Dhampur Bio Organics Limited (DBOL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Dhampur Bio Organics Limited's Q3 FY '25 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 Mr. Nalin Gupta, CFO. We'll have the opening remarks from Mr. Goel, followed by Q&A session. Thank you, and over to you, Mr. Goel.

Thank you, Navin. Good afternoon, everyone, and thank you for joining us as we review the operational and financial performance for the quarter and 9 months ended 31st December 2024. The company's results and investor presentation have been uploaded on the exchanges, and I trust you have had the opportunity to review them. I will begin by discussing the key economic and geographical factors that have influenced the sugar industry and its related segments. I will then highlight our major operational developments during the quarter before handing the call over to Nalin, who will provide a detailed update on our financial performance. To begin with the sugar sector overview, the Government of India recently permitted the export of 1 million metric tons of sugar, a move that has provided a much-needed relief to the industry. And according to the latest ISMA estimates released on the 31st of January, the gross sugar production has been revised down to 31 million metric tons. The sugar diversion is estimated at 33.75 million (sic) [ 3.75 million ] metric tons, while the domestic sugar consumption is projected to be 28 million metric tons. These measures have led to an improvement in ex-mill sugar prices, which is a welcome development for the industry. In its recent meeting, the CCEA maintained the price of ethanol derived from grains, sugarcane, syrup and B-heavy molasses, while increasing the price for ethanol produced from C-heavy molasses by INR 1.69 per liter to INR 57.97 a liter. Additionally, the government has decided to release 2.4 million tons of FCI rice at INR 22,500 per metric ton ex warehouse for ethanol production. Ethanol derived from this feedstock is priced at INR 58.50 per liter and is expected to produce 110 crore liters of ethanol. The OMCs have recently released a third tender for 124 crore liters of ethanol, which is restricted for supplies made from the above mentioned FCI rice and C-heavy molasses. The OMCs have been offered 164 crore liters, out of which 159 crore liters is with FCI rice and the balance 5 crores with C-heavy molasses against the set tender. Our company's performance highlights are as follows. In this quarter, we crushed 13.82 lakh tons of cane as compared to 14.48 lakh tons of cane during Q3 FY '24. The sugar production for Q3 FY '25 stood at 1.01 lakh tons as compared to 1.38 lakh tons for the last quarter -- for the same quarter last year. The sugarcane diversion to syrup derived ethanol for this quarter stood at 2.2 lakh tons, which was nil for last year. The net recovery for Q3 FY '25 stood at 8.72% as against 9.51% for the corresponding period last year. Q3 FY '25, our sugar sales stood at 89,252 metric tons, representing an increase of 188% or 189% from 30,948 tons in the corresponding quarter last year. The sugar realization for this quarter, this year stood at INR 38,714 a ton as compared to INR 40,142 a ton for the corresponding quarter last year. The EBIT for this quarter was INR 2.19 crores, a margin of 0.3% as against a negative EBIT of INR 0.72 crores and a negative margin of 0.17% for the corresponding period last year. For the 9 months ended FY '25, our EBIT stood at INR 6.24 crores, a margin of 0.3% this year as compared to INR 39.37 crores and a margin of 2.23% for the corresponding period last year. I now hand the call over to Nalin for an update on our financial performance. Thank you.

