Godavari Biorefineries Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

Godavari Biorefineries reported a 12% YoY revenue growth to Rs. 447 crores in Q3 FY25, with an EBITDA of Rs. 40 crores and PAT of Rs. 6 crores. The company made significant strides in strategic diversification, including debottlenecking bio-based chemical capacity and securing a license for biobutanol production. Despite these positives, the nine-month financials showed negative EBITDA and PAT, impacted by headwinds in the sugar segment like reduced quotas and delayed crushing.

Highlights

  • Revenue from operations grew 12% YoY to Rs. 447 crores in Q3 FY25.

  • Q3 FY25 EBITDA was Rs. 40 crores with a margin of approximately 9%.

  • Successfully debottlenecked 1,3 butylene glycol production capacity from 120 tons/month to 200 tons/month.

  • Secured exclusive India license agreement with Catalyxx Incorporated for biobutanol production, targeting 15,000 metric tons annually in the first phase.

  • Reduced term debt by Rs. 240 crores using IPO proceeds, bringing total debt to Rs. 405 crores as of December 2024.

Concerns

  • 9-month EBITDA was negative Rs. 1 crore.

  • 9-month PAT was negative Rs. 95 crore.

  • Faced headwinds in Q3 FY25 due to reduced sugar release quota and delayed sugarcane crushing.

Key financials

3 periods

Headline

  • Gross Block
    ₹1,245 Cr

Q3 FY25

  • Revenue
    ₹447 Cr
    YoY +12%
  • EBITDA
    ₹39.6 Cr
  • EBITDA Margin
    9%
  • PAT
    ₹5.8 Cr

9M FY25

  • Revenue
    ₹1,291 Cr
    YoY +20%
  • EBITDA
    ₹-1 Cr
  • PAT
    ₹-95 Cr
  • PAT Margin
    1.3%

What they filed

Q1 FY27: revenue up 3.6%, net profit down 23.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue316 445 576 523 423 +34%457 +3%562 −2%542 +4%
EBITDA-34 37 110 5 -9 +74%43 +16%86 −22%-2 −140%
Net profit-76 6 70 -17 -43 +43%8 +33%52 −26%-21 −24%
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

  • Distillery Division
    39% Revenue Contribution (Q3 FY25)
  • Ethyl Acetate
    ₹60 Cr Revenue (Q3 FY25)₹180 Cr Revenue (9M FY25)₹230 Cr Revenue (9M FY24)

Capital allocation

high confidence
  • Capex Capex disclosed
    • New dual-feed 200 kiloliters per day corn/grain based facility
    • Biobutanol facility and higher alcohols (first phase 15,000 metric tons)
    • Debottlenecking of bio-based chemicals unit (1,3 butylene glycol from 120 tons/month to 200 tons/month)
    We have placed an order for 200 KL per day of grain. That we are targeting for commissioning from Q4 of the coming financial year which is H2 FY26. So that hopefully answers your question on the capacities. The second question is the effect of the increase in FRP vis-à-vis, in fact as far as sugarcane juice or B molasses is concerned, the prices have remained the same. The industry is requesting the government to look at increasing the prices of ethanol derived from sugarcane juice and from B heavy molasses in line with the increases of the FRP made. But repeating the point, the reason we are investing in a maize/grain-based facility is to a) participate greater in the market of the ethanol blending program and also provide ourselves an additional feedstock to mitigate against climate and policy risks.
  • Debt Gross ₹405 Cr
    • Repayment Prepayment of term debt using IPO proceeds, leading to Rs. 24 crores interest saving. ₹240 Cr
    • New borrowing Interest subvention loan for dual-feed grain-based ethanol project at approx. 5.4%. ₹119 Cr
    In terms of the debt, so as at December 24, the debt stands at Rs. 405 crores. Now in terms of interest cost, so from the IPO proceeds, we have made a prepayment of Rs. 240 crores. So that will lead to the interest saving to the extent of Rs. 24 crores. Along with that, our external credit rating has been improved. So earlier it was BBB stable and it improved to BBB plus. So we are expecting and requesting the banks to reduce the interest cost further.
  • M&A Catalyxx Incorporated Joint venture · Signed

    Exclusive India license agreement for conversion of ethanol into biobutanol and other higher alcohols, marking a significant milestone in decarbonization and sustainability.

    Another key highlight for this quarter is an exclusive India license agreement with Catalyxx Incorporated for the conversion of ethanol into biobutanol and other higher alcohols. This agreement enables us to convert up to 30,000 metric tons per annum of ethanol. Godavari will be, in the first phase, constructing and operating a state-of-the-art facility to design to produce 15,000 metric tons of biobutanol and higher alcohols annually, marking a significant milestone in the company's commitment to decarbonization and sustainability.

