Dwarikesh Sugar Industries Ltd
NSE:DWARKESH
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Dwarikesh Sugar Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Dwarikesh Sugar Industries Limited, hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anupam Goswami from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Good afternoon, everyone, and welcome to the 4Q FY '22 conference call of Dwarikesh Sugar hosted by B&K Securities. I will now hand over to Mr. Banka who is the MD of Dwarikesh Sugar to start with his opening remarks. Over to you, sir.
Very good afternoon, friends. I welcome you all to the Q4 FY '22 earnings call conference. We had our Board meeting on the 2nd, that is day before yesterday, to adopt and approve our results. So as you would have gone through our results, our results are impressive, and we can look at our results with the sense of satisfaction.
We have had the highest ever revenue in the history of our company, highest ever EBITDA, highest ever profit before tax. So generally, it has been a good quarter and a good year for us. For example, in Q4 FY '22, we had a profit before tax of INR 86 crores and profit after tax of about INR 60 crores, which is at least about 35 -- and so what as a PBT is concerned it's 35% over and above what we had clocked in the corresponding quarter last year and PAT is also 24% better than what we had clocked in the corresponding quarter last year. On a full year basis, our PBT is INR 219 crores and PAT is INR 155 crores. So the improvement taking PAT is about 70%. And our net worth also stands improved from INR 579 crores to INR 673 crores. As you would recall during the year, 2 dividend payments were made. One was in respect -- one was the final dividend, which was paid for the FY 2021, which was at 125% and then we paid interim dividend at the rate of 200% for -- during FY '21-'22. Since the Board meeting for the approval of that dividend was on the 29th of March, so we had to provide for the same.
So we have had, like I said, Q4 FY '22 EBITDA margin is also better. It's about 21.7% vis-à-vis 14% during the corresponding quarter last year. Similarly, revenue from operations has also grown. And sugar sold during the quarter, we have sold about 10.11 lakh quintals of sugar. And this sales is entirely in the domestic market as compared to 15.23 lakh quintals that we sold in the corresponding last quarter last year, which includes 7.95 lakh quintals export sales, so which means our domestic sales is grown by nearly 3 lakh quintals. And during the entire year, we've sold 45.99 lakh quintals, which includes only about 2.5 lakh quintals of export sales as compared to 49.29 lakh quintals during the last year, which includes 15 -- almost 16 lakh quintals of sugar exported. So far as the domestic sales is concerned, there has been substantial improvement, which is all because of accelerated leases that we got, which again is on account of weightage being given for our ethanol production and the exports that we did last year.
So we were carrying a stock of 19.60 lakh quintals on the 31st March 2022. This is as compared to 26.02 lakhs that we carried in the last corresponding -- on the corresponding date last year. So a reduction of nearly 6.5 lakh quintals. So this August was in the sense that this will evidently result in lower inventory carrying costs, et cetera and lesser burden on the company insofar as providing for the storage facilities, et cetera, is concerned.
So impressive performance has come from the -- in the distillery segment, where we've sold 5.57 crores liters of ethanol as compared to 3.17 crores liters of ethanol in the last year. So our debt profile continues to be lean and trim.
We have -- of course, there has been an increase in the term loan -- long-term loan of the -- long-term loan position of the company, which is because we have availed -- we are -- one loan for the new distillery is under disbursal. So -- but insofar as the old loans are concerned, the repayment is happening on time.
Our long-term rating is A+, but during the year, our outlook was revised from stable to positive. So it's, in a sense, 1 step better than what it was earlier. And our crushing operations in DD units have gotten over on the 20th of April. DN and DP units' operations are still on. We expect to close the operations by about the 20 -- anywhere between the 20th and 25th of May. So this has been a -- insofar as crushing quantities are concerned, last season, we have crushed about 378 lakh quintals of sugarcane. So this year, we expect to crush around 375 lakh quintals, so more or less what we had crushed during the last season.
We would have actually -- the area under cane has been higher for this season, but unseasonal rainfall during the month of September, which resulted in heavy waterlogging across the state and mainly in our DP and DD area [indiscernible] area, so this resulted in lowering of the yields, insofar as the farmers are concerned.
And of course, it's vented recovery also as far as the sugar mills are concerned. So this is about our working. And insofar as the industry scenario is concerned, you will perhaps be aware that this might last come out with an estimate of 35 million tonnes of sugar production for the country. So which means, fundamentally, we are a very -- we are a surplus sugar producing nation. So if you add 3.4 million tonnes of sacrifice that has been made -- sugar sacrifice that has been made in favor of ethanol, so gross production is 38.4 million tonnes or maybe more. So -- well, in spite of such increase in the production, there has been no glut like situation in the country, which is mainly because of the industry having demonstrated great ability in exporting sugar, the number is expected to be about 9 million tonnes plus.
