BALRAMCHIN - Balrampur Chini Mills Ltd. Share Price

Management provided a positive outlook for Balrampur Chini Mills, highlighting the current sugar production estimates and market conditions. The company anticipates gross sugar production of 325 lakh tonnes with a net production of 290 lakh tonnes after accounting for 35 lakh tonnes diverted for ethanol. Sugar prices in Uttar Pradesh are currently between INR 41 to INR 41.5 per kilogram, with further price increases expected as the year progresses. The opening inventory is reported at approximately 5 million tonnes, suggesting a tight supply situation that could support higher prices.

In terms of cane pricing, key sugar-producing states have raised cane prices, adding cost pressures. Uttar Pradesh has seen a hike of INR 30 in cane prices. The management emphasized the need for a revision of the Minimum Selling Price (MSP) to maintain timely payments to farmers and ensure market stability, although it noted that immediate adjustments may not significantly alter pricing trends in light of current market conditions.

A 5% to 6% increase in sugarcane crushing is expected, driven by improved yields and a higher cultivated area. The company has also reported a commitment to sustainable practices in sugarcane cultivation, reducing chemical inputs and focusing on mechanical pest control.

Furthermore, the PLA project is progressing as planned with INR 1,421 crore spent so far. Once operational, it is projected to contribute approximately INR 2,000 crore in revenues at peak capacity, with an estimated EBITDA margin of 35%. Overall, management is optimistic about leveraging the strong demand environment and operational efficiencies to drive growth.

Question 1: Regarding this ethanol pricing, if we have to look the other way, what is the incentive for the government to increase the ethanol price right now?

Vivek Saraogi: The government should prioritize supporting policies that are climate-friendly and farmer-friendly, rather than acting purely as a trader. Historically, an increase in FRP was accompanied by a similar rise in ethanol prices. Just because blending targets are met does not mean we should halt price increases. The government's commitment should not shift; they should recognize the need for fair pricing to maintain farmer payments and market stability.

Question 2: Have we received any formal or informal assurances from potential clients regarding offtake "” particularly from segments such as railways, defense, or temples?

Avantika Saraogi: At this moment, I cannot disclose specific details. However, we have engaging discussions with various institutions; these are indicated in our presentations. While I can't name them all, the market outlook we're seeing is promising, especially since PLA trade volumes have significantly risen and our technical successes indicate a solid foundation for future agreements.

Question 3: Could you provide a broad sense of how the downward revision in production estimates is distributed between UP and Maharashtra?

Pramod Patwari: UP production is expected to max out at around 10 million tonnes. For Maharashtra, along with Karnataka, we anticipate about 17.5 to 18 million tonnes. Together, UP, Maharashtra, and Karnataka will account for approximately 28 million tonnes, with an additional contribution of around 4.5 to 4.7 million tonnes from the rest of India.

Question 4: You highlighted an increased cane allocation by 5% to 7%. Does the additional land already secured have meaningful cane availability or is there further scope for improvement?

Avantika Saraogi: The 5% to 6% increase refers to crushing, not merely land allocation. Additionally, while we've secured new areas with cane, these regions have significant potential for further yield improvements. The farmers are eager, and we believe that by collaborating with them, we can boost cane availability significantly.

Question 5: While there's an expectation of increased recovery, why does it seem to have plateaued? Are weather or ratoon crops to blame?

Vivek Saraogi: You're correct; recovery rates have varied across regions. West UP saw some areas improve by 0.5%, while others faced declines. Unexpected weather conditions affected timelines, resulting in more modest overall recovery expectations. We still hope to achieve a marginal improvement of 0.1% to 0.15%.

Question 6: What is the current capacity utilization for the PLA project, and at full capacity, what kind of profit contribution can we expect?

Avantika Saraogi: The plant is set to be commissioned in October 2026, so capacity utilization is currently at zero. Once fully operational, we anticipate peak revenue potential of INR 2,000 crore, with an expected EBITDA profit margin of 35%.

Question 7: Are we on track to close FY26 with ethanol sales of 28 crore liters?

Pramod Patwari: We are projecting ethanol sales to be between 26 crore and 27 crore liters for FY26, which is slightly below our initial target.

Question 8: If the government doesn't revise the ethanol prices, can we maximize sugar production and increase our distillery capacity for grain-based ethanol?

Vivek Saraogi: Due to the lack of price increases, we've already diverted some capacity to C-heavy ethanol. However, grain-based ethanol cannot be produced at our other units outside of Maizapur, where we have that capability. Our current focus remains on maximizing sugar production while navigating government policy constraints.