Balrampur Chini Mills Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

Balrampur Chini Mills reported strong performance in its sugar segment for Q3 FY25, driven by improved margins, while the distillery segment faced challenges due to lower recovery and unchanged ethanol prices. The company provided a detailed update on its ambitious PLA project, with revised capex figures and a clear commissioning timeline. Management expressed concerns over ethanol pricing but highlighted robust sugar demand and prices.

Highlights

  • Sugar segment delivered strong results with improved margins.

  • PLA project remains on schedule for October 2026 commissioning, with enhanced capacity from 75,000 to 80,000 tons.

  • PLA project's net cost reduced to ₹1,750 crore after capital subsidy, with targeted EBITDA margins of 35%+ and revenue of ~₹2,000 crore at full capacity.

  • Company's sugar recovery, despite a 48 bps drop, is showing an uptrend and is strong compared to the state average.

Concerns

  • Distillery segment faced challenges due to lower recovery and reduced Pol%, leading to a loss in the quarter.

  • Disappointment regarding the unchanged ethanol price, making diversion unattractive and potentially jeopardizing the government's program.

  • Sugar inventory valued at ₹38.26/kg against a costing of ₹41.21/kg for the quarter, indicating an inventory loss.

Key financials

2 periods

Headline

  • Sugar Inventory Valuation
    ₹38.26/kg
  • Sugar Recovery Drop (Company)
    -0.005 decimal fraction

Q3

  • Sugar Costing
    ₹41.21/kg

What they filed

Q1 FY27: revenue up 6.2%, net profit down 15.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,298 1,192 1,504 1,542 1,671 +29%1,454 +22%1,604 +7%1,637 +6%
EBITDA49 124 365 134 120 +145%202 +63%285 −22%114 −15%
Net profit67 70 229 52 54 −19%113 +61%160 −30%44 −15%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Sugar Segment
    strong results qualitative Performanceimproved qualitative Margin
  • Distillery Segment
    faced challenges qualitative Performancelower qualitative Recoveryreduced qualitative Pol%loss qualitative Quarter Result

Capital allocation

high confidence
  • Capex Capex disclosed Raised — detailed engineering and optimization · ₹1,650 crore through long-term debt and ₹1,200 crore from internal accruals
    • PLA project gross cost ₹2,850 Cr
    • PLA project net cost (after capital subsidy) ₹1,750 Cr
    • Capital subsidy for PLA project ₹1,100 Cr

    Previously planned ₹2,000 Cr

    Our PLA project remains on schedule, with the UP government's bioplastic policy further enhancing its viability. The board has approved a capex of Rs. 2,000 crore, which was previously estimated. These figures were calculated before detailed engineering, which did take time. Now, based on a complete capex and opex review, our project cost stands at Rs. 2,850 crore gross or Rs. 1,750 crore net, with an expected capital subsidy of around Rs. 1,100 crore. This higher investment will lead to an enhancement of capacity from 75,000 to 80,000 tons and a much lower conversion cost than envisaged. ... The project cost is expected to be funded through long-term debt of Rs. 1,650 crore and Rs. 1,200 crore from internal accruals.
  • Debt Net cash ₹1,200 Cr Maturity: ₹89 crore payable annually in next two years for existing long-term debt
    • New borrowing Borrowed for PLA project within December ₹325 Cr
    • Repayment Repayment of existing long-term debt by March 2025 ₹22 Cr
    • Rate reset Cost of loan reduced by 25 basis points on some portion due to repo rate drop
    Yes. So, long term, we borrowed around Rs. 325 crore for the purpose of PLA within December, and our existing long-term debt is Rs. 200 crore. Out of this Rs. 200 crore, Rs. 22-odd crore will be repaid within March 2025. Thereafter, Rs. 89 crore is payable on an annual basis in next two years.
  • Liquidity Cash ₹1,200 Cr Net of cash and cash equivalents, ranging from ₹1,200 crore to ₹1,300 crore.
    The figure as of now is net of cash and cash equivalents it should be around Rs. 1,200 crore to Rs. 1,300 crore.

Guidance & targets

Sugar Production

  • Indian Sugar Production (net of diversion) Sugar Production · current season · High confidence 272 lakh tonnes

    Previously 320 lakh tonnes → 272 lakh tonnes

    According to latest ISMA estimates, Indian sugar production net of diversion to ethanol is in the region of 272 lakh tonnes. This is down from 320 lakh tonnes, reflecting a 15% decline.

    — Vivek Saraogi

  • Company Sugar Production Sugar Production · this year · High confidence 9.4-9.5 lakh tonnes
    As far as the sugar production is concerned, for this year the sugar season looks like we will be doing around 9.4 lakh tonnes to 9.5 lakh tonnes.

