Dhampur Sugar Mills Limited — Q3 FY25 earnings call

Call held 7 Feb 2025

Management summary

Dhampur Sugar reported a return to profitability in Q3 FY25, with revenue growing 21.7% YoY to INR 587.1 crores. This was primarily driven by strong performance in the sugar and potable spirits segments. However, overall profitability metrics like EBITDA and PAT saw significant declines due to challenges in the ethanol segment, lower cane availability, and reduced recovery rates caused by red rot. The company is implementing a varietal shift plan to address cane issues and expects higher sugar production for India in FY26.

Highlights

  • Revenue from operations increased 21.7% YoY to INR 587.1 crores.

  • Potable spirits revenue surged 47.4% YoY to INR 199.6 crores, driven by new tetra pack machine commissioning.

  • Sugar business turned profitable with INR 1.2 crores profit in Q3 FY25, reversing a INR 6.6 crores loss in the prior year.

  • Company reported being 'back in black' after two quarters of losses.

  • Government's lifting of the ban on syrup for ethanol production and increase in C-heavy molasses ethanol price by INR 1.69 per liter.

Concerns

  • EBITDA declined 30.7% YoY to INR 48.3 crores in Q3 FY25.

  • PAT decreased 52.2% YoY to INR 15.2 crores in Q3 FY25.

  • Ethanol revenue sharply declined 44.7% YoY to INR 97.6 crores due to prior restrictions on syrup and B-heavy molasses use.

  • Lower cane availability and red rot continue to be significant headwinds for the sugar industry in UP.

  • Gross recovery rate was lower at 10.17% in Q3 FY25 compared to 11.01% last year.

Key financials

  1. Revenue from Operations ₹587.1 Cr +21.7%YoY
  2. EBITDA ₹48.3 Cr -30.7%YoY
  3. Profit After Tax (PAT) ₹15.2 Cr -52.2%YoY
  4. Cash Profit ₹38.3 Cr -31%YoY

What they filed

Q1 FY27: revenue up 6.0%, net profit up 569.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue421 412 619 521 504 +20%451 +10%491 −21%553 +6%
EBITDA-0 42 101 23 10 +2002%56 +34%85 −16%31 +37%
Net profit-13 15 49 1 -8 +42%27 +75%46 −7%6 +569%
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

Share of Revenue
₹712.8 Cr Total
  • Sugar Business ₹305.9 Cr 42.9%
  • Potable Spirits ₹199.6 Cr 28.0%
  • Ethanol Business ₹97.6 Cr 13.7%
  • Power Business ₹62.2 Cr 8.7%
  • Chemicals Business ₹47.5 Cr 6.7%

Capital allocation

high confidence
  • Capex Capex disclosed
    No plans at all. All our plants are all set. We are fully set on all our sites. So there is no expansion plan for the year 2025.
  • Debt Debt disclosed Cost 5%
    Total is about -- our weighted average cost for the long-term will be around 5%, 5.25%. ... Short-term, of course, is the working capital. So I mean that depends on the MCLR of the banks. It's around 7.6% to 7.8%.

Guidance & targets

Sugar Production

  • India Sugar Production Sugar Production · FY25 · High confidence 26.5 million to 27 million ton
    So, Rohit, to answer your first thing that the sugar production that we are seeing for the year '24-'25, it will be in the range of 26.5 million to 27 million ton, is what we are seeing India to do for this year.

    — Gaurav Goel

  • India Sugar Production Sugar Production · FY26 · Medium confidence higher
    For the year '25-'26, early days, but for surely, it should be higher because both in Maharashtra and in south, we have seen that the swing of cane has been higher.

    — Gaurav Goel

Cane Recovery

  • Cane Recovery Rate (Dhampur) Cane Recovery · current season · High confidence lower by about 0.7
    So we are hoping, in Dhampur, we will have a lower by about 0.7.

    — Gaurav Goel

  • Cane Recovery Rate (Rajpura) Cane Recovery · current season · High confidence lower by about 0.3 to 0.4
    Rajpura to be lower by about 0.3 to 0.4.

    — Gaurav Goel

Crushing Volume

  • Total Crushing Volume Crushing Volume · current season · Medium confidence same as last year
    As of now, we are hoping that we are the same as to what we were last year.

    — Gaurav Goel

Varietal Shift

  • Varietal Shift Plan Duration Varietal Shift · ongoing · High confidence 2 years
    So the plan is for 2 years.

    — Gaurav Goel

  • Dhampur Plant Varietal Mix Varietal Shift · next season · Medium confidence 75% 238, 25% others (118 etc.)
    So if I talk about both the plants individually, in Dhampur, we are hoping that 75 will still stay in 238, 25 will go to others, 118 and everything else.

    — Gaurav Goel

  • Rajpura Plant Varietal Mix Varietal Shift · next season · Medium confidence 65% 238, 35% other seeds
    Rajpura, it will be about 65 will go to 238 and 35 will be for other seeds.

