Balrampur Chini Mills Ltd

Ladies and gentlemen, good day and welcome to Balrampur Chini Mills Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded.

I now hand the conference over to Ms. Jenny Rose from CDR India. Thank you and over to you.

Good afternoon everyone and thank you for joining us on Balrampur Chini Mills Q2 and H1 FY26 Results Conference Call. We have with us today Mr. Vivek Saraogi, Chairman and Managing Director, and Mr. Pramod Patwari, Chief Financial Officer of the Company.

We would now like to begin the call with brief opening remarks from the management, following which we will have the forum open for the question-and-answer session.

Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier.

I would now like to invite Mr. Saraogi to make his opening remarks.

Good afternoon everyone and thank you all for joining us on Balrampur Chini Mills Q2 and H1 FY26 Earnings Conference Call. I trust all of you have had the opportunity to go through the results presentation, providing details of the operation and financial performance. I will initiate the call with an update on the current developments in the sugar sector, followed by a company's key highlights for the period under review.

Production is expected to rise to about 34.5 million tonnes, this is pre-diversion. After diversion of 3.5 million tonnes for ethanol, net production is expected to be about 31 million tonnes. The total sugarcane area stands at 57.35 lakh hectares, slightly higher than last year. Maharashtra is set to lead the output, rising 39% to 13 million tonnes, driven by strong monsoon rains and a 6% increase in acreage. U.P. is expected to produce 10.3 million tonnes, maintaining stability despite a 3% decline in area, and Karnataka is expected to post a rise of 16% to 6.4 million tonnes.

Domestic sugar consumption is expected to be 28.5 million tonnes. The opening stock on October 1, 2025, is estimated at about 5 million tonnes. After adding 31 million tonnes of

production and deducting 28.5 million tonnes for domestic consumption, and accounting for exports, the closing stock is expected to be around 6 million tonnes. The Government has allowed exports of 1.5 million tonnes for the sugar season 2025-26. We welcome this move as it should provide some relief to the market and support domestic price stability.

The U.P. Government has recently announced INR 30 increase per quintal in SAP for the 2025-26 season, which will take the SAP to INR 400 per quintal for the early maturing variety. In this background, an improvement in domestic sugar realization becomes critical to offset the rise in cane costs and sustain industry profitability.

Coming to the ethanol situation, reduced diversion from sugarcane feedstock is expected to add to the sugar surplus. We were expecting probably a little higher exports allotment for the sugar industry in general. For 2025-26 Ethanol Supply Year, approvals from sugar sources for the sugar sector stand at 289 crore litres, accounting for only 28% of the total requirement, with the balance 72% expected from grain-based feedstocks such as maize and rice. This shift could leave part of industry's ethanol capacity underutilized. While the recent export permission should help, it is equally important that the ethanol prices under Juice and B-heavy routes are revised upward in a timely manner. Such a step will be essential to offset the increase in cane costs and maintain the viability of the sugar mills, especially in light of the significant rise in sugarcane FRP and SAP, for the millers to pay farmers on time.

Moving on to the company's performance, we have delivered a healthy performance in a seasonally weak quarter, marked by improvement in both volumes and realizations. The overall performance was supported by upward revision in power tariffs, which contributed positively to the profitability.

We continue to make steady progress on our PLA project, which remains a key element of our forward integration and value addition strategy. Construction activities are advancing well. We have also commenced market development through trading of imported PLA. As of 31st October 2025, investments of INR 1,093 crore have been made towards the project, out of which INR 570 crore has been funded through debt and the balance from internal accruals.

I am pleased to share that the Board of Directors has declared an interim dividend of INR 3.50 per equity share, amounting to a total payout of INR 70.7 crore, this is including taxes.

As we move forward, BCML remains committed to deliver and create sustainable value. The PLA project marks a significant milestone in our growth journey, diversifying our product portfolio and offering eco-friendly alternatives to conventional plastics, in alignment with Government's sustainability objectives. With a disciplined approach to investment and a strong focus on operational excellence, we aim to strengthen our growth trajectory and continue to create long-term value for our shareholders. Thank you. Pramod over to you.

