Ladies and gentlemen, good day and welcome to Balrampur Chini Mills Limited 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. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Jenny Rose from CDR India. Thank you, and over to you.
Good afternoon, everyone, and thank you for joining us on Balrampur Chini Mills Q2 and H1 FY2026 Results Conference Call. We have with us today Mr. Vivek Saraogi, Chairman and Managing 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 a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now like to invite Mr. Saraogi to make his opening remarks. Over to you, sir.
Good afternoon, everyone, and thank you all for joining us on Balrampur Chini Mills Q2 and H1 FY2026 Earnings Conference Call. I trust all of you have had the opportunity to go through the results presentation, providing details of the operation and financial performance. I will initiate the call with an update on the current developments in the sugar sector, followed by a company's key highlights for the period under review. Production is expected to rise to about 34.5 million. This is pre-diversion. After diversion of 3.5 million tons for ethanol, net production is expected to be about 31 million. The total cane area stands at 57.35 lakh hectares, slightly higher than last year. Maharashtra is set to lead the output, rising 39% to 13 million, driven by strong monsoon rains and a 6% increase in acreage.
UP is expected to produce 10.3 million, maintaining stability despite a 3% decline in area, and Karnataka is expected to post a rise of 16% to 6.4 million tons. Domestic consumption is expected at 28.5 million tons, with opening stock of about 5 million tons and adding 31, deducting 28.5, and then the export, the closing stock is expected to be around 6 million tons. The government has allowed in exports of 1.5 million tons for the sugar season 2025-2026. We welcome this move as it should provide some relief to the market and support the domestic price stability. UP government has recently announced an INR 30 increase per quintal in SAP for the 2025-2026 season, which will take the SAP to INR 400 per quintal for the early maturing variety.
In this background, an improvement in domestic sugar realization becomes critical to offset the rise in cane cost and sustain industry profitability. Coming to the ethanol situation, reduced diversion from sugarcane feedstock is expected to add to the surplus. We were expecting probably a little higher allotment for the sugar industry in general. For 2025-2026 ethanol supply year, approvals from sugar sources stand for the sugar sector at INR 289 crore, accounting for only 28% of the total requirement, with balance 72% expected from grain-based feeds, maize, and rice. This shift could leave part of industry's ethanol capacity underutilized. While the recent export formation should help, it is equally important that the ethanol prices under juice and BAB routes are revised upward in a timely manner.
Such a step will be essential to offset the increase in cane costs and maintain viability of the sugar mills, especially in light of the significant rise in sugarcane FRP and SAP. For the millers to pay farmers on time. Moving on to the company's performance, we have delivered a healthy performance in a seasonally weak quarter, marked by improvement in both volumes and realizations. The overall performance was supported by upward revision in power tariffs, which contributed positively to the profitability. We continue to make steady progress on our PLA project, which remains a key element of our forward integration and value addition strategy. Construction activities are advancing well. We've also commenced market development through trading of imported PLA.
As of 31st October, investments of about INR 1,093 crore have been made towards the project, out of which INR 570 crore has been funded through debt and the balance from internal approvals. I am pleased to share that the Board of Directors has declared an interim dividend of INR 3.50, amounting for a total payout of INR 70.7 crore. This is including taxes. Yeah. As we move forward, BCML remains committed to deliver and create value. The PLA project marks a significant milestone in our growth journey, diversifying our product portfolio and offering eco-friendly alternatives to conventional plastics in alignment with government sustainability objectives. With a disciplined approach to investment and a strong focus on operational excellence, we aim to strengthen our growth trajectory and continue to create long-term value for our shareholders. Thank you. Pramod, onto you.
Thank you, and good afternoon, everyone. I hope all of you had the opportunity to go through the detailed results presentation that has been shared with you. I would request the moderator to open the forum for Q&A session. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take a first question from the line of Prashant Biyani from Elara Capital. Please go ahead.
Yeah, thank you for the opportunity. Mr. Saraogi, in case there is no change in ethanol price, at current price of SAP, how much would you want to divert to ethanol and for which categories of feedstock?
What we are doing is we have taken an internal call, and Pramod, you'd like to answer that?
Maybe around 10% of our cane crush would go towards juice route and maybe 25% towards BAB route and the balance towards BAB.
Balance towards BAB.
So B.
Yeah.
