E.I.D.- Parry (India) Limited (EIDPARRY) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the EID Parry India Q1 FY '27 Earnings Conference Call hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Manyal from DAM Capital. Thank you, and over to you, sir.

Hello, everyone, and a warm welcome on behalf of DAM Capital to the Q1 FY '27 Earnings Call of EID Perry. We thank EID Perry's management for giving us this opportunity to host this call. On the call today, we have Mr. Muthiah Murugappan, Whole-Time Director and CEO, along with the senior management team of EID Parry. I hand over the call to the management for opening remarks, followed by a Q&A session. Thank you, and over to you, sir.

Many thanks, Sanjay. A very good morning to everyone. I hope you're all doing well. It gives me great pleasure to be a part of the Q1 F '27 analyst call to share an update about our financial results for the first quarter. I will start with the global sugar scenario. Global sugar markets are transitioning from a surplus-driven bearish phase towards a more balanced outlook. According to the ISO, the International Sugar Organization, the world sugar market is expected to record a surplus of 2.24 million tonnes in '25-'26 compared to a deficit of 3.2 million tonnes in the previous year. This is largely driven by a better global production of 182 million tonnes. However, weather concerns are increasingly supporting prices. [ London ] white sugar prices have recovered from lows near $404 per tonne in early 2026 to about $471 per tonne by July 2026, while raw sugar prices remain subdued around $0.14, $0.15 per pound. In Brazil, a stronger sugarcane harvest has increased ethanol production and lowered domestic ethanol prices, although more cane is currently being directed towards ethanol rather than sugar. I'll come now to the Indian scenario. In sugar year '25-'26, the latest estimates are as follows: gross production is 31 million tonnes, diversion towards ethanol a little over 3 million tonnes; domestic consumption, 28 million tonnes, exports 0.8 million and closing stock slightly at 4.2 million. For sugar year '25-'26, the net sugar production is about 28 million tonnes, up from 26 million in the previous year. This has largely been supported by stronger output in both Maharashtra and Karnataka, partly offset by lower production in Uttar Pradesh. Domestic consumption, as mentioned, remains stable at 28 million, while exports are at about 0.8 million. As mentioned, the closing stocks will also be about 4.2 million metric tons, which is slightly lower than what was carried into the season. At the same time, sugar diversion to ethanol is about 2.9 million tonnes, supporting the government's E20 program. While there's been a lot of -- a lot said about E20 program in the public domain, we expect that blend levels will remain at 20% for the foreseeable future. On the sugar front, the El Nino conditions which are prevailing in the country, coupled with tight inventories and a very steady demand have pushed sugar prices upward. In the current month, sugar prices have moved well north of INR 45 to INR 46 per kg. We will need to wait and see if these hold. Perhaps once crushing starts, it's very likely that there may be some correction. I will now hand over to our CFO, Mr. Venkateshwarlu, to take you through the operating performance of the company.

