Balrampur Chini Mills Limited

The PLA project's total cost has been revised upwards by INR 230 crore, bringing the new total to INR 3,080 crore from the initial INR 2,850 crore. This overrun is primarily attributed to increased costs of key construction materials, global supply chain disruption^🌐s, adverse forex movements (Euro moved from 90 to 110), and certain refinements in engineering and design. Management also noted that some costs were inflated due to suppliers demanding higher prices for timely delivery, which they referred to as 'blackmail'.

Balrampur Chini has approved an investment of INR 160 crore for a new lactogypsum processing plant at Kumbhi. This facility will convert lactogypsum, a synthetic by-product of the PLA manufacturing process, into gypsum boards. The plant is projected to have an annual production capacity of approximately 76 lakh boards and is expected to commence commercial production within 18 months. This initiative is anticipated to generate an annual revenue potential of INR 150 crore and has an estimated payback period of 5 years.

To support the increased project outlays and ensure financial flexibility, the Board approved a preferential allotment of equity shares worth INR 450 crore. Promoters will participate in this fundraise, maintaining their 43% stake, which amounts to approximately INR 193 crore. Additionally, an enabling resolution was passed to raise debentures of INR 200 crore. These funds are intended to cover the INR 390 crore combined outlay for the PLA overrun and the new lactogypsum plant, provide adequate liquidity for cane purchases, maintain credit ratings, and avoid potential ratio breaches.

The lactogypsum plant is viewed as a highly compelling initiative that monetizes a by-product, enhances operational efficiency, and creates a new revenue stream. It also reinforces the company's sustainability agenda by embedding circular economy principles, converting waste into value-added products. This move is strategically aligned with past successes, such as converting bagasse into co-generation, to avoid dependence on external disposal options and potential 'blackmail' situations.

Despite the cost overrun, the PLA project commissioning remains on track for Q3 FY27. Management confirmed that the revised project cost would still be eligible for the 50% capital subsidy under the Uttar Pradesh bioplastic policy, which does not curtail investment based on project size. This subsidy is expected to significantly offset a portion of the project's capital expenditure.