Dhampur Bio Organics Limited (DBOL) Earnings Call Transcript

Good day, ladies and gentleman. Welcome to the Dhampur Bio Organics Limited Q1 FY '26 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agarwal, head, Institutional Equities. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. It's my pleasure to welcome you on behalf of Dhampur Bio Organics Limited and SKP Securities to this financial results conference call. We have with us Mr. Gautam Goel, Managing Director and CEO; and Mr. Nalin Gupta, CFO. We'll have the opening remarks from Mr. Goel, followed by a Q&A session. Thank you, and over to you, Mr. Goel.

Thank you, Navin. Thank you all for joining us this afternoon. I would like to warmly welcome everyone to the Q1 FY '26 Earnings Conference Call for Dhampur Bio Organics. The company's results and the investor presentations for the quarter are now accessible on the stock exchanges and our company's website. I hope you have had a chance to review them. To begin, I will discuss the key economic factors affecting the sugar and ethanol industries, followed by an overview of our company's performance. After that, our CFO will provide an update on our financial performance. According to ISMA's latest data for the sugar season '24-'25, as of -- the total sugar output reached 29.9 million tonnes, while the season's net production is estimated at gross -- the net sugar production is estimated at 26.4 million tonnes, taking into account a diversion of 3.5 million tonnes for ethanol production. Domestic demand during the season was estimated at 28 million tonnes and about -- an export of about close to 1 million tonnes will result in the closing inventory of around 5.4 million tonnes. Looking ahead to the sugar season '25-'26, the government announced an FRP adjustment of INR 15 per quintal, bringing the rates to INR 355 a quintal based on 10.25 recovery. The current sugar prices in UP -- current sugar prices in UP are at about INR 4,050 per quintal. And for the Maharashtra mill, we are realizing around INR 3,900 a quintal. For the upcoming sugar season, that is the '25-'26 season, we expect an increase in the gross sugar production to about 34 million to 35 million tonnes. This increase is expected mainly from Maharashtra and Karnataka. Furthermore, varietal replacement initiatives in Uttar Pradesh and other Northern Indian states have demonstrated significant progress. This is likely to yield -- to lead to enhanced yields and recovery during the '25 to '26 sugar season in these regions as well. Global sugar production is projected to reach around 189.3 million tonnes in the '25-'26 season, up 4.7% year-on-year, resulting in a surplus of about 41.2 million metric tons, the highest in 8 years. Major contributors include Brazil, expected to produce 44.7 million tonnes and Thailand at approximately 10.3 million metric tons. This sharp rise in supply has driven the global prices down over 16% year-to-date, and the ice raw sugar future has fallen to a 4-year low of around $0.165 per pound. OMCs have allocated about 930 crore liters across 2 tender cycles to meet the annual demand. The current supply performance shows significant progress with the OMCs receiving 550 crore liters of ethanol from November '24 to May '25. The actual blending reached 572 crore liters during the 7-month period, resulting in an average blending rate of 18.8%. Monthly performance peaked at 19.8% blending in May 2025, nearing the 20% target. The sector continues to request -- the sugar sector continues to request the government for a revision of ethanol pricing, especially for ethanol produced from sugar syrup and B-heavy molasses to align with the current input cost and keep up with the production and to keep the production incentives intact. Now to our company's operating -- operational performance. During the current sugar season, DBO crushed 35.3 lakhs metric tons of cane compared to 37.93 lakh tonnes of cane in the previous season. Our gross sugar recovery for the season stood at 10.43% versus 11.46 last year. Net recovery declined to 9.55%, down from 10.48%, reflecting a decrease of approximately 93 basis points. As a result, our net sugar production for the season was 3.05 lakh tonnes compared to 3.98 lakh tonnes in the previous year. We diverted 3.37 lakh tonnes of sugar to B-heavy molasses during the season, a significant rise from 0.58 lakh tonnes in the previous year, aligning with our ethanol blending strategy. In Q1 FY '26, we crushed 2.32 lakh metric tons of sugarcane, an increase from 2 lakh metric tons in Q1 FY '25. Sugar sales during the quarter stood at 0.96 lakh tonnes compared to 0.95 lakh tonnes in the corresponding period last year. Our gross recovery reduced to 11.03%, down from 12.01% in Q1 FY '25. Similarly, the net recovery declined to 9.54% as compared to 11.73% in the same period last year. Our sugar realizations saw an improvement of 4.5%, increasing from INR 39,153 a tonne in Q1 FY '25 to INR 40,915 a tonne in Q1 FY '26. We produced 21.67 million liters of ethanol during Q1 FY '26 compared to 13.7 million liters in the same period last year. Total ethanol sales reached 19.33 million liters, up from 10.21 million liters in Q1 FY '25. Of this, ethanol derived from B-Heavy molasses accounted for 15.51 million liters compared to 7.28 million liters in the previous year quarter, underscoring our alignment with the government's ethanol blending targets. Our country liquor segment has witnessed a significant growth, reaching 11.24 lakh cases in Q1 FY '26 as against 7.75 lakh cases in Q1 FY '25, reflecting an increase of 45.16%. It gives me immense pleasure to inform you all that we have also commenced the production of UPML, and we are hopeful of continued growth in this segment. We have successfully commenced -- completed the conversion of a 100 KLPD molasses-based distillery at a smaller unit into a dual feed capable -- dual feed facility, capable of processing both molasses and grain-based feedstock. This conversion completed in June 2025, provides enhanced operational flexibility and optimal capacity utilization throughout the year. The dual feed capability enables us to optimize feedstock utilization based on raw material availability and government policies, positioning us well for both traditional sugar-based and emerging grain-based ethanol programs. We maintain our commitment to cane development initiatives and varietal improvement programs for enhanced productivity in the future crushing season. I would now like to hand it over to Nalin for an update on the financial performance. Thank you.