    — Pramod Patwari

Sugar Diversion

  • Sugar Diversion to Ethanol Sugar Diversion · current season · High confidence 37.5 lakh tonnes

    Previously 20 lakh tonnes → 37.5 lakh tonnes

    Sugar diversion is expected to be at 37.5 lakh tonnes as against 20 lakh tonnes last season.

    — Vivek Saraogi

Sugar Production (UP)

  • UP Sugar Production Sugar Production (UP) · current season · High confidence 93 lakh tonnes

    Previously 104 lakh tonnes → 93 lakh tonnes

    UP's production is expected to fall from 104 lakh tonnes to 93 lakh tonnes, primarily due to red-rot infestation and ongoing varietal replacement.

    — Vivek Saraogi

Sugar Production (Maharashtra)

  • Maharashtra Sugar Production Sugar Production (Maharashtra) · current season · High confidence 85 lakh tonnes

    Previously 110 lakh tonnes → 85 lakh tonnes

    Maharashtra is likely to produce 85 lakh tonnes, a sharp decline from 110 lakh tonnes.

    — Vivek Saraogi

Sugar Production (Karnataka)

  • Karnataka Sugar Production Sugar Production (Karnataka) · current season · High confidence 45 lakh tonnes

    Previously 52 lakh tonnes → 45 lakh tonnes

    While Karnataka is expected to see a drop in production from 52 lakh tonness to 45 lakh tonnes.

    — Vivek Saraogi

Sugar Supply

  • Total Sugar Supply Sugar Supply · current season · High confidence 352 lakh tonnes
    Total supply for the current season is expected to be 352 lakh tonnes, that is 272 lakh tonnes production plus 80 lakh tonness opening stock.

    — Vivek Saraogi

Sugar Consumption

  • Domestic Sugar Consumption Sugar Consumption · current season · High confidence 280 lakh tonnes
    With domestic consumption estimated at 280 lakh tonnes and export of 10 lakh tonnes, we deduct 290 lakh tonnes from 352 lakh tonnes, the closing stock is expected to be around 62 lakh tonnes by the end of the season.

    — Vivek Saraogi

Sugar Exports

  • Sugar Export Quota Sugar Exports · current season · High confidence 10 lakh tonnes
    The government's approval of 10 lakh tonnes of exports has provided some relief to the millers.

    — Vivek Saraogi

Sugar Closing Stock

  • Closing Sugar Stock Sugar Closing Stock · end of season · High confidence 62 lakh tonnes
    the closing stock is expected to be around 62 lakh tonnes by the end of the season.

    — Vivek Saraogi

Sugar Crushing

  • Crushing Number Decline Sugar Crushing · crushing season · Medium confidence -0.03
    our drop in crushing will not be, too early, and should not exceed 3%, based on our current figures.

    — Vivek Saraogi

Sugar Recovery

  • Recovery Drop (Company) Sugar Recovery · current season · Medium confidence -0.004
    even if we expect a drop of 0.4% or 0.35%, except for Dalmia, whose recovery is slightly lower than last year, the others are much lower than us.

    — Vivek Saraogi

PLA Project

  • PLA Project Commissioning PLA Project · October 2026 · High confidence October 2026
    The commissioning schedule remains on track for October 2026.

    — Vivek Saraogi

  • PLA Project Capacity PLA Project · full capacity · High confidence 80,000 tons

    Previously 75,000 tons → 80,000 tons

    This higher investment will lead to an enhancement of capacity from 75,000 to 80,000 tons and a much lower conversion cost than envisaged.

    — Vivek Saraogi

  • PLA Project Revenue PLA Project · full capacity · Medium confidence ₹2,000 crore
    At full capacity, the project is expected to generate ~Rs. 2,000 crore in revenue, with EBITDA margins, though it's still early, we are targeting 35% plus.

    — Vivek Saraogi

  • PLA Project EBITDA Margin PLA Project · full capacity · Medium confidence 35%+

    — Vivek Saraogi

Ethanol Volume

  • Alcohol Volume (Total) Ethanol Volume · FY25 · High confidence 21.5-22.5 crore liters

    Previously 28 crore liters → 21.5-22.5 crore liters

    For FY25 it looks like alcohol volume will be in the region of around 21.5 crore to 22.5 crore, including ENA and everything. ... Yes, so total is around 28 crore liter, considering Rs. 3 crore towards ENA, so around 25 crore liter will be ethanol for EY25.