Similarly, there has been some improvement in the consumption number also as compared to the last year. So from -- we see a reduction in inventory of about 1.5 million tonnes between 2021 and 2022, which roughly translates to about 3 months of consumption. If all goes well for the sugar industry in the sense that sugar mills will be now sort of a reasonable price for the sugar that they are going to sell.
And there, of course, is no scare of any runaway increase in the sugar prices. So government also is not really bothered about it. So it's a happy situation to be at the moment. Distillery segment, as you are all aware, every sugar company is expanding, they are ramping up their distillery capacity.
So our project, Dwarikesh Dham, where we are setting up 175 KLPD of distillery. The project execution is on time, and we expect this project to be commissioned by end of June this year. So it's good -- I mean, cogeneration segment, the power segment, of course, continues to do all right.
I mean there has been no good news in so far as the tariff is concerned, which continues to remain at the level it was announced 4, 5 years ago with a marginal increase year after year. So that's about it. Thank you so much for hearing me out. I would now request you to please ask me questions, and I'll be very happy to answer your questions, doubts, whatever you may have.
[Operator Instructions] The first question is from the line of Ayush from Systematix.
[indiscernible]
Mr. Ayush, sorry to interrupt, your voice is breaking up, sir.
Am I okay now. Am I audible now?
Yes, yes.
Yes. Yes.
Sir, I wanted to know the closing price at which we have valued our closing stock? The price at which we have valued our closing stock of sugar?
We've valued our closing stock of sugar at INR 3,199.63. So you can assume INR 3,200 per quintal.
The next question is from the line of Ambar Taneja from [indiscernible].
Sir, just a couple of quick questions. One is on any planned CapEx? Question has 2 parts. Last time, you had mentioned that with the expansion of this new 175 KLPD distillery, you will be completely self-sufficient with regards to enough cane for molasses and in fact, even from juice. So you will be actually in a position that there is nothing, no extra cane. So a, if you do CapEx, you will probably have to get new areas under command. So any comments you have on that? And part B is I have heard that it costs much less to set up a juice to ethanol plant rather than a molasses to ethanol plant. So any comment on these 2 things, if you can?
Firstly, sir, on the CapEx, as you rightly mentioned, yes, now with the setting up of new distillery, we will be fully integrated. We'll be self-reliant in the sense that we will neither be molasses surplus, molasses or juice surplus nor we will be deficient. So we will not have to outsource our molasses requirement from outside.
But then we have a couple of plans. Number one, which we are very actively evaluating to set up a refinery at one of our units. So what happens with the setting up of refineries to -- I mean 2 things happen. Number one, with the kind of sugar that we will produce there, which will be internationally -- which will be acceptable as per international standards, new export opportunities will arise.
As you have seen, the white sugar is traded at much higher price than raw sugar. So that will be an interesting option. And number two, I mean when we produce sugar from only 1 of our 3 units, domestically also, we should be sort of a better price realization than what we are doing now. This CapEx will not cost us much. This -- I mean if the feasibility is fine, maybe we will take a decision very quickly and this can be put in place in the coming season itself.
Secondly, I have mentioned here that in our District units, both the units, goes up to 25th of May, sometimes still the end of May, okay? So here, we intend to increase our capacities a little, but that perhaps may not be feasible in this offseason. We will be able to take it up in the next offseason.
So when we do that, number one, we will be able to crush our cane in the best part of the season and not extending our season during the harsh and severe summer months. And number two, it's natural that once the capacity is increased, additional cane keeps coming in some form or the other within the same command area, lesser diversion would happen and more cane will be available.
So this is one that -- these are the 2 things that we have in mind. And secondly, you asked me...
Anything on the cost, sir, juice to ethanol versus molasses to ethanol?
Sir, we are going to make -- from juice to ethanol we are going to make in the coming May in the distillery that we are going to put up now. So we will be using juice, sir. You see we have 21,500 TCDs of capacity. So with both the distilleries, perhaps together, I mean each maybe about 2,250 TCD, we will be dedicating about 4,500 TCD of cane crushed for making juice to be used directly for making ethanol.
So -- I mean this plant will be able to make use of the juice directly for making ethanol. Perhaps your question is what if set up a new sugar mill, new sugar mill where you only crush the sugarcane, generate juice and then use that juice and set up a distillery accordingly?
Yes, yes. That was actually my question...
