Dwarikesh Sugar Industries Ltd
NSE:DWARKESH
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
59.26
93.15
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Dwarikesh Sugar Industries Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day and welcome to the Dwarikesh Sugar Industries Q2 FY '24 Result Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this call is being recorded.I now hand the conference over to Mr. Tejas Sonawane. Thank you and over to you, sir.
Thank you, Harsha. Good afternoon, everyone. On behalf of Dolat Capital, I would like to thank the management of Dwarikesh Sugar Industries Limited for giving us the opportunity to host their Q2 FY '24 earnings conference call. From the management team, we have with us today: Mr. Vijay Banka, Managing Director; Mr. B.J. Maheshwari, Managing Director and Company Secretary, Chief Compliance Officer; and Ms. Priyanka Morarka, President, Corporate Affairs.Without further ado, I would like to hand over the call to the management for their opening remarks. Post which, we'll open the forum for a Q&A question. Thank you and over to you, sir.
Very good afternoon, everyone. Welcome to you all to the earning conference call of the second quarter and half year of FY '24 results. The results are already there in the public domain. As you can see in this particular quarter, we have had a total income of about INR 449 crores. Income is down as compared to the corresponding quarter last year. And I'll quickly take you through the highlights of our operations and highlight of our financial results. So PBT was about INR 15 crores and PAT was -- I mean PBT was INR 15 crores vis-a-vis INR 11 crores last year same quarter and PAT was about INR 10.26 crores vis-a-vis INR 7.84 crores last year. If we take the half year into account, then our PBT is INR 74 crores vis-a-vis INR 67.89 crores and PAT is INR 50.88 crores as compared to INR 47.54 crores corresponding half year last year. So there has been some improvement in the financial results of this particular quarter as compared with the last year same quarter.Now see, ISMA has come out with the production numbers. This number of course is the data which they have published over a 1.5 month ago. ISMA has estimated a production of 31.7 million tons, which is against 32.8 million tons of sugar production during season '22-'23. So this estimated production factors our 5 million tons of sugar sacrificed in favor of ethanol, which means at gross level we expect surgarcane to produce 36.7 million tons of sugar. But these are early numbers, we're [ not expecting ] any big changes. Weather has played truant and we have seen delayed arrival of monsoon across the country and then there was heavy rains in the month subsequently. But heavy rains in the subsequent month doesn't much impact the growth of the crop because the crop needs rains particularly in the month of July or so.Anyway some trade houses in fact are estimating that the production number could be as low as 29 million tons, which is why as you are aware, Government of India has banned the sugar export for the time being since they apprehend that the prices could go upwards if spot is allowed. Currently, the sugar prices are hovering between INR 3,800 and INR 3,900 a quintal. This has been after a very long and sustained period of flattish sugar prices, which was throughout FY '22, '23. We've seen resurgence in the prices from April onwards. Gradually the prices have gotten better and now they are hovering between INR 3,800 and INR 3,900. In fact lately it has touched INR 4,000 a quintal also. So here are some of the numbers. The EBITDA for the quarter is INR 31.9 crores and for half year it's been INR 109 crores. So the results are marginally better as compared to the corresponding quarter and half year numbers of last year.There are various factors, which need explanation and which I will explain as we go along. So during the second quarter of this fiscal, as you have seen, there has been significant reduction in the total income, which is because of lesser quantity of sugar sold. Sugar is sold as based on the releases ordered by the government so we've received lesser releases. So in this particular quarter, we sold 7.19 lakh quintals of sugar vis-a-vis 11.49 quintals of sugar in the corresponding quarter last year. So you can see there has been reduction of about 4.3 lakh quintals of sales during this quarter. Prices have been better, nearly INR 200 more than what we realized in the corresponding quarter last year. During the half year, we sold 16.89 lakh quintals vis-a-vis 26.78 lakh quintals, which included sugar export of about 5 lakh quintals. So half year also, we've seen in terms of quantity of sugar sold, the quantity has been lesser.Now there a couple of reasons. So let's say number one, the releases have been less and plus we have diverted more of sugarcane for -- our focus has been to release more and more and make more ethanol as is possible. So again the price realization is almost