EIDPARRY — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
PARRY (INDIA) LIMITED · MR. SURESH KANNAN – WHOLE TIME DIRECTOR –
MR.
MUTHIAH · MURUGAPPAN
MURUGAPPAN –
WHOLE · TIME
TIME DIRECTOR AND CEO - E.I.D.- PARRY (INDIA) LIMITED MR. A SRIDHAR – CHIEF FINANCIAL OFFICER - E.I.D.-
PARRY (INDIA) LIMITED · MR. SURESH KANNAN – WHOLE TIME DIRECTOR –
MR. SURESH KANNAN – WHOLE TIME DIRECTOR – PARRY SUGARS REFINERY INDIA LIMITED MR. BISWA MOHAN RATH – COMPANY SECRETARY -
E.I.D.- PARRY (INDIA) LIMITED · Management
E.I.D.- Parry (India) Limited May 18, 2022
Questions and answers
murugappa · Research Analyst
“E.I.D.- Parry (India) Limited
Moderator · Conference Operator
Thank you very much.
We will now begin the question-and-answer session.
The first question is from the line of Akshay Ajmera from Nizara Securities LLP.
Please go ahead.
Akshay Ajmera
Thank you for the opportunity Sir and congratulations on a very good set of numbers.
Regarding this Pettavaithalai plant, the original plan was to shift the plant from Pettavaithalai to Bagalkot and so, it has not happened, so what exactly was the issue because of which we are not able to shift the plant to Bagalkot, was there any scarcity of cane availability or it was not feasible to move the plant and what was the total realization that we have received by sending of that?
S. Suresh
The total realization part Mr. Sridhar will answer you.
On the point of the original idea of shifting the assets to Bagalkot was envisaged from two years back we did assessment on cane availability and the potential competition for the available cane from the nearby mills.
I am taking a parallel of Haliyal, Haliyal is a standalone unit almost in the nearby 120 km radius that is no other sugar mill available, so there is plenty of cane availability whereas in the case of Bagalkot for the large number of mills are available, our new capacities are also getting added, so in the light of that plus the certain areas of Bagalkot also have certain low sugar varieties are also available almost more of low sugar variety to the best, and other related challenges over there, so if you have to be choosy then we will have to ignore those low sugar varieties, if you are going to put investment there will be scrambling for cane with Karnataka though there is availability of command area concert, in practice it is not getting followed, so you need to get assured quantum of cane and I am going to put an investment over there which was there in Haliyal and then we transferred the Pudukkottai assets to Haliyal.
In the case of Bagalkot where we did not have that level of assurance and certainty in the availability of cane, we better thought that whatever the assets available at Petta can be monetized and that can be put to productive use for a better return on the capital employee, hence the reason is sell the assets of and in terms of the realization what we got under the assets is almost 57.5 Crores for the equipments and for plant and machinery.
Akshay Ajmera
For the plant and machinery?
S. Suresh
Yes.
E.I.D.- Parry (India) Limited May 18, 2022
Akshay Ajmera
On the ethanol side although we have commendable volumes and we have grown significantly but if we talk about realizations per liter, it has gone down as compared to last year, so how would we see that?
S. Suresh
The realization of the alcohol has weighted average has gone down.
For the ethanol whatever is the government realization it has gone up, the mix is also that between EMA and ethanol, EMA prices are dropped last year compared to the previous year, hence we are seeing relatively lower weighted average realization for alcohol.
Akshay Ajmera
Okay.
Thank you, Sir.
I will get back in the queue for the next question.
Moderator · Conference Operator
Thank you.
The next question is from the line of Bhavin Sheth from Enam Holdings.
Please go ahead.
Bhavin Sheth
Good afternoon, Sir, if you can share the refinery debt number and the refinery inventory separately, what is the gross borrowings and cash debt?
Suresh Kannan
Good afternoon, as far as the refinery is concerned, we had a closing debt of 648 Crores response to around 1.2 lakh tonnes of raw sugar and around 50,000 tons of white sugar of inventory.
Bhavin Sheth
648 Crores, okay, this includes term debt and working capital debt, right Sir?
Suresh Kannan
The term debt is 200 Crores separate, the 648 is a working capital debt.
Bhavin Sheth
Okay term debt is 200 Crores and working capital is 648, okay and right now what are the steady state numbers there in terms of how much is the conversion costs there and premiums overall?