Thank you, Gautam. Thank you, everyone, for joining us today for our earnings call for the first quarter of fiscal 2026. I'm pleased to share our financial highlights and performance across our key segments. Our revenue from operations for Q1 FY '26 stood at INR 821 crores as compared to INR 638 crores in FY '25 in Q1, reflecting a growth of 28.75% year-on-year. The change in the revenue is primarily on account of improved sugar realization and higher ethanol and country liquor sales. There is a loss after tax of INR 19.37 crores as against profit of INR 1.71 crores in Q1 FY '25. In Q1 FY '26, our sugar segment reported a revenue of INR 523.49 crores as compared to INR 428.7 crores in previous year's corresponding quarter, representing a Y-o-Y increase of 22%. We sold 95,505 tonnes of sugar in Q1 FY '26 as against 95,153 tonnes of sugar in Q1 FY '25. Our average realization for Q1 FY '26 was INR 40.84 per kg as compared to INR 39.15 per kg in Q1 FY '25. Our inventory as on 30th June 2025 stood at 1.52 lakh tonnes of sugar, which has been valued at INR 37.39 per kg as compared to 2.02 lakh tonnes of sugar as on 30th June 2024, which was valued at INR 34.57 per kg. Coming to power segment, the power generated stood at 20.37 million units in Q1 FY '26 as against 18.12 million units in the same quarter last year. We exported 9.94 million units at an average realization of INR 3.44 per unit in Q1 FY '26 as against export of 6.56 million units in the same quarter last year. Coming to biofuels and spirits segment. Our revenue from the biofuels and spirits segment reached INR 127.66 crores in Q1 FY '26, an increase from INR 69.55 crores in Q1 FY '25, reflecting a Y-o-Y growth of 84%. EBIT for Q1 '26 stood at 68 lakhs. We sold 19.33 million bulk liters of ethanol during this quarter, including grain-derived ethanol of 1 million bulk liters, which is up from 10.21 million bulk liters in Q1 FY '25 with an increase of 89% Y-o-Y. Our average realization of ethanol stood at INR 59.64 per liter in Q1 FY '26 as against INR 58.52 per liter in the same quarter last year. Ethanol stock as on 30th June 2025 stood at 6.41 million bulk liters as compared to 8.63 million bulk liters as of 30 June 2024. Coming to country liquor segment. In Q1 FY '26, gross revenue from our country liquor segment experienced significant growth, reaching INR 286.34 crores as compared to gross revenue of INR 189.98 crores last year, reflecting Y-o-Y increase of 51%. Revenue net of excise increased from INR 19.13 crores in Q1 FY '25 to INR 28 crores in Q1 '26 with an EBIT of INR 4.33 crores in Q1 FY '26 as compared to EBIT of INR 2.51 crores in Q1 '25. We have repaid long-term loans of INR 15 crores during the quarter. Our long-term loans stood at INR 304 crores as on 30th June 2025. Our working capital loan as on 30th June was INR 671 crores. As of 30th June 2025, our debt equity ratio remains at 0.3x. Long-term and short-term ratings of the company as on 30th June is Care A- with stable outlook for long-term facilities and Care A2+ for short-term facilities. With this, I request the moderator to open the floor for the questions.