Thank you, Gautam. Good afternoon, everyone. I will provide an overview of our standalone financial highlights for Q3 and 9 months FY '25, followed by a discussion on our segment performance. Revenue from the operations in Q3 FY '25 stood at INR 740.5 crores against INR 424.78 crores in Q3 FY '24 last year. EBITDA in Q3 FY '25 stood at INR 16.85 crores against INR 12.89 crores in Q3 FY '24 last year. Company incurred a loss of INR 6.21 crores in Q1 -- Q3 FY '25 at after tax level against INR 4.16 crores loss in Q3 FY '24. For the 9 months ended, revenue from the operations stood at INR 2,011.92 crores against INR 1,766.54 crores in 9 months FY '24. EBITDA for 9 months FY '25 stood at INR 44.10 crores as compared to INR 74.54 crores in 9 months FY '24. We incurred a loss of INR 27.56 crores in 9 months FY '25 against a profit of INR 7.6 crores in 9 months FY '24. Coming to the segmental highlights, starting with the Sugar segment. Revenue from Sugar segment stood at INR 473.51 crores in Q3 FY '25 against a revenue of INR 237.8 crores in Q3 FY '24. EBIT in Sugar segment stood INR 14.72 crores in Q3 FY '25 against a loss of INR 9.17 crores in Q3 FY '24. We crossed sugarcane after a diverse of 2.2 lakh tons, 11.63 lakh tons in Q3 FY '25 against 14.48 lakh tons in Q3 FY '24. We produced 1.01 lakh tons in Q3 FY '25 against 1.38 lakh tons in Q3 FY '24. We sold 89,252 tons in Q3 FY '25 against 30,948 tons in Q3 FY '24. As on 31 December 2024, we had an inventory of 1.11 lakh tons of sugar, which was valued at INR 37,648 per ton against an inventory of 1.07 lakh tons, which was valued at INR 34,445 as of 31 December '23. Cost of production in Q3 FY '25 stood at INR 39,858 per ton, which has been valued at INR 37,648 per ton. Two of our units have been marked down to net realizable value, resulting in a net impact of INR 9.13 crores. Coming to the Renewable Energy segment, we generated 87.58 million units in Q3 FY '25 against 99.73 million units in Q3 FY '24. We exported 29.16 million units in Q3 FY '25 at an average rate of INR 3.44 per unit against 37.48 million units in Q3 FY '24. Coming to Biofuels & Spirits segments, revenue from this segment stood at INR 91.72 crores in Q3 FY '25 against INR 110.98 crores in Q3 FY '24. We incurred a loss of INR 88 lakhs at EBIT level in this segment against a profit of INR 7.25 crores in Q3 FY '24. Ethanol production in Q3 FY '25 stood at 156.03 lakh bulk liters in Q3 FY '25 against 195.05 lakh bulk liters in FY '24. Ethanol sales in Q3 FY '25 stood at 129.02 lakh bulk liters at an average realization of 64.02 per bulk liter against sale of 173.47 lakh bulk liters at an average realization of 58.87 per bulk liter in Q3 FY '24. Ethanol inventory as of 31st December '24 stood at 8.63 lakh bulk liters against 12.43 lakh bulk liters as on 31st December '23. In Country Liquor segment, revenue stood at INR 283.25 crores in Q3 FY '24 against INR 161.94 crores in Q3 FY '24. EBIT stood at INR 4.77 crores in Q3 FY '25 against EBIT of INR 2.86 crores in Q3 FY '24. We sold 11.51 lakh cases of Country Liquor in Q3 FY '25 against 6.87 lakh cases in FY '24. The realization, net of excise, in Q3 FY '25 stood at INR 274.67 per case against realization of INR 280.15 per case in the corresponding quarter last year. Coming to the financial position, as of 31st December long-term loans stood at INR 233 crores. We paid INR 15 crores of long-term loans during this quarter. Debt equity ratio stood at 0.24x. Net working capital stood at INR 380 crores as of 31st December 2024. We incurred interest cost of INR 10 crores in Q3 FY '25 against interest cost of INR 5.6 crores in Q3 FY '24. Increase in interest cost is mainly on account of higher working capital utilization of INR 386 crores in Q3 FY '25 versus INR 208 crores in Q3 FY '24 due to higher inventory. Both long-term and short-term ratings remain at A as assigned by Care Ratings. I now invite moderator to open the floor for the Q&A session.

[Operator Instructions] The first question is from Sanjeev Damani from SKD Consultants.

[Foreign Language] Am I audible?

[Foreign Language] Yes. [Foreign Language]

Sir, my first question is that the government has not revised the prices of ethanol made out of syrup and B-heavy. So would we be discontinuing to supply this and rather start C type of ethanol to the government because there, the prices are as high as INR 57, INR 58, sir. So I want to have your opinion on this, kindly tell me.

[Foreign Language] then I can answer all of them.

Okay, sir. The second question is that out of 1 ton of cane processed, how much syrup ethanol is made out of it? That is my second question. The third question is regarding our current position of crop availability in this season and how we estimate that how much more sugar will we be able to produce in this season? And what are the prospects for next year in the sense that have we overcome the red rot issues and have we replaced all our farms with the new variety of new seeds?

With regards to [Foreign Language] we all very disappointed -- the industry was all very disappointed government price rise [Foreign Language], which was at least the bare minimum price rise which was expected, and this is the second year when the price has not been increased. So yes, after this decision, we have had to relook at our process [Foreign Language] because of some constraint, but we have switched over to B. We were already maximizing the C as much as possible. [Foreign Language] I would imagine anything between about [Foreign Language] the yields depend on the recovery of cane, which can fluctuate from 6.5 to about 8 liters per quintal or 65 to 80 ton per ton of cane depending on the [Foreign Language]. With regard to the current position of cane crop, we do expect the cane crop [Foreign Language] cane crop is supposed to be down by about 5% to 7% in East UP. [Foreign Language] We expect the cane crop for us to be probably anything between 5% to 8% lower than last year, which could be a little bit better than our peers, but there will be a reduction for sure. With regards to the current position of red rot [Foreign Language], but we do expect about 60/70% area [Foreign Language]. By next year, we 100% replacement [Foreign Language]. [Foreign Language] with the current sugar prices and competing prices, we are not anticipating a big increase in cane planting in UP for this year. [Foreign Language]

[Foreign Language] if I can know some rough estimate.

[Foreign Language] there was some disturbance in the background.

Sorry, sir. Is it better now?

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] variation is to subject to a lot of things, sir...

But you are not too far off, Sanjeev [Foreign Language].

[Foreign Language]

[Foreign Language] refined sugar in North India was quoting at about INR 40 -- INR 40.25 [Foreign Language] So we hope that prices should remain maintained going forward.

[Foreign Language]

[Foreign Language] If you ask me from our industry perspective, if the prices go up too soon [Foreign Language].

[Operator Instructions] Next question is from the line of Suraj Khaitan from SKP Securities.

Am I audible?

Yes, Suraj.

I just wanted to know about the insights on how January has been in terms of sugarcane yield. Additionally, how do you see ethanol prices evolving going forward?

I missed the first part. What about the sugarcane yield were you interested to know?

How has been January in terms of sugarcane yield?

So the yield of sugarcane this year, plant cane should start coming in from January. If you're talking about sugar percentage per ton of cane, there has definitely been an upward movement as compared to the Ratoon cane. So, we think the differential that was in the sugar recovery should reduce going forward. The sugarcane yield for plant cane is probably a little lower than last year, not as bad as the Ratoon cane yield in our area at least. And on the ethanol, the government hasn't increased the price of ethanol. So, for next year, we will have to recalibrate our strategy and see what is the best-case scenario for us, whether we want to -- I don't think we will be looking to divert sugarcane into syrup for next year if the sugar prices and everything remains as is where is [Foreign Language] I think closer to September. [Foreign Language]

Next question is from the line of [ Falguni Dutta ] from Mansarovar Financials.

Sir, I have a few questions. First is, sir, what's the reason for the sharp decline in the Biofuels & Spirits, this profitability for 9 months from INR 40 crores to INR 7 crores. Is it just the ethanol prices?

Falguni, do you want to ask all your questions and list them down and we can answer them?

And sir, I also wanted to know what is the maximum profit that we can generate from this Country Liquor segment if things were to be like in a normal case scenario, given that we -- on a INR 660 crore turnover, the current performance is quite a bit lower. So what's the maximum that we can be achieving there?

So I think [Foreign Language] the key point this year, of course, has been the low yields of ethanol per ton of sugar because the cane was -- as we've all experienced, the recoveries have been down because of the severe red rot and pest issues. The red rot really adversely affected the recovery of cane. There wasn't enough sucrose content, and therefore, that reduced the overall availability of the total amount of yield of ethanol per ton of cane. Also, in the last Q1 -- in Q2 basically, if you remember, last year, the government had adversely -- they had stopped the diversion of ethanol. So, we all had to recalibrate our strategy and we could not produce enough ethanol. So, in Q2, we did not produce enough ethanol as compared to last year. So, these 2 things put together. And now the prices too haven't increase. So, all these things have really impacted the profitability of the biofuel sector. Now with regards to Country Liquor...

Sir, just to add to that, sir, how much do we expect that to be, let's say, for the coming year, I mean, assuming a normal cane scenario? And without expecting anything on the price front, how much can that get to?