Suresh Kannan
At the moment as you can appreciate we are on a very inflationary scenario as far as both fuel, chemicals and packing material is concerned, so our refinery cost has moved up compared to the previous year and to large extent this increase is also seen in the market in the form of improvement of spreads, so we could have a lag or lead effect with respect to the inflationary fuel increase vis-à-vis what we can recur of the market.
Bhavin Sheth
And what are the currently if you can say the spreads?
Suresh Kannan
Currently we are between $50 and $60 depending upon market conditions that are prevailing now.
E.I.D.- Parry (India) Limited May 18, 2022
Bhavin Sheth
Okay and regarding Nutraceutical, what is the outlook there, when can you scale that numbers and how the profitability will improve in that segment because there has not been substantial improvement in profitability there, so what is the roadmap there?
MUTHIAH · MURUGAPPAN
On the Nutra segment I think the standalone numbers were impacted because of bad weather, because of the monsoon season and that had an impact on the harvest, so that is why the standalone was badly impacted, we have taken some corrective measures from the plant infrastructure prospective, so we do not see that recurring this year, in terms of the Valenca business which is the business in the US and then we will continue to invest in the ban building activities of the Flomentum product which is the prostate has banned this year as well, so to that extend there will be burn I think we will start seeing those numbers scale from next year onwards and I think we can get back into the profitability.
Bhavin Sheth
Okay, thank you Sir.
I will come back for more questions.
Moderator · Conference Operator
Thank you.
The next question is from the line of Gautam Dedhia from Nalanda Securities Private Limited.
Please go ahead.
Gautam Dedhia
Just continuing on the previous participant question, so at $50 to $60 spreads in the refinery at with coal cost ranging during $300-$400 on the yearly basis do you think we can breakeven?
Suresh Kannan
I think very fair question, with the current levels of spread and as we can continue to source this from India, coal has started giving little bit in terms of the increases that what we have seen, so it takes possible to produce breakeven or slightly favorable results as far as refinery is concerned.
Gautam Dedhia
In this quarter whatever profit we have gained there is no one up right and there are no M2M gains or any foreign exchange gains?
Suresh Kannan
As far as Q4 profit is concerned, it has got an element of forex gain because that gain because of the nature of the contract accrues towards in Q4, if you discount that also the quarter is profitable to the extent of around 13 Crores to 14 Crores.
Gautam Dedhia
Okay and on the Nutraceuticals division, so Flomentum would be what proportion of the prostate sales that you have shown in the presentation?
MUTHIAH · MURUGAPPAN
It has been negligible.
I mean the prostate being this year we talked about 120 odd Crores is negligible.
Ethanol is only been launched a year ago, so it is in the very early stages, so I think at the right time, we will start giving you, we are of course seen the data on a very E.I.D.- Parry (India) Limited May 18, 2022 consistent basis but at the right time we start opening that up is well for your better understanding, once we also have a good idea of trend.
Gautam Dedhia
Okay and so as in the retail sugar division, you mentioned that you are going to target one lakh outlets by FY2025 so currently how many outlets are we targeting?
MUTHIAH · MURUGAPPAN
So, our current direct coverage is slightly under 30,000 outlets, indirect will be about close to 50,000 outlets where indirect I mean wholesale coverage will also reach a larger number of outlets, I think the one lakh outlet target we aspire to do it before FY2025, I think by FY2025 we need to be substantially larger we are really going to build a sizeable business vertical out of this, so I think by FY2025 that number should be much larger.
Gautam Dedhia
And this aspirationally would it be fair to assume that if we are like 250 Crores in retail change right now, we are looking at 3x the size just based on the outlet coverage, so is it something substantially more?
MUTHIAH · MURUGAPPAN
I think it is a fair milestone I think as we promise we started opening up for the retail store little bit to be invested communities, so I think as we go, we will provide more granular detail, but I think Gautam that is a fair milestone to have.
Gautam Dedhia
Okay Sir.
Thank you and best of luck.
Moderator · Conference Operator
Thank you.
The next question is from the line of Jatin from Investsavvy Portfolio Management LLP.
Please go ahead.
Jatin
Congratulations on the great results.
We wanted to know that your operating margin has improved, is that going to continue to be sustainable or what is the reason for that change happening and the other is, how do you foresee revenues growing in the year going forward?
S. Suresh
For a type of business like us predominantly in the sugar, the better operating margins have been predominantly due to the increased chain volumes for the given level of assets what we have.
