days for the crushing. As you know that last year, the crushing was lower. That's -- the lower effect of lower crushing will always happen in the period post March. So if you are comparing the FY '22 with FY '21, definitely, the proportion of crushing, which happened in the last quarter will be more than [ 50% ]. There, you are right.
But as we have mentioned in the call that next year onwards, we are expecting an improvement in cane availability. The same thing will happen again the next year also. The spillover effect of incremental cane availability will be seen in the first quarter of FY '24.
Okay. Okay. Sir, on the margin trend, there is some decline. I understand that...
Sorry, sir. Sorry. But in general, what should be the trend for March, especially on the sugar segment?
So again, we have been saying this that results should always be pressed at group level, considering all the segments together. Because the transfer pricing varies from period to period and company to company. Even in this adverse situation, we have been able to maintain our EBITDA margin at a group level of around 14.4%, which was same as per last year.
Now you are aware of the fact that there was increase in cane price by INR 25 per quintal. Cane availability was lower. Recoveries are down by 31%. So the cumulative effect of all this is the increase in cost of production, which has resulted in lower margin.
Yes. All these gets covered at the moment the cane quantity increases. So cane quantity increases is because of increase in the little area and then majorly because of increase in yield. The yield is better recovery is better. If your quantity is higher, you get more byproduct. and you get a lesser cost of production as fixed cost gets spread over a much larger quantity.
So if the down trend is cane availability that one factor will lead to, you will see the impact. It's like an earthquake and you'll see our sales mix on. And here, this is a virtuous cycle. The moment it picks up, you'll see benefit everywhere.
Sir, just to continue on the same point. Assuming that we have a normal crushing season like we had in previous [ band ] and assuming that, of course, revenues from this certain segment has go to -- capacity expansion happens this year and next year, financial year. So is it safe to assume that our margin should be [ ringing ] upwards?
Definitely. Obviously. It's more than obvious.
Sir, last question from my side. So to your mind, do you think there are any percentages or probabilities that the government will come out with a cap on the sugar prices per se? It has not happened, but it can happen. So to your head, is there a possibility that tomorrow, the government might introduce a cap...
I'll try and address. Essentially you don't get me correctly. Is there a possibility an earthquake can happen tomorrow? The answer is yes, no? So you want my mind, I did not -- after being in this industry, 35 years, I cannot say it more loudly and clearly that I don't see any chance by any standard of any move, which is negative. And trust me, I do not understand how this move is negative. It is telling you, "Please export 10 million." So if somebody was on the fringe and after 9.2 million, he was wanting to wait till Russian exports. If Russia is in export, your inventory decreases. Your pricing, if at all, is firming up for coming years. Government wants gain payment to be done.
Now please let's understand one thing. Why is this ethanol program? Why is this MSP thing? Why is this quota thing? Why is all this seen by the government once a year? Because they fix the cane price. They say, "We want you to be continuing to pay it." So they look after the entire -- once they assess the cost side of your balance sheet, they look after the revenue side of your balance sheet. So if you see the heavy juice, gain and CRE, prices are revised the moment the price is touched. So they say, once we increase your included our input cost, we'd look after your output cost.
So I remind people of pandemic days when we did a call and crude went to 0. I don't know how many times I had to say what I had to say. But the fact is ethanol price is fixed once a year. It will neither go up, nor go down. If crude goes to INR 200, if my cane price is raised, my ethanol price will be raised. If crude goes to 0, my ethanol price won't decrease. So ethanol is not linked to crude even though it's mixed with petrol. So there are 2 separate sources to mix at the depot.
So assume that you're running a multifuel sort of retail outlet, you are allocating 10% of shelf space to one product, 90% to one product. 10% product will go up to INR 15, INR 17, INR 20 in 3 years. The rest will come from the 80%. This is how this is done for the quantity. That quantity is nonnegotiable.