[Operator Instructions] First question is from Niteen Dharmawat from Aurum Capital.

Yes. So it's pretty disappointing number. So what has gone wrong? Can you please elaborate on that point? You talked a lot about what is currently going on, but I wanted to understand what is going wrong with the company and why continuously, we are having a disappointing set of numbers while we are having sales number going up, but the EBITDA margin is down and when things are going to come on track for the company?

Yes, Mr. Dharmawat. Yes, you're right. In many ways, the numbers have not been as per our expectation. But this is also what we had highlighted during our year-ending conference call. Our sugar recoveries have taken a beating in our -- 2 of our factories. Overall, UP, the sugar recoveries have been down by about 0.7% to 0.8% in West Central UP. Since bulk of our cane comes from this region where the red rot infestation and the pest infestation was high, which resulted in a lower recovery, lower net recovery, which increased the cane's overall cost of production. Also, the sugar prices in this quarter did not really show any marginal increase in spite of the overall lower country-wide reduction in sugar production. The sugar prices did not show any substantial increase, which they have now started to move up. Going forward, we do believe the cane development and pest management activities that we put into place more aggressively should help us reverse this trend. And as we mentioned, all our other sort of rationalization efforts with regards to ethanol, dual feed, all of them have now just about come on stream in June. So we hope this will continue to help give us better performances in the -- especially in Q3, Q4.

We are again going for the Q3, Q4 because last con call, I also attended, you mentioned that by August, September, we'll come to know about the cane availability and yield and looks like better compared to last year because last year, we were hit by the disease. So this year looks better. And you mentioned during that period that will be cleared by August, September, but now we are pushing it to Q3, Q4, then it is again disappointing. Don't you think so?

No, Mr. Dharmawat, I think there seems to be some confusion here. The sugar production cycle in North India is over, basis the current sugar crop that we had from October to -- the factory started in November to March, April. So that sugar season, the cost of production that got enhanced because of this sort of lower recovery and lower results, that is the sugar that we are selling now. This sugar should be out of our system pretty much by November latest, but bulk of the sugar should be sold by October. The current crop -- so I mean, if you -- I don't know if you were there for the last 1 or 2 calls, but in every call when the recoveries were lower, both in the March call and the December call, I did mention about the lower recoveries and lower yields, both in UP and to us specifically. Now going forward, whatever cane data that we have, and we are doing a lot of extensive surveys and we are spending, in fact, a lot of -- our only focus this year, one of our biggest focus is on cane development and pest mitigation. So as of now, all the surveys which we have got in the -- on the ground report we have, both the replacement of 238 has gone on at a faster pace and pest management has also been far more effective this year at this point of time.

Okay. Okay. Let's keep the fingers crossed because I'm pretty surprised with the numbers that we have received. In fact, a lot of market participants are also started talking very negatively about the company. So I'm pretty sure that company is more focused on operational efficiencies now and be more focused on the results because it's a pretty disappointing set of numbers which have come from the company consistently.

Yes, we have noted your concern and we will work on it, thank you.

[Operator Instructions] The next question is from Nithin Renjith from Frontline Access Capital.

So I think the management did touch upon the red rot infestation about a few minutes back. But there have been reports of a new pest outbreak, if I am not mistaken. About a black bug or something like that. I know that to counter the red rot infestation, a new variety of sugarcane was actually given to the farmers recently. So what is the update on that front. There is also -- there is new bug, should I say pest or black bug which has affected large parts of Bijnor which is like kind of our catchment area. So what is the update on that? Has that been contained or we'll have a spillover effect towards the next sugar season as well?

So black bug, you see, black bug is not a new pest. It has been there in the sugarcane crop for quite some time. But in our areas, whatever black bugs we did observe in very early on was contained with the right amount, the right kind of pesticides are put into place and the treatments are put into place to keep it contained. So as of this point of time, we don't have any black bug-related damages, which have been -- that they have all been contained. We don't have anything of material to report there.