So, we have moved up almost from our 39.5 Lakh ton to 50 Lakh tons.
Some of the benefits of that I have already shown into the current year.
The incremental molasses it gives the benefit already shown in the last year and that the incremental whatever is the benefits out of the extra chain will be shown in the current financial year.
So, you can expect that definitely similar or better margins to persist for the current financial year as well.
Jatin
And what about revenue projections?
E.I.D.- Parry (India) Limited May 18, 2022
S. Suresh
We expect close to almost around 8 to 10% of the increase in cane volumes growth roughly, just on the availability of cane given the predictions what the monsoon and all is giving, if everything goes well that is what should be.
There will be totally a volume gain plus the value addition, and all should add to the incremental.
Jatin
Thank you, Sir.
Moderator · Conference Operator
Thank you.
The next question is from the line of Ritwik from One-Up Financial Consultants.
Please go ahead.
Ritwik
Good afternoon, Sir.
Sir, I have a few questions, firstly this continuing with the cane growth, what would be our peak crushing output on these 40,000 tons per day capacity?
S. Suresh
We can touch it up to almost 20% up from the current level minimum.
Ritwik
So, that would be maximum crushing days of about 180 days.
Would that be a fair understanding?
S. Suresh
Yes, you can take that but there is a permitting etc, these are all linked to the cane availability and the weather.
Ritwik
Right, okay and you mentioned that 8 to 10% cane crushing can be accepted depending on the cane procurement for FY2023?
S. Suresh
Right.
Ritwik
Sure, Sir my next question is on the Sankili distillery which is a green based capacity which is coming up.
What could be the total potential output from this distillery?
S. Suresh
Almost 3.6 Crores liter should get added to the distillery volumes on an annual basis.
Ritwik
Okay, and part of it we can realize in FY2023 and fully in FY2024?
S. Suresh
For FY2023 will be an equivalent of say three months.
Ritwik
Sure, and Sir right now we are doing about 10-11% margin in the distillery segment from the existing capacity.
With this new capacity what do you think will the margins be higher or at par with the current distillery margins?
E.I.D.- Parry (India) Limited May 18, 2022
S. Suresh
Distillery margin is a function to the molasses cost and whatever is the price of the Ethanol or EML that is prevailing in the market.
So, depending on the business growing in distillery we will be producing more of Ethanol that will be governed by the price of the OMC in terms of Ethanol and also the FRB prices of the governments for the cane.
So, this is a normal derivative of these two parameters that is what is going to be the distillery margins and cost are definitely for a higher sized distillery, the cost will be accordingly there and the margins should by and large minimum maintain that level of the existing anyway whatever possible that could be an opportunity to improve.
Ritwik
Okay, and this one last question, is it possible to give the FY2022 revenue and EBITDA figures for the refinery business?
A. Sridhar
We have already posted that in the website but I would like to read it for you.
The revenue has been $ 269 million, and EBIT has been about $ 4.7 million.
Ritwik
And does it include any one off you mentioned there was some?
S. Suresh
Not in this financial year.
Since FY 2022 there is no one off.
Ritwik
Okay, and Sir one follow up on this strategic question, in the last few years we have faced some challenges on the refinery business.
In the goal have actively considered to high walk this business because on a capital employed of Rs.900 Crores to almost Rs.1000 Crores we are making negligible return on the capital employed.
So, is there any active consideration or any discussion internally to diverse this business, some thoughts on that?
MUTHIAH · MURUGAPPAN
This was also discussed in one of the prior investor’s calls.
These kind conversations are always going on we do not have anything concrete to record.
If we have anything concrete we certainly keep you all updated.
Suresh Kannan
Just a small clarification you mentioned on the capital employed, capital employed on the refinery segment is around Rs.500 Crores odd not Rs.700 Crores or Rs.1000 Crores.
So, currently we are between 6 to 7% return on capital.
Ritwik
Okay, in the initial comments you mentioned that Rs.50 Crores is that short-term debt and Rs.200 Crores, odd is the long-term debt?
A. Sridhar
At that position we had claimed that the borrowings or the long-term debt was about Rs.200 Crores that is more of a term loan and the short-term working capital loan is about Rs.648 Crores that had one off substantially in the month of March because our turnover increased as our sales was higher during that month.