Guidance & targets

Capacity

  • 1,3 Butylene Glycol Production Capacity Capacity · Ongoing · High confidence 200 tons per month

    From 120 tons per month today

    One of the key highlights this quarter has been the successful debottlenecking at our bio-based chemicals unit, enabling us to expand 1,3 butylene glycol production capacity from 120 tons per month to 200 tons per month at full utilization.

    — Samir Somaiya

  • Biobutanol and Higher Alcohols Production (First Phase) Capacity · Q2 FY27 · High confidence 15,000 metric tons annually
    Godavari will be, in the first phase, constructing and operating a state-of-the-art facility to design to produce 15,000 metric tons of biobutanol and higher alcohols annually, marking a significant milestone in the company's commitment to decarbonization and sustainability.

    — Samir Somaiya

  • Dual-feed Corn/Grain Based Distillery Capacity · H2 FY26 (Q4 FY26) · High confidence 200 kiloliters per day
    This facility will not only significantly enhance our long-term ethanol production capacity, but will also be designed as a dual-feed fungible unit, allowing for greater flexibility and efficiency in production and simultaneously mitigate climate and policy risks. This quarter, we encountered headwinds, including a reduced sugar release quota and a delayed commencement of sugarcane crushing, due to directives from thse Karnataka government for improving sugar recovery.

    — Samir Somaiya

Revenue

  • Biobutanol and Higher Alcohols Revenue Revenue · Second year of operation · Medium confidence Rs. 250 crores
    The revenue expected at 100% capacity utilization would be in the order of Rs. 250 crores, which we will probably hope to achieve in the second year of operation.

    — Samir Somaiya

Volume

  • Sugar Export Quota Volume · Current period · High confidence 5,400 tons
    Our export quota out of the 1 million tons is about 5,400 tons.

    — Samir Somaiya

What to watch in Q4 FY25

Biobutanol CAPEX Estimate

Next meeting
Current Engineering teams working on estimate
Target Specific CAPEX amount

Why it matters

Crucial for assessing the investment scale and project feasibility for a new growth driver in bio-based chemicals.

I would like to answer that question probably in the next meeting when we will have a much better estimate of that cost.

Risks & concerns

  • Reduced sugar release quota

    medium

    Led to lower sugar sales, lower cash flow, and increased inventory in Q3 FY25.

    Management acknowledged

  • Delayed sugarcane crushing

    medium

    Impacted financial performance in Q3 FY25 due to government directives.

    Management acknowledged

  • Ethanol pricing not keeping pace with sugarcane FRP

    medium

    Industry is requesting government to increase ethanol prices to align with FRP increases, indicating potential margin pressure if not addressed, though volume is expected to compensate.

    Management acknowledged

  • Seasonal nature of business

    low

    Leads to quarterly variations in performance, especially in the sugar and ethanol segments.

    Management acknowledged

Q&A highlights

2 direct, 2 evasive
Analyst's misstatement of 9-month profit and debt figures Partial
I would like to say with the IPO, the turnaround is happening as we speak. In the last quarter, the IPO was done and the term debt was reduced by about Rs. 240 crores. The reduction in interest and principal repayments will happen from this current quarter onwards.

The analyst misquoted the 9-month profit (Rs. 97 crores vs. reported -Rs. 95 crores) and debt repayment (Rs. 306 crores vs. Rs. 240 crores). Management did not directly correct the profit figure but clarified the debt repayment, focusing on the positive impact of IPO proceeds.

Asked by V Rangan

CAPEX for the new biobutanol plant Evasive
I would like to answer that question probably in the next meeting when we will have a much better estimate of that cost.

Management deferred providing a specific CAPEX estimate for the biobutanol plant, indicating that the financial details are still being finalized by engineering teams. This leaves an important financial unknown for investors.

Asked by Dhruv Muchhal

Impact of FRP increase on ethanol margins without corresponding ethanol price revision Partial
So, although an increase in sugarcane prices and not a corresponding increase in ethanol so produced is going to affect margins, the overall benefit of producing sugarcane ethanol in a higher manner is going to compensate for the same.

Analysts are concerned about margin pressure if ethanol prices don't keep pace with rising sugarcane costs. Management acknowledged the impact but expressed confidence that increased production volume would offset it, suggesting a volume-over-margin strategy in this segment.

Asked by Prathamesh Sawant

Reasons for delayed sugarcane crushing season in Q3 FY25 Direct
That was the recommendation by the government of Karnataka. And the recommendation was based on anticipating that the recovery of sugar would be better if the season started later.

The delay in crushing impacted Q3 performance. Management clarified it was a government directive aimed at improving sugar recovery, providing context for the operational challenge.

