Dhampur Bio — Q3 FY25 earnings call

Call held 6 Feb 2025

Management summary

Dhampur Bio Organics reported a significant increase in revenue for Q3 FY25, driven by strong sugar sales and Country Liquor segment growth. However, the company posted an overall net loss, primarily due to challenges in the Bio-Fuels & Spirits segment, including lower ethanol production and unrevised prices. Management highlighted issues with cane crop recovery and increased working capital costs.

Highlights

  • Revenue from operations increased to ₹740.5 crores in Q3 FY25, up from ₹424.78 crores in Q3 FY24.

  • EBITDA increased to ₹16.85 crores in Q3 FY25 from ₹12.89 crores in Q3 FY24.

  • Sugar sales volume surged by 188% YoY to 89,252 metric tons in Q3 FY25.

  • Sugar segment EBIT turned positive to ₹14.72 crores in Q3 FY25, compared to a loss of ₹9.17 crores in Q3 FY24.

  • Country Liquor segment revenue grew to ₹283.25 crores in Q3 FY25 from ₹161.94 crores in Q3 FY24, with EBIT rising to ₹4.77 crores from ₹2.86 crores.

Concerns

  • The company reported a net loss of ₹6.21 crores in Q3 FY25, compared to a loss of ₹4.16 crores in Q3 FY24.

  • Bio-Fuels & Spirits segment incurred an EBIT loss of ₹88 lakhs in Q3 FY25, down from a profit of ₹7.25 crores in Q3 FY24.

  • Ethanol production declined to 156.03 lakh bulk liters in Q3 FY25 from 195.05 lakh bulk liters in Q3 FY24.

  • Net sugar recovery for Q3 FY25 decreased to 8.72% from 9.51% in the prior year.

  • Interest cost increased to ₹10 crores in Q3 FY25 from ₹5.6 crores in Q3 FY24, driven by higher working capital utilization.

Key financials

  1. Revenue from Operations ₹740.5 Cr +74.3%YoY
  2. EBITDA ₹16.85 Cr +30.7%YoY
  3. Loss After Tax ₹-6.21 Cr
  4. EBIT (Company) ₹2.19 Cr
  5. Sugar Sales Volume 89,252 metric tons +188%YoY
  6. Ethanol Production 156.03 lakh bulk liters -20%YoY

What they filed

Q1 FY27: revenue up 4.5%, net profit up 300.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue466 486 464 530 526 +13%441 −9%472 +2%554 +5%
EBITDA-9 16 98 12 -7 +22%39 +144%80 −18%11 −8%
Net profit-22 -6 40 -19 -16 +27%14 +333%46 +15%38 +300%
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

SegmentRevenueEBIT
Sugar₹473.51 Cr₹14.72 Cr
Renewable Energy——
Bio-Fuels & Spirits₹91.72 Cr₹-0.88 Cr
Country Liquor₹283.25 Cr₹4.77 Cr

Capital allocation

high confidence
  • Capex Capex disclosed
    • Grain-based distillery commissioning
    • Ability to make C molasses in all units
    • Augmenting Country Liquor bottling capacities
    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 end April, early May. The only other capex that we see for ourselves is on the Country Liquor segment, as and when we are able to gain market share, we will have to augment our bottling capacities. So we are already augmenting some capacity right now as we speak. The only difference is, as I was mentioning before, this year, we could not divert some of our capacity into C molasses. So some capex would probably go in small amounts into making us giving us the ability to make C molasses in all our units.
  • Debt Debt disclosed
    • Repayment Paid long-term loans during the quarter ₹15 Cr
    Coming to the financial position, as of 31st December long-term loans stood at INR233 crores. We paid INR15 crores of long-term loans during this quarter. Debt equity ratio stood at 0.24x. Net working capital stood at INR380 crores as of 31st December 2024. We incurred interest cost of INR10 crores in Q3 FY'25 against interest cost of INR5.6 crores in Q3 FY'24. Increase in interest cost is mainly on account of higher working capital utilization of INR386 crores in Q3 FY'25 versus INR208 crores in Q3 FY'24 due to higher inventory.

Guidance & targets

Cane Crop

  • Cane crop reduction Cane Crop · this year · Medium confidence 5-8% lower than last year
    We expect, for us the cane crop 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.

