Balrampur Chini Mills Limited earnings call

Ladies and gentlemen, good day and welcome to Bal rampur Chini Mills Limited's Earnings Conference Call. As a reminder, all participant lines will be in the listen -only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that thi s conference is being recorded. I now hand the conference over to Ms. Jenny Rose Kunnappally from CDR India. Thank you, and over to you, ma'am.

Good afternoon everyone, and thank you for joining us on Balrampur Chini Mills Q4 and FY24 Result Conference Call. We have with us today Mr. Vivek Sar aogi, Chairman and Managing Director of Balrampur Chini Mills; Ms. Avantika Saraogi, Executive Director; and Mr. Pramod Patwari, Chief Financial Officer of the Company. We would now like to begin the call with brief opening remarks from the management, following which we will have the forum open for the question -and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward - looking in nature and disclaimer to this effect has been included in the results presentations shared with you earlier. I would now like to invite Mr. Saraogi to make his opening remarks. Over to you sir.

Hello and good afternoon , everyone and thank you for joining us on our Q4 & FY24 results call. I trust all of you have got the opportunity to go through the results presentation, providing details of our operational and financial performance. I will initiate the call with a brief update on the sugar sector. As per the latest industry data, India's sugar production is expected to reach 32 million ton nes, this is net of diversion in the season 2023 -24, which is just slightly lower than 32.8 million tonnes produced in the preceding season 2022-23. Maharashtra sugar production unexpectedly increased to 11 million tonnes, where UP had a bit of a decline, which was not expected , but it came down to 10.35 million tonnes. Karnataka produced 5.25 million tonnes. Considering an opening stock of 5.6 million tonnes and a projected consumption of 28.7 million tonnes, we anticipate the closing stock for the year to be about 8.9 million tonnes. In the coming season, that is 2024-25, production is expected to moderate to 31 million ton nes pre-diversion. So, let me put out a sort of disclaimer here that , this is very early days to be able to comment on 2024-25 production, but this is the best guess available as on-date. Given the opening stock of 8.9 million tonnes, we expect the government's intervention to facilitate the diversion towards ethanol to manage the excess inventory and that would also support sugar prices. So, basically, the knee-jerk reaction, which happened owing to a perceived lower production not only in 2023-24, but 2024 -25, we hope there will be correction s. We've already got 2023 -24 production, 8.9 million tonnes stock and we're definite that the next year production will be higher than the consumption. Hence, there will be about more than 3.5 million ton nes available for diversion to ethanol, that's our best belief as of today. Moving on to our business performance, we have delivered robust operational and financial performance during the year, supported by strong volumes and realizations, both in sugar and distillery segment. On the PLA project, we have contracted with renowned global technology providers, setting the stage for the development of India's first integrated sugar -to-bioplastic facility, projecting a new avenue for growth and market leadership. Thank you. Now I hand over the floor to Pramod. Pramod, over to you.

Thank you, sir, and good afternoon, everyone. As the presentation has already been shared, I will not repeat the financial highlights. I would now request the moderator to open the forum for question-and- answer session. Thank you.

Thank you very much, Sir. We will now begin the question -and-answer session. The first question is from the line of Prashant Biyani from Elara Securities.

Sir, we had done ve ry good crushing volume on a FY to FY basis, but for the season also we had guided for around 10% increase in crushing. Unfor tunately, that has not happened, c an you explain the reason for it?

Good afternoon. Thank you for the question. So, there were about two, three factors at -play. I think the first and something which has not happened ever in my father's career of 37 years and this has been widely discussed is that , we had never seen the impact before of zero winter rain. So, the yield which was projected for plan ned cane was quite reduced due to this which we could not predict because the cane was standing in the field, but it had lower weight. This is one of the major reasons that we were not able to predict it even until the very end. A couple of things which happened due to the reaction of the government also and then the election year being at play is that , a diversion to unorganized MSME sector of Khandsari and G ur increased because they were able to pay higher prices due to the election and the unorganized liquor demand and as well as very good gur prices. Both, consequently made farmers divert more than what we had anticipated as well. And the third factor is that, this time due to the lack of winter rain again there were a lot of extra animal attacks and rodent attacks which had never occurred before. So, these ar e the major reasons that we had a lower crush. Also the reduced crush which happened in some of the mills due to the ethanol policy being changed that also impacted us because we had to reduce crush in few of our units.