Yes, it's not relevant. It's not relevant, and perhaps then we will have to look for other newer areas to do that. So that is not there in our plan of things as of now.
Understood. Understood. Just a quick follow-up, sir, any market for brownfield assets. As per my understanding in the last 4, 5 years, the economics of this industry has become such that the top 4, 5 well-managed companies obviously take a lion's share of all the profits because they are capital efficient, they are operationally efficient, they are becoming cash surplus, whereas 60% to 70% of the plants are still quite inefficient, whether they've been cooperative or 1 mill or small owners, et cetera. Do you see any evidence of any brownfield assets or any small-scale M&A happening or can we basically forget about that because of political consideration?
No, no, you are right, sir. Actually, when the companies do well, there is always -- companies are eager to -- they have the appetite and they're eager to expand their base. But what happens is when the industry is doing well, the pricing becomes too high. So that's a problem. And anyways, I mean, everybody looks around for opportunities, but it's not -- it's easier said than done, I would say.
[Operator Instructions] The next question is from the line of Dipen Shah, an individual investor.
Okay. Sir, my question was more to do with the global scenario. If you can just give us your thoughts on how you see the global scenario panning out over the next maybe 3 to 6 months, especially the Brazil season, how is it starting off? And what would be your outlook for the global sugar prices, if at all, whatever you can sort of guess, sir, that will be helpful?
So you see, when we commence this season, our midway through the season the experts predicted this season to be a deficit season, with a small deficit of not more than 2 million tonnes. But considering the fact that in India is growing at surprises, reporting more and more production numbers, this small deficit could turn into a small surplus. But having said that, if you have seen more Brazil, the production is lesser for this season, and it is also expected to be lesser in the coming season because more and more sugar mills are opting to use sugarcane juice for making ethanol sugar. So -- and if you see the pricing -- future pricing for the next year May, there is no reason for pessimism. We remain optimist that even in the coming season, the sugar prices should be reasonable. And as I mentioned earlier, we have demonstrated great abilities to export sugar.
So in the coming season, we expect 2, 3 things to happen in India. Number one, the production numbers will be high. But whether they will be as high as what they have been in this season, may not be so because we expect higher ethanol sacrifice in the coming season. And I think, 3.4 million tonnes, my guess is we should do -- we should sacrifice at least about 4.5 million tonnes of ethanol in the coming season. So ethanol sacrifice is going to be higher. So the availability insofar as Indian sugar is concerned in Indian to the market, maybe lesser.
And if we have done about 9 to -- if we are going to do about 9 to 9.5 of exports -- million tonnes of export in this season, I don't see any reason why we cannot do at least about 5 million, 6 million tonnes of sugar export in the coming season. So indicating that there is no possibility of a flood situation developing, the sugar balance, which is expected to be about 6.7 million tonnes by the end of this season will perhaps remain the same or maybe a little on the lower side.
Okay. And sir, just for my understanding at what international prices would we be indifferent to domestically selling sugar or selling it in the exports market because subsidy is now no more available from the current deal?
Yes, sir. So subsidies, even when we are talking about 9 million to 9.5 million tonnes of exports season 2021-'22, there has been no subsidy of made available to the sugar mills. So we have been helped by better international prices. And as I mentioned a little while ago, we will continue to be -- we will continue to get benefit out of the international prices in the coming season as well. So it should -- we should be able to -- whether there are subsidies or no subsidies, we should be able to export.
And well, your question was at what prices, we are kind of in different together -- I mean, what is the price parity? It is different for different sugar mills. For example, the mills in Maharashtra, you see for them, the parity is at a much lesser international prices as compared to the mills in Uttar Pradesh.
Number one, they are closer to the port, so their transportation costs are lower. And number two, they compare their export realization with the domestic realization, which they get in Maharashtra, which is at least about INR 100 to INR 150 per quintal lesser than what we get in Uttar Pradesh. So in the 9 million to 9.5 million tonnes of export that has happened or is likely to happen, the major chunk is going to come from Maharashtra because UP sugar mills have found it difficult because they are in the inland and for them, the -- selling it in the domestic market is little more remunerative than in the export market.
The next question is from the line of Nimish Sheth from GT Advisory.
Congratulations, good numbers. My usual couple of questions. And before that, my usual comment on dividend. Thank you for your generous interim dividend, but you gave no final dividend. I hope that the purpose of the interim is to give an interim and then a final. So I hope you make that amend in the coming year. But yes, INR 2 interim is generous, and thank you for the same. Just a couple of questions.
You mentioned about wanting to put up a refinery. And -- sir, I have another question on the distillery side. Have you considered maybe doing something on the grain distillery side, experimenting with grain...
