EIDPARRY - E.I.D. Parry (India) Ltd. Share Price

Management of E.I.D.-Parry (India) Limited provided a cautiously optimistic outlook during the Q4 FY'25 earnings call. They highlighted a global sugar deficit projected to increase to 3.9 million tons in 2024-25, driven by production cuts in major sugar-producing regions. For India, sugar production as of April 30 was noted at 25.7 million tons, with ISMA maintaining estimates of 30.3 million tons for the full season. Domestic consumption is anticipated at 28 million tons, with 1 million tons allocated for exports. The management emphasized that the upcoming season looks promising, with good planting numbers and early signs of a normal monsoon, potentially leading to higher sugar availability.

Key forward-looking points included:

1. Sugar Production: Anticipated improved sugar production in the upcoming years, especially considering good planting conditions and rainfall.
2. Ethanol Revenues: A significant focus on increasing ethanol production, with current distillery capacity at 582 KLPD running at over 90% utilization. Management noted expectations to dynamically adjust ethanol production based on market demand.
3. Policy Monitoring: Continuous observation of government policies regarding sugar pricing, sugar release quotas, and potential revisions in molasses-based ethanol pricing after three years without increases amid rising FRPs (Fair and Remunerative Prices).
4. Refinery Business: Challenging performance in the refinery segment due to falling white sugar premiums. Although management expects an improvement in FY'26, they have acknowledged the necessity to adapt to ongoing market conditions.
5. Consumer Products Growth: Plans to expand in the consumer products segment, emphasizing growth rates, market presence, and distribution enhancements.
6. Debt Management: Refining strategies to maintain healthy financials post exceptional items and impairments in FY'25.

Overall, the management remains hopeful about tighter sugar supply dynamics and future policy changes that could bolster the sector's health.

1. Rushabh (RBSA Investment Managers): "Are you looking to enter the organic or chemical-free category in the CPG division seriously over the next 2 to 3 years?"

Balaji Prakash: "Currently, we focus on conventional staples and do not have immediate plans to enter organic or chemical-free staples. Future consideration may arise, but we haven't optimized the supply chain to engage with farmers yet."

2. Sanjay Manyal (DAM Capital): "What could be the crushing number for us next season, and how would that translate into ethanol volumes?"

Abdul Hakeem Ashiq: "Good timely monsoons in Karnataka and Tamil Nadu are promising. We're still planting, but we hold a neutral outlook with potential positive changes as we gather more data by next quarter."

3. Sanjay Manyal (DAM Capital): "What about the role of grain ethanol and its economics in South India?"

Y. Venkateshwarlu: "Our distillery capacity is about 582 KLPD. We'll dynamically adjust ethanol types based on profitability. We can produce about 3.5 to 4 crore liters of grain ethanol depending on availability and government pricing outlook."

4. Sanjay Manyal (DAM Capital): "Why has there been no hike in ethanol prices, and is the 20% blending plan being stalled?"

Muthiah Murugappan: "We haven't seen an increase in molasses-based ethanol prices for almost three years. Given that FRPs increase consistently, it's a challenge, and we're hopeful for positive policy changes as discussions continue regarding growth in blending percentages."

5. Yash Visharia (Mavira Asset Management): "What is the reason for the INR 427 crores write-off and the subsequent INR 350 crores reinvestment?"

Muthiah Murugappan: "The impairment was due to poor financial performance, necessitating a write-off. The reinvestment aims to strengthen the net worth and improve debt metrics."

6. Manoj Shah (Lax Gov Investments): "What should be the minimum selling price increase for sugar to ensure business viability?"

Muthiah Murugappan: "We would need prices in the early 40s to approach viability. Sugar pricing has lagged significantly behind other commodities, and we continue to engage policymakers on this crucial issue."

7. Manaswi (ICICI Bank): "What have been the key reasons for the negative income in the sugar segment, and how is EID Parry addressing this?"

Suresh Kannan: "Challenges stem from sugar realization being low due to government-set MSPs while FRPs rise. We're shifting focus towards refined sugar and consumer products to bolster revenue and seek higher release quotas from policymakers."

8. Manoj Shah (Lax Gov Investments): "How are government controls on raw sugar expected to impact the sugar refinery?"

Suresh Kannan: "The new regulations aim to balance domestic production and enhance competition. However, since raw sugar for our refinery is primarily imported or procured under special licenses, we don't foresee any significant impact on our operations."