Right. And sir, has there been any communication from the government? I mean, FELA is not a formal communication that they are evaluating any increase in ethanol price?
Yeah. What I'll do is after this question, I'll answer. I'll just give a general overview.
Yeah.
Okay. Any other questions from you? Otherwise, I'll sort of.
Yeah. Just one more question. Sir, post-announcement of 1.5 million tons of export, has there been any surge in sugar price in the last two, three days?
Okay. Sorry. What I'll do is I'll begin with UP government. There has been an INR 30 rise in the SAP. If we see FRP, FRP has gone up 16% in the last three years. Is this UP government's first rise?
Yes.
Last year, last year was nailed. I think before that was nailed. So there's been a INR 30 rise after two years, and the government is fully aware that this INR 30 rise is a little steep, and probably INR 20 was what everyone was expecting. The informal feeling is that INR 30 was meant for two years, and maybe next year. One simple comment is that nobody should extrapolate that this can lead to another gigantic rise next year. Okay? Next, we are dialoguing, and as you said, it's not a statement of knowledge, but a statement of our dialogue with the government on both increase in country liquor price of ethanol, reduction in country liquor percentage, transport out-center cane rebate, and some other reliefs by the government.
We are hoping to get a relief package, so as to say, from the UP government, which is not going to be—we are hopeful on that front, is the best I can say. These are the four agendas we are aligning with the UP government, with the central government. Yeah. Yeah. Yes.
Sir, with elections coming up in February 2027 around, would they want a reduction in country liquor quantum?
The country liquor quantum reduction from our sector does not mean country liquor going down. There are other avenues for them to fill up. There is grain, there is probably Khansari, and plus, technically, what they are doing, they are taking excess and storing it. There are a lot of closing stock based on the previous allotments which they picked up from us. Right? It does not mean there is going to be a reduction in the total volume of country liquor sale.
Correct.
Clear? We are lobbing on these three fronts, which can overall put together, give a decent relief, is our big goal.
Sure.
As I very clearly have mentioned, to extrapolate this kind of a rise in future is one should not think on those lines. Now, back to the central government, export has been announced, and if you see the export and with the currency and maybe with some premium and maybe just a marginal rise in the global prices, I personally feel exports should happen. If you followed my remarks on the opening remarks, it says the entire rise is prominently only Maharashtra and Karnataka. That is where the entire rise is. They'll be saddled with stocks, and hence it makes logical and numerical common sense for them to export. They will be saving huge amount of interest.
If you see in the last few days, formal agitation, etc., both the CMs of Maharashtra and Karnataka have very heavily lobbied with the central government, which brings me to my next point, we are very hopeful in the ethanol price rise. The quantum, etc., is not known, but yes, definitely one is seeing a, and again, as I said, the dialogue with the central government is that with this kind of an environment, exports barely going to happen is what we're telling them. We are very, very hopeful of a rising ethanol price. At some point, even I think the MSP dialogue may result in some give some results there. One is UP government, I've told you, one is central government.
Together with both these sort of understanding, relief package, whatever you want to call it, correction of what they should have done earlier, etc., etc., the fall of INR 30 should not be as hard as people expected. Thirdly, on our company front, based on the weather, based on the cane allotment, based on our internal calculations, Pramod, we're hoping for a 7-8% increase in cane crushing for Balrampur. That will improve our fixed cost. Also, we are hoping for an improvement in recovery based on the weather conditions. All put together, UP government, central government, Balrampur's own crushing quantum, Balrampur's own recovery expectation, we are feeling that the worst may be behind us with this INR 30 announcement. However, a little more evidence to everything I have mentioned may be sort of available in a month.
I think one month we will have a lot more clarity on all the three factors I've mentioned. I have covered the UP government, I have covered the central government, I have covered the company's own expectation on crushing and recovery. This, I thought, will come up from various ends, so I thought it's sort of my duty to clearly spell it out.
Sir, just lastly, one thing. Whatever dues the industry or any mills pay to the farmers for the cane that we crush, what is the split? How much do we pay upfront and in subsequent installments?
In UP, everything is paid upfront. We have to pay in single installment.
Okay. Okay, sir. Thank you for answering the questions.
Thank you. We'll take a next question from the line of Sanjay Manyal from DAM Capital. Please go ahead.
Yes, Sanjay.