E.I.D.- Parry (India) Limited May 18, 2022
Ritwik
Okay, thank you Sir and all the best for the year.
Moderator · Conference Operator
Thank you.
The next question is from the line of Anupam Goswami from B&K Securities.
Please go ahead.
Anupam Goswami
Hi!
Good afternoon, Sir and congratulations on the good set of numbers.
My first question on the recovery in Karnataka, how has been the recovery so far in this season and going forward how much recovery are you going to expect in rest of the season and the next season as well?
S. Suresh
As far as Karnataka is concerned for the current season the recovery has been in the range of around 11.1% to 12.1% i.e., plant like Haliyal was around 11.1% and plant in Ramdurg is around 12.1%, Bagalkot is somewhere in between.
If the current crushing to be taken as a reference and the if you have a span of running from mid-October to mid-March we should be able expect definitely a level of recovery for the next year as well.
Anupam Goswami
Okay, Sir and did we export any sugar from our domestic plant to refinery unit in Q4?
S. Suresh
If there is opportunity, yes.
Anupam Goswami
How much volume this time?
S. Suresh
Last year we had exported close to 1,72,000 tons.
Like that there is if we are limited with the relief quota of 4 – 5 tons sales in domestic.
So, any opportunity subject to the refinery margins getting fulfilled we should be able to and also EID getting better realization for the stocks sold, we should be able to do that.
Anupam Goswami
Okay, and Sir what I understand your refinery profit this time EBIT would be about Rs.30 Crores and you said there is a one-off forex gain about Rs.13 Crores to Rs.14 Crores, so that could about Q4 or what is the profit without the forex about Rs.16 Crores is it?
Suresh Kannan
You are right the EBIT for the refinery for the whole year is Rs.36 Crores. the forex gain is basically a structural gain because we are operating dollar as a functional currency, and we are sourcing some of the debt in the form of Indian rupee.
So, the settled gain accrues to us towards the end of the year and therefore it is not the one off again it is part and partial of the business.
I hope that clarifies the question.
Anupam Goswami
Okay, and Sir we are expanding our 120 KLPD distillery capacity since we have still room increasing our crushing capacity why are we putting our grain based capacity and why not a molasses based?
E.I.D.- Parry (India) Limited May 18, 2022
S. Suresh
This 120 KLPD is a new plant based in Sankili Andhra one is this is a green belt, second is the cane availability is for a period almost December to March.
So, four months is the cane availability period, so you run on the four months on the cane whatever is available in the form of syrup and for whatever the molasses is generated you will run two more months after that it is not economically viable to buy molasses and then run the distillery.
Grain is available throughout the year, so wherever possible we should go and buy the grain and then run the plant in the grain form.
This also gives a different protection for the distillery in the event of any cane shortage in any particular year, the grain is anyway available.
The refinery can all through the year without any stoppage for want of raw material.
Anupam Goswami
Okay, so I am to understand you said about 3.6 Crores liters around 50 to 60% would be syrup and de-heavy molasses, am I right on a tentative note Sir?
S. Suresh
You make it out of the ten months of running i.e., 300 days you can take around five months will be on syrup and two months maybe on the de-heavy, three months equivalent will be on the grain.
Anupam Goswami
Okay, could be around 60-70% volume could be from juice and molasses based?
S. Suresh
Yes, Sir correct.
Anupam Goswami
And Sir, what is our distillery volume target for FY2023 and FY2024?
S. Suresh
Roughly we shall touch somewhere around 11 Crores liters.
Anupam Goswami
And FY2024?
S. Suresh
FY2024 should add another at least one or two Crores liters because this Sankili is going to come full year.
Anupam Goswami
Okay, Sir I will join back in the queue.
Thank you.
Moderator · Conference Operator
Thank you.
The next question is from the line of Akshay Ajmera from Nirzar Securities LLP.
Please go ahead.
Akshay Ajmera
Thank you for the opportunity again, Sir.
Have we sold sugar from standalone EID to the refinery also this year?
S. Suresh
Yes, we have sold.
E.I.D.- Parry (India) Limited May 18, 2022
Akshay Ajmera
How much of it, Sir?
Is that export quantity is the quantity that we have sold to the refinery?
S. Suresh
Almost around 80 – 85000 ton’s must have been shift to the refinery.
Akshay Ajmera
And Sir, if we look at the Q4 number of standalone sugar the revenue has increased from last year if you compare year-on-year number from Rs.400 Crores to the revenue has become Rs.700 Crores.
