BALRAMCHIN - Balrampur Chini Mills Ltd. Share Price

Management provided a positive outlook for Balrampur Chini Mills, highlighting several key forward-looking points:

1. Sugar Production: For the upcoming 2025-26 season, India's sugar production is expected to reach approximately 35 million tonnes, a significant 18% increase from 29.6 million tonnes in the previous year. Maharashtra is projected to see a 42% increase, reaching 13.2 million tonnes, while Karnataka is expected to rise 23% to 6.6 million tonnes, and UP may remain stable at 10.2 million tonnes.

2. Ethanol Diversion and Exports: To manage the anticipated sugar surplus, 4.5 million tonnes of sugar are expected to be diverted into ethanol, alongside around 2 million tonnes allocated for exports. Management awaits supportive governmental policies, particularly regarding ethanol pricing and minimum sale price (MSP) adjustments.

3. Business Performance: For Q1 FY26, there was an observed rise in revenue in both the Sugar and Distillery segments due to higher volumes and better realizations. Despite a 65% drop in sugar production due to a shorter crushing season, management emphasizes their strategy of maximizing cane availability through development initiatives.

4. Polylactic Acid (PLA) Initiative: The PLA project is considered a pivotal part of the company's growth strategy. The commencement of in-house production is set for Q3 FY27 (October 2026), with an expected ramp-up to 50% capacity utilization within the first year. Up to July 2025, Rs. 927 crore has already been invested, against a total capex of Rs. 2,850 crore.

5. Sustainable Growth and Innovation: The management's long-term focus remains on sustainable growth and disciplined capital allocation. They anticipate the PLA initiative will diversify their portfolio into bioplastics, allowing Balrampur to play a significant role in the transition to a circular economy.

Management expresses confidence that ongoing factors such as favorable weather, improvements in crop health, and supportive government policy will contribute to the company's performance and resilience in market conditions.

Major Questions and Answers from the Q&A Section:

1. Question from Sanjay Manyal: "What is your view from the demand conditions for ethanol in the next few years, especially regarding increasing blending from 20% to 25% and the contributions from sugarcane-based versus grain-based feedstocks?"

   Answer (Vivek Saraogi): I am optimistic about ethanol demand. The government is committed to increasing blending, aiming for increments from 20% to 27%. We are engaged with the government to support ethanol pricing amid anticipated surplus sugar production, which should facilitate increased diversion. Discussions are progressing positively, and I foresee upward adjustments in pricing due to our surplus situation.

2. Question from Sanjay Manyal: "Is it possible for us to increase sugar recovery from 11.3% back to 11.7%, or are the new varieties hampering that?"

   Answer (Avantika Saraogi): There's certainly potential for improvement. Our varietal balance is strong; disease-resistant varieties are performing well. While we did see a marginal recovery drop last year, with favorable conditions and effective management, I believe we can reach an uptick in recovery, but it may take more than one year to achieve peak recovery levels.

3. Question from Prashant Biyani: "What would be your view on any changes in State Advised Price (SAP) that may happen this year?"

   Answer (Vivek Saraogi): I believe SAP is likely to increase. It should assist our crushing levels and ensure adequate raw material for ethanol production, which aligns with governmental strategies ahead of upcoming elections. The expected increase in SAP could help in offsetting any dips in yields caused by recent varietal changes.

4. Question from Nikhil Agrawal: "For FY26, is the expected 18% increase in sugar production for the overall country or just UP?"

   Answer (Vivek Saraogi): The projected 18% increase refers to national sugar production. For UP specifically, we expect stability, with the expectations of yield improving due to various factors including weather and management practices.

5. Question from Krishan Parwani: "Is it correct that the term loan repayments for the PLA plant will commence from Q3 FY29, with no interest outflow until then?"

   Answer (Pramod Patwari): That is accurate for principal repayments; however, we will incur interest payments monthly. The 5% interest subsidy from the government will kick in once commercial production starts, which we anticipate by October 2026.

6. Question from Shailesh Kanani: "What unit economics can you share regarding our grain ethanol volumes, especially with the increase in maize-based production?"

   Answer (Pramod Patwari): The profitability from maize will depend on procurement prices. Currently, our maize production is mainly filling fixed costs, covering around 5 crore liters annually. We'll assess profitability more accurately by the next earnings call once market conditions stabilize, particularly with DDGS pricing and maize supply dynamics in focus.