So, what I would like to add to this is , as Balrampur we crushed 2% lower than our last year's crushing. And in UP apple-to-apple basis crushed about 12% lower cane?

Around 8%. UP was down by around 8%.

We crushed 1009 lac qtuianls this season as compared to 1030 in previous season.

So, UP if you see other groups they've come down by 10%, 12% and we've come down by 2%. So, basically there has been an error of average 10% calculation of cane by everybody in their projection which did not fructify. This is a very weird agroclimatic condition.

Ma'am, the first point you mentioned was that zero winter rains impacted yield. Am I correct?

Yes. It impacted the yield of plant cane.

Secondly our domestic quota for sugar I believe was somewhere around 1,59,000 ton nes and we have sold 2,25,000 ton nes. I believe , we cannot sell above quota and there is no carry -forward of previously unsold quota also? So, am I missing something here?

So, there is no separate penalty as such. Yes, you are right , we sold slightly higher in March quarter and you may be aware of the fact that in the April month's quota government has deducted aroun d 25% out of our eligible quota, beyond this nothing is carried forward. Sir, just to reconfirm the UP crushing number, this year it is 980 lac tons versus last year 1 ,082 lac tons. So, it's around 9% down in UP.

Vivek sir, where do you expect the sugar price to move in one or two quarters?

Just to tell you the sugar price has been pretty stable , despite this ethanol sort of curtailment of diversion. So, we are selling around Rs. 3,950 per quintal odd or average around Rs. 3,925-3,950 per quintal because we have various mills making sulfitation and refined sugar. So, I don't think this price would come down from here. It should gradually inch up, very gradually.

Right. And sir, post this price increase in maize ethanol, is the profitability better than what industry was able to earn from FCI rice-based ethanol?

Pramod, can you answer that.

Okay. So, Prashant, this will vary company to company, what kind of overhead we have in that particular unit but having said that even at the maize price of, say, Rs. 72 per litre , it is not as profitable. FCI rice works very well.

The next question is from the line of Sanjay Manyal from DAM Capital.

So, definitely CO238, the yield was a bit more. But the point is that the deteriorated CO238 yield versus other new varieties are much better. So, CO238, yes, if you're talking about historical, about four years ago versus the new varieties of today, I would say that there is a slightly lower yield, but nothing to write home about in the sense that the draw l which we have, that means the supply yield that we have is still quite low. So, the varietal impact is not that much, I would say.

So, yes, CO238 yield is not available in any other variety. Having said that CO238 was already dying and, you cannot have that.

The deteriorated CO238 yield, recovery, everything was not working out.

So, agroclimatic conditions, how much ever we predict, when the cutting yield comes in and there are variations, some things are out of your hands. And this has happened all across UP, each group. Comparatively, this is not a defense we have done the best, in terms of reduction of 2%.

Right. So, what we can understand from the next season perspective, given that now I believe 90% of our variety are the newer ones, and if there are normal weather conditions, because last time I think you mentioned that you planted almost 7% to 8% higher.

I'll give you the visibility. So, basically, our CO238 is down to 8% for next season. And there is other good varietal balance apart from that. Now, if we have to talk about yield, variety is not the only influencing factor. In fact, the agroclimatic conditions will affect us much more than the variety because all the varieties which we have planted are only released by the scientists and agricultural research unit after they can prove a 1 ,000 quintal per hectare yield. Before that, a variety is not allowed by law to be released. Our supply yield is around 300 only. So, this varietal influence on yield is actually the lowest in our group. Other groups, I don't know. But for our group, the varietal impact on yield is a bit low. Other than this, the agroclimatic conditions, if they are to be distributed rain, we will enjoy a very, very good benefit of that no matter which variety we have because all our varieties are still very, very, very good. And you've seen the increase in recovery. You've seen this 11.72% is the FY24 recovery, Pramodji?

Pramod, what's the recovery for the FY24 and for the season?

Season is 11.72%, FY24 is 11.73%.

So, FY24 11.73%, this is one of our highest recoveries ever that we have achieved.