Thank you and good afternoon, everyone. I hope all of you had the opportunity to go through our detailed results presentation that has been shared with you. So, I would request the moderator to open the forum for Q&A session. Thank you.

Thank you very much. We will now begin the question-and-answer session. We will take our first question from the line of Prashant Biyani from Elara Capital.

Mr. Saraogi, in case there is no change in ethanol price, at current price of SAP, how much would you want to divert to ethanol and for which categories of feedstock?

So, what we are doing is, we have taken an internal call. Pramod, you would like to answer that.

So, maybe around 10% of our cane crush would go towards Juice route and maybe 25% towards the C-heavy route and the balance towards B-heavy. Balance towards B-heavy? Yes.

Right. And sir, has there been any communication from the Government? I mean, feeler not a formal communication that they are evaluating any increase in ethanol price?

Yes, what I will do is, I will just give a general overview. Do you have any other questions from you?

Yes, just one more question. Sir, post announcement of 1.5 million tonnes of export, has there been any surge in sugar prices in the last 2-3 days?

So, what I will do is, I will begin with UP Government. There has been INR 30 per quintal rise in the SAP. So, if we see FRP, FRP has gone up 16% in the last 3 years and this is UP government's first rise. Last year was Nil. So, there has been INR 30 per quintal rise after a gap of 1 year and the Government is fully aware that, you know, this INR 30 per quintal rise is a little steep and probably INR 20 per quintal was what everyone was expecting. So, the informal feeling is that, you know, INR 30 per quintal was meant for 2 years and maybe next year. So, one simple comment is that nobody should extrapolate that this can lead to another gigantic rise next year. Next, we are in dialogue, and as you said, this is not a statement of knowledge but a statement of our dialogure with the Government - both increase in country liquor price of ethanol, reduction in country liquor percentage, transport out-center cane rebate and some other reliefs by the Government. So, we are hoping to get a relief package so as to say from the UP Government, we are hopeful on that front is the best I can say. So, these are the 4 agendas realizing with the U.P. Government.

Sir, with elections coming up in around February 2027, would they want a reduction in country liquor quantum?

So, the country liquor quantum reduction from our sector does not mean country liquor going down. There are other avenues from where they can fill up. There is grain, there is, probably Khandsari and plus technically what they are doing, they are taking excess and storing it.

There are lot of closing stock based on the previous allotments which they picked up from us. It does not mean there is going to be a reduction in the total volume of country liquor sold. So, we are lobbying on these 3 fronts which can, overall put together give a decent relief is our meaning. And as I very clearly have mentioned that to extrapolate this kind of a rise in future, one should not think on those lines.

Now, back to the Central Government. Export has been announced and if you see the export and with the currency and maybe with some premium and maybe just a marginal rise in the global prices. I personally feel export should happen and if you followed my remarks on the opening remarks, it says the entire rise is prominently only Maharashtra and Karnataka. That is where the entire rise is. They will be saddled with stocks. And hence, it makes logical and numerical common sense for them to export. They will be saving huge amount of interest. And if you see in the last few days, farmer agitation, etc., both the CMs of Maharashtra and Karnataka have very heavily lobbied with the Central Government. Which brings me to my next point is we are very hopeful in the ethanol price rise. Quantum, etc., is not known. But yes, as I said, our dialogue with the Central Government is that with this kind of environment, exports are barely going to happen - that is what we are telling to them. We are very, very hopeful of a rise in ethanol price. At some point, even I think the MSP dialogue may give some results there. So, one is UP Government, I have told you, one is Central Government. So, together with both these sort of understanding, relief, package, whatever you want to call it, correction of what they should have done earlier, etc., the fall of, INR 30 per quintal should not be as hard as people expected.