No, no, no.
You're not thinking of that? Okay.
No, no.
And sir, what is the current expected sugar prices in your -- in your area, meaning where your factories, where you sell the sugar?
Just now -- so when we talk of the current sugar prices, I'm talking about the sugar prices, which are period in the last 1 week or so. It's about INR 3,500-plus, sir, INR 3,500-plus per quintal.
Okay. INR 35 a kilo, basically.
Yes, basically. Sir, while on your dividend comment, I must say that by your own admission it was a generous dividend payment, interim dividend payment which is like elbow room for us to declare another final dividend...
That's why I said FY '23, I hope you give interim and a final. The purpose of interim is to break up the total dividend. So we get the cash twice in the year. But it's not [Foreign Language] that was not the purpose, actually.
That's right. Thank you so much, sir. Thank you.
[Operator Instructions] The next question is from the line of Dhwani Chawla, an individual investor.
First of all, congratulations for -- on a good set of numbers, especially in the backdrop of the situation we are in. I just had one question. Sir, this is with regards to our decision making. So again, I see that we are getting a lot better margins from our distillery and from our ethanol bases. So how do we arrive at the decision that we are going to crush more cane this time and you're going to sacrifice the more and we're going to sale more or is it a given that our distilleries are going to run at full capacity?
Sir, basically, I must repeat actually, I have to repeat what I keep repeating every time. We must not see the segment results in isolation. We should see the company's results in totality, but you have a very valid question as to how do we decide whether we should be producing sugar or we should be using ethanol. Now having set up ethanol capacity, it is imperative that we utilize our ethanol capacities fully. But yes, when we set up distillery -- when we have set up distillery and when a decision on putting up distilleries are made, we try to equate the price of ethanol with the price of sugar that we are -- with the price of sugar. So in case of B-heavy molasses, it equates to a price of more than INR 3,700 a quintal of sugar. So basically, these are the decisions -- these are the factors which have helped enable us to take a decision. Now we must keep look at the -- we take a very holistic view of the entire situation.
We cannot be guided by short price movements, et cetera. So if all of us think alike and if all of us start thinking that if at a given price, sugar makes more sense, so let us not make sugar make ethanol. And if all of us start thinking alike, then perhaps there will be a glut like situation in the country, we'll be producing more and more sugar and the sugar prices will start crashing.
So -- but yes, having a distillery gives us that extra flexibility that, yes, we can take a decision as and when required. But whether we're going to use that flexibility, I don't think any one of us should do that because we should produce because the demand for ethanol is unlimited. With the government's ambitious target, we will have to give more and more ethanol to oil marketing companies. We also have a duty but we should not get the ethanol gelling program derailed because the ethanol blending program is the program which has brought the industry back on track.
Okay. All right. So just a small follow-up. I just wanted to know the prices of ethanol move in tandem with the kind of prices of crude oil or there is no correlation between them?
Price ethanol moves in tandem with what, price of?
Sir, crude oil.
No, no, no. No, no. There is no correlation between the same. I mean any downward pressure on the crude prices does not have any similar pressure on the ethanol prices. It's only the -- what government takes into account is the FRP that they announced year after year. So based on the FRP that they've announced, they grant an increase in the -- I mean they announced an increase in the ethanol prices. And they also in the back -- also keep in mind the market selling price of sugar -- for sugar.
The next question is from the line of [ Nikhil G from Abakkus ].
Sir, just a few questions from my end. Firstly, a few data points I wanted. Can you give me what is the annual sugar that we've crushed in FY '22, sugarcane?
I think it's -- one moment. Just give me a moment. We have crushed -- in FY '22, we've crushed 374 lakh quintals of sugarcane as vis-à-vis 397 lakh quintals of sugarcane that we crushed in FY 2021. The lower crushing is because the lesser number of days that were available for crushing during the FY '21-'22.
Now I would urge here that we should not consider a crushing that has happened in a particular FY. What is more important, what is more relevant is the crushing that we do in a particular season.
No, sir, I completely understand that. It's just from -- because we do...
Yes. So 374 lakh quintals, sir.
Yes. And sir, simultaneous, what would be the sugar production for FY '22?
FY '22, one moment, sir -- during -- we have produced -- just a second, give me a moment. Yes, we produced lesser sugar for 2 reasons. Number one, I can tell you that separately, I just don't have it the -- yes, yes, sugar production is 39.6 lakh quintals vis-à-vis 45.93 lakh quintals in previous FY.