You got prime ministers around the world, prime ministers. Say, from Lal Qila on [Foreign Language] he is so clear on this environment. He said that even globally, if you are allowed plastic stores in India or you're not. You're seeing his thrust in the environment. You've seen his [ Atman network ] concept, both convert so very well into ethanol, I can [ understand ]. To the pricing of ethanol. The pricing of ethanol is a derivative. So it is derived from cane price and increase in cost.
So if these 2 increase, ethanol price will keep on increasing. If at all government might provide some small impetus in ethanol pricing to incentivize further diversion because after diversion also, if you have got so much of production, they would want a little more diversion a little faster than we want. So that is very, very clear.
Okay, sir. I agree with you on the quantity front and thanks for the insight on the pricing front.
Not the quantity front. I hope everyone is ramrod clear. I'm willing to answer more questions on the pricing front. On the pricing front and quantity, both are as clear as daylight.
The next question is from the line of Aditya Ahluwalia from Invesco.
Hello. Hi, can you hear me?
Yes, please.
Yes. Thank you so much for clarifying that in the previous question. I just had a follow-on to that. So the country is already at about an 8% blending. And what we are given to understand is that beyond 10-odd percent, the rubber parts and the vehicle manufacturers need to really get their act together so as to be able to blend more as now into the queue. So the question is that growth beyond '24, maybe you've added capacities right now and '23, '24, we will already reached that 12%, 13% blending level. So beyond that, if the growth doesn't change, how will the growth come?
Yes. Pramod, do you want to answer that after -- so basically, let me explain to you. There are 2 types of sort of fuel compatibility. One is an engine compatibility and 1 is material compatibility. So engine compatibility is the big measure, permanent measure; material compatibility, the rubber parts, is a smaller measure. Up to 15%, there is no material compatibility folding. Maybe if we have gained some rubber parts a little parts going to spend, INR 5,000 a year, so be it. That's it.
Government is moving ahead very clearly, internally understanding this. They have debated around CM. I cannot share more than that, but it's very clearly debated. So we will move to 12% to 13% next year. And thereafter, those flex fuels and the other vehicles and the fact that some will do 15%, some will do 25%, 2-wheelers can go up to 85%. So there is a full short program drawn out year-to-year to next year promote 12% to 13%. If we can supply, it will get picked up. So it's going to go, in my mind now, this is Vivek Saraogi of Balrampur Chini Mills, not ISMA or anybody.
So we are saying 10% to maybe 12.5%, then 15%, then maybe 20%, or maybe 18% and 20%. So your question whether the car parts will be a deal breaker, the answer is no, not in the next year, not in the coming years. There are a full programs plotted out.
Okay. Maybe I'll check with the automakers on that as I think...
You do that. Not the automakers, you check with CM. Not individual, CM.
We'll move on to the next question that is from the line of Madhav Marda from Fidelity International.
I just wanted to check that how much was the -- so I think 3.5 million tonnes is diverted towards ethanol season.
Right.
How much do we expect, as the vending moves to 12.5% and then 15%, just how much would that number be given the mix of the end for the 4.5 million?
4.5 million should be next year, then maybe 5.5 million, then 6 million. At peak, Pramod, 6.5 million.
Yes, 6 million.
6 I would say maybe 6 million, 6.5 million -- 6 million plus at peak.
At peak, 6 million tonnes. Okay. And then, of course, there are incremental growth for us for the ethanol business will be more from grain-based ethanol incrementally. Is that the right way to think maybe 2, 3, 4 years out?
So are you talking for Balrampur?
Yes. For Balrampur, yes.
So see, our 35 crore liters can take care of that distillation capacity. We can take care of about 11.5 crores in terms of cane easily. So we have built our assets to handle 11.5 crores to 12 crores in terms of cane. And I'm very hopeful I'm getting it within 12 -- 2 years from now.
Next year and thereafter, we will reach our levels of what we think, and this is a bit of a forward-looking statement, if I can say so. Having said that, our next round of growth after we sort of stitch up all what we have done should come from there only. And again, let us check out our experience, how grain behave, because we have gone a grain portion in Maizapur. We will get an experience very soon on that.