about INR 200 better in the half year as well. Sugar stock as on the 30th September was 2.68 lakh quintals vis-a-vis 1.81 lakh quintals. The sugar stock is slightly higher, which also is mainly because of lesser releases that we have had. Stock as on 30th September 2023 is valued at INR 3,534 a quintal. So we had some good sales of industrial ethanol. During this quarter, we sold about 2.87 crores liters of ethanol. We wanted to touch the permitted mark of 3 crore liters, but we fell a little short. And during the half year, we have sold about INR 5.90 crores liters of ethanol. So the 5.90 crores liters is vis-a-vis 3.79 liters crores that we sold in the corresponding half year last year.The template that we are following is we use sugarcane juice directly for making ethanol during the season and during the off-season whatever sugar B heavy molasses that we have generated, we'll use for making ethanol. Our loan profile is lean interim, as you can see. We have long-term loans of about INR 258 crores and all the loans are subsidized loans. All the repayments are happening on time. In fact we have cash and cash equivalents of more than this amount on the same date. One very important development that happened in this quarter, which unfortunately has gone against our industry in U.P. is that the industry was burdened with significant increase in the molasses levy obligation. The government on the 28th of April came out with a policy where they created B heavy molasses with C heavy molasses which regarding the difference in their potential output.If we use B heavy molasses, we get more than 30 liters of ethanol and if we use C heavy molasses, we get nearly 32 liters of ethanol. So they integrated all. And this change in the policy has been in complete deviation from the policy that they had followed hitherto. So those of us who manufacture B heavy molasses were widely impacted. This resulted in an increase in our expenditure of nearly INR 20 crores. We had to give additional B heavy molasses to the extent of 2 lakh quintals. I mean we had to earmark it not necessarily give it. So we had to earmark about 2 lakh quintals of additional B heavy molasses for levy country liquor purposes. So this had a big setback and plus it has deprived us of the opportunity of using that molasses and converting it into ethanol and earning profits out of it. So that has been 1 big setback in this particular quarter. This is a setback which is there for all the sugar companies and we have accounted for this setback.And well, we are prepared to start our next crushing season and our Dwarikesh Nagar and Dwarikesh Puram units will commence their crushing on the 31st of this month and our Bareilly unit will commence crushing on the 5th of November. We have had very unprecedented and very heavy rainfall in the month of August and September, which really doesn't augur well for sugarcane crop. So we have seen incidents of red-rot in the Bijnor district where 2 of our units are located. So initially our cane team was trying to -- they thought there could be a big reduction in the crushing numbers. But as we go along, we are seeing some improvement. The subsequent good weather has been conducive for the growth of sugarcane yet we don't know how much we are going to crush. Last season we crushed about 4 crore quintals of sugarcane.So we will have to wait and see how much we are going to crush. If the crushing numbers are less, the impact is going to be there in the next financial year because the last part of the crushing happens in the subsequent financial year. So we will be following the same template. We'll be using sugarcane juice for making ethanol in both our distilleries during the season and we'll store B heavy molasses whatever we'll generate across our 3 units and we use it for making ethanol in the off-season. Our rating continues to be AA-. Maybe in a couple of months, we will pitch for improvement in our rating. Our rating for the commercial program is A1+, which is the highest rating accorded by any rating agency.Thank you very much. We will discuss a lot more as you ask me questions. I look forward to hearing from you. Please go ahead and ask your questions. Thank you very much.
[Operator Instructions] The first question is from the line of Mr. Dhvaneet Savla from [ Savla Family Office ].
First of all, all the best for the coming crushing season and hope you are all doing well. I had a 2-part question.
Just a minute. Can you bear with me for a minute?
I had a 2-part question. My first question was with regards to the cogeneration front. I wanted to know whether there were any significant development on the front and I heard recently we had some dispute with the U.P. government. What is the current status on that? And secondly, my question was with regards to whether we can use the cane juice for production of ethanol since this impact which has come on the B heavy and the C heavy molasses will be used to generate ethanol and whether it was a more viable option or not?