Sanjay, your line is unmuted. Please go ahead with your question. Any response from the current participant? We'll move on to the next question from the line of Shailesh Kanani from Centrum Broking. Please go ahead.
Sir, just one question from my side. I think on the sugar front, you have highlighted. Can we share some volume guidance for ethanol for this season?
Pramod?
For the ethanol year 2025-2026, we are expecting around INR 28 odd crore of ethanol, including union.
Just a route-wise breakup as well in that?
Maybe around INR 90 million crore from juice, INR 120 million crore from BAB.
Three odd million.
3 odd million.
3 plus something million.
Three plus maje.
Three and a half country liquor.
Three and a half country liquor, maybe INR 1 crore CAV.
INR 1 crore CAV. Exactly. Yeah.
Yeah. Just one more question. Sir, just a qualitative question. Regarding the PLA initiative, although it's still in an early stage, we have already commenced market supply, right? What are the initial takeaways or insights from these interactions we are having with the clients? Do they align or differ from our original assumptions on product development? Any qualitative observations you'd like to share which can be useful to us to understand this further?
Okay. Thank you. I'll try and deal with that. I want to think how to address it better, but she's in Delhi for PLA-related meetings. Let's understand what is the roadmap of this. Current consumption, now maybe 30,000-40,000 tons per year based on the sort of import data. Pramod, these import data is of PLA, not PLA mixed.
Embedded PLA quantity.
Not embedded PLA quantity, which is PLA compounds. Let's call it PLA. Our reaction with the customers is everybody wants to do it, but they are saying, "Where is your production?" That is when we began the import. We are dialoguing, etc. Demand is going to come from two things. One is direct dialogue with the customers, which is happening. Two is mandate. There are going to be certain mandates. One is working with the government, both state and center, and we are hopeful with the mandate and the dialogue with the customer. Personally, I feel we should be very sort of confident of selling our entire product. Obviously, nothing will happen overnight. It's not like sugar that you start a factory, you produce the sugar bag, and you dispatch it.
It may take a little more time, but it's not ad infinitum into years and all that. We are working very hard on both the mandate and customer interface, both with the person who will produce and to whom we will supply.
Okay. Any initial feedback or it is in line with our assumptions? I know it's very early. We have just started it, but any initial feedback on that terms?
No, we feel confident. Even people are tracking PLA prices and Pramod giving me the data, etc. The issue is, let's be clear, we are making it very clear that there must be some parity. Let's say today India's cane price is higher than a Brazilian cane price by miles or by a Thailand cane price, or let's say China. There must be a level playing ground via MIP or QCO or whatever, anti-dumping, etc. We are hopeful on all fronts. The government is looking to come out with a comprehensive, and we are dialoguing with them on a policy for this bioplastic as a sector, which will cover everything.
Fair enough, sir. Thanks a lot. Best of luck.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. We'll take a next question from the line of Sanjay Manyal from DAM Capital. Please go ahead.
Hi sir. My line was dropped in between, so I'm not sure if you have answered this question or not.
No, I have not heard you.
Yeah. So.
We have not heard you. You can continue with your question.
Okay. Yeah. What I understand broadly is that there is an industry-wide ethanol capacity of 1,900-2,000 crore liters, and now total demand, including the ENA and rectified splits, should not be more than 1,500. Is it good to say that the industry will not go beyond 70-75% of the utilization level, and some players might be lower than this and some might be higher than this? Given the fact that we are not getting ethanol price, at least from the last two years, and there is no visibility even for the current year, what kind of normative margins, EBITDA per liter margins can we achieve with the entire sugarcane sort of feed stock?
Pramod?
Sanjay, I think INR 1,800 crore is the overall capacity in my mind, and in any case, it is not possible to operate the capacities at 100%. There are some periods on which the plant needs to be shut down for normal upkeep, repairs, and maintenance. Even if you assume that 80% is the effective capacity utilization, that means around INR 1,400-1,450 crore of production capacity. That is currently taking care of the ethanol requirement as well as the other segment requirement. On the other part of your question regarding the profitability, we have always said that it needs to be evaluated at a corporate level because transfer pricing can change. It will not be possible for us to give product-wise margins in the distillery.
Sanjay, Pramod, are you done? Yeah?
Yes.