Three reasons for that: number one, lesser crushing, as I have already given you the crushing data for the current FY and the previous FY. And number two, because of more generation of this in the season -- ongoing season of '21-'22, we have generated B-heavy molasses across our 3 units, whereas in the earlier season, we had generated B-heavy molasses only in B-heavy -- only in 2 units and not in the third unit. So this time, we've generated B-heavy molasses across the -- across all our 3 units, so which means we have sacrificed more sugar production in favor of ethanol. And number three, of course, the recoveries have also been slightly lower than the last year.
I understood, sir. Sir, just lastly to close on this. Then just for FY '22 -- I'm not sure whether you have done that math or not, but what would have been the C-heavy and the B-heavy sort of crushing production?
No. It's 0 C-heavy production. Zero C-heavy.
Zero C-heavy for FY '22, you are saying?
Yes, yes.
Okay, sir. Got it, sir. Sir, my next question is that you mentioned that we are going to do 4,500 TCD for sugarcane juice once the new distillery comes in. So that equates out to be close to 15% to 20% through sugarcane juice, right, from the total crushing?
Correct, correct, correct.
And the remaining would be B-heavy?
Remaining would be all B-heavy. So the plan is, we have 1 distillery at our the Dwarikesh Nagar unit, which is 162.5 KLPD distillery and the one that's going to come up in Dwarikesh Dham unit, which is a 175 KLPD. So you can see more or less the capacities are the same, similar. And -- so in each we will be, for example, in the Dwarikesh Nagar distillery, we will be dedicating about 2,200 TCD of crushing for generating juice, which will be used directly for making ethanol. So here in Dwarikesh Dham maybe about 2,300 TCD. So about roughly 4,500 TCD is going to be dedicated for making juice to be used directly for making ethanol. The rest of the crushing will be used for generating B-heavy molasses, which will be stored during the season to be used in the offseason in the distillery as feedstock.
Understood, sir. Understood. And sir, lastly, since our distillery is going to be commissioned in June '22, any idea how much sort of a distillery production we can do in FY '23?
FY '23, we can do about 8 crore liters. We have done about 5.57 crore liters. So we will be able to do about 8 crore liters in '22-'23. And in '23-'24, we can do 11 crores liters.
11 crore liters. And safe to say that with this distillery expansion, we will completely use our molasses and we cannot further expand our distillery from your -- the capacity, right?
It's like this: I had -- one gentleman earlier had asked me what is the way forward. So I had also mentioned about -- in the coming offseason, not this offseason, in the coming offseason, we are looking at a possibility of increasing our crushing in 2 of our units because our crushing extends to the month of -- goes up to end of May.
So we crush our cane in the hot and -- severe hot months of May -- April as well as May. So when we increase the crushing, then what will happen is the additional cane will naturally come. Although the command area is the same, but it's a phenomenon which is prevalent all over because -- I mean larger your cane crushing capacity, more cane you get because the diversion will be lesser. So that's how crushing numbers can get better.
So -- plus that -- if that does happen, then, of course, instead of our planned 300-plus days of distillery operations, we can always run the distillery for 10% more days and subtle small adjustments in the distillery capacities we can always make and ramp up our production capabilities.
Understood. But by and large, this is like the large part of the expansion is done with...
Yes, yes, yes.
The next question is from the line of Rajesh from B&K Securities.
So I wanted to ask you a strategic question on the overall equation of the sugar plus distillery. We have seen nearly 38 million tonnes of sugar being produced this year and about 3.4 million or 3.5 million diversion. And net of diversion, we had substantial surplus, which is getting exported because of the high export market realizations and Brazil having a lesser crop or whatever. But what I'm saying is that going forward at 20% blending, we get facile at 6 million to 6.5 million tonnes of sugar diversions...
No, it can get higher, sir. It can get higher.
At 20%. At 20%. At 20%, I'm saying.
Okay. Okay.
At 20%, we're saying 6 million, 6.5 million tonnes of sugar divergence. So suppose we end up producing 40 million tonnes in 3 years and we divert only 6.5, and if the export markets are not as buoyant, then we are back to square one in terms of the domestic equilibrium and then sugar prices can fall again, if there is no further structural change in the equation. Is that a right assumption?
No, 2 things. Let me add my bit here. Number one, this 6 million to 6.5 million tonnes of sacrifice can go up further. I mean as is it even without -- even with 10% lending, we are talking about 3.4 million tonnes of sugar sacrifice, okay? So with 20% blending happening, the sacrifice, of course, can be much larger, not just 6 million, 6.5 million tonnes.
And number two, we've seen increased in preference of sugar mill to use the sugarcane juice for making ethanol and sugar. So -- and secondly, the consumption is also getting better and better with -- this year, it's expected that the crushing consumption will be more than 27.5 million tonnes.