Yes. Regarding your first question on the cogeneration, there has been no development so far. Tariff was revised sometime in 2018-'19 and it was slashed by nearly 40%. So thereafter there has been marginal increase year-after-year so presently what was then INR 2.95 per unit is perhaps INR 3.25 per unit now. So there has been no development in so far as the cogeneration. The matter is subjudice, but we don't immediately expect any positive output out of that litigation. So we are not very enthusiastic about generating more power and all. Our focus is to save on the steam, save bagasse and whatever bagasse we save; firstly, we use it for our distillery operations and secondly, whatever spare bagasse we have, we sell the spare bagasse. And as you can see from our results, we have sold more bagasse during this half year period. So that's number one.And number two, yes, we will be using sugarcane juice for making ethanol during the season and wherever we will generate B heavy molasses across all our units, which will be stored and kept and used in the off-season for generating C heavy molasses. Now to answer your question about the viability. Yes, sugar prices have recently risen very high. So if you compare the recent high prices of sugar, yes, perhaps it would make more sense to make sugar rather than use juice for making ethanol. But there is absolutely no assurance as to how long the prevailing prices will remain and we will have to take a very holistic view. We will have to take a bigger picture into consideration that we need to make this ethanol blending program a great success. We will have to participate in it in a big way because sugar price high or low. I mean the price rise that we are presently seeing could be sporadic, could be there for maybe a few months. But like I said, we must take a holistic view of the entire situation and we must do our bit to ensure that the ethanol blending program is a great success.
Sir, just a follow-up to this. Is there any particular quota, which we must fulfill under the ethanol blending program or there is no such limits on that?
No, there is no. You can bid whatever quantity that you want. Presently the government has -- the oil marketing companies have come out with a tender for about 800-odd crores liters of ethanol. So you can bid for as much quantity as is required. So any company obviously would like to make the best use of the ethanol infrastructure that they have set up.
[Operator Instructions] The next question is from the line of Mr. Rajiv from Radical Advisors India Private Limited. There's no response from the participant. We will move on to the other participant in the question queue. The next question is from the line of Mr. Sanjay Manyal from DAM Capital Advisors Limited.
Sir, just want to understand the next year levy obligation, how the things would be? Because you have been producing ethanol through B heavy process. Now will there be any change in that because next year if you supply from B heavy again, you have to sort of account for the higher output?
Basis the dialog that we have had with the government, next year will be rational and our B heavy obligation will be commensurately lesser as compared to C heavy obligation. So I'll give you an example. For example if C heavy obligation is 20%, B heavy obligation will be 73% of that, 14.6%, which is kind of commensurate with the respective ethanol output. So on basis our dialog with the government on this particular subject, this is what we understand. And in a couple of days from now, the molasses policy will be out in the public domain. So we do expect that justice will be done in the coming molasses season.
Okay. And other than the C heavy, B heavy change; was there any increase in the levy quota obligation on a normalized basis?
I don't expect there will be any increase in the levy because you see for example this year whatever obligation that has been cast upon us, the molasses year will end on the 31st of October, right? So on that particular day, the requirement will not be as much as has been set aside by us. So there is going to be carryforward of that obligation in the coming year. So that much more molasses is going to be available to the government for the next year, number one. Now this year in the molasses policy, they are trying to cover the khandsari units also. So they are also very large producers of ethanol. So those khandsari units, which are having capacity of 1,000 TCB and more will also be under the molasses obligation. So I don't expect -- so there will be 2 things; number one, benefit of carried forward stock and number two, the coverage of molasses policy to the khandsari units. So I don't expect the molasses obligation to be more than 20%. This is after considering the fact that during the election year maybe the country liquor requirement will be more.
Okay. And sir, just last one. What would be the parity between the juice and the B heavy process means at what level of sugar prices, it would be more profitable to sort of do B heavy? I know you mentioned that you will be continuing with the juice part because we need to see the holistic view.