    — Pramod Patwari

  • Ethanol from Grain Ethanol Volume · this ethanol year · High confidence 4 crore liters
    And our target is around 4 crore liter during this ethanol year.

    — Pramod Patwari

Export Quota

  • Export Quota Allocation Export Quota · over five months starting March · High confidence 31,000 tonnes
    So, our export quota was around 31,000 tonnes. We have traded our export quota, and we retain our domestic release, so we will be getting the domestic release of this 31,000 tonnes over a period of five months beginning from March, so there is an upside in the domestic.

    — Pramod Patwari

What to watch in Q4 FY25

PLA Project Commissioning

next quarter
Current On track for October 2026
Target Continued progress towards October 2026 commissioning

Why it matters

Successful commissioning of the PLA project is crucial for new revenue streams and diversification.

The commissioning schedule remains on track for October 2026.

Risks & concerns

  • Ethanol Pricing Policy

    high

    Recent decision to keep ethanol prices unchanged is disappointing and makes diversion unattractive, potentially jeopardizing the government's ethanol program.

    On the ethanol front, there has been a disappointment. The tender was floated as usual, in November. However, the recent decision to keep the price unchanged or without any hike has been very disappointing. This is a deviation from the past practice of linking ethanol prices to the hike in FRP. We have raised this issue strongly with the government. This will make the diversion unattractive, and we will continue to address it vigorously through the industry association. We believe this could put the government's program in jeopardy.

    Management acknowledged

  • Distillery Segment Profitability

    medium

    Lower recovery, reduced Pol%, increased raw material costs, and inflationary pressure on conversion costs are muting distillery margins.

    Distillery segment, however, faced challenges due to lower recovery induced impacted by reduced Pol%. ... Distillery margin will surely be muted in comparison to last year for previous years because of the continuous increase in the raw material cost and no increase in the realization. In addition to the raw material cost, there is an inflationary pressure also on the conversion cost.

    Management acknowledged

  • Sugar Inventory Valuation Loss

    low

    Q3 sugar inventory valued below cost (₹38.26/kg vs ₹41.21/kg costing) due to short crushing period, expected to normalize in Q4.

    Yes, for the quarter our sugar costing is Rs. 41.21/kg and we have valued the sugar inventory at Rs. 38.26/kg. So, this is the phenomena every year because in Q3 we get ~40-45 days of crushing, so this cost will, on a full year basis, will come down because next quarter we will have 90 days of crushing.

    Management acknowledged

Q&A highlights

7 direct
PLA Project Capex Increase Direct
The capex initially envisaged was for the go-ahead of the project, based on the feasibility study, and was considered a Level 5 capex estimate, which can have a variation of +/-50%. Now, we are at a Class-2 estimate, where the variation should not exceed 10%.

Analyst questioned the significant increase in PLA project capex (40% higher), and management explained it was due to moving from a preliminary Level 5 estimate to a more precise Class-2 estimate after detailed engineering, which also optimized the project.

Asked by Sanjay Manyal

PLA Project Subsidies and EBITDA Margin Partial
So, as far as 35% margin is concerned, surely, we have taken into consideration the capital subsidy and the interest submission, but SGST net reimbursement as of now has not been factored into it.

Analyst inquired if the targeted 35% EBITDA margin for the PLA project included subsidies. Management confirmed capital subsidy and interest subvention were included, but SGST reimbursement was not yet factored in, implying potential for even higher margins.

Asked by Sanjay Manyal

Distillery Segment Margin Outlook Direct
Distillery margin will surely be muted in comparison to last year for previous years because of the continuous increase in the raw material cost and no increase in the realization. In addition to the raw material cost, there is an inflationary pressure also on the conversion cost.

Analyst asked about the impact of increased sugarcane costs and unchanged ethanol prices on distillery margins. Management confirmed margins would be muted compared to previous years due to rising raw material and conversion costs.

Asked by Sanjay Manyal

Ethanol Production Shift (B-heavy to C-heavy) Direct
we have converted two of our units from B-heavy to C-heavy, immediately, after the zero increase. And post the export, sugar production will become attractive.

Analyst questioned the impact of unchanged ethanol prices on distillery volumes. Management stated they reacted by converting two units from B-heavy to C-heavy production, indicating a strategic shift towards sugar production due to better economics.

Asked by Vikram Suryavanshi

Sugar Inventory Loss Direct
for the quarter our sugar costing is Rs. 41.21/kg and we have valued the sugar inventory at Rs. 38.26/kg. So, this is the phenomena every year because in Q3 we get ~40-45 days of crushing, so this cost will, on a full year basis, will come down because next quarter we will have 90 days of crushing.