Thank you, Muthiah, and good morning to all participants. It's a great pleasure to be part of the analyst call and share the key operational and financial performance of the company. I would like to take you through the key operating parameters of each segment. So during the quarter, we operated the Tamil Nadu units, and we have -- overall crush was about 54 days during the quarter against 37 days in the corresponding quarter of the previous year. We crushed about 147,000 metric tons of cane against the 212,000 metric tons of corresponding quarter of the previous year. As far as the gross recovery is concerned, we recovered at a 7.95% against 8.02% in the corresponding quarter of the year. We produced about 12,000 metric tons of sugar during the quarter against 17,000 metric tons in the corresponding quarter of the previous year. Overall, cane landed cost is about INR 4,031 per metric ton as against INR 3,844 per metric tonne in the corresponding quarter of the previous year. This increase is mainly on account of the FRP, which has moved up in the current year at about INR 3,550. As far as the sales volume is concerned, we sold about 89,000 metric tons of the sugar and against the 56,000 metric tons in the corresponding quarter of the previous year. The average sugar selling price at INR 40.02 against the INR 40.097 in the corresponding quarter of the previous year. As far as the closing stock is concerned, we are carrying 1.1 lakh metric tons, which is valuing at about INR 42 as against the 120,00 metric tons in the corresponding quarter of the [indiscernible]. As far as the revenue is concerned, we achieved about INR 410 crores against INR 347 crores in the corresponding period of the previous year, an increase driven by the higher sales volume. So all FRPs was paid as per the time lines. As far as the cogen operations is concerned, we produced -- we generated 180 lakh units during the quarter as against 221 lakh units in the corresponding quarter of the previous year. As far as the power exports is concerned, we exported about 89 lakhs units during the quarter as against the 122 lakh units in the corresponding quarter of the previous year. As far as the power tariff is concerned, average rate realized is about INR 4.89 per unit during the quarter as against INR 3.67 per unit in the corresponding quarter of the previous year. As far as the power segment is concerned, we achieved about INR 6.6 crores during the quarter as against INR 7.53 crores in the corresponding quarter of the previous year. As far as the alcohol distillery segment is concerned, we produced about 351 lakh liters during the quarter as against 412 lakh liters in the corresponding quarter of the previous year. So we sold about 380 lakh liters against the 413 lakh liters in the corresponding quarter of the previous year. Of which 380 lakh liters, we sold about ENA 138 lakh liters and ethanol 242 lakh liters. As far as the price realization is concerned, we average price realization is at INR 63.9 per liter as against the average realization of INR 67.59 per liter in the corresponding period of the previous year. As far as Nutra is concerned, we achieved about INR 6.22 crores current quarter as against INR 6 crores in the corresponding previous quarter. At a consolidated level, turnover was about INR 61 crores as against the previous corresponding quarter of about INR 27 crores. As far as the CPG is concerned, we achieved about turnover of about INR 94 crores against the INR 188 crores in the corresponding previous year quarter. So as far as the PSRIPL refinery closure status is concerned, as we already updated in the last analyst call, -- so communication has been sent to all the statutory authorities about the closure and cessation of operations of the unit. So as far as the bank liabilities is concerned, all bank liabilities are fully settled. So as on date, there is no bank dues as on date as far as the PSRIPL is concerned. As far as the SEZ unit exit related is concerned, we received somewhere in the 20th April 2026. And we are in the process of debonding the entire unit, and that is in the process. We are expected to close by 30th September. So as far as the funding is concerned, as approved by the Board, INR 610 crores has been infused into the PSRIPL to settle all the bank obligations that have been closed. So as far as the liquidation of plant and machinery is concerned, which is in progress, subject to the approval of the SEZ unit and the de-notification of the entire site. Okay. This is the update for the Q1. Thanks for everyone. The floor is open for the questions.

[Operator Instructions] The first question is from the line of Sanjay Shah from KSA Securities.

Sir, my first question was regarding our Consumer Products division. Sir, revenue fell from INR 187 crores and -- but the loss narrowed down. So when do you expect CPG to reach quarterly breakeven? And even highlighting upon and elaborating something to understand about our evaluating into the ethnic snacks and anlimary convenience. So what is that? Is it an organic launches or is an through acquisition? And third, in the same division regarding your new Jagri plant commissioning...

Yes. Sanjay, thank you for your question. Yes, the CPG division revenue has fallen significantly. This has been on account of a recalibration of the model. So this is intentional. Our contribution margin pool, the absolute margin pool, however, has grown very well as we have focused on more margin-accretive products and a margin-accretive operating model into the market. In terms of a quarterly breakeven for this business, we are working towards another 4 or 5 quarters. We should have a quarterly breakeven on this business. That's how we've designed the new operating model. The newer categories which we are exploring, at this point in time, it's still under exploration. We could look at this both organically as well as inorganically. We are exploring both alternatives. And I think you also asked about the Jaggery plant. Plant will be commissioned in 6 months' time. It's coming up in Karnataka. It will more than double our current Jaggery capacity.

Yes. So what we expect from Jaggery turnover and margins from that side?

Jaggery, again, margins are substantially better than white sugar. White sugar, of course, there are commodity margins will command a premium. Jaggery margins are substantially better. They are more akin to gross margins you would see in food products. In terms of the turnover, once we have both plants running, we should be able to do close to INR 100 crores in terms of turnover just from both of these plants in terms of the quantum of Jaggery we would get.

So sir, should we expect CPG revenue to remain lower, but with materially lower losses? Or can both revenue and margins recover from H2?

I think if you look at the history of the CPG segment, we've had -- last year was about INR 600 crores, INR 650 crores, I think, in terms of revenue. The year prior to that was INR 800 crores, in fact. We can expect revenues to remain lower. But yes, the margin...

Ladies and gentlemen, please stay connected. The management's line has been dropped. You may proceed.

Yes. I think we just answered Sanjay's question. Sanjay, have I clarified all of your queries?

Yes. This was much on the first question regarding CP consumer product business. Now my next question was regarding Nutraceutical. Sir, how much growth is from U.S. Nutra Valensa versus India? And how -- what EBITDA and PBIT margin can nutraceutical reasonably achieve once scales normalizes?