B heavy is definitely more profitable. There is no question about it. And so far as juice is concerned, there are 2 important developments, which are awaited. Number one, the increase in the SAP and number two, the increase in the ethanol price also. So there is going to be increase in the ethanol pricing. We hope the price increase in ethanol to be made from juice is going to be -- it will be an alluring price so that more and more sugar companies are able to convert juice and make ethanol out of it. So that is the expectation and we do expect. But yes, like we said, if you take today's sugar price into consideration, maybe one could be tempted to make sugar and not ethanol; but that according to me will not be pragmatic.
[Operator Instructions] The next question is from the line of [ Mr. Marcel ] who's an individual investor.
Actually you have explained this new regulation of U.P. government regarding this molasses levy whatever. But actually voice was not clear and it was very fast also. It's a very new thing for us and it's a significant sum of INR 20 crore hit. So can you please explain in detail that how does it work? What it the molasses [Technical Difficulty] or we have to give it the government? How does it work, please?
Sure sir, I'll explain to you. You see it's like this. In the state of U.P. country liquor forms -- the molasses is actually totally bought by the state government. Whatever molasses we produce. So as long as it's that 20% of the molasses in formula and so much of molasses is required to be given for country liquor processes. Now this molasses is given at a price which is ridiculously low. This molasses is given at a price -- for example B heavy molasses is given at a price of INR 210 a quintal and C heavy molasses is given at a price of around INR 150 a quintal. Now INR 150 is the price at which we are compelled to give and INR 210 similarly is the price at which we are compelled to give molasses for country liquor purposes. Whereas the market price of C heavy molasses is in itself nearly INR 800 a quintal.Now B heavy molasses in our books based on the sugar content, et cetera, et cetera, we had valued it at INR 1,195 a quintal. Now what was valued at INR 1,195 a quintal has now been -- that particular thing has been sold at INR 210 a quintal, INR 210 or INR 220, whatever it is. So it has been sold at that price. So there has been a nearly INR 1,000 reduction in the valuation of the molasses that we had kept so B heavy molasses. So that is the loss that amounts to about INR 19.92 crores, which is what I have stated. And another offshoot of this particular thing is that that B heavy molasses had I not given it for country liquor purposes, I would have made use of that and produced ethanol out of it. So there is a loss of profit there. That's an indirect loss, but the direct loss is INR 19.90 crores. I hope I'm clear.
It's very much clear. So previously what was the selling? How much we have to sell 20% or it was 15%, 10%? What was the previous percentage?
No, no, it was 20%. So you see when you use C heavy molasses, the output of ethanol is lower. Country liquor also is lower and ethanol is also lower, okay? Any industrial output is nearly 22 liters per quintal of C heavy molasses. Similarly if you use B heavy molasses, per quintal of B heavy molasses, you get more than 30 liters of ethanol, okay? So the earlier policy was such that if your requirement for C heavy molasses was 20%, your B heavy levy obligation was 73% of 20%, which is 14.6%. Now in this particular policy, they equated both disregarding the potential ethanol output. So this is a big injustice which has been meted out to us and we expect based on whatever dialog we have had with the government that this will stand corrected in the coming molasses year.
But I want to mention a couple of things. I know that you are a veteran in the industry. But currently since we have the double in the sarkar, the central government is completely pushing for the ethanol. So why is this like dilemma and why this is number 1? So maybe you would like to take up the central government [indiscernible] whatever, sir?
No. It's a good question. Number one, you see the country like contributes to, I don't know the exact number, but maybe INR 50,000 crores, INR 60,000 crores by way of stage exchequer. So the state government generates that kind of revenue when the country liquor gets sold. So state government always wants this to happen that there has to be maximum sale of country liquor. The amendment which they brought in April 28, initially there was lot of confusion. And by the time we brought it to the notice of the central government and the central government took it up on our behalf, it was rather late. And in fact we went legal also, we filed a writ. Aggrieved by this particular thing, we filed a writ also. But as you know in the court, the process takes long. This presently was where it stands and we have been assured that at least next year the policy will be reasonable.