Thirdly, on our company front, based on the weather, based on the cane allotment, based on our internal calculations, we are hoping for a 7%-8% increase in cane crushing for Balrampur. That will improve our fixed cost. Also, we are hoping for an improvement in recovery based on the weather conditions. So, all put together, UP Government, Central Government, Balrampur's own crushing quantum, Balrampur's own recovery expectation, we are feeling that the worst may be behind us with this INR 30 per quintal announcement.

However, a little more evidence to everything I have mentioned may be sort of available in a month. I think in one month we will have a lot more clarity on all the three factors I have mentioned. So, I have covered the UP Government, I have covered the Central Government, I have covered the company's own expectation on crushing and recovery. So, this I thought will come up from various ends. So, I thought it was sort of my duty to clearly spell it out.

And sir, just lastly one thing. Whatever dues the industry or any mills pay to the farmers for the cane that we crush, what is the split, how much do we pay upfront and in subsequent installments?

In UP, everything is paid upfront. We have to pay in single installment.

The next question is from the line of Shailesh Kanani from Centrum Broking.

Sir, just one question from my side. I think on the sugar front you have highlighted. Can you share some volume guidance for ethanol for this season?

For the ethanol year 2025-26, we are expecting around 28-odd crore liters of ethanol including ENA.

And just a route wise breakup as well in that?

Maybe around 9 crore liters from Juice, 12 crore liters from B-heavy, 3+ crore liters odd from maize, 3.5 crore liters country liquor and maybe about 1 crore liter C-Heavy.

So, just one more qualitative question. Regarding the PLA initiative, although it is still in early stage, but we have already commenced market supply, right? So, what are the initial takeaways or insights from these interactions what we are having with the clients? Do they align or differ from our original assumptions on product development? And any qualitative observations you would like to share, which can be useful to us to understand this further?

Okay, thank you. So, I will try and deal with that. Avantika would have dealt with it better, but she is in Delhi for PLA related meetings. So, let us understand what the roadmap of this is.

So, current consumption, now maybe 30,000 tonnes-40,000 tonnes per year, based on the sort of import data of PLA compounds. So, our reaction with the customers is everybody wants to do it, but they are saying, where is your production? So, that is when we began the import. We are dialoguing, etc. So, demand is going to come from two things.

One is direct dialogue with the customers, which is happening. Two is mandate. So, there are going to be certain mandates. One is working with the Government, both State and Centre. And we are hopeful with the mandate and the dialogue with the customer.

Personally, I feel we should be very, sort of confident of selling our entire product. Obviously, nothing will happen overnight. It is not like sugar that you start a factory, you produce the sugar bag, and you dispatch it. It may take a little more time, but it is not ad infinitum into years and all that. We are working very hard on both the mandate and customer interface.

Both with the person who will produce and to whom we will supply.

Okay, and any initial feedback or it is in line with our assumptions? I know it is very early; we have just started it. But any initial feedback on that terms?

The next question is from the line of Sanjay Manyal from DAM Capital.

What I understand broadly that there is an industry wide ethanol capacity of 1,900 to 2,000 crore litres and now total demand including the ENA and rectified spirit should not be more than 1,500 crore litres. So is it good to say that the industry will not go beyond 70%, 75% of the utilization level and some players might be lower than this and some might be higher than this and given the fact that we are not getting ethanol price like at least from last two years and there is no visibility even for the current year. What kind of normative EBITDA per liter margins can we achieve with the entire sugarcane sort of feedstock?

So, Sanjay I think 1,800 crore litres is the overall capacity in my mind. And in any case, it is not possible to operate the capacities as 100%. There are some periods on which the plant needs to be shut down for normal upkeep, repairs, and maintenance. Even if you assume that 80% is the effective capacity utilization, that means around 1,400 crore litres, 1,450 odd crore litres of production capacity. So, that is currently taking care of the ethanol requirement as well as the other segment requirement. On the other part of your question regarding the profitability, we have always said that it needs to be evaluated at a corporate level because transfer pricing can change. So, it will not be possible for us to give product-wise margins in the distillery.

Let me explain. The problem is in the grain side. So, if mills have not got full order, like what we bid, we have got our entire capacity order; we are full. What we did not get is our maize.