Okay, okay. Got it. And the second question was basically in terms of the sort of sugar price outlook from here, basically, like, given inventories have come down the 6 million, 7 million tonnes.
Yes. So the outlook is positive only logically. So now if one -- how can I say it. Okay, I'll only say it the way I understand how to say it. If in place, fundamentally, your pricing is for the month, we get.
Absolutely.
In the next 15 days, if I am to predict prices, or 10 days or 20 -- 15 days, 20 days, it will be added 1% down only, no? Because there is fear in the system. So there will be destocking, by whom? By the traders.
So if you understand, there's a pipeline of at least 5 lakh tonnes in the country, a pipeline means where the sugar is either on road or at the store. People have 1 truck on the road and a little bit of sugar in the store. So when you go to a hand-to-mouth scare technology, you have nothing -- you have 1/4 on the road and 1/8 in your store.
So if that happens, which will, let's say, happen, there'll be a lull in buying for a few days. But we are seeing results of our company in a year. What is the price trajectory over a year, a quarter at least. On that front, we -- today after this announcement, with all confidence and analysis that at my command, the move today is price positive and not price negative.
That's exactly what I thought as well. I don't...
I'm sorry, I had to explain it a little vociferously because of the number of fear mongering I'm hearing.
Understood. And if I can ask 1 more question. Our sugar volume sales that have come down in the last 2 years, I guess that's a function of our lower sort of cane availability and then some diversion to ethanol. But as we issue the red rot disease and flooding, et cetera, goes away, are -- we could be in a position where ethanol volumes and sugar volumes will both move up, right? That also could happen the next couple of years?
You see ethanol is made from sugar only, no?
Yes, yes.
Cane, when you crush cane, you get cane juice. You either divert it to ethanol or to sugar. So if you sacrifice there, you will get -- as a combination, you will get much more revenue of the -- whatever products you make.
So given the recovery rates and sort of cane volume crush had come down in the last couple of years, I'm assuming that should bounce back, right, because we had some weather issues and sort of [ agri ] issues....
We promote and Avantika, I'm sure, very clearly explained the road map till now. Let's now sort of drop this in another point next year. Let's assume next year, and obviously, the production should come down from here because anybody who goes into the month of May better tune next week. I'm just assuming -- I'm drawing up a scenario, higher volume, let's say, 320 is the production. Let's say 20 is the consumption. I'm just trying a figure.
Your availability at your hand is higher by the difference between the 2 is 4 million. You already -- you begin with a closing stock of, let's say, 65 million. Government, next year, comes and says, okay, you cannot export more than 4 million. It's fantastic, isn't it? So you've been told today next year, this is how your export figure will be targeted. You will get permission to export this much is the indication from this announcement that the backward calculation only requires you to have 6 million stock.
So I'm even seeing next year. So if I am to do a next-year contract, I'll be very comfortable doing it. Assume price goes to INR 0.22, and I want to sell sugar from Balrampur, I'll go ahead and do it, no? Because I know this and I have some visibility on the production. I'll go and say no.
The next question is from the line of Bhalchandra Shinde from Kotak Life.
Sir, regarding the capacity addition, I would like to know, means like, by November 2022, we'll have additional capacity. Post that, if government needs to achieve this 20% blending, there should be addition of more grain-based ethanol capacity. What are our plans beyond that? Means like, to assume that where we see ourselves in the next 2, 3 years?
As we said, one moment we put -- sort of stitch up all what we have let loose in terms of sugar, modernization, expansion, distillation, juice, et cetera. We'll get back with further plans maybe after next season.
Okay. Okay. And sir, one scenario I would like to know, say, next year because of this gap and sir, surplus production, if say, domestic market is available with surplus sugar. What kind of a pricing action we can see? And what kind of a profitability impact we see on -- especially on the sugar profitability?