Next year means like next sugar year?
No. This molasses year starts from 1st of November to 31st of October.
1 November to 31 October so it means from coming November, the year is...
'23 to '24. So it will applicable for the sugar season '23-24.
Okay. So applicable means the reverse will be applicable, right? They have assured to take this out or this anomaly will be just...
No, no, no. Whatever has happened in '22-'23 is over and done. Nothing is going to be -- we will have to take that hit. '23-'24 is what where we expect the rationality to prevail.
The next question is from the line of Mr. Rajesh Majumdar from B&K Securities Private Limited.
Question one is that for financial year '23-'24, your commentary seems to be a bit muted unlike some of the other players in U.P. who have slightly better drop and even improving recoveries. So where is the disconnect I'm not able to understand? Is there a particular [ reason ] -- or what is it?
No, it's like this. You see red-rot was attacked. We found the menace first in Eastern U.P., then it spread to the Central U.P. and now for the first time it spread to the Western U.P. okay? So people in Eastern U.P. and Central U.P., they have already taken corrective measures. This came as a rather big surprise for us in the Western U.P. because of excessive rainfall. Had the rainfall not been there, there wouldn't have been this red-rot problem because this red-rot spread is a water borne disease. So if a particular field is impacted by red-rot and water flows from that field to another field so it spreads to another field also. So bad weather, for the first time red-rot was seen and visible in a big way in Western U.P. But as we go along if the weather improves, we will have to wait and see maybe things could improve, but improve certainly. But as of now we are little cautious in our number, we are little conservative in our estimate for numbers for the next season.
So the entire Western U.P. is impacted by red-rot currently? Is that what you're saying?
More so the Bijnor district and other district as well.
Okay. And how much of our current crop is Co 0238?
See, West U.P. is entirely 0238. We've done a big transformation in the Bareilly unit where, I'm talking about the supply, supply would be nearly 30% of other varieties and I mean 65% to 70% will still continue to be 0238. We've taken lot of care to ensure that red-rot management is better and we've educated the farmers and the farmers, they themselves are very keen to replace the variety. So what is going to be 30% to 35% of other variety this year will be next season nearly 70%. And here kind of every sugar mill has just woken up because of that very sudden impact. So the effort would be number one to control the menace of red-rot, to manage it somehow. And secondly, to bring about varietal change also. So we will have to fast-track the varietal change because that's the only viable option.
Correct, sir. And sir, my last question is what are we going to do with our cash flows from next year because we don't have any kind of formal policy in terms of dividends or buybacks? So is there any...
We have a dividend policy. We have a 200% dividend. So actually we were planning an expansion in our DN and DP unit, but since we see cane cash crop offering there. So we're going to be waiting, we'll wait and watch the situation. And secondly, there is another unit which has come up in that district, which is owned by the Bindal Agro Group. So there is going to be some amount of cane diversion by all the sugar mills in that district. So we will wait and see and we will take appropriate call at that time.
The next question is from the line of Mr. Ambar Taneja from Geomatrix.
How could this policy which came in April -- I mean you're saying that this year they are being more rational, et cetera. But I mean surely, they knew that the impact would be huge and like you said that if their primary concern is with excise collection from country liquor, then I mean the consumption in this sugar year given elections, etcetera, is going to be huge. So I mean there is really no certainty out there that this doesn't get repeated and in fact it could be worse. And to bring a little historical perspective here. I'm noticing last 3 years, every year there is some unexpected surprise. Last year it was the wage thing; then there was some money that they wanted to move the molasses from 1 division to the other. So I mean looking at it little holistically, sir, the multiple is going to stay very, very bad. So I'm wondering what as an industry you guys are doing about it? Because from an outsider perspective, it seems to me that they just do whatever they feel like and they see you as a cash cow. So really how much planning is possible? The only thing I guess you can do is to increase your efficiency.