So, I am just clarifying. We bid for, let us say, 5 crore maize, we got 3 crore. So, maize has been underutilized, maize has got 60%. So, maize gang has been deprived by 40%. That side of the capacity is overburdened, and that is the excess part. Where millers in sugar did not get the order, probably is they did not bid for Q3, Q4. And there may be a second tender coming, whereby I am hoping some more orders should come to the sugar sector.

Balrampur is full, two others maybe. So, that may help some further diversion down the line.

And we are dialoguing, and that is the point I think you were making, that sugar sector should have some reservation. So, if Government used to take 1,050 crore a year, and the E22 mandate takes a couple of years to come, in the interim 450 crore, which is at least 45% to 50%, should be allotted to the sugar sector and should be a kind of half-half split between the two sectors. Because this sector, see, if diversion was higher, probably you would not have needed exports. If you did not need exports, you are not sort of uneasy as to what will happen to the surplus. There would be no surplus. So, with the farmer agitation and with the reality on the ground, I think Government is slowly understanding this. Thereby, I remain hopeful of, one, some revision in ethanol price. My word is I remain hopeful. And two is we also remain hopeful of going ahead in times to come, getting a much larger portion of the pie for the sugar side. Clear. Have I explained myself well?

Yes, sir. That is quite helpful, actually. And I have a last question on the PLA front. So, I think you mentioned that you have started importing some quantities. But what is the response from the customers or clients? I am sure it is still one year ahead, but have we been able to sort of confirm some sort of orders once our capacity is on stream or have, we

got the visibility that this capacity will be utilized to the optimum level once we are on stream?

So, we are in a trial stage with a lot of customers whereby they have given, let us say, a yes.

They want to now do a trial of the product. There are some trials required at their end also for them too, to give visibility of a large quantity or a meaningful application, let us say. So, we are doing trials with various people, including, let us say, you know, even Government bodies. So, I will wait for Avantika, and I will wait for a little more visibility. So, what I would like to say is, (A), we do not look at this on a quarter-to-quarter basis. (B), we see the mandates coming. We see the macro improving. And thereafter, we can be reasonably sure we will sell, which we are, which we are very confident. So, let us say, mandate and let us say large buyers. We are dialoguing with both the meaningful side and even small buyers.

Right, sir. And if I may just squeeze in one, if you can just give a regular update on what kind of, because I think crushing must have started at least with a few mills in Eastern UP as well.

So, if it is possible to give an update, what kind of recovery and crushing numbers we are expecting?

So, Sanjay, I did mention we are expecting a 7% to 8% increase in Balrampur's crushing, quantum-wise, which will be helpful for everything, for both power, sugar, and ethanol business. And East UP has not yet begun. Yesterday, we began our first factory in the evening. So, give it a little more time, but one definitely expects an improvement in recovery. Definitely.

The next question is from the line of Nitin Awasthi from InCred Research.

Just wanted to understand something on the dynamics of the politics which is going on right now. You alluded to the fact that Indian sugarcane prices are miles ahead, and which is a fact, not only for sugarcane, but for some other crops also, that we are completely broken from the international market, and what you call sugarcane or other feedstocks have gone haywire because of Government interventions. And I do not see Government having the capability of reducing the prices going ahead. So, there has to be steps taken to increase the profitability without dropping the prices. One such step which seems possible is that the UPML route, which is the UP made liquor route, being pushed by the UP Government so that the sugar mills can hold on to their molasses. One, do you think that is something which can happen? Number two, if that happens or does not happen, apart from that, with the current rate of SAP at INR 400 per quintal, your production cost of sugar as a product would be close to INR 39 per kg?

Pramod, you can take the cost question. First, I will take the thing. So, you are talking of deregulation from the country liquor sector for sugar mills.

Yes, because sugar mills have to be profitable.

I do understand the question. So, as I said in the opening remarks of mine, there will be some reduction, hopeful again, because, you know, in the percentage and some improvement in the price. And I am very hopeful that down the line, something, a large portion of what you have been alluding to, things may move in that direction. Understood, sir.