    — Gautam Goel

Sugar Production

  • Sugar production (Jan onwards) Sugar Production · Jan onwards · Medium confidence around 2.7 Lakh tons
    Your estimation is not too far off from ours.

    — Gautam Goel

Ethanol Strategy

  • Diversion strategy for next year Ethanol Strategy · next year · High confidence Not diverting sugarcane into syrup if sugar prices remain
    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 it is.

    — Gautam Goel

Grain-based Distillery

  • Operation start date Grain-based Distillery · after the season · High confidence end April, early May
    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 end April, early May.

    — Gautam Goel

Capex

  • Overall capex cycle Capex · this financial year · Medium confidence fairly moderate
    But overall, we see the capex cycle for this financial year to be fairly moderate.

    — Gautam Goel

What to watch in Q4 FY25

Grain-based distillery commissioning

end April, early May
Current Under construction
Target Commercial operations

Why it matters

Successful commissioning will add new capacity and feedstock flexibility for ethanol production, impacting the Bio-Fuels & Spirits segment's future performance.

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 end April, early May.

Risks & concerns

  • Unrevised ethanol prices for syrup and B-heavy molasses

    high

    Government's decision not to increase ethanol prices impacts the profitability and diversion strategy for the Bio-Fuels & Spirits segment.

    Both acknowledged

  • Red rot and pest issues affecting cane recovery

    high

    Lower sucrose content and overall cane yield due to red rot have adversely affected sugar and ethanol production.

    Management acknowledged

  • Increased working capital utilization and interest costs

    medium

    Higher inventory levels led to increased working capital needs and a rise in interest expenses for the quarter.

    Management acknowledged

  • Expected reduction in cane crop for the year

    medium

    The cane crop is expected to be 5-8% lower than last year, impacting raw material availability for sugar and ethanol production.

    Management acknowledged

Q&A highlights

8 direct
Ethanol pricing and diversion strategy Direct
With regards to the ethanol industry, it was all very disappointed that government didn't provide the price rise, which was at least the bare minimum price was expected, and this is the second year when the price have not been increased. So yes, after this decision, we have had to relook at our process aur jo hamne syrup ki quantities commit kari thi usko humlog C-heavy me puri tarike se switch over nhi kar paye because of some process constraint, but we have switched over to B-heavy. We were already maximizing as much as possible.

Reveals management's disappointment with government ethanol pricing policy and its impact on diversion strategy, leading to higher sugar production.

Asked by Sanjeev Damani

Cane crop health and future planting Direct
We expect, for us the cane crop 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. ... we do expect 60%-70% area hamara new varietys me to aa jaanaa chaahiye if not more by next year we hope 100% replacement ho jana chahiye plant cane me.

Provides insight into the expected cane crop reduction for the current year and plans for new cane varieties to address red rot issues for the next year.

Asked by Sanjeev Damani

Decline in Bio-Fuels & Spirits profitability Direct
So I think the key point this year, of course, has been the low yields of ethanol per ton of sugar because as we've all experienced, the recoveries have been down because of the severe red rot and pest issues. ... Also, in Q2 basically, if you remember, last year, the government had adversely 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 increased.

Explains the multi-faceted reasons for the significant drop in profitability for a key segment, including agricultural issues and policy changes.

Asked by Falguni Datta

Ethanol diversion strategy for next year Direct
Now this becomes a little bit, in the normal cane scenario, if the sugar prices remain where we are, there is no reason for us to in North India and for us to make refined sugar to divert sugar into sugarcane into ethanol. ... It will probably be more towards C molasses.

Clarifies the company's likely shift in ethanol production strategy towards C molasses if current sugar prices and ethanol policies persist, impacting future segment mix.

Asked by Falguni Datta

Increase in unallocable expense Direct
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 INR15 crores. So that is why the net expense last year was seeming to be low.

Provides a clear explanation for a financial anomaly, confirming it's not an underlying operational issue but a prior period exceptional gain.

Asked by Falguni Datta

Grain-based distillery commissioning timeline Direct
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 end April, early May.

Gives a specific timeline for the new grain-based distillery, which is crucial for future ethanol production capacity and feedstock flexibility.