I think I've attempted to explain that already. I cannot explain more. I've given you a demand/supply scenario. If all surplus is going, price will remain from.
No, no, I'm -- because of some worse conditions, pricing goes down. So how we see impact on the profitability because, say, pricing goes down?
Do you have to calculate, no? If you feel price will go down, you have to calculate that so much sugar has made, so much price will go down, so much profitability will reduce. We don't see prices going down much. So we've -- given our trajectory, our view based on the rationale, we've said that our costing will come down. We've given our view.
The next question is from the line of Archit Joshi from Dolat Capital.
Sir, I have a slightly elaborate question on the road map of grain-based distilleries that has been set up by the government of India, the data what we believe that is presented by [ TI Org. ], we have the distillation capacity of ethanol made from sugar. There's slightly more skewness towards the capacity from ethanol made from sugar compared to the grain-based distilleries as on today.
But as per the road map, maybe 3 to 4 years later, the capacity of grain-based distilleries and the distilleries from ethanol -- from sugar are almost at par given that the pricing also of procuring food grains has been quite lucrative at a 60% discount to the MSP. Given all that, the participation from the industry to voluntarily put up grain-based distilleries seems to be quite lower. How do you see this going forward? Is it -- is the road map that has been set up by the government in line with how the industry feels going ahead? Or is there any diversion that you feel that you might see?
Because even for us, I mean, today, we are looking at a INR 35 crore liter manufacturing capability of ethanol all, out of which, only INR 5 crore liters is allocated to grain waste distilleries. So overall industry participation seems to be quite weak on that end. So any thoughts on that, sir?
Pramod?
Archit, if you see the DTI document, it clearly says that for 20% blending, 1,000 crores liter of ethanol will be required. And sugar industry is expected to supply between 5.5 million o 6 million. Rest is expected to come from grain-based only.
So the intention of the government at this point in time is to take care of the surplus sugar. By sacrificing 6 million tonne of sugar, we would be supplying 5.5 million to 6 million liters of ethanol from the molasses based route. The rest is expected to come from the grain-based distillery model.
So as far as our surplus scenario is concerned, that will get addressed even if at a supply -- even if the blending happens, let's say, 12%. 12%, 12.5% will take care of sugar requirement of 6 million tonnes.
And your question that industry will participate more, I have told -- we have said very clearly that our participation, we will get back after putting up so much of work which we have undertaken. Once it is commissioned, then we will give our views.
Understood, sir. So sir, if I understand this correctly, the participation of the sugar companies in putting up grain-based distillery will be limited only, but there might be other companies who might think of putting up these kind of capacities?
Why not? Yes, yes.
We move over to the next question here from the line of Varinder Bansal from Omkara Capital.
Sorry, okay. I think all my questions are very well answered, okay, by both of you.
The next question is from the line of Riya from Equitas.
I'd like to ask my question based on the global sugar scenario. So basically, what's the update on the Brazil crushing? .
So Pramod, you want to take that, Brazil?
So in the sugar season '21/'22, the Brazil production came at around 32.1 million tonnes. And in the month of April, we already have seen the data that the crushing is lower. Divergent towards ethanol is high because of the elevated crude prices. We are getting various reports on various agencies giving a range of 29 million tonnes of production to 34 million tonne of production for the next year as far as the real response. However, at this point in time, our internal view is that we can see a production of around 33 million tonnes from Brazil in the season '22, '23.
Okay. My next question would maybe pertain to what are our contracted exports to?
Exports?
Yes, contracted, not physical.
No. Whatever we have contracted, we have already exported. 50,000 tonnes is what we have done.
Okay. And as you see in the segmental results, we have clubbed co-gen and sugar this time. So could you give us a breakup for that revenue?
See, this has been clubbed. Operational data we have given in the presentation.
Yes, yes. Okay. And then my last question would pertain to grain base. So basically, we have seen that lately, the grain prices have increased. So when distilleries setting up, the government had given prices of INR 19 per kg, now it's gone up to INR 28. So what is your outlook on that?