Absolutely. So you are right, sir. Actually the coming year is an election year, which is why there can be heavy demand for country liquor and therefore the country liquor molasses as well. But like I said, there are going to be 2 positives. I mean there is a little bit of positive factor actually. One is the carry forward molasses obligation of this particular year. And secondly, the khandsari units will be brought into the realm of country liquor molasses. So yes, we cannot deny the fact that we are a regulated industry, something or the other keeps happening. So our focus has to be on improvement of efficiency, enhancing our crushing. So these are the things so that these returns do not make much difference to our fortunes.
Next question is from the line of Mr. Nikhil Gada from Abakkus Asset Manager, LLP.
Sir, my first question is just on this calculation of INR 19.92 crores. So is it that basically they have equated that example, I'm assuming 20% C heavy. They have equated that same 20% for B heavy as well? So based on that assumption and the pricing you gave, sir, I'm getting somewhere around INR 11 crores, INR 12 crores impact.
No, no, no. So the additional obligation that was cast on us was about 2 lakh quintals approximately. Now we had on the 30th of June valued our B heavy molasses at INR 1,195 a quintal based on the sugar content in the B heavy molasses. So INR 1,195. Now out of 2 lakh quintals, 1.25 lakh to 1.30 lakh quintals we have already given by way of country liquor obligation at INR 210 or so per quintal. So there is a difference of nearly INR 1,000. And the rest of it, 70,000 to 75,000 quintals which is perhaps going to be carried forward for the next molasses season is valued at INR 210 or whatever price, that price we have valued it. So there's nearly INR 1,000 difference and the quantity in all is 2 lakh quintals, which is how you get that INR 19.92 crores.
So basically if I understand this correctly, so the impact is this additional 2 lakh quintals on which... because that number for me was coming...
No, no. It's 2 lakh quintals to additional obligation is to platform rates.
Okay. And this you are saying that from the coming season, that is from 1st of November, it will once again be rationalized so we'll not see this impact.
It will be rationalized prospectively. Whatever has happened in '22-'23 has happened.
I get that. But from here onwards, we'll not see this impact if they rationalize?
That's an assurance we have got from the state government because in this, central government was also involved because let's look at it like this from. From 2 lakh quintals, we could have generated about 60 lakh to 65 lakh liters of ethanol. So there has been a setback in the ethanol blending program. So from the state of U.P. alone, I think several crore liters of ethanol which could have otherwise been supplied has not gotten supplied. So obviously central government is also worried. So it's a balance between the success of ethanol blending program on the one hand and the collection of state exchequer on the other hand for the state government. So since there was paucity of the time, there was nothing much that could have been done. We tried the legal remedy also, but nothing came out of it because the process takes time. Eventually the case has all the merits, but by the time the molasses season is over. So I think the best that we have got is an assurance that in future the policy is going to be rational.
Got it, sir. Sir, my next question is I did note the varietal mix change. So I'm assuming for this coming season, you are saying 30% to 35% of the overall...
In 1 of the units. No, no, in 1 of the units.
The Bareilly unit, right?
Bareilly unit, yes.
So that will be 30% to 35%, which we're expecting to go to 70% next year whereas in Western U.P...
70% next year. Western U.P. the impact has been -- this is the first year where the red-rot has kind of impacted the crop in a big way. So here it's going to take about 3 years. But we do hope as the weather has improved, the crushing numbers. We get our lab results on a daily basis so we really don't see much of a difference in so far as the recoveries are concerned between last year and this year. But yes, I went around the units and I saw for myself the red-rot problem was there. But within a month or so, our cane team says that the supply is going to be better than what we had assured you last time.
Understood. So that was basically my last question. If you can help us from a fiscal year '24 perspective, what would be our crushing? I think we did 38.21 lakh odd in '23.
'24 crushing numbers will not be -- fiscal number will not be different. I mean they could in fact be better only because it's '24-'25 numbers, which I'm worried about, the crushing numbers.
Yes. But then I'm assuming that a major part of the crushing will happen in the fiscal year '24-'25.