    — Gaurav Goel

Ethanol Pricing

  • Ethanol Price (Syrup/B-heavy) Ethanol Pricing · FY25 · High confidence no increase
    Ethanol price for this year '25 has already been set. So there is no more so if we're expecting that syrup or B-heavy price will now go up, no, it won't. So the price for '25 is done.

    — Gaurav Goel

What to watch in Q4 FY25

India Sugar Production FY26

Next year (FY26)
Current 26.5-27 million tons (FY25 estimate)
Target Higher than FY25

Why it matters

This is a key indicator for the overall health of the sugar industry and the company's raw material availability.

For the year '25-'26, early days, but for surely, it should be higher because both in Maharashtra and in south, we have seen that the swing of cane has been higher.

Risks & concerns

  • Red Rot Disease in Sugarcane

    high

    The industry in UP and the company face headwinds in cane availability due to red rot, leading to lower gross recovery rates (10.17% vs 11.01% YoY).

    Management acknowledged

  • Lower Cane Availability

    medium

    Lower cane availability, caused by multiple factors including red rot, flooding, and extended monsoons, impacted H1 FY25 results and continues to be a challenge.

    Management acknowledged

  • Ethanol Production Restrictions

    medium

    Past restrictions on using syrup and B-heavy molasses for ethanol production led to significantly lower ethanol sales volume (135.58 lakh liters in Q3 FY25 vs 268.69 lakh liters YoY).

    Management acknowledged

  • Lower Pol in Sugarcane

    medium

    Lower pol in sugarcane compared to the previous year contributed to lower sugar production in Q3 FY25.

    Management acknowledged

Q&A highlights

8 direct
Sugar Production Outlook for FY25 and FY26 Direct
So, Rohit, to answer your first thing that the sugar production that we are seeing for the year '24-'25, it will be in the range of 26.5 million to 27 million ton, is what we are seeing India to do for this year. ... For the year '25-'26, early days, but for surely, it should be higher...

Provides specific numerical guidance for current year's sugar production and a directional outlook for the next year, crucial for industry supply-demand dynamics.

Asked by Rohit Singh

Ethanol Production Feedstock Mix Direct
So right now, in the last 10 days, earlier we were on syrup, but now we have moved to B-heavy for the last 10 days because we saw no rise in the price of syrup. So we have moved to B-heavy from January 28.

Highlights the company's agile response to pricing signals by shifting feedstock, impacting ethanol segment profitability.

Asked by Chirag Pachisia

Improvement in Sugar Realization and Pricing Trend Direct
So Chirag, that you know. I mean, like you've asked me that question, but I think that, yes, we have seen a slight, the prices of sugar have for surely gone up, but they are still at the same range. So earlier, we were selling at about INR37.5, INR38. Right now, the price is around INR41 ex-mill.

Confirms an upward trend in sugar prices, indicating improved realization for the company's core product.

Asked by Chirag Pachisia

Future Ethanol Feedstock Mix Direct
I think I would say that as of now, because till January 28, we ran on syrup. So till January 28, almost a third went to syrup. The next would be about, I would say so if I was to do the mix, I would say 30% is syrup, 40% will be B-heavy, 30% would be grain.

Offers a detailed breakdown of the expected ethanol feedstock mix for the year, which is critical for understanding production costs and segment profitability.

Asked by Uday Shanbhag

Remunerativeness of Sugar Exports Direct
No, no. Even at present prices at about $19.6, I think it shut last night, I think it's I mean, even on that, the exports can and out here, we have to realize that India is going to export a lot more of whites than of raw.

Clarifies the company's view on export profitability, suggesting that even at current global prices, exports are viable, especially for white sugar.

Asked by Uday Shanbhag

Cyclicality of the Sugar Industry Direct
So I think that the cyclicality in sugar is for surely far, far lower than what was there 10 years back.

Management's perspective on the reduced cyclical nature of the sugar business due to diversification into multiple products (ethanol, power), implying more stable earnings.

Asked by Uday Shanbhag

Capital Allocation for Buyback/Dividend Direct
March is out exactly as to how much we would like to do vis-a-vis dividend or buyback. So both options are open as of now.

Indicates management's consideration of shareholder return mechanisms post-fiscal year-end, signaling potential capital allocation decisions.

Asked by Uday Shanbhag

Expansion Plans for 2025 Direct
No plans at all. All our plants are all set. We are fully set on all our sites. So there is no expansion plan for the year 2025.

Provides clear guidance on the absence of immediate expansion plans, suggesting a focus on optimizing existing capacities.

Asked by Sneha Jain

3 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview and Return to Profitability

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.

Segmental Performance Highlights

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.

Challenges in Cane Availability and Recovery

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.

Ethanol Feedstock Strategy and Pricing

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.

Varietal Shift Plan for Cane Development

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.

Capital Allocation and Debt Profile

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.

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