Balrampur Chini Mills Limited (BALRAMCHIN) Earnings Call Transcript
November 12, 2025
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to Balrampur Chini Mills Limited Earnings Conference Call. [Operator Instructions] 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 FY '26 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 FY '26 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 development in the sugar sector, followed by our company's key highlights for the period under review. Production is expected to grow to about, 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 285 and then the export, the closing stock is expected to be around 6 million tons. The government has allowed exports of 1.5 million tons for the sugar season '25-'26. We welcome this move as it should provide some relief to the market and support the domestic price stability. UP government has recently announced INR 30 increase per quintal in SAP for the '25-'26 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 '25-'26 ethanol supply year, approvals on sugar sources stand for the sugar sector at INR 289 crores, accounting for only 28% of the total requirement, with balance 72% expected from grain-based feed [for] maize and rice. This should shift could leave part of the industry's ethanol capacity underutilized. While the recent export formation should help, it is equally important that the ethanol prices under juice and B-heavy 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 mill, especially in light of the significant rise in sugarcane FRP and SAP, for the builders 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. Constructive activities are advancing well. We've also commenced market development through trading of reported PLA. As of 31st October, investments of about INR 1,093 crores have been made towards the project, out of which INR 570 crores has been funded through debt and the balance from internal accruals. I'm pleased to share that the Board of Directors has declared an interim dividend of INR 3.5 amounting for a total payout of INR 70.7 crores, including taxes. 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 over to 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. So I would request the moderator to open the forum for Q&A session. Thank you.
[Operator Instructions] We take our first question from the line of Prashant Biyani from Elara Capital.
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?
So what we are doing is we have taken an internal call and Pramod, you would like to answer that?
So maybe around 10% of our cane crush would go towards juice route and maybe 25% towards the juice route and the balance towards [B-heavy route]. [Technical difficulty]
[And the balance towards B-heavy route?]
Right
And sir, has there been any communication from the government? I mean, if dealer is not a formal communication that they are evaluating any increase in ethanol price?
Yes. What I'll do is I'll, after this question, I'll answer. I'll just give a general overview. Okay. Any other questions from you? Otherwise, I'll sort of...
Yes. 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?
What I'll do is I'll begin with UP government. There has been an INR 30 rise in the SAP. So, if we see FRP, FRP has gone up 16% in the last three years. And this is UP government's first rise. I think before that was May. [Audio Gap] So, there has 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. So, the informal feeling is that INR 30 was meant for two years and maybe next year, so one simple comment is that nobody should extrapolate that this can lead to another gigantic rising, 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 relief by the government. So, 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. So, these are the four agendas we are rising with the UP government. With the central government... Yes please.
With elections coming up in Feb '27 around, would they want a reduction in country liquor quantum?
So the country liquor quantum reduction from our sector does not mean country liquor going down. There are other avenues from them to fill up. There's grain, there is probably Khandsari. And plus technically, what they are doing, they are taking excess and storing it. They have a lot of closing stock based on the previous allotments, which they picked up from us. It does not mean there is going to be a reduction in the total volume of country liquor sold. Clear? So we are lobbying on these three fronts, which can overall put together, give a decent relief in our opinion. And as I've very clearly mentioned that 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 some premium and maybe just a marginal rise in the global prices, I personally feel exports should happen. And 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 settled with stocks. And hence, it makes logical and numerical common sense for them to export. They will be saving a huge amount of interest. And if you see in the last few days, farmer education, et cetera, both the CMs of Maharashtra and Karnataka have very heavily lobbied with the central government, which brings me to my next point is we are very hopeful in the ethanol price rise. The quantum, et cetera, is not known. But yes, definitely, one is seeing, 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 rise in ethanol price. At some point, even I think the MSP dialogue may result in some, give some results there. So one is UP government, I've told you, one is central government. So together with both these sort of understanding the package, whatever you want to call it, correction of what they should have done earlier, et cetera, et cetera, 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, we are hoping for a 7% to 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. So 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. So I've covered the UP government, I've covered the central government. I've covered the company's own expectation on crushing and recovery. So this I thought will come up from various ends. So I thought it sort of my duty to clearly spell it out there.
And sir, just last 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 a single installment.