Yes. So Sanjay, the growth is largely coming through from the Valensa business. There have been some new product launches there. And I think some of our existing segments also are doing well. That has driven the growth. From an EBITDA margin perspective, steady state is likely between 12% and 15%.

Right. Sir, my last question was regarding how we look beyond seasonal Q1 weakness. What are the 3, 4 financial KPIs, the key performance indicator by March '27 that management itself will use to judge whether disciplined approach, what we have accepted in the last few quarters is now going successful.

if you look at the -- as far as the financial KPI is concerned, we are more looking at the efficient working capital. And also, we are working on the -- how do we leverage the debt cost, okay? And also, like if you look at it as on date, we had about INR 150 crores of long-term debt, about INR 800 crores, INR 900 crores of the short-term debt or something. We are also closely working towards the monetization of all nonperforming assets or something to bring the pool into the -- cash pool into the business so that the debt levels will be lower. And also, we wanted to improve the current ratios for the business. And also, we are working towards the efficiencies on the operational side also, we are working on the efficiency. And also, we are working on the cost reduction programs across all the businesses so that we can have the leverage on the current balance sheet, and we are also trying to strengthen the balance sheet by March '27 and March '28.

Yes, Sanjay, just to add, I think Venkat articulated well. Those are the effort priority areas. We're certainly hoping to see a stronger balance sheet over the next 4 to 6 quarters. And I think this is the endeavor to tide over precisely the seasonality element. I think apart from Venkat's articulation, I think even on the Consumer Product group, we have set out certain margin KPIs, which we are well on the path towards achieving. The first quarter has been a good start. We still have some distance to go in F '27. Those margin KPIs will enable us to get to that quarterly breakeven level in the next 4 to 5 quarters.

That's helpful to understand, sir. Thank you very much.

The next question is from the line of Gautam Dedhia from Nalanda Securities.

Yes. So just wanted to understand on the nutra division now that things have stabilized over the 1, 2 years, what kind of revenues can be scaled up to.

So the growth on the nutra front is largely coming through from Valenza. I think we will see that scale improving. I don't want to give any guidance particularly. But I think we're seeing an improving -- this year. I will say that we're perhaps going to do this year is our highest ever revenue in nutra and I think consequently, EBITDA will also be healthy. But I want to refrain from giving any number guidance. What is -- what is rather working in Valensa is an organic management fee structuring and product development, which we have worked on over the last 2 or 3 years is now coming into the market, particularly on the derm help, which is hair and skin health side apart from some incumbent product categories also performing very, very strongly. So it's a good performance in Q1. We have seen the traction continue.

So this 12% to 15% margin that you've indicated is contingent on you reaching a certain scale or how does that work?

We'll have to build a bit more scale from the current levels. I think we can get to those margins at that point in time. The India business is -- we're not -- in the India business, we're not really adding any capacity. It will likely remain at the same level. a more consistent order load there. We had some certification issues. In the India business is only about 20-odd percent of the consolidated net turnover but we had some certification issues in Europe, not entirely -- not entirely up with our port -- in the past, those have been resolved. So that scale has to pick up a little bit more. But the lion's share has come from the U.S. And I think once both settle down is when we can get to these EBITDA margin level.

Secondly, on the consumer goods, when you say you want to break even in 4 to 5 quarters, what would be the drivers to that breakeven? Is it you achieving more scale on a quarterly basis or like your value mix shifting more towards value-added?

So Gautam, that's a great question, and you also partly answered it, yes, the value mix shifting more towards value-added. I think you've seen that shift play out in quarter 1. We'll see more of that play out. I think adding new products, grounds and that we onto a big area of focus. I think growing growing revenues there will contribute. I think distribution expansion, we have a -- in the Southern market, we have a good organized trade presence. And as the organized trade, I mean online channels as well as modern channels, large-format retail. The key now will be to build general trade distribution, so that the business expand. So I think these are really the KPIs, which will really drive drivers towards that breakeven expansion in distribution expansion, margin expansion, new products coming into the mix. This is what will drive. And I think the underlying -- this is a consumer business after the underlying bedrock of all of this is to strengthen brand equity.

Okay. And just last question. Can you just repeat what was the sugar inventory for the quarter? And what was the value there?

116,000 Gautam, we are valuing at about INR 41.50.

Thank you. The next question is from the line of Rajesh Majumdar from 360 ONE Capital.

So I had a few questions. The first 1 was on the inventory, which you answered. Secondly, we are seeing some drop in the rushing from Tamil Nadu and Andhra Pradesh, which you've highlighted in the notes. How do we read this? This feedstock availability? Do we see a lower crushing going on? Or do we see further restructuring in the business in Tamil Nadu how do we read this in the sugar business?