So -- and if about 3 million, 4 million tonnes of surpluses sugar produced in the country, it can always be exported, it can be pushed out easily. And number two, another thing, once in 5 years-or-so, we do experience droughts in the states of Maharashtra and Karnataka. I'm not saying I'm banking on them. But yes, we think -- do bring about some correction in the equation.
No, no, fair point. Fair point. I just wanted to know if the government -- the road map beyond 20% blending is not as clear in terms of the...
It's not clear, but it will get clearer -- it will get clearer in the times to come.
Okay. And as I understand the sugar companies are geared up well for supply, but the other ecosystem, for example, petrol pumps, et cetera, in terms of whether they can service multi-fuel, multi-ethanol dispensing and stuff like that is not yet clear.
Sir, they are working on that. We have an assurance from the government that all these things will be ironed out simultaneously when the capacities of the distilleries are being ramped up.
Okay. Okay. And my last question is on your Eastern UP mill. What is the amount of cane availability you foresee there and recoveries stay 2 to 3 years down the line? Because you've seen a structure fall in the recovery in CO 0238 in the region. So any color on that?
Yes. Everybody is working very hard to bring about varietal changes. So there are some 2, 3 interesting varieties which are there. One is 15023, which seems to be very promising. So there is this variety, 118, that again is a very promising variety. So we do expect -- but then the varietal change is a 3 to 5 years' program. So in 3 years, maybe, yes, you can do about 60% to 70% change. The density of one particular variety can be replaced by another variety. So all these changes are constant, they keep happening. There is always scope for improvisation.
Right. So we will not see any fall, any drastic fall in the sugar production in that mill?
No.
The next question is from the line of Riya from Equitas.
Congratulation on good set for -- numbers for sugar division.
Thank you.
[indiscernible] question. So basically what is your recovery percentage for this quarter?
Well, we don't calculate recovery percentage for the quarter. It's on a cumulative basis that we calculate the recovery.
For this crushing season?
Up to March, we -- sorry? Yes, up to the -- for the crushing season, up to March we have computed. So which is lower than what we had computed. I'll -- just give me a moment, I'll tell you what the recovery percentage has been, from the start of the season till March, just a second.
So it's been on the lower side, of course. But as we complete our crushing, my gut is that we should -- just a moment, I'll tell you this number first. So now we -- now that we are diverting -- we are generating B-heavy molasses for producing ethanol, so all those numbers under -- tend to undergo change.
So our gross recovery was 12.13% from the start of the season till 31st March 2021, which is down to 11.85% from the start of the season till 31st March 2022. So there is about a 28 basis point drop in the recovery. But subsequently, there has been some improvement, but I think overall for the season, the drop in the recovery could be about 25 basis points.
Got it, sir. Also from a very macro perspective, I was just reading that FICCI has increased the grain -- broken rice prices. And the grain-based distilleries have a toss in their calculation because of the CapEx done. So what are your views on this?
Ma'am, we don't do grains, so we have not applied our mind on that. But yes, this is the fear which we had when -- before we wanted to -- this is the fear that was there in uppermost in our mind when deciding if we should also put up a grain-based distillery or not.
Firstly, we are in a rich belt of Uttar Pradesh where we put up a distillery and the general expectation around is that we will be sourcing grains there. So the prices of grains would go up. And again, because of the war that is happening between Ukraine and Russia, again, I think the grain prices are shot up because of the export opportunities that have come up.
So yes, theoretically speaking, I do believe that, yes, their economics can go haywire a little, but I'm not fully aware of, I mean, how they are -- how much are the economic is going and how they propose to deal with it. I have no clue ma'am.
Okay. Okay. That's -- one more question will be what is the current scenario in Brazil for ethanol blending? So basically, the delta between sugar and ethanol had decreased over there, I think a couple of months before. So right now, what is the scenario and what kind of blending are we seeing there?
There is 1% improvement in the blending this season as compared to the last year. So -- while on the one hand, the sugar prices have also gone up, on the other hand, the crude prices have also moved up. So I mean what we understand from our counterparts there is that ethanol making is more remunerative than sugar making.
Okay. And just for our domestic purpose, what currently the ethanol blending percentage has reached, like the 10% and 11% in few states, so what is the...
10%.
Maximum percentage in the current vehicle with the current engine that can take the blending up to how much level?
See, I mean, vehicles can easily take more, but that's an ongoing debate with the automobile manufacturer association with the petroleum ministry with our food and agricultural ministry and the sugar industry. So easily 12% blending can happen. Presently, what kind of lending we have reached is 10% blending.