Asked by Sahil Vora

Global sugar price trends and Brazil's performance Evasive
I think the global markets are very volatile and climate related issues and geopolitical issues often have an influence on global commodity prices. So I would not like to comment on where the market is headed based on these reasons.

Management declined to provide a forward-looking view on global sugar prices, citing volatility and external factors. This indicates uncertainty in a key commodity market affecting the company's sugar segment.

Asked by Pratik Tholiya

Future revenue contribution from different segments over the next 5 years Direct
In the immediate future, which is FY26, we will see the ethanol business take a larger place, FY26, FY27. With the investments of debottlenecking chemicals as well as in the biobutanol licensing facilities, we will start seeing that business also growing from, starts with FY26 itself and continuing to grow FY27 and onwards. Sugar, making of sugar, we considering right now to see primarily as static.

Management outlined a clear strategic shift, projecting ethanol and bio-based chemicals as the primary growth drivers for the next 5 years, with the sugar business expected to remain static. This provides a long-term roadmap for revenue mix.

Asked by Devang Mehra

Volume growth split between ethyl acetate and other bio-based chemicals Partial
On the volume side, I will get back to you on that. For the revenue side, so for the three months, the revenue from the ethyl acetate is to the extent of 60 crores and the balance is our specialty biobased chemicals. And for the 9 months, it is approximately 180 crores of ethyl acetate.

The analyst sought a volume breakdown, which management could not immediately provide, offering only revenue figures. This suggests a lack of granular volume data readily available for a key segment, which could be important for understanding underlying demand trends.

Asked by Dhruv Muchhal

3 min read 6 chapters

Detailed narrative

Q3 FY25 Financial Performance Overview

Godavari Biorefineries reported a 12% year-on-year growth in revenue from operations, reaching Rs. 447 crores in Q3 FY25. For the nine-month period, revenue stood at Rs. 1291 crores, a 20% increase over the previous year. The company achieved an EBITDA of Rs. 39.6 crores with a margin of approximately 9% in Q3 FY25, and a PAT of Rs. 5.8 crores. However, the nine-month financials showed a negative EBITDA of Rs. 1 crore and a negative PAT of Rs. 95 crores, with a PAT margin of 1.3%.

Strategic Shift to Bio-based Chemicals and Ethanol

The company is strategically focusing on high-value bio-based chemicals and strengthening its ethanol division. A key highlight was the successful debottlenecking of the 1,3 butylene glycol production capacity from 120 tons per month to 200 tons per month. Further debottlenecking of other chemical capacities is planned for coming quarters to meet rising market demand, reinforcing the company's commitment to innovation-led biorefining. The gross block of the company stands at Rs. 1,245 crores, with further capitalization planned for strategic projects.

Ethanol Expansion and Feedstock Diversification

The distillery division contributed 39% of the company's revenue in Q3 FY25. To enhance production flexibility and mitigate climate and policy risks, Godavari is investing in a new dual-feed 200 kiloliters per day corn/grain-based facility, which is targeted for commissioning in H2 FY26 (Q4 FY26). This new facility will complement the existing 570 kiloliters per day sugarcane-based distillery. The industry is actively seeking government intervention to increase ethanol prices derived from sugarcane juice and B heavy molasses, aligning them with the increases in Fair and Remunerative Price (FRP).

New Biobutanol Venture and Market Opportunity

Godavari Biorefineries has secured an exclusive India license agreement with Catalyxx Incorporated for the conversion of ethanol into biobutanol and other higher alcohols. The first phase of this initiative involves constructing a facility to produce 15,000 metric tons of biobutanol and higher alcohols annually, with commissioning targeted for Q2 FY27. Management projects that this facility could generate approximately Rs. 250 crores in revenue at 100% capacity utilization in its second year of operation, driven by global demand for bio-based solutions that support net-zero goals.

Debt Reduction and Financial Strengthening

The company significantly reduced its term debt by Rs. 240 crores during the quarter, utilizing proceeds from its IPO, bringing the total debt to Rs. 405 crores as of December 2024. This prepayment is expected to result in an annual interest saving of Rs. 24 crores. Furthermore, the company's external credit rating improved from BBB stable to BBB plus. Godavari also plans to take an interest subvention loan of Rs. 119 crores at approximately 5.4% for the dual-feed grain-based ethanol project, further optimizing its financing costs.

Q3 FY25 Headwinds in Sugar Segment

The sugar segment faced headwinds in Q3 FY25, primarily due to a reduced sugar release quota, which resulted in lower sugar sales, reduced cash flow, and increased inventory. Additionally, sugarcane crushing was delayed due to directives from the Karnataka government, which recommended a later start to the season to improve sugar recovery. However, the government's recent allowance of a 1 million-ton sugar export quota has improved market sentiment, and the company expects to sell its sugar at similar or better prices in the coming quarters.

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