However, the segment result shows that the PBIT level is still at the same level.
So, how should we read it?
A. Sridhar
Our costs are normalized over a period of 12 months, so the optimization actually happens during the months in which we produce.
Depending on the stocks that is available with us, the profitability also changes.
So, the stock adjustment could be one of the reasons for the normalization which happens on the bottom line, which gets spread over the subsequent periods.
Akshay Ajmera
Okay, thank you so much.
Moderator · Conference Operator
Thank you.
The next question is from the line of Rajesh Majumdar from B&K Securities.
Please go ahead.
Rajesh Majumdar
Good afternoon and congratulations once again for a good set of numbers.
I had again a question on the lines of some of the participants earlier.
We had a large jump in the sugar revenue and I can understand that the cane cost has gone up a little bit this year but the profitability of the sugar division has not gone up despite the increase in the price realization of nearly Rs.
0.50 on an average.
I just wanted to know at what valuation of the inventory being held at as of 31st March?
A. Sridhar
As of 31st March the inventory is valued around Rs.31.90.
Rajesh Majumdar
Okay, so that going inline.
So, basically despite closing volume going up by 25% and the inventory change is not reflecting the volume and sales data.
So, is it partially because we have sold sugar to the refinery at lower realization, is that possible?
A. Sridhar
The exports sales is based on the international prices that is prevailing on the day in which we enter into a contract and we normally enter into a contract on those days where actually the realizations are the best.
So, it has got nothing to do with the transfer price or the price at which we sell to refinery, it is on an arm’s length basis and based on the international prices prevailing on the date of contract.
E.I.D.- Parry (India) Limited May 18, 2022
Rajesh Majumdar
Right, it is almost 50% jump in the raw material cost.
So, I was just wondering as soon as the cane price increases just about Rs.0.10 and then there is volume increase of about 25% but the RM price increases much more than that?
A. Sridhar
Tamil Nadu government has withdrawn the transport subsidy that is one reason our cane price has went up.
S. Suresh
One more thing we should keep in mind is that the volume of crush which has happened in the last quarter the benefit of that in terms of molasses, bagasse etc., will flow in the subsequent year because we will not be able to monitor the by-product benefits in the same period.
In fact, incidentally the Q4 of current year has crushed significantly more volumes compared to the Q4 of the previous year, right the entire quantity will be sitting in stock whether it is sugar under the recovery or whether it is molasses or whether it is bagasse or further might be anything.
Hence we may not be able to get the benefit in the last financial year that will subsequently flow in the next financial year added to that is an impact of Rs.15 Crores what our CFO was saying about the transport subsidiary which was there in FY2021 it has been withdrawn FY2021 -2022 and the FRP increase impact is also there.
Rajesh Majumdar
Right, would you be able to give me the closing inventories of other than sugar, sugar as well, molasses and bagasse as the figures?
S. Suresh
We will share that information with you.
Rajesh Majumdar
Okay, perfect.
So, that was actually the main question I had because the jump in the sugar turnover how to read it in terms of profitability going forward, it is going to partially impact in Q1, is that what you are saying?
A.Sridhar
Yes, because as I mentioned to earlier being the seasonal industry is at five months of production the inventory holding and the carrying cost gets spread over in the subsequent periods.
Rajesh Majumdar
Right Sir, and my second question was in the cash flow statement in our standalone business you mentioned that Rs.200 Crores repayment by subsidiary in term so inter corporate loans.
So, I understand that was the loan given to the refinery business even after that repayment there is a Rs.200 Crores, term debt, is that correct?
A. Sridhar
Very true, yes.
With refinery there is a Rs.200 Crores term loan still due from that.
Rajesh Majumdar
And that Rs.60 Crores working capital position, how do we realize going forward, is going to come down substantially this quarter?
E.I.D.- Parry (India) Limited May 18, 2022
A. Sridhar
Is it for EID Parry is what you are asking or is it for refinery?
Rajesh Majumdar
Parry refinery?
Suresh Kannan
As far as the refinery is concerned one of the reasons as what Mr. Sridhar earlier explained for increase in the short-term loan is also on account price increase.
Sugar prices as you may recall have gone up by close to 30-35% on an average on a year-on-year basis.
However, we are working in terms of better turnaround cycle, so I think we might be in a position to move between Rs.400 Crores to Rs.500 Crores of short-term debt.