Asked by Udit Gupta

Sugar MSP hike and export strategy Direct
On the MSP, I can tell you, Rajesh ji, on the notes of account, I'll let Nalin answer it afterwards. On the MSP, basically, we have been representing you right to the government. They are yet to take it up, but I believe the matter could come up in the CCEA sometime sooner than later. ... On the export front, in North India, with the current prices of sugar there and the international prices and the price we get for quota, didn't make sense for us to really export our own sugar, even though we do make the export quality, high-quality sugar, but we are getting a premium for that up North.

Highlights the pending government decision on MSP and explains the company's decision to prioritize domestic sales over exports due to favorable local prices.

Asked by Rajesh Kumar

Company's stance on share buyback Direct
No, I don't think we're looking at any buyback right now, Rajesh Ji, with the way this current year behaved. I think it is more prudent for us right now to be a little bit more conservative with capital.

Provides a clear signal on capital allocation priorities, indicating a conservative approach given recent performance rather than immediate shareholder returns via buybacks.

Asked by Rajesh Kumar

3 min read 6 chapters

Detailed narrative

Q3 FY25 Financial Performance and Overall Outlook

Dhampur Bio Organics reported a robust increase in revenue from operations, reaching ₹740.5 crores in Q3 FY25, a significant jump from ₹424.78 crores in Q3 FY24. EBITDA also saw an improvement to ₹16.85 crores from ₹12.89 crores year-on-year. Despite this top-line growth, the company recorded a net loss of ₹6.21 crores for the quarter, compared to a loss of ₹4.16 crores in the previous year, indicating underlying profitability challenges. For the nine months ended December 31, 2024, revenue stood at ₹2,011.92 crores, with a loss of ₹27.56 crores.

Sugar Segment Revival and Pricing Dynamics

The sugar segment demonstrated a strong turnaround, with revenue increasing to ₹473.51 crores in Q3 FY25 from ₹237.8 crores in Q3 FY24, and EBIT turning positive to ₹14.72 crores from a loss of ₹9.17 crores. This improvement was largely driven by a 188% increase in sugar sales volume, reaching 89,252 metric tons. Management noted that the government's permission for 1 million metric tons of sugar export and revised ISMA estimates for gross sugar production (down to 31 million metric tons) have led to an improvement in ex-mill sugar prices, which is a welcome development for the industry.

Challenges in Bio-Fuels & Spirits Segment

The Bio-Fuels & Spirits segment faced significant headwinds, reporting an EBIT loss of ₹88 lakhs in Q3 FY25, a sharp decline from a profit of ₹7.25 crores in Q3 FY24. Ethanol production decreased to 156.03 lakh bulk liters from 195.05 lakh bulk liters in the prior year. Management expressed disappointment over the government's decision not to revise ethanol prices for syrup and B-heavy molasses, which, coupled with low yields due to red rot and prior diversion restrictions, severely impacted profitability. The company is re-evaluating its strategy for next year, potentially shifting focus towards C molasses.

Strong Performance in Country Liquor Segment

The Country Liquor segment continued its robust growth trajectory, with revenue increasing to ₹283.25 crores in Q3 FY25 from ₹161.94 crores in Q3 FY24. EBIT for this segment also grew to ₹4.77 crores from ₹2.86 crores. Sales volume saw a substantial increase to 11.51 lakh cases from 6.87 lakh cases. The company aims to continue gaining market share in this segment and is actively augmenting its bottling capacities to support future growth, viewing it as a higher-margin business.

Cane Crop Health and Operational Efficiency

The company highlighted that the cane crop for the current year is expected to be 5-8% lower than last year, primarily due to severe red rot and pest issues that affected cane recovery. Net sugar recovery for Q3 FY25 stood at 8.72%, down from 9.51% in the corresponding period last year. Management indicated that while plant cane is performing better than ratoon, overall yields are still not on par with last year. Efforts are underway to replace 60-70% of the area with new cane varieties by next year to mitigate these issues.

Capital Expenditure and Debt Management

Long-term loans stood at ₹233 crores as of December 31, 2024, with ₹15 crores repaid during the quarter, resulting in a healthy debt-equity ratio of 0.24x. However, interest costs increased to ₹10 crores in Q3 FY25 from ₹5.6 crores in Q3 FY24, mainly due to higher working capital utilization of ₹386 crores driven by increased inventory. The company's capex cycle is expected to be 'fairly moderate' for the current financial year, with key investments including the commissioning of a grain-based distillery by end April/early May and augmentation of Country Liquor bottling capacities.

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