Dhampur Sugar

Dhampur Sugar Mills Limited reported a revenue from operations of INR 587.1 crores in Q3 FY25, marking a 21.7% increase compared to INR 482.4 crores in the corresponding quarter last year. The company is 'back in black' after incurring losses in the first two quarters of the fiscal year. Despite the revenue growth, EBITDA declined by 30.7% to INR 48.3 crores, and Profit After Tax (PAT) fell by 52.2% to INR 15.2 crores, primarily due to challenges in the ethanol segment and lower recovery rates.

The sugar business saw a significant turnaround, posting a profit of INR 1.2 crores in Q3 FY25 against a loss of INR 6.6 crores in the prior year, with revenue growing 31.1% to INR 305.9 crores. The potable spirits segment demonstrated strong growth, with revenue increasing 47.4% to INR 199.6 crores and profit doubling to INR 3.6 crores, aided by the commissioning of a new tetra pack machine. In contrast, the ethanol business experienced a sharp revenue decline of 44.7% to INR 97.6 crores and a 75% drop in profit to INR 5.7 crores, largely due to past restrictions on feedstock usage.

The company continues to face headwinds from lower cane availability and the prevalence of red rot disease in Uttar Pradesh. This resulted in a lower gross recovery rate of 10.17% in Q3 FY25, down from 11.01% in the comparable quarter last year. The late start of the crushing season by 9 days and lower pol in sugarcane also contributed to reduced sugar production of 0.97 lakh tons compared to 1.29 lakh tons YoY.

Following the lifting of restrictions on syrup use, the company diverted 1.06 lakh tons of cane for ethanol production through syrup, an increase of 10.42% YoY. Management indicated a shift from syrup to B-heavy molasses for ethanol production from January 28, 2025, due to stable syrup prices. The estimated feedstock mix for the year is 30% syrup, 40% B-heavy, and 30% grain. The ethanol price for FY25 has been set, with no further increases expected for syrup or B-heavy based ethanol.

To mitigate the negative impact of red rot and improve cane availability, Dhampur Sugar has chalked out a detailed 2-year plan for varietal shift, which commenced two years ago. The plan focuses on ensuring sufficient seed availability and aims to change cane varieties in affected fields. For the Dhampur plant, 75% of cane will remain 238, while 25% will shift to other varieties; for Rajpura, 65% will be 238 and 35% other seeds by the next season.

The company maintains a healthy balance sheet with a balanced long-term debt profile. The weighted average cost of long-term debt is approximately 5-5.25%, while short-term working capital debt is around 7.6-7.8%. Management stated that there are no expansion plans for 2025, with all plants fully set. Decisions regarding dividends or buybacks will be evaluated after March 2025, with both options currently open.