So, on the September results call which would be in October at that point of time, we will be able to give much better visibility.

Sir, just one more question on the ethanol front , given the fact that a t the country level, we have a sufficient inventory now and the government most probably will allow higher diversion from the next season. So what could be our distilled capacity utilization for the next season, 2024-2025?

Again, we have to wait it out. So these figures indic ate that we will be much better -off without a doubt. Having said that, it is very difficult to give this expectation data , let it come out. But there is enough sugar, as we told you on the call to be able to get distillation orders much more than the previous year.

The next question is from the line of Achal Lohade from JM Financial.

Sir the first question on the cane crushing again. So, if we understand correctly, basically, it is to do with the agroclimatic condition coupled with the election -related event, which has resulted into lower cane crushing for us, as well as the state as a whole. Have I understood it right?

Yes.

Okay. Now, specifically for us, if you could talk about Avantika with respect to, you said 8% of sugar season 2025 will be the CO238. What was it for sugar season 2023-24 and 2022-2023, would you be able to give that number?

For sugar season 2023-24, it was upwards of 20%.

And prior year, would you know that?

It would have been, I mean, I don't know the exact figure, but it would have been upwards of between 35%-40%.

I would say, closer to 40%.

Okay, understood. So since we have done so much work on the sugar cane part for several years now, our mix is substantially different from the other groups or in the state according to you or everybody is kind of working towards that and hence, I mean, we would be better, but still, is that materially different?

I think our CO-0118 percentage should be higher than the rest of UP and maybe one or two other new varieties should be higher than the rest of UP.

It's very difficult to be able to give the variety configuration of others.

So, see west we know, has more CO-238.

West is having a lot of CO-238.

And they will take one more year to come out.

Okay, understood. And if you could give, I mean, you have kind of covered in the answer with respect to the yield is lower than the original CO238, but it's better than the deteriorated CO238. But in terms of recovery rate how do they stack up?

But we will wait till October. So, your question, if I've understood, is how much better are we? You're comparing us to the competition, right?

No. Let me rephrase . For the CO-0118 variety, what is the recovery rate, a thumb rule, compared to CO238?

CO-0118 is very decent recovery. CO-0118 is the best recovery in the current variety test.

Okay. Would you be able to share any percentage now?

We can't do it this way, actually, because it will not be accurate data.

All this data we will get in October. But we are on the right line.

It's better than old CO238 .

Right. Old CO238 at its peak was very good.

Now, let me ask in terms of, given where we are standing, I know it's hard to call out, but still if we were to build a number for coming year, FY25, how do we look at the cane crushing volume? Do we assume an increase? Do we view flat?

We were not able to predict it this time, now we will not predict it.

I don't care if others were down more than me etc , we'd be very careful and cautious when we predict next year. We are going in far-far deeper calculation.

Understood. Okay. Now with respect to you know the PLA , if you could give some heads up you know is there any further update post the last call what we had on PLA apart from the tie -up what we have with the vendors and the tech partners, any particular timeline, etc?

Everything is on-track as per what it was the last time, when we do have an update we have a separate call for that.

Orders are out . We are working hard on developing the market . Its building towards the commissioning, whatever has to be done before that . As Avantika said, anything more meaningful except saying that we are in the right direction, we will have a call later on.

Understood, okay. Since you are not able to give the cane guidance, I presume you won't be able to give any crushing in terms of the distillery volume guidance as well right?

They are linked to each other.

No change. Achal, no change from last year; B is still at Rs. 1,090 per quintal and Juice obviously will be at cost.

The next question is from the line of Shailesh L. Kanani from Centrum Broking.

Sir, couple of questions from my side . So I wanted to get some sense on realizations . You have answered in part , but if FY24 was good in terms where we have seen 6% increase , especially considering that last year was 15% export as well . So in our model building how do you think we should factor in this considering the current environment and next season, if you can give some color on that?

Pramod?

For the financial year gone by , it was Rs.38 per kg. Currently we are selling sugar at around Rs. 39 plus per kg. So, we have given our thought that it is going to remain stable at this point in time and with a bias towards inching up, but on a gradual basis. So that's the range in which you can assume in your model.