Let me explain. The problem is in the grain side. If mills have not got full order, like what we paid, we got our entire capacity order, entire. Be it juice, be it fill, full. What we did not get is our maize. I'm just clarifying. We paid for, let's say, INR 50 million maize, we got INR 30 million. Maize has been underutilized by 40%. Maize has got 60%. Maize gang has been deprived by 40%. That side of the capacity is overburdened, and it's like that's the excess part. Where millers in sugar did not get the order, probably is they didn't wait for Q3, Q4, Pramod, and there may be a second tender coming whereby I am hoping some more orders should come to the sugar sector. Balrampur is full. Two others maybe.
That may help some further diversion down the line, and we are dialoguing, and that is the point I think you were making, that sugar sector should have some reservation. If government is to take INR 1,050 crore a year and the E22 mandate takes a couple of years to come, in the interim, INR 450 crore, which is at least 45%-50%, should be allotted to the sugar sector and should be a kind of half-half split between the two sectors. Because this sector, see, what have you done? If diversion was higher, probably you would not have needed exports. If you did not need export, you are not sort of uneasy as to what will happen to the surplus. There would be no surplus. With the farmer agitation and with the reality on the ground, I think government is slowly understanding this.
Thereby, I remain hopeful of, one, some revision in ethanol price. My word is I remain hopeful. Two is we also remain hopeful of going ahead in times to come getting a much larger portion of the pie for the sugar side. Clear? Have I explained myself well?
Yes, sir. That's quite helpful, actually. I have a last question on the PLA front. I think you mentioned that you have started importing some quantities. What is the response from the customers or client? Have we been able to, I'm sure it's still one year ahead, but have we been able to sort of confirm some sort of orders once our capacity is on stream? Have we got the visibility that this capacity will be utilized to an optimum level once we are on stream?
We are in a trial stage with a lot of customers whereby they have given, let's say, a yes. They want to now do a trial of the product with hot food. There are some trials required at their end also for them to give visibility of a large quantity or a meaningful application, let's say. We are doing trials with various people, including, let's say, even government bodies. I'll wait for Avantika, and I'll wait for a little more visibility. What I'd like to say is, A, we don't look at this on a quarter-to-quarter basis. B, we see the mandates coming. We see the macro improving, and thereafter, we can be reasonably sure we'll sell, which we are very confident. Let's say mandate and let's say large buyers. We are dialoguing with both the meaningful side and even small buyers.
Right. Right. If I may just squeeze in one, if you can just give a regular update on the what kind of a, because I think crushing must have started at least with a few mills in Eastern UP as well. If it is possible to give an update, what kind of recovery and crushing numbers we are expecting?
I did mention we are expecting a 7-8% increase in Balrampur's crushing quantum-wise, which will be helpful for everything, for both power, sugar, and ethanol business. East UP has not yet begun. Yesterday, we began our first factory in the evening. Give it a little more time, but definitely, it expects an improvement in recovery. Definitely.
Sure, sir. Thank you very much, sir.
Thank you. We'll take a next question from the line of Nitin Awasi from InCred Research. Please go ahead.
Hello, sir. Just wanted to understand something on the dynamics of the politics which is going on right now. You alluded to the fact that Indian sugarcane prices are miles ahead, and which is a fact, which not only for sugarcane but for some other crops also, that we are completely broken from the international market, and what do you call sugarcane or other feed stocks have gone haywire because of government intervention. I don't see government having the capability of reducing the prices going ahead. There has to be steps taken to increase the profitability without dropping the prices. One such step which seems possible is that the UP ML route, which is the UP-made liquor route, being pushed by the UP government so that the sugar mills can hold on to their molasses. One, do you think that is something which can happen?
Number two, if that happens, does not happen, apart from that, with the current rate of SAP at INR 400, your production cost of sugar as a product would be close to INR 39?
Pramod, you can take the cost question first. I'll take the thing. You are talking of deregulation for the country liquor sector for sugar mills?
Yes. Because sugar mills have to be profitable. Yes.
Yeah. Yeah. Do I understand your question? As I said in the opening remarks of mine, there will be some reduction, hopeful again, because in the percentage and some improvement in the price. I am very hopeful that down the line, something, a large portion of what you've been alluding to, things may move in that direction.
Understood, sir.
See, understand, our Chief Minister is a man whose ear and legs are on the ground. There is nobody who understands the ground reality better than him. We have dialogued with him. We are hopeful things should play out in a much better fashion.
Understood.