Yes, the cane availability in TN and Andhra is a concern, but it's a macro concern. If you see in the industry is suffering from TN farmers shift to more lucrative crops. There are some corrections in our organization that we take to make it more economically feasible to farmers, which is an ongoing exercise. I think the government also sees. You have seen recently some announcement on state support in Tamil Nadu for sugarcane. We keep ourselves fully aware of the situation, and we keep evaluating the scenario, take appropriate actions in that direction. What we are currently doing is to ensure we run a tight ship in terms of cost in these 2 geographies so that we improve on our margins.

And would we see a lower crush for the company because of this reason in the future season '26-'27?

In the current year, yes, probably there is going to be flat or about a 5% drop in these geographies.

The only place Rajesh, where we can make up Karnataka. But I will say the back half, while we can cure the grains in July and August, I think the rains in the back half of August and September are very critical to ensure that yields remain intact from the -- crop, particularly in Karnataka. Now the yields remain intact. And I think we all set for a strong pricing season. It will be a passing season it starts early as per what we're hearing from the authorities is given that [indiscernible] stocks are letting lower this year. But yes, the makeup can really only come from Karnataka as you've articulated the cane volume in TN & AP is much lower.

And sir, with the current increase in the cane price in TN and the lower recoveries and the problem there, does it make sense to continue in TN in terms of the sugar business already saw a few years ago. You had relocated 1 plant to Karnataka. And is there any further plans of any kind of further restructuring in the TN sugar business particularly?

I think, as articulated. We are going -- we discuss various measures of how we can be stronger on our operations. Then I think those discussions continue. I think our macro focus is really around working capital cost and efficient operations. So I think we'll really have to fall in line here in the coming quarters.

Great. My second question is on the refinery. We have seen some operations in this quarter. So will that continue in the second quarter? Or that will be not there at all on PSRIPL.

Rajesh, what you have seen in the operations is basically that there was a closing stock which was there as on 31st March. So those closing stocks have been liquid. Other than that, there is no other operations as such. The operations have been ceased as on 31 March.

Right. So from 2Q, it will be zero PSRIPL?

Yes. There will be some period cost incurring will be there that as per the plan.

And secondly, can you make me understand this write-off and then the write-back because I won't understand the cash impact of this because you invested, you are saying INR 610 crores to meet the obligations of the subsidiary. But then again, you have taken a remeasurement on the financial guarantee in loans of INR 591 crores. So I understand that, that's a noncash. So I think the cash outgo will be INR 610 crores?

Yes. Rajesh, what your understanding is correct. First, let me clarify on the what is INR 610 crores, what is the INR 591 crores. As on 31st March, being 100% subsidiary. So we have guaranteed all the loans for the PSRIPL, thereby we have to -- as a parent, we have to create a financial liability as far as the PSRIPL is concerned. So that's where we have created a liability. But -- that doesn't mean that we have infused the money as on 31st March. The actual infusion has happened somewhere in April, that investment which we have put it as a part of the infusion, which is in line with the Board approval as on 31st March. So since the business sees these operations, there is no -- there is as per the accounting requirements, we have impaired that asset. At the same time, since all obligations are completed, we have remeasured the financial liabilities and we reversed that liabilities. So net-net impact for the quarter, what you have seen is INR 610 crores is the impairment, INR 591 crores is the reversal of the impairment, about INR 18 crores is a fresh impairment, which we harden the for the quarter.

I understand the impairment part. I'm trying to understand the cash part. The cash part is still out go of INR 610 crores, right, for the....

INR 610 crores is already done. It's there in the public, Rajesh, INR 610 crores and we are [indiscernible]. Over and above that INR 55 crores loan also we have given. Total INR 665 crores, which we have infused during the current quarter to settle all the bank liabilities.

Right. You mentioned also INR 130 crores out of which you have given INR 55 crores. So balance INR 65 crores is also less, right?

Yes. INR 65 crores is left. But over a period, based on the requirement, we will be giving it. So it is not that INR 130 crores we will give at one stretch because today, if you look at it, the INR 55 crores was required for the quarter 1 we have given. If PSRIPL start generating any cash at something, then we will not be giving it.

And in terms of the assets, will we get any value out of selling the assets in that plant?

Yes. Yes, you will -- we will get cash out of selling the asset. [indiscernible] testing is already going on. Of course, we have to get all of our clearances before we can start any dismantling, but we will get value. I wouldn't like to put a number to it. I think that prospecting is certainly underway.