See, understand, our Chief Minister is a man whose ear and legs are on the ground. There is nobody who understands the ground reality better than him. We have dialogued with him.

We are hopeful things should play out in a much better fashion. Understood.

And on the cost front, last year, our cost of production of sugar was INR 35.5 per kg. This year, we are expecting a better cane availability, which will reduce the fixed overhead cost incidence. We are expecting a better recovery also, which will again have a positive impact on the cost of production. In spite of the cane cost going up, obviously there will be some increase in the cost of production of sugar, but it will again depend upon the transfer prices.

So, we are in the process of evaluating the transfer prices as well. We will come to know only once we take a final call on that.

The next question is from the line of Krishan Parwani from JM Financial.

Couple of questions. Firstly, on the PLA business. So, when is your internal estimate of EBIT level breakeven for the plant?

So, we are expecting commercial production to commence in October. So, I really do not know. This being the new product for us, whether it will take one month or two months to get the stabilization. Let us assume, we get a full three months of our machineries running at full capacity.

So, it is tough for now. It will take a little more time, but not much.

We are not expecting any loss in the first year also.

Okay. So, you know, we are working on the product side so that whatever is made is sold.

So, my point was like, because of INR 2,800 crore kind of a gross block, our depreciation at a 5%, 6% depreciation rate could be in the range of INR 150 odd crore or so. So, when I meant by EBIT level breakeven as in like EBITDA of 150-150 getting offset with the depreciation. So, EBIT level breakeven. That way I was trying to understand when is it that your EBITDA will be higher than your depreciation?

These three, four months from my view is we should forget. In terms of forget means we hope to reach 100% of the capacity, make an absolutely world-class quality and make our market. So, I think two, three, four months will go in that. And if we look at a product like this,

I don’t think it will take much time. Even globally, it has taken less time. But having said that, let us say from March 2027 onwards, I think we should fly. These are my personal views, since you asked for them. And as we always say—or as I always say—this is something new for us, but it is not without research, not without global precedent, and not without understanding.

Understood, sir. That is very helpful. Thank you for that. Secondly, on the traditional business, just a couple of kind of points and apologies if you have already answered since I joined the company a little bit late. So, on this quarter, we had a sharp jump in the grain- based ethanol. So, will we see this trend continuing given the grain-based pricing is higher, but I think the margins are lower? So, how will the trend be?

So, see, there will be much better profitability on the grain side.

So, in the ethanol year gone by, we did around 4 crore litres of ethanol out of maize. In the coming season, we got only 3.15 crore litres including 40% allocation of rice. So, rice will definitely have a lower margin than the margin in maize.

But the margin in maize per liter will be higher than that. Okay.

But if you take your fixed cost, obviously.

Yes, understood. And the last bit on the sugar exports. So, do you expect a meaningful jump for you in particular because I think last year the allowance was higher, but the actual exports were lower. So, do you think this sugar season that we will, as a country, first will reach 2 million tonnes of export? If not at a country level, you would not have an idea but probably at your company level, what do you expect there?

So, obviously we will not be exporting. As I said in the beginning, the jump in production is Maharashtra and Karnataka. So, I am personally of the view, and we have the view that they will definitely export. So, give it some more time and I think export will happen.

And this year we will get a longer period to export. Last year's announcement was in January, in fact third week of January.

So, this is before you begin production, you got the announcement. So, things will play out.

And see, I always believe to improve like 280 lakh tonnes, 15 lakh tonnes is what 6%. So, to improve 94% of your life, if one has to do a little bit on the 6%, go do it. That theory plus the saving on account of interest. These two factors being the underlying emotions, I think exports would happen.

Thank you. Ladies and gentlemen, as there are no further questions, I now hand over the call to the management team for closing comments. Over to you, sir.

Thank you once again and we will always be there if somebody has more questions and next three months should give a lot of clarity on all the questions and the thoughts. Thank you, everyone.