We'll take our next question from the line of Sanjay Manyal from DAM Capital. There is no response, so we move on to the next question from the line of Shailesh Kanani from Centrum Broking.
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?
For the ethanol year '25, '26, we are expecting around INR 28-odd crores of ethanol including.
Just a route-wise breakup as well in that?
Maybe around INR 9 crores from juice INR 12 crores from B-heavy, 3 crores plus maize, 3.5 crores country liquor. Maybe 1 crore CAV.
So just one more question. Sir, just a qualitative question. Regarding the PLA initiative, although it's still in early stage, but we have already commenced market supply, right? So what are the initial takeaways or insights from the interactions what we have having with the clients? Do they align or differ from our original assumptions on product development? And any qualitative observations you would like to share, which can be useful to us to understand this further?
Okay. Thank you. So I'll try and deal with that. Avantika would explain this better, but she's in Delhi for PLA-related meetings. So let's understand what is the road map of this. So current consumption maybe 30,000, 40,000 tons per year based on the sort of import data, Pramod this import of PLA, not PLA mix.
Embedded PLA quantity.
Not embedded PLA quantity, which is PLA compounds, let's call it PLA compounds. So our reaction with the customers is everybody wants to do it, but they are saying where is your production. So that's when we began the import. We are dialoging, et cetera. So demand is going to come from two things. One is direct dialogue with the customers, which is happening. Two is mandate. So 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 add infinite term 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. And 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. And even people are tracking PLA prices and Pramod give me the data, et cetera. The issue is, let's be clear, we are making it very clear that there must be some parity. So let's say, today, India cane price is higher than a Brazilian cane price by miles or by Thailand cane price or let's say, China. So there must be a level playing ground by MIP or QCO or whatever, antidumping, et cetera. We are hopeful on all fronts. So 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.
[Operator Instructions] We'll take our next question from the line of Sanjay Manyal from DAM Capital.
My line was dropped in between, so I'm not sure if you have answered this question or not.
We are able to hear you, we are absolutely with your question.
So what I understand broadly that there is an industry-wide ethanol capacity of 1,900 crores to 2,000 crores liters. And now total demand, including the ENA and rectified split should not be more than INR 1,500 crores. So 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. And given the fact that we are not getting ethanol price at least from last two years and there's no visibility even for the current year, what kind of a normative margins, EBITDA per liter margins can we achieve with the entire sugarcane sort of feedstock?
So Sanjay, I think INR 1,800 crores 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 in which the plant needs to be shut down for normal repairs and maintenance. Even if you assume that 80% is the effective capacity utilization, that means around INR 1,400 crores, INR 1,450-odd crores of production capacity. So that is currently taking care of the ethanol requirement as well as the other segment. 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. So it will not be possible for us to give us a product-wise margins in the Distillery.
Let me explain the problem is in the grain side. So if mills have not got full order, like what we bid, we've got our entire capacity order in that. The juice, we are filled full. What we did not get is our maize. So we , I'm just clarifying, we bid for, let's say, INR 5 crores, maize, we got INR 3 crores. So maize has been underutilized, maize has got 60%. So 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'm hoping some more orders should come to the sugar sector. Balrampur is full, two others maybe. So that may help some further diversion down the line. And we are dialoging and that is the point I think you were making that sugar sector should have some reservation. So if government is to take INR 1,050 crores a year and the E22 mandate takes a couple of years to come, in the interim, INR 450 crores, which is at least 45% to 50% should be allotted to the sugar sector and should be kind of half-half split between the two sectors. Because this sector, see, what have you done? If diversion was higher, probably wouldn't have needed exports. If you didn't need export, you're not sort of uneasy as to what will happen to the surplus. There would be no surplus. So 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. And two is we also remain hopeful of going ahead in times to come, getting a much larger portion of the price for the sugar side. Have I explained myself well?
Yes, sir. That's quite helpful, actually. And I have last question on the PLA front. So I think you mentioned that you have started importing some quantities. But what is the response from the customers or client? And 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 on stream? Or have we got the visibility that this capacity will be utilized to an optimum level once we are on stream?