But there's a road map, which has been laid down by [indiscernible] to progressively increase the blending to about 20% blending as per the target that they have taken. There is a plan to introduce flex-fuel vehicles also in the country. So all this augurs well, and we should see increased blending in the times to come.
The next question is from the line of [ Muskaan Gupta from FinTrust Capital ].
Congratulations on good set of numbers.
Thank you. Thank you, ma'am. Yes, please go ahead, ma'am.
Sorry?
Please go ahead.
Please go ahead with your question.
Yes, yes. So right now, we have been talking about setting up some distillery plant for ethanol production and everything. So can you please give what is the CapEx plan in terms of numbers? This is the first point. And second point is that what can be the expected volume growth because of this CapEx plan? And what is the time frame by which we can achieve this?
So ma'am, I think I've already answered this question. We see our -- we already have one distillery at our Dwarikesh Nagar unit. We are in the -- we are executing a project for setting up another distillery at our Dwarikesh Dham unit. It will be 175 KLPD distillery.
It's at advanced stages of execution, and we expect this plant will be operational at least before the end of June 2022. Now the total cost involved in this project is 230 -- envisaged cost was INR 232 crores, and I don't see any reason why we will be going beyond that particular cost. So we will be able to execute our projects within that cost.
So our distillery in Dwarikesh Nagar, we can produce about 5.5 crore liters of ethanol and with the new distillery coming up, we will be able to again produce another 5.5 crore liters of ethanol. But as you can see full benefit of that expanded capacity will not be available in FY '21, '22, '23. So we should be doing about 8 crore liters in FY '22-'23. And in -- from '23-'24 onwards, we will have the capabilities to use 11 crore liters of ethanol.
The next question is from the line of [ Udit Gupta ], an individual investor.
Sir, my question is that, sir, we're looking at 10% blending, 20% blending in flex fuel. So sir, these petrol pumps are required to have 3 dispensers, sir, so like all of them?
Yes, they'll have to have 3 dispensers. Yes. So the government is working on that, and the government is very hopeful that it will all be worked out.
And sir, for flex fuel, sir, like what is the ethanol blending in flex fuel? Is it, sir, 100% or 70%...
100%, 100%, 100%.
100%.
Yes.
Okay. And sir, do we have any debt reduction plans after the CapEx is overall or anything like that?
Sir, all our long-term debt is on -- is at subsidized rate of interest. So we have no interest inclination to prepay any of the debt. So...
And sir, the short-term working capital debt, sir, which we require for the inventory that can be...
Yes, that is if you've seen because of the improved cash flows, our working capital requirements are got compressed because of the change in the sales mix that we have had in the last 1 year with distillery segment contributing more than what it used to contribute in the earlier years and in the compression in the shrinking of the sugar stock level, so our working capital cycle has improved. So we expect lower interest outflow in the coming years in spite of the increase in the long-term debt and we do expect that we should have the benefit of better rating in the times to come. So all this will -- and we always, of course, explore opportunities to raise money through commercial papers, WCDL, et cetera. So we think we will be able to rationalize more our interest outgrowth.
Get your point, sir. Sir, when are we looking at the capacity coming in line, sir, in June?
Which capacity, sir? This will be, yes, operational by June end, by June end.
By June end. And sir, are we looking at, sir, from sugarcane juice to ethanol also, like grain we are not looking at?
No, we are going to do. At both the distilleries, if both the -- both the distilleries have to be operational for more than 300 days, we will have to you juice as a feedstock during the season, and we'll be using B-heavy molasses as feedstock during offseason.
Okay. So we'll be doing both, I guess...
Yes, yes, yes.
The next question is from the line of Anupam Goswami from B&K Securities.
Sir, you mentioned about the 40 million -- 38-sort-of-million tonne production that can happen. Of that, if we even at a highest blending rate that can happen. And now that grain-based distillery is also coming up, and I'm to understand that came ethanol prices are lower than both B-heavy and A and cane juices. So wouldn't the OMCs would be more eager to buy -- purchase that first and instead of molasses-based and can we cater to the...
No. The agreement is very watertight, and it says priority is to be given to ethanol made from B-heavy molasses or sugarcane juice.
Okay. Okay. And going forward, will there be any sort of -- because we are doing -- as of now, we are heavily reliant on export. And next year, if these things only come to a 4.5 million, and even under 20%, if it goes like max 6.5 million, 7 million, where can we see this on the domestic prices? Any pressure on the domestic prices scenario?
