Balrampur Chini Mills Q1 FY27 earnings call

Balrampur Chini Mills Limited commenced Q1 FY27 on a stable note, with revenues improving across both the Sugar and Distillery segments. This performance was primarily driven by higher sugar realizations and increased distillery volumes. Despite Q1 being an off-season for sugar production, the company's profitability was supported by the realization from its previous crushing season's inventory. As of June 30, 2026, the company held a sugar inventory of 45.67 lakh quintals at an average carrying cost of INR 37.19 per kg, which management views as a favorable base for profitability in the upcoming quarters.

The company's ambitious 80,000-tonnes PLA (Polylactic Acid) plant project is progressing well and remains on track for commissioning. The Lactic Acid plant is expected to be commissioned in October 2026, followed by the PLA plant in December 2026. By the end of July, the company had already spent approximately INR 2,180 crore on the project, with construction activities, equipment arrivals, and erections in full swing. Management expressed high confidence in the project's long-term potential, suggesting it could create a 'parallel Balrampur' in the medium term.

The PLA project is poised to capitalize on the growing demand for sustainable packaging, particularly driven by regulatory changes like the ban on plastics in pan masala and gutka. Management confirmed successful technical trials and sees a 'very large market' opportunity, potentially absorbing the entire capacity. For the initial operational period from January to March 2027 (Q4 FY27), the company anticipates achieving an average capacity utilization of around 40%, with a target for even higher utilization as the new business scales.

The 2025-26 sugar season was tighter than anticipated, marked by lower production, healthy domestic consumption, and ethanol diversion, leading to a drawdown in inventory. This tight demand-supply balance has resulted in firming domestic sugar prices. For the upcoming 2026-27 season, management noted it is too early for a definitive view on production, with clarity expected around the end of September 2026, based on monsoon progress and crop development. Despite broader concerns, rainfall in Balrampur's command area has been ideal, leading to a positive outlook for their cane crop.

Distillery segment margins in Q1 FY27 were robust, primarily due to the use of B-heavy molasses and maize-based ethanol, with minimal juice-based ethanol sales. Management anticipates potential government restrictions on B-heavy and juice diversion for ethanol in the next season, expecting only C-heavy molasses to be allowed. While this might impact distillery volumes, the company believes the resulting increase in sugar production and higher sugar prices will lead to a net positive financial outcome, offsetting any potential margin pressures in the distillery segment.

Management believes that the current tight sugar inventory, which has driven prices up to INR 48-49, is tighter than market perception. They project that if diversion restrictions are maintained, the national sugar inventory could normalize to 45-50 lakh tonnes by October 1, 2027. Furthermore, they expect sugar prices to remain 'north of' the INR 43-46 levels in the upcoming years, providing a sustained favorable pricing environment for the sugar business.