Fair enough. Sir also on a PLA project , just an extension of the earlier question , can you give some guidance with respect to how the capex is going to flow in the next two years in terms of our project , if that is possible?

We don't have the visibility exactly.

Let's get more visibility and we will definitely keep you updated.

In fact the moment we do have something to report we will definitely organize a separate call just for that and we'll have enough substantial information to give you.

Okay. Fair enough. So in that case just the last question , tax rate going ahead we had little bit higher tax rate for last year, so 2025 & 2026 what is the tax rate we are going to have?

So we will continue to be under MAT. But there will be some provision account of deferred taxation in the year gone by it was around 29% put together for the time being we can assume to be at the same level.

Okay. So just one last question , I'm just trying to get some clarity on the ethanol volume . In the last call we had guided that we will try to achieve the same volume numbers for next year . Do you think that is a possibility for FY25 to achieve the same volume numbers?

So Shailesh though, it's very difficult to give any visibility on cane crush for the sugar season . But as far as March is concerned, I think for the purpose of model building, we can assume around 9.8 to 10 crores quintal of sugar cane crushing . This will obviously include whatever cane we have crushed in the month of April this year.

Yes. I'm talking only of financial year.

Fair enough . And how would that translate into ethan ol volumes because there would be some component of cane?

We have to assume certain thing that we will get full diversion in place with respect to juice, with respect to B-heavy and if that is played out then we can definitely estimate the numbers as well.

But Pramod to everybody that is not yet clear.

It is not clear as of now. We will have to wait till September end to get a sense.

So the current Maizapur facility are we using any of the feedstocks available from the market broken rice, corn or maize? What is the approach till the time the season starts any colour on that, if you can provide?

We did run for a few days on broken rice and on maize also. So Pramod you have the figures in hand?

For the full year FY25?

Till September, I think we have done 40 days of rice and about 30 odd days on Maize if my memory is correct.

Whatever feedstock we are having as of 31st of March and whatever additional crush we did in the month of April on that basis , I think we sh ould be in a position to be distil around 10 crores liter of ethanol before beginning of the new season.

That's quite helpful sir.

The next question is from the line of Vikram Suryavanshi from PhilipCapital India.

You gave transfer pricing for B and juice, but what was the transfer price for C molasses?

C molasses is Rs. 600 per quintal.

And was there any bagasse sale for full year or fourth quarter , if you can give the quantity of bagasse sale?

Bagasse sale for the year? We will come back to you on this.

What I was trying to understand that now some of the power plant , PPA has been expired so that prices are quite remunerative, so how is the process for other plants to renew our PPAs how is that schedule and will that make sense to convert that bagasse because I think 5.25 is quite good price to convert from bagasse to power?

Bagasse we sold around 5 lakh tons in the full year FY24 and two of our plants are already outside the ambit of PPA. S o we are exporting power t hrough these plants in open access market and I think the next plant will come out of PPA only in the year 2026.

In 2025-2026 something like that , I don’t have numbers. We are getting very good rates. In one unit we got Rs.8 per unit.

And currently how much is the prevailing bagasse prices for us, if you want to know sale outside?

Bagasse transfer price is Rs. 1800 per ton.

I think that is same what we are continuing till now. A nd last question sir if you look at today's prices for maize will we use the multi -feed grain distillery for maize to ethanol or will keep it as option for when if government allows from B or juice I think that would be more profitable? At prevailing prices can we go for this maize to ethanol capacity utilization?

We are already running on maize.

So around 4 crores to 5 crores liter capacity we will use it for this year also?

Yes. Our ability is to run on all feedstock. De pending on the price and the profitability one takes a decision at the beginning of the year based on government policy. Don't worry, we will do our best, take the best decision, but not everything is in our hands.

Understood sir.

Thank you. L adies and gentlemen we will take that as the last question for today , I would now have the conference over to the management for closing comments. Over to you.

Thank you everybody and I think Pramod is there , we are all there for any questions and we hope to clear out all of the ambiguity in the September quarter results.

Thank you everyone. This is a transcription and may contain transcription errors. The transcript has been edited for clarity. The Company takes n o responsibility for such errors, although an effort has been made to ensure a high level of accuracy.