Analyst asked about any inventory loss. Management confirmed an inventory valuation below cost for Q3, attributing it to the short crushing period in Q3, and expected it to normalize with longer crushing in the next quarter.

Asked by Vikram Suryavanshi

PLA Project End-Use Applications and Market Direct
So, basically, the SUP ban is one of the main kickers for us, because now those products are very easily made with PLA. We are looking at all the applications. And it's not an R&D in the sense that everything is possible, we are just sort of working with multiple people. If you ask me who exactly are we selling to, I do not know, but I am working with 10 people on 10 applications to see which one gives us the highest revenue actually.

Analyst questioned the end-use applications and market for PLA. Management highlighted the SUP ban as a key driver and stated they are actively exploring multiple applications to identify the highest revenue opportunities, indicating a strong market potential.

Asked by Deepak D.

PLA Project Cost Competitiveness Direct
if you are asking me for a straight answer pellet to pellet cost, then PLA cost almost double of normal plastic. Now because of our optimizations and everything, let us see where we get to. But in my opinion, I am not really looking at it being a challenge to be sold at the price that I would like.

Analyst raised concerns about PLA's cost competitiveness against normal plastic. Management acknowledged PLA's higher cost but expressed confidence in its marketability due to optimizations and the SUP ban, suggesting a focus on value-added applications.

Asked by Deepak D.

Sugar Recovery Trajectory Direct
Rajesh ji, firstly, last year our recovery was quite up as compared to the year before that. So, the varieties are definitely performing, its agro climatic conditions which happen and some other changeovers which farmers do at a local level, but largely these are agro climatic factors. I would not be surprised if next year the recovery would again be up.

Analyst asked about the timing of recovery benefits from varietal changes. Management clarified that while varieties are performing, current recovery drops are mainly due to agro-climatic factors, with expectations for recovery to improve next year.

Asked by Rajesh Majumdar

2 min read 5 chapters

Detailed narrative

Sugar Segment Performance and Outlook

The sugar segment delivered strong results in Q3 FY25, supported by improved margins. Indian sugar production net of diversion is estimated at 272 lakh tonnes, a 15% decline from 320 lakh tonnes last season, primarily due to lower cane yields in UP, Maharashtra, and Karnataka. Despite this, overall sugar availability is deemed sufficient, with a closing stock expected around 62 lakh tonnes. The company's sugar recovery, though down by 48 bps, is showing an uptrend and is considered strong relative to the state average, with expectations for further improvement.

Distillery Segment Challenges and Ethanol Policy

The distillery segment faced challenges in Q3 FY25, primarily due to lower recovery and reduced Pol%, leading to a loss for the quarter. Management expressed significant disappointment with the government's decision to keep ethanol prices unchanged, which makes diversion to ethanol unattractive and could jeopardize the ethanol blending program. The company has shifted two units from B-heavy to C-heavy production to prioritize sugar, and FY25 alcohol volume is projected to be 21.5-22.5 crore liters, down from 28 crore liters in the previous year.

PLA Project Update and Enhanced Vision

The Poly Lactic Acid (PLA) project remains on schedule for commissioning by October 2026. The project's gross cost has been revised upwards to ₹2,850 crore (from an initial estimate of ₹2,000 crore) after detailed engineering, but the net cost is ₹1,750 crore after an expected capital subsidy of ₹1,100 crore. This increased investment will enhance capacity from 75,000 to 80,000 tons and is projected to generate ~₹2,000 crore in revenue with over 35% EBITDA margins at full capacity. The company is actively exploring diverse end-use applications, driven by the Single-Use Plastic (SUP) ban.

Capital Structure and Funding

The PLA project is being funded through ₹1,650 crore of long-term debt and ₹1,200 crore from internal accruals. The company borrowed ₹325 crore for the PLA project in December. Existing long-term debt of ₹200 crore will see ₹22 crore repaid by March 2025, with ₹89 crore payable annually over the next two years. The company maintains a strong liquidity position, with net cash and cash equivalents estimated between ₹1,200 crore and ₹1,300 crore. The cost of debt on some existing loans has decreased by 25 basis points due to lower repo rates.

Market Dynamics and Inventory Management

Current sugar prices in UP and the company's mills are upwards of ₹41/kg. For Q3, the sugar inventory was valued at ₹38.26/kg against a costing of ₹41.21/kg, resulting in an inventory loss. Management clarified this is a seasonal phenomenon due to the short crushing period in Q3 and expects the cost to normalize in Q4 with a longer crushing season. The company has an export quota of 31,000 tonnes, which will be released over five months starting March 2025, providing an upside in domestic sales.

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