BCL Industries Limited (524332) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to BCL Industries Limited Q3 FY '22 Earnings Conference Call hosted by InCred Equities [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Awasthi from InCred Equities. Thank you. And over to you, Mr. Awasthi.

Thank you, Nira. Before we begin, I would like to thank the management for giving us this opportunity to host this con call. And from the management side, we have Mr. Kushal Mittal, who is the Joint MD of the company. Now I would like to read out a short cautionary statement before we begin. Some of the statements made in today's con call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by them and the information currently available to the management. Audiences are cautioned not to place undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings con call is purely to educate and bring awareness about the company's fundamental businesses and the financial quarter under review. That's all. Over to you, sir.

Good afternoon, everyone, and thank you, Nitin, for the introduction. We'd like to extend a warm welcome to everyone attending the earnings con call for the third quarter of financial year ending 2022. Before I begin, I'd like to wish you and your family a happy New Year, and I hope you and your families are keeping safe and well. For the ones who are participating for the first time, let me give you a brief background about the company. BCL Industries Limited is a diversified business house with business interest spread primarily across edible oils industry. The company started off in 1976 with a solvent extraction plant of 40 tonnes per day, extracting oil from rice bran. Over the years, the company has grown to become one of the largest edible oil manufacturers in North India, having a total capacity of 1,020 tonnes per day. Furthermore, we have forayed into the business of distillation by setting up our own grain-based distillery of extra neutral alcohol of 100 KLPD along with the bottling plant in Bhatinda and later doubled this capacity to 200 KLPD and added an ethanol plant. With the rise of demand in both ENA and ethanol, the company is now installing a state-of-the-art distillery history of 200 KLPD and 10 megawatt cogeneration power plant in Kharagpur, West Bengal. Furthermore, the company is also expanding in the distillery capacity at Bhatinda by adding another 200 KLPD of ethanol capacity. The company has already received the environmental experience for the expansion, and the civil work is in full swing. And all the machinery orders have been placed, and some machinery suppliers are also on site working. The company aims to bring this plant to production in the second half of FY '23. Post expansion, the capacity of Bhatinda unit would be 400 KLPD and BCL Industries Limited to be one of the largest suppliers of grain-based ethanol in the nation. Now talking about the key financial highlights for the third quarter. We've had another consistent and phenomenal performance this quarter. The total income for the quarter was INR 567 crores, which increased by around 40% year-on-year and 22% quarter-on-quarter. EBITDA for the quarter was at INR 36 crores, which increased around 66% year-on-year and 13% quarter-on-quarter. EBITDA margin stood at 6.41% with an increase of 96 basis points on a year-on-year basis. Net profit after tax was approximately INR 24 crores, which is an increase of 139% year-on-year and 15% quarter-on-quarter. And PAT margins for the company were reported at 4.25%, an increase of [ 123 ] basis points on a year-on-year basis. In the first 9 months of the current financial year, the total income has stood at INR 1,483 crores, which increased by approximately 48% compared to the same period last year. EBITDA stood at INR 96 crores, an increase of 62% on year-on-year. And EBITDA margins were at 6.40%, an increase of 58 basis points on a year-on-year basis. That stood at around INR 62 crores, an increase of 114% compared to the same period last year, while PAT margins are at 2.17%, an increase of 129 basis points year-on-year. Now coming to the operational highlights of the quarter. I would like to start with the Distillery segment. The revenues from the Distillery segment for quarter 3 stood at approximately INR 130 crores. And for 9 months, it was at INR 390 crores. Demand for both ENA and ethanol continues to be very healthy. The work at Svaksha Distillery is ongoing, and the company has already started the initial testing of the power plant. And these vendors and the company are now working tirelessly to bring the plant into commission as soon as possible. And we're hoping to do that before the end of this financial year. With regards to the Edible Oil segment, the revenue for the Edible Oil segment for quarter 3 were approximately at INR 448 crores and INR 1,108 crores for 9 months. We're experiencing strong demand for our products in this segment, driven by consistency and the quality of our products and the seamless supply chain that is being offered by our company despite the COVID troubles. With the government focus of making India for the Edible Oil sector, the company expects to keep increasing its revenue and capacity utilization in this segment. Thank you. I would now like to open the floor for questions.

[Operator Instructions] The first question is from the line of Ravi Naredi from Naredi Investments.

Sir, first of all, thank you very much for your fantastic results so far. Sir, what is the real estate revenue likely in next few years?

See, the Real Estate revenue, we have about, I think, inventory levels of around INR 30 crores less to sell. And we hope to monetize the entire amount in the next 2 years.

Okay. After completing this project, no further real estate is there, right?

There's no further real estate projects of plan as of today.

Okay. Sir, second, how much rice production are you anticipating in current harvest year? And will you get broken by a reasonable price?

See, the rice production, I think, has stayed consistent on a year-on-year basis. But broken rice, at the same time, it does not seem like a problem, and there are various reasons for it. See, one, as you know, many states, especially in Eastern India, are now growing 3 costs of paddy, whereas Punjab and [indiscernible] was the grain basket of the nation only going 1 crop of paddy in a year where these states can do 3. And secondly, the second reason is with an increase in income in India and the decrease of price of grains in India, over the years, what has happened is the poor class and the labor class initially, they used to eat the damaged rice. Then a lot of damaged and the broken rice used to go in for human consumption. And with the increase in the income and the increase in the standard of living in India, now even the lowest class of people, they don't eat broken rice. They prefer the [indiscernible]. So that has [indiscernible] the supply of broken rice for distillers in the nation. And another big reason is that we do not see any problem with the supply of broken rice is the policy that has been initiated by the government where we can now buy rice from FCI at a subsidized rate, and that is converted into ethanol. And this year, we've seen that all grain-based distillers have increased the amount allotted to the FCI policy. And that's why we haven't experienced any supply side pressure from the non-goods supplier.