Rajesh Majumdar
Okay, thank you very much.
Moderator · Conference Operator
Thank you.
The next question is from the line of Parin Gala from SageOne Investments.
Please go ahead.
Parin Gala
Good afternoon, Sir.
After moving that lump sum Tamil Nadu could you got into Haliyal and also one hell for sale and some other land that we might hold so, how much is that surplus kind of land that we would be holding in the company and what are the plans with that surplus land?
S. Suresh
The process of disbursal of machinery is on there Pettavaithalai plant, we have just concluded the sale deal and the process itself will take almost six to 9 month’s time after that only we will be looking at the opportunity for monetizing the land.
Parin Gala
How much would be the land bank with us, surplus land bank?
S. Suresh
We will just get back to you.
Parin Gala
Okay, Sir.
Thank you.
That is all from my end.
Moderator · Conference Operator
Thank you.
The next question is from the line of Dhruv Maheshwari from Premji Invest.
Please go ahead.
Dhruv Maheshwari
Sir, thank you so much for giving me an opportunity and thanks for the comprehensive presentation.
Sir, just one question on slightly two-to-three-year outlook do you think ROC targets were the very if I understand that there are multiple living thoughts in the business, generally the refinery piece.
Just overall, when we look at 7% ROC targets or the refinery business, how do you think about it from a medium-term perspective especially when our subsidiaries generating high ROCs and passing out on dividends.
So, just wanted your thoughts on how you think about it?
E.I.D.- Parry (India) Limited May 18, 2022
MUTHIAH · MURUGAPPAN
Can you just repeat that question, sorry the question is on the refinery ROC is it?
Dhruv Maheshwari
No, it is on the overall ROC, we understand that refinery can be more or less but at a standalone level is there a ROC target especially when we typically being generating strong ROC at a subsidiary level and when that comes on it used to be passed on as dividends or whatever the way you think about the business going forward.
So, just wanted to understand the overall capital allocation strategy that is working with today?
MUTHIAH · MURUGAPPAN
I am seeing a number of questions within your question.
Let me address the ROC first: I think from current levels with the aspiration is to move up and we are confident of the visibility on that front, the work that we have done in terms of re-location of plants, in terms of better recoveries, in terms of volumes of cane crush, in terms of the tail winds from the ethanol blending program, I think all of that will lead to better matrix and we can see herein key forward guidance but we are seeing a good scope there in terms of incremental ROC even we like to get to industry standards that leads the best in class industry standards.
So, in terms of the broader capital allocation strategy, we will see at allocating more capital to first growth areas I think the whole bio-fuels program will just give us hope area in this allocated capital so that you see us setting up a distillery.
In terms of moving of assets into higher recovery zone we have done by moving Pudukkottai into the Haliyal unit.
Beyond that you have seen some of our data on the retail and the retail growth that is another area which the capital allocation as mentioned we will need to get way beyond one lakh outlets you have to have a good detail play book we will need to be north of two lakh outlets.
So, that will be capital allocation and we are taking some people understanding of the Nutra- segment to see what the growth area can be, once we have done that, that is another area where we will allocate.
This is where the capital allocation will be centered around in the years to come.
Dhruv Maheshwari
Got it, Sir this is helpful.
Just in terms of the standalone business today we will be able to generate strong cash flows with going by all the initiatives that you have taken up.
Will that be sufficient to fund it or we would continue to look deploying capital in form of subsidy that receiving from our subsidiaries there?
MUTHIAH · MURUGAPPAN
No, it will be largely from internal accruals, as we deploy capital we will determine what the best context of that deployment is but for the reasons stated just a few minutes ago we should see better internal accruals in the business itself.
Dhruv Maheshwari
Fair enough, this is very helpful.
Thank you so much.
Moderator · Conference Operator
Thank you.
The next question is from the line of Dipesh Sancheti and individual Investor.
Please go ahead.
E.I.D.- Parry (India) Limited May 18, 2022
Dipesh Sancheti
Just wanted to know what is the realization for ethanol especially from syrup, B-heavy, C- heavy and ENA in this quarter?
A. Sridhar
The B-heavy realizations we were at Rs.58.07 and syrup was about Rs.63.27 and C-heavy was at around Rs.47.00.
Dipesh Sancheti
And what about ENA?
A. Sridhar
ENA was at around Rs.56.00.
Dipesh Sancheti
In one of the previous questions, you had said that the ENA prices have fallen down.
Is that correct?
A. Sridhar
That is right, compared particularly to the previous year.
Dipesh Sancheti
Okay, can you just tell me the quantum of the fall or how much was it previous year?
A. Sridhar
Previous year was about Rs.61.00.
Dipesh Sancheti
And this has been all over India or only the Southern market?
S. Suresh
It is more in Tamil Nadu where has been a lot of inflow of the ENA from the neighborhood states and that let to the fall un the price.
Dipesh Sancheti
Okay, are we looking at setting up ENA something like a state of West Bengal where the ENA prices are higher than even the ethanol prices.
Are we looking for something like that or setting up ENA plant in future?
S. Suresh
Actually, the raw material for the plant will have to molasses unlike ethanol where you can even have this predominantly it is from molasses which we make you need to have enough cane sourcing availability in the absence of that we may not be looking at that.
Dipesh Sancheti
And I can see that the profitability of the distillery plants has been excellent and we are also looking at almost increasing our capacity by more than 110 KLPD.
In future are we looking for any more expansion plans?
S. Suresh
Further expansion plans because already this financial year we have got 120 KLPD at Sankili we will have to see the opportunity in terms of cane availability.
Every sugar unit can have its distillery for example Pugalur or for example maybe addition Nellikuppam, we have to only evaluate the sustained cane availability for the next three-to-five year -time E.I.D.- Parry (India) Limited May 18, 2022 frame because for a typical ethanol project to pay that it takes four to five years.
Once you see an assured cane availability and also the government policies continuation in terms ethanol blending then we will be in a better position to take the call on future investments.
As Muthiah was pointing most of the high margin areas that if there is an assurance in terms of the raw material availability and also the market forex then definitely we will be looking at that.
Dipesh Sancheti
Sir, then what about ethanol which is being produced with some grains especially broken rice.
Are we looking getting into that?
S. Suresh
In fact for Andhra plant, the Sankili plant 120 KLPD is also designed with molasses as well as the grain as peak stock so, already using that.
At present we are not looking at putting a plant exclusively based on grain.
Dipesh Sancheti
Okay, because the availability of that raw material will be far easier than getting the sugar cane?
S. Suresh
Always it is green by other sides, so we have to evaluate the things it is better to have multi- feed stock for us at any point in time that can mitigate the risk in a better way.
Dipesh Sancheti
Okay, thank you so much.
Thank you.
Moderator · Conference Operator
Thank you.
The next question is from the line of Anupam Goswami from B&K Securities.
Please go ahead.
Anupam Goswami
Hi!
Sir, my question is that going forward where is the improvement in the margins, if at all it is there and my second question is that how we exhausted our opportunity of distillery capacity expansion in Haliyal because Haliyal now has a crushing capacity of 12000 PTD and as you mentioned that the cane availability is better then the rest of the areas.
But we have a only 50 KLPD of distillery in Haliyal, so can we look in any more expansion in Haliyal to exhaust the distillery opportunity over there?
S. Suresh
Haliyal, actually this year we should allow the second plant to perform to the fullest, get the mileage out of it, then continuously explore the opportunity to top up another distillery over there that is what we will be doing.
We will have to see how this all transfer because last year only we have invested close to almost Rs.120 Crores – Rs.130 Crores into the Haliyal plant.
So, we will phase it our accordingly based on the opportunity.
Anupam Goswami
And Sir, going forward what is the range for margin improvement in all businesses like sugar, refinery and distillery and nutraceuticals?
E.I.D.- Parry (India) Limited May 18, 2022
S. Suresh
In a business, you said all the businesses what they have mentioned with so many factors which are beyond the control of the business.
Continuous margin improvement only has dragged the business to these levels what we are seeing in terms of the results and definitely there are opportunities.
But the thing is we are talking about improving from hereon, so continuous cost reduction opportunities will be explored and we will be looking at it in the years come.
Anupam Goswami
Okay, got it.
Thank you, Sir.
Moderator · Conference Operator
Thank you.
As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
S. Suresh
Thank you so much everyone for taking time out and then joining this call.
We will be meeting you three months from now in the next call.
Thank you so much.
Moderator · Conference Operator
Thank you.
On behalf of DAM Capital Advisors Limited that concludes this conference.
Thank you for joining us.
You may now disconnect your lines.