Yes. There will be how much -- we crushed about 98 lakh quintals in this fiscal '23-'24, which pertain to the season '22-'23. So as far as the fiscal is concerned, our crushing numbers could be better than what they were for the last year. But for the season, yes, on the lower side. So the cause of worry is '24-'25 not '23-'24.
Okay. We can see a degrowth basically you are saying?
We will have to wait and see. If the numbers improve, there may not be any problem. But yes, as of now, the numbers look little bleak.
[Operator Instructions] The next question is from the line of [ Mr. Shekar Singh ], an Individual Investor.
Sir, with respect to the upcoming sugar season, I would like you to shed some light on the expected transfer pricing, expected cost of production and what is the expected syrup diversion?
See, syrup diversion during the entire duration of our season from our DN and DD unit where the distilleries are set up, we will be using sugarcane juice for making ethanol. I think last year from these 2 units, we diverted about 76.29 lakh quintals of sugarcane for making ethanol. So our crushing capacity in our DN unit has gotten little better so 76 lakh could become little better in the coming season diversion. And the rest of it, we will generate B heavy molasses whatever be the quantity and after providing for whatever is the country liquor obligation will be available to us for making ethanol during the off-season.
Sure. Okay, sir. And what is the expected transfer pricing?
Transfer price will depend on what -- because SAP is not yet announced. We expect announcement of SAP quickly. This being an election year, there might be an increase in the SAP, but we do hope and we've seen the pragmatism of the state government. So there may not be any -- whatever increase is there if at all, it's going to be reasonable. So whatever is the price that will come out, depending on that, our transfer pricing will get fixed.
[Operator Instructions] The next question is from the line of [ Mr. Udit Gupta ], an individual investor.
Sir, when do we plan to start our crushing?
I mentioned it. Our units in Bijnor district will start crushing on the 31st of this month and the Bareilly unit will start on the 5th of coming month.
Okay. And sir, the cane crush like you said because of red-rots and this new plant coming up, it could be slightly lower. And sir, what about the recovery? Is that expected to be impacted as well?
See it does impact. The red-rot impact does impact. Primarily when red-rot attacks a field, the crop of that field actually dries up completely, okay? So if it dries up completely, obviously the farmers are going to uproot it and throw it away or use it for any other purposes. But sometimes what happens is it gets mixed with the normal sugarcane that comes to us. If that happens, there could be a bit of a dent in our recovery. But our lab results, as I was mentioning, indicate the same kind of recovery which we had seen the last season. So the recovery may not be much impacted. We will have to wait and see. We will have to be very vigilant. Our cane team has to be very vigilant so that we don't get any red-rot mixed cane because red-rot mixed cane will obviously have some weight, but have no sugar in it. So we will have to be very vigilant and if we are vigilant in so far as the recovery is concerned, the recovery may not be impacted.
And sir, like you were talking about the possible expansion opportunity maybe next year so what are the lines that we can look at in the future like this?
No. We were encouraged by the crushing numbers that we achieved in the last season. So the last season we saw our units in Bijnor district running up to the 12th of June 2023, which was we had a very, very prolonged season. So what happens is towards the end of the season because of we crushing sugarcane in the very hot month, the recovery suffers a blow so which is why we were planning expansion of at least our Dwarikesh Nagar unit, which is like 25, 26 year old unit for us and that's our first unit. But since we see the possibility of lower sugarcane arrival number one, because of the rainfall on the red-rot and number two, also because of the Changipur unit, which is a Bindal Agro unit, which has come up and they are also commencing crushing operations simultaneously. So we'll have to wait and see for a season or so before we embark upon steps to enhance our capacities. But it will happen in couple of years for sure.
Okay. And sir, you just said that they are expected to start crushing along with you? Almost at same time.
Yes. All Bijnor units will start crushing simultaneously. So it's basically unwritten rule if I start, everybody else starts; if everybody else starts, I also start.
And sir, any other concerns apart from this red-rod and this thing?