So we are in a trial stage with a lot of customers, whereby they have given, let's say, yes, they want to not do a trial of the product. There are some trials required at their end also for them to give visibility of a large one or a meaningful application, let's say. So we are doing trials with various people, including, let's say, even government bodies. So I'll wait for Avantika, and I'll wait for a little more visibility. So 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, which we are very confident. So let's say, mandate and let's say, large buyers, we are dialoguing with both the meaningful side and even small buyers.
And if I may just squeeze in one, if you can just give a regular update on what kind of, because I think crushing must have started at least with a few mills in Eastern UP as well. So if it is possible to give an update what kind of recovery and crushing numbers we are expecting?
Sanjay, I did mention we are expecting a 7% to 8% increase in Balrampur's crushing, quantum-wise, which is helpful for everything for both power, sugar and ethanol business. And East UP has not yet begun. Yesterday, we began our first factory. So give it a little more time, but definitely expects an improvement in recovery, definitely.
We'll take our next question from the line of Nitin Awasthi from InCred Research.
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 you call sugarcane or other feedstocks have gone haywire because of government intervention. And I don't see government having the capability of reducing the prices going ahead. So there has to be steps taken to increase the profitability without dropping the prices. One such step which seems possible is that the UP MA 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. So you are talking of deregulation for the country liquor sector for sugar mills.
Yes. Sugar mills have to be profitable.
Yes. I do understand the question. So as I said in the opening remarks, there will be some reduction, hopeful again because in the percentage and some improvement in the price. And 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. Understand our Chief Minister is a man who is here and leg on the ground. There is nobody who understands the ground reality better than. We have dialogue with him. We are hopeful, things should play out in a much better fashion.
And on the cost front, last year, our cost of production of sugar was 35.5%. This year, we are expecting a better cane availability, which will reduce the fixed overhead cost incidents. 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. So 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.
We'll take our next question from the line of Krishan Parwani from JM Financial.
Sir, a couple of questions. Firstly, on the PLA business. So when is your internal estimate of EBIT level breakeven for the plant?
So we are expecting commercial production to commence in October, right? So I really don't 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.
It takes a little more time. But yes, not very much more.
We are not expecting any loss in the first year also.
So we are working on the product side so that whatever is made is sold.
Understood. No, because coming [Break] So my point was like because of INR 2,800 crores kind of a gross block, our depreciation at a 5%, 6% depreciation rate could be in the range of INR 150-odd crores or so. So when I meant by EBIT level breakeven is in like EBITDA of INR 150 crores, INR 150 crores getting offset with the depreciation, so EBIT level breakeven. 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, these three, four months, Pramod, my view is we should forget. In terms of, forget means we hope to reach 100% of the capacity, the absolutely world-class quality and make our market. So I think two, three, four months will go in that. And we see a product like this, I don't think it globally also has taken lesser time. But that having happened. Let's say, 27 March onwards, I think we should fly. And these are my personal views since you asked for it. And as we always say what I always say, this is something new for us, but it's not without research, not without global precedents, not without understanding.
Secondly, on the traditional business, just a couple of kind of points. And apologies if you have already answered since I joined the call. So on this quarter, we had a sharp jump in the grain-based ethanol. So will we see this trend continuing given the grain-based pricing is higher, but I think the margins are lower. So how will the trend be?
So see, there will be a much better profitability on the grain side.
So in the ethanol you are gone by, we did around 4 crores 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. So rice will definitely have a lower margin than the margin in maize.
But the margin in maize per liter will be higher than last. But if you take your fixed cost, obviously.
Understood. And the last bit on the sugar exports. So do you expect a meaningful jump for you particular, Balrampur particular? Because I think last year, the allowance was higher, but the actual exports were lower. So 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?
So but obviously, we will not be exporting. As I said in the beginning, the jump in production in Maharashtra and Karnataka. So I'm personally of the view and we have the view that they will definitely export. So give it some more time, and I think export will happen.
And this year, we will get larger period, longer period to achieve. Last year's announcement was in January. Third week of January.
So this is before you begin production, you've got the announcement. So things will play out. And I always believe to improve like 280 lakh tons, 15 lakh tons is what, 6%. So to improve 94% of your line, 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 emotions, I think it should happen.
Thank you. [Operator Instructions] 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. And next three months should give us 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.
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