On the cost front, last year, our cost of production of sugar was INR 35.5. This year, we are expecting a better cane availability, which will reduce the fixed overhead cost incidence. We are expecting a better recovery also, which will again have a positive impact on the cost of production. In spite of the cane cost going up, obviously, there will be some increase in the cost of production of sugar, but it will again depend upon the transfer pricing. We are in the process of evaluating the transfer prices as well. We'll come to know only once we take a final call on that.
Understood, sir. Thank you.
Thank you. We'll take a next question from the line of Krishan Parvani from JM Financial. Please go ahead.
Yes. Hi, sir. Thank you for the opportunity. Yes. Sir, a couple of questions. Firstly, on the PLA business, when is your internal estimate of EBIT level break-even for the plant?
I mean, I am looking half Pramod, half.
We are expecting commercial production to commence in October, right? I really do not know. This being a new product for us, whether it will take one month or two months to get the stabilization. Let's assume we get a full three months of our machineries running at full capacity.
That's tough, Pramod.
That's tough.
It takes a little more time. Yeah, not very much more.
We are not expecting any loss in the first year also.
Okay. We are working on the product side so that whatever is made is sold.
Yeah. Understood. No, because.
At the price.
Yeah. Please, sir, go ahead.
Yeah. Please, sir. Yeah. I'll pull up. You tell me.
Gee, so my point was because of INR 2,800 crore kind of a gross block, our depreciation at a 5%-6% depreciation rate could be in the range of INR 150 crore or so. When I meant by EBIT level break-even, as in EBITDA of INR 150 crore, INR 150 crore getting offset with the depreciation, so EBIT level break-even. That way, I was trying to understand when is it that your EBITDA will be higher than your depreciation.
I think first year one should be three, four months. Pramod, my view is we should forget. In terms of forget means we hope to reach 100% of the capacity, be absolutely world-class quality, and make our market. I think two, three, four months will go in that. If we see a product like this, I do not think it globally also has taken lesser time. That having happened, let's say 27 March onwards, I think we should fly. These are my personal views since you asked for it. As we always say, or I always say, this is something new for us, but it is not without research, not without global precedence, not without understanding.
Understood, sir. That is very helpful. Thank you for that. Secondly, on the traditional business, just a couple of kind of points. And apologies if you have already answered since I joined the call.
No, no. Don't bother. Don't bother.
On this quarter, we had a sharp jump in the grain-based ethanol. Will we see this trend continuing given the grain-based pricing is higher, but I think the margins are lower? How will the trend be?
See, there will be much better profitability on the grain side. Pramod, answer?
In the ethanol year gone by, we did around 4 crore liter of ethanol out of maize. In the coming season, we will get we got only 3.15 crore liter, including 40% allocation of rice. Rice will definitely have a lower margin than the margin in maize.
The margin in maize per liter will be higher than last year.
Okay.
Maize price will be higher. If you take your fixed cost, obviously.
Yeah. Understood. The last bit on the sugar exports. Do you expect a meaningful jump for you particular, Balrampur particular? I think last year the allowance was higher, but the actual exports were lower. Do you think this sugar season that we will, as a country, first will reach 2 million tons of export? If not, at a country level, you would not have an idea, but probably at your company level, what do you expect then?
Obviously, we will not be exporting. As I said in the beginning, the jump in production in Maharashtra and Karnataka. I'm personally of the view, and we are of the view that they will definitely export. Give it some more time, and I think export will happen.
This year, we will get a larger period, longer period to achieve.
Yeah.
Last year, the announcement was in January.
Yeah, right now.
January, third week of January.
This is before you begin production, you've got the announcement. Things will play out. See, I always believe to improve like 280 lakh tons, 15 lakh tons is what? 6%. To improve 94% of your life, if one has to do a little bit on the 6%, go do it. That theory plus the saving on account of interest. These two factors being the underlying emotion, I think exports will happen.
Understood, sir. This is very helpful, sir. Thank you for patiently answering my question. Wish you all the best for the coming quarter.
Thank you.
Thank you very much.
You're welcome.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. As there are no further questions, I now hand over the call to the management team for closing comments. Over to you, sir.
Thank you once again, and we will always be there if somebody has more questions. The next three months should give a lot of clarity on all the questions and the thoughts.
Thank you, everyone.
Thank you, sir. On behalf of Balrampur Chini Mills, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.