Got it. And this -- I mean, even the black bug is also affecting the Co 023 variety as well? Or is it -- or has it been affecting the new variety, which got introduced after the red rot infestation?

See, red rot is a fungal infestation. Black bug is a pest. But there was no -- I mean, black bug, we did not find any major impact. Whatever little black bug was seen, it came in the ratoon crop, which was predominantly 238 at that point of time. But that was contained. So we don't see any spillover effect or any sort of problems there.

Going to -- I mean, I know that these are like -- I know that these are like early times, but going forward for the next sugar season, what sort of production or should I say, recovery are you like estimating? I mean I'm sure that at a company level, you have some internal calculations of your own, right? Are you like seeing an uptick? Or what is that we are getting from the ground? Or are these like early times?

So these are definitely early times, but what we can tell you is the crane crop is looking really healthy at this point of time, touch wood. We don't see any -- the varietal changes programs that have been put into place are also beginning to show results. The red rot containment also has been -- we don't see any major red rot outbreak. Also, the monsoons have not been -- one of the biggest reasons for red rot to spread is also when you have excessive rains when the water carries from one field to the other, which seems to be a lot more sort of fortunate this year that the grains have been there, but they have been sporadic. So all in all, with regards to disease and pest and varietal replacement, we believe we are in a better situation. And we do believe this will reflect both in terms of sugarcane yields and the sugarcane recovery.

Got it. And if I may squeeze one more question, with the operator's approval. So I mean, I think, OMCs have given out a new tender for the next -- I mean, procurement season. So going forward, will our focus -- I mean, I think, you had mentioned that the prices in international markets have kind of fallen. So what is going to be the company's approach on that front? Are export kind of viable right now...

I don't understand your question. Sorry, I couldn't understand, your voice got lost a little bit in between. After the OMCs tender, we couldn't understand what you said.

Well, going forward, what's the company's approach going to be like? Are we like focusing on -- are we shifting our production towards ethanol increasing. What sort of capacity utilization are we looking at for ethanol plants? And last year, I was referring to the export quarter. You had mentioned that the prices of sugar have fallen in the international market and are exports kind of viable right now given the sharp fall we have seen in the international markets. So those are 2 questions which I had.

Okay. So with regards to our focus on -- see, our focus will be on value addition, depending on the ethanol prices that the government announces for the current year. We will be in a better position to decide what raw material we will use for ethanol diversion, whether it will be B-heavy, C molasses or syrup. Our distillery, we have today, our distillery capacity, which is about 300,000 liters a day, 300,000 liters per day. We have a swing capacity of 100 KLPD. So we should be able to completely -- depending on the feedstock that we use, we should be able to mix and match and supply the maximum ethanol possible. Our country liquor segment continues to do well. So which we will also be diverting both -- some of our own molasses for this segment, and we will be buying levy molasses from outside for this segment. With regards to export, we see the opportunity for export right now, I mean, there isn't much of export that is going to happen from North India. But there could be opportunities and positions for Western part of India to export a certain amount of sugar in the new season. But that will be dependent upon when the government permits exports and to what quantities.

[Operator Instructions] Next question is from Udit Gupta, who is an individual investor.

So my question is, what is our cane acreage looking like considering that the planting will be complete by now?

So Udit, yes, so out of our 3 units, Mansurpur, which is in West UP, the cane acreage is pretty much similar to last year with the yields seem to be better for sure. For Asmoli and Mirganj, the cane acreage is about, say, 4% to 5% lower, but we do hope to make that up with enhanced productivity of cane.

Sir, this acreage in the 2 units has dropped because of shift to other crops?

So there is, once you see when -- because of this red rot and in any case, there was an expected drop of acreage, and we've got the UP data right now. This drop in acreage is pretty much uniform across all of West and -- sorry, all of Central and East UP. UP -- all of Central and East UP is showing about a 5% to 7% drop. Some of it is because of, of course, diversion to maize and other such crops. And partial reason for that had also been because pretty much across UP, the cost -- red rot had inflected 238 considerably and farmers are switching over till the time the seed for better varieties was made available in adequate quantities. I have a feeling in '25, '26, you will start seeing a bump up and my hunch is in '25, '26, we'll start seeing the sugarcane prices. I mean, sugarcane acreage to start going up again in UP.

And sir, what would be a shift to -- from 238? So like what would shift to other varieties, what percentage would it be by the ratoon crop and by the plant, sir?