No, I don't see any pressure on the domestic prices. If you've seen in a situation where there is not an -- there isn't a substantial sugar surplus in the world globally. So we've seen prices stabilizing at a reasonable level. So with that kind of price levels, I don't see there should be any problem in exporting, pushing out about 4 million, 5 million tonnes of sugar out of India. And with that, sugar stocks remaining between, let's say, 6 million to 8 million tonnes of -- sugar stock of 6 million to 8 million tonnes, I don't see any downward pressure on the sugar prices.
Okay. And sir, my last question is on the -- now that we have finished with CapEx, what is our cash flow utilization going forward?
Sir, we are planning the CapEx though, of course, it's a small CapEx because there is just a few processes that we need to upgrade and for making refined sugar less than 45 [Technical Difficulty] sugar, so that will cost is about maybe INR 35 crores, INR 40 crores, not much.
So besides that, yes, we also mentioned that we might take up increasing the capacities of our sugar mills, both at Dwarikesh Nagar and Dwarikesh Puram. So those are the thoughts that we have and we would want to implement them in the times to come. So -- and then you see what happens is the surplus cash only towards the end of the offseason. Otherwise, we -- I mean, even during this season where [indiscernible] has been good, we have utilized our working capital mix.
Okay. Sir, 35 to...
So that -- the point I'm trying to make is, when the sugar season is on, no sugar company can be cash surplus.
Okay, okay. Got it. And INR 35 crore to INR 40 crore CapEx, how much capacity would that put in, in refineries?
Refineries, 1 unit, we will -- if you put in a refinery, in one of the units we will get -- like I said, 2 to 2.5 -- 2,300 tonnes of TCD -- 2,000 to 2,300 TCD of sugarcane juice will be diverted for making ethanol, will be generating B-heavy molasses again to be made use of in the distillery for making ethanol during offseason. And the rest of the production in that particular will all be refined sugar, less than 45 [Technical Difficulty] sugar, which will open up opportunities for export of white sugar for us and also our domestic realization price will get better.
Okay. Okay. At the current market price, is it feasible for a mill in Uttar Pradesh and at the Central UP to export?
Yes, sir. If you've seen the white prices have been far better than the raw prices. At various points in time, while prices have been so much better also in the export market and also in the domestic market.
The next question is from the line of [Vignesh Iyer from Sequent ] Investment.
Congratulations on a good set of numbers, sir.
Thank you, sir. Thank you.
So I just want to ask you about the distillery division of the company, right? So if we see the EBITDA margin for the year, which is around like 37.1% as compared to 36.3% for FY '21, but the quarterly results show that the margin is around 31%. So going ahead with a new set of quantities kicking in from the fresh CapEx, where do we see our margins for this division?
Sir, I think I already mentioned this, we should never see that -- see, in a sugar company, it's always better not to see, number 1, quarterly results in isolation; and number two, never see segment results in isolation. It's the total results which matters. And you would see lesser margin in sugar segment, higher margin in distillery segment, but that's mainly on account of what transfer pricing we assigned for the bagasse or what transfer pricing we are saying for the B-heavy molasses.
So it's so much dependent on all these things. So what is more important, what is relevant is the ethanol prices are good, the recoveries are good, the sugar prices going forward should get better. So we don't see any room for any kind of despondency.
Right. But sir, on a yearly basis, at least margins are more or less than same levels, right? There won't be that much of...
See, last year, I'll tell you why the margins -- 2 things have happened. Last year, we did produce ethanol making use of B-heavy molasses where the pricings were lower. And -- so that's one thing. And this year, we have used only B-heavy molasses.
Secondly, last year, the transfer pricing of B-heavy molasses was lower and this year, it is higher. So one factor offsets the other and maybe that is how you see the same kind of margin. But ideally distillery margins should be around 25%. Sugar prices margins a little better than what it is. Overall, it kind of evens out.
The next question is from the line of [ Rajiv Kumar Raj ], an individual investor.
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The next question is from the line of [ Narendra Porwal ], an individual investor.
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As there are no further questions, I now hand the conference over to Mr. Vijay Banka for closing comments. Over to you, sir.
Thank you, friends. Thank you. Thanks a lot for your help and support. Thanks a lot for the confidence in our report. Like I said in my opening remarks, we look back at our results for FY '21 -- '21-'22 with a sense of satisfaction. But that gives us additional responsibilities because year after year, the intention there for is to churn better profits than what we have done in the previous years. So it's put greater responsibilities on us. We do expect the market situations, market realities are -- continue to be favorable and that we will do -- we will perhaps meet your expectation and post better results in the times to come. Thank you so much.
Ladies and gentlemen, on behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.