Again, this ethanol based out of grain will be revisited. The price will be revisited on an annual basis.
I'll again reiterate that basically, government will be encouraging ethanol from all sources.
Yes. I'm sure. I'm just talking on the dynamics of the grain-based CapEx, which we have done. So does the increase in the grain price increase our overall payback period?
I'm just giving you a figure. INR 5 crores is our grain-based production. Argument goes up by INR 1 , we made INR 5 crores. It goes up by INR 2, we'll make INR 10 crores. INR 400 crores payback capacity helps a little bit, but it's not a game changer.
The next question is from the line of Nitin Awasthi from InCred Equities.
I only need to ask 1 question, which is really technical and something which has not been asked until now. Now you're seeing all these grades which are being -- having a hard time currently because of the power cost, which is heavy. Because power is an input when you have to produce the railways, whatnot not. Whereas for sugar companies, power is a byproduct of, let's say, 4 products.
So where you have a distillery like you also said we have, which will do both grain and sugar based, is there a very big advantage that comes in because you have your own [ system ] to power these distilleries?
Absolutely rational question. Sugar factories will have a much, much bigger advantage in being able to fulfill any sort of tendering process with a lot more visibility than stand-alone people. The point you're making is absolutely valid.
Okay. Fair enough. I read all the time, the technicalities a bit -- maybe -- still, I can visit or take it offline, but I understand the technicalities in detail. But that was the fundamental question that this should happen.
The next question is from the line of Prathamesh from Axis Securities.
So my question is regarding this again, given that your revenues from sugar exports were INR 180 crores, do you see a scenario going forward where, like, sugar companies have to fight out for that 10 million export space, which will affect the revenues going forward?
The 10 million is the limit set by the Government of India for this season '21-'22. What we believe that 9 million tonnes has already been contracted. We have already explained that by end of May, we will see around physical evacuation of 8.5 million.
As far as Balrampur Chini is concerned, we are not -- we were not looking any export in the season '21/'22.
If there is a fight in 10 million, your domestic prices will fly ultimately.
No, sir. But because there will be 5 million or 10 million, the supply in the domestic would increase, right?
How will it increase, yes? If you have INR 100 in your pocket and you give somebody the INR 50, you're left with INR 50. You give INR 60, you're left with INR 40. So if we export more, you're left with less domestic? Or more?
No. But like -- so to understand, in a normal scenario of companies in India are planning to export less than 10 million on usual, according to your logic.
Yes, yes. They will never even rent out for export.
Okay. So then this news is going to have no effect on any company at all in the Indian scenario?
My view is double 0.
Okay. And sir, do you see, since these guys are -- this move for food security. So going tomorrow, if there's any chance they limit the amount of sugar going towards ethanol as a food security concern?
We need 28 million.
You need 28 million tonnes a day. You don't make 28 million tonnes, these questions are valid. Let's understand 1 thing, what this move also is. I'm saying suppose tomorrow, sugar went to INR 0.25, certainly in 3, 4 days. And India started exporting like mad, and you were looking to cross 10 million. I mean these are -- tomorrow, as I said, can there be a quick answer of yes, no?
So in that sense, if government has just put a marker, they said these are the rules of the game. And it cannot be a more fairer clarity and a more fair rule of the game. So if you're paying football, there is a rule, no? Outside the goal is not allowed. It's not allowed. Simple. So there is a rule to the game. The rule to the game here is 6 million closing stock, 28 million domestic consumption. Feed the 2, do rest -- do with the rest what you want.
Got it, sir. And sir, as per your...
And this is for future also.
Yes. And sir, as per your...
Mr. Prathamesh, sir, this is the last question that we could take.
Yes. So this is the rule of the game.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
Thank you, and we're always there to answer any more questions, Pramod and me. Thank you once again for joining us.
Thank you, everyone.
Ladies and gentlemen, on behalf of Balrampur Chini Mills, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.