Now this becomes a little bit regular for us now in the normal cane scenario, if the sugar prices remain where we are, there is no reason for us to now -- in North India and for us to make refined sugar to divert sugar into sugarcane into ethanol. As I was mentioning to Mr. Damani, we have, in fact, discontinued the diverting any more sugarcane into ethanol. We are better off by paying the penalty and not diverting cane into ethanol and may be making B-heavy or C Molasses. So for the coming year, if the sugar prices remain where they are, the ethanol prices haven't been increased, the merit to divert cane into ethanol will not be there. It will probably be more towards C molasses. So that is what the scenario for the coming year for North India and for a company like us looks like if the current environment continues. Now with regards to Country Liquor, you have to take the duty element out of the overall sales. There is about a 90% duty per ton -- per case of Country Liquor, the duty elements are substantially high. If you take the duty element out and if you look at the raw material price, the levy molasses price, then there is some margin, maybe a 15%, 20% margin to be enjoyed in this business. And with that margin, we do hope to continue to grow this business. We are today #6 in UP, and we hope to continue to gain some market share.

Okay. And just to clarify on your ethanol part, so you said coming year, you just do C-heavy ethanol. Am I right?

See, again, too early to say. But with the current sugarcane prices -- sorry, with the current sugar prices, ethanol prices, the merit calculation does not warrant us diverting. Now if there is a change in sugar prices or sugar outlook or the ethanol outlook, ethanol prices, we will have to recalibrate strategy, but that is still some time off. I think the new tender will come September, October. We will have to decide closer to the time over there.

And sir, finally, what do you expect the sugar cost of production to be as we end this season if we include the depreciation, but exclude the interest?

Nalin, do you want to answer that question?

So the COP for till December stood at INR 39.85 per kg. But the COP for this full season will, again, a derivation of the recovery, the kind of sugarcane we get. So, we definitely will get to see the reduction in COP going forward. But probably it will not be right to comment on the exact number here from my side, please.

Fine. Never mind, sir. And I just missed one more question, which is on this other unallocable expense, which is higher Y-o-Y. So what does that pertain to this INR 18-odd crores versus INR 1.5 crores Y-o-Y in the segment results?

So Falguni, last year, the expense on the -- unallocated expense are same on Y-o-Y basis. But last year, we had one exceptional income from the sale of property of INR 15 crores. So that is why the net expense last year was seeming to be low.

Okay. So, this quarter is normal.

Yes.

[Operator Instructions]. Next question is from the line of Manu Harikumar S an individual investor.

Am I audible?

Yes. Harikumarji, audible.

My 2 questions, sir, like the state has been increasing the price by itself apart from the central. So can the UP industry represent the government to increase the power price and the Country Liquor price because those are under the state government control. And the second question, sir, we are not presenting the power segment as a different segment, sir? That's all.

Harikumarji, what you said on the power price, we have been representing and even in Country Liquor, we have been representing. But unfortunately, the government hasn't given us any favorable outcome. We continue to represent quite really as an industry body. [Foreign Language] Now power right now -- we basically only do incidental -- we only do cogeneration and incidental cogeneration. So that is why the results have merged with the sugar business itself.

Next question is from the line of [ Udit Gupta ], individual investor.

Can you hear me?

Yes, we can now.

Sir, when is the grain-based distillery coming online?

So grain-based distillery, now we plan to get it to start operating after the season gets over as per our production plan. We should start its operation somewhere in April, early May.

And sir, we are looking at FCI rice as an input for this, like the price was recently reduced?

Yes, we have tendered for the current tender, which came out, we did participate in the tender. Now we are waiting for that to understand how much quantity will get allocated to us.

And sir, have the maize prices also come down or rice will be better with the FCI rice now reduced price?

See, this year, we can only do FCI rice because this tender is only for FCI rice and C molasses. It's not for maize. But to my understanding that the prices of maize do not -- are not very attractive, and there is a lot of other concerns with maize regarding the overall availability and things like this. So, in fact, the current tender also allowed for people to switch from maize to rice.

Okay. And sir, the current recovery [Technical Difficulty]

We lost your voice. Can you repeat your question once again?

Yes. Sir, what is our recovery right now, sir, for the season so far?

For the season so far as of January, the November numbers we have, January numbers, Udit, I think it should be higher by about, I would imagine, 0.5 percentage point. We'll just give you a number just given -- on percentage.

Sir, is it expected to improve now in the balance of this year?

Recovery is continuously improving now for plant cane that the recoveries are continuing to go up. So we do hope that we will be able to reduce the gap that we had for the first half.

All right. But we cannot go back to last year's figures.