No. As such, there is no concern. The molasses policy is 1 thing, which we are waiting and watching. So there are 3 things, which we expect the regulators to inform us. Number one is the ethanol pricing for the ethanol season '23-'24, sugarcane pricing for -- the SAP for the season '23-24 and then the molasses policy for molasses year '23-'24. So these are 3 very crucial and important announcements which are awaited. They could happen anytime now within a week from now.
And sir, the molasses policy and the ethanol year are the same?
Yes, more or less. See, molasses policy they say is from 1st of November to 31st of October, but it really coincides with the sugar season.
Right. And sir, the sugar prices in Uttar Pradesh for our mill, how are they holding up and what is the trend looking like?
Prices seem to be pretty good at this moment, but we can see some sobering effect on the prices once there is arrival of new sugar from the new season. Recently the prices are very good. I mean few transactions have happened at more than INR 3,900 a quintal, but I wouldn't say the average realization is INR 3,900. Yes, what realization we had in September, it's better in October and government has released some advance quota for the month of November. So whatever little sugar we have sold for the month of November, the realization is better than what we got for October.
The next question is from the line of Ms. Riya Mehta from Aequitas Investment Consultancy Private Limited.
My first question is in terms of obviously we've seen news that Karnataka and Maharashtra because of the rainfall next season probably they are expecting around 20% to 30% lower production. So in the state of U.P. you're saying that because of the rainfall. Is it fair that even U.P. would see a lower crushing?
No, ma'am. U.P. last year we produced about 10.6 million tons and this year we are going to produce -- expected to produce about 10.9 million tons. You see the Central and Eastern U.P. has not had much of impact of rainfall. It's only the Western U.P. where the rainfall was unseasonal and unprecedented and heavy. So U.P. is going to see better sugar production number. Maharashtra and Karnataka, of course the production numbers are going to be lower. ISMA last estimated the number to be at 31.7 million tons, but some experts are talking about 29 million tons. So we will have to wait and see. And again '24-'25 season is also going to be little tight season both internationally as well as domestically. So U.P., if you see, is kind of insulated from all the weather conditions because U.P. most of the cane fields are irrigated and not rain dependent.
Right, right. And my second question is what would be the market size, which you would be equivalent to either sell sugar or produce ethanol like cardamom?
It will depend. We will have to rework our numbers when number one, the ethanol prices are all expected to be announced and we do expect coming.
On the basis of current prices of both molasses and...
I mean you see INR 3,700, we are very happy with the sugar prices. We'll be too happy to make ethanol directly from juice if the price is around INR 3,700. But like I said, we cannot be governed by the prices prevailing in 1 particular month. The prices are always -- we have to see what is the sustainable price over a period and then to take a call. And in any case, we are all duty bound to make the ethanol blending program a good success.
But anything beyond INR 3,700, making sugar would be more profitable.
Which is for the past based on the last season's numbers. And the numbers will undergo a change once the [indiscernible] is announced and once the ethanol prices are announced for the new season.
Right. I understand. And my last question is in regards with the new molasses policy. Just to get an understanding. The B heavy molasses earlier used to be around 73% of the C heavy obligation. Now they have made it equal, right?
You're correct for season '22-'23.
For season '22-'23 in a perspective manner.
Yes.
In the interest of time, that would be the last question. I would now like to hand the conference over to Mr. Vijay Banka for closing comments. Please go ahead, sir.
Thank you very much, everyone. It was a very thought provoking session that I had with you all. It was interesting to chat with you, clear your doubts and share our perspective of how the coming season is going to be, what are the challenges before us and how we propose to overcome them. I must express my gratitude for the confidence and the trust that you have reposed in our company. We will continue in our quest to improve our efficiencies, clock better recoveries, have the best standards and follow the less loftier standards of efficiency in our distillery operations. So all that we propose to do.Thank you very much. I would request my colleague, Mr. Maheshwari, to say a few words.
Yes. I thank each and every one of you for active participation in this earning call and look forward to seeing and hearing you again in the next conference. Thank you.
Thank you, sir. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us and you may now disconnect your lines.