My third question was whatever target for 2024 set by Government of India for ethanol. So from where we will get the capacity more from grain-based or sugar-based?

See, actually, if you read the media report and what the government wants, they don't want the supply increasing from the sugar much further. They want all of their supply increasing from grains. So their forecast and their expectation is around -- they want around 350 crores to 400 crore liters of ethanol being supplied from the grain distillers, whereas the current supply is at 52 crores. This year, the tendered amount of grain-based ethanol in this ethanol year is around 52 crores, which they want to take to 350 crores to 400 crores. So that's where they want the increase coming from. And to achieve that in such a short time is a challenge for all, and that's why we have gone into expansion at our units.

Right, right, right. When Svaksha Distillery will start and Bhatinda, you said by November '22. Then what is planned for expansion for further expansion of our units?

See, we have also taken the necessary permission for [indiscernible]. So our target right now is to, before the end of this calendar year, make Bhatinda 400 KL capacity and bring Svaksha to 300.

400 and 300.

And for now, our focus is on this to make a company 700 KL company. And then we can come up with the plans, if needed.

And after that, any expansion plans you have made so far?

This is the expansion plan for now.

Okay. Okay. So there will be no CapEx in financial year '23 and '24, right?

Not as of now.

[Operator Instructions] The next question is from the line of [ Dipesh ] from Omni Financial Service.

First of all, congratulations on a great set of results once again.

Thank you.

Just wanted to know what is the average price realization of ethanol after the price have been revised?

See, the ethanol is being supplied now in 2 policies. There is the ethanol that is supplied against the damage crane, which is at INR 52.13. And then there's the ethanol that is being supplied against surplus grains that have bought at 22 -- INR 20 per kg from FCI. And the same ethanol is supplied to them at INR 56.87.

So we are doing mainly the surplus FCI. What is the revenue mix?

About 30% of our quantity. 30% to 35% is under the surplus scheme and the rest is under the damage.

And in the future, are we going to increase? I mean how are we looking forward for this expansion also coming in place?

Yes. You mean change this ratio or...

I mean the ratio, since we get a higher realization at...

No, the realization is about the same in both according to our calculations. And it depends for some parts of the year, the damage crude grain might give you a better realization. And in some part of the year, the surplus grain could give you a better realization. But on average, we've calculated to be about the same throughout the year. The ratio could be changed a little. Maybe we could increase the FCI supply in the next year. But we haven't taken a call on that yet. It's usually closer to the next sugar year that we'll take a call on that.

What is the average utilization on -- I mean, since it's almost the same for damage as well as surplus, what is the average realization on this?

See, like the average realization on an average, we expect the per liter will get INR 10. That is also including DDGS and all the other byproducts. That is the mode of calculation that we follow.

Okay. So that is apart from the other ways, which are -- I mean, whatever we are selling the other ways that...

It's including that.

That is included in this. So per liter, about...

I wouldn't call it ways, I would call them byproducts.

Sorry, byproducts.

Out of INR 500 crores of revenue at a 200 KLPD plant, it gives us 100 crores in DDGS. So I think it would not be like calling it waste. I think it could be termed as a core product. It's not even a byproduct.

Yes. Okay. And just one question about the Svaksha Distillery. When is it getting commissioned because we were waiting since 2020?

Yes. I think there were some delays, of course, due to COVID in the commissioning of the plant. And then with the prices -- increasing commodity prices increasing globally, there were a lot of plant suppliers who were in trouble. But due to our long-term relationship, we kept that going and they've agreed to supply on the previous terms. So there were some delay due to COVID and everything, but we're expecting to have it commissioned either Feb or in March.

Feb or March, will that be full capacity?

Yes. So once the commissioning begins, the plant will go into commissioning at full capacity.

Full capacity, okay. And one more question is that once we get the 700 KLPD expansion done by FY '24, so by FY '25 -- I'm talking about long term as I'm a long-term investor. By FY '25, can we reasonably assume that the profits which we are showing today from the Distillery division will triple?

You mean the revenues?

The revenues as well as the profits, if all the other things remain the same, the government policies, the government everything.

Yes. So with the 700 KLPD expansion coming into place, we expect revenues around the tune of INR 750 crores -- INR 1,750 crores from the Distillery sector. And the margins, too, we expect them to continue.

Do we expect that the profits and the margins will grow according to the capacity. So basically, for right now, we are working at 200 KLPD. By FY '24, if you are having 700 KLPD, so is it reasonable to assume that profit will triple, sales as well as profit will triple?

Yes.

[Operator Instructions] The next question is from the line of Abhishek Maheshwari from SkyRidge Wealth Management.

Yes. Congratulations on the...

Abhishek, sorry to interrupt you. May I request the speaker to louder and closer towards the phone, please?

Yes, one second. Am I audible now?

Yes. Much better.

Congratulations on this result. So sir, I have a couple of questions. Could you talk a little about any input cost pressures that you might be facing in Edible Oil and Distillery division?

The pressure in Edible Oil division, is that the question or both?

I think, majorly, it would be Edible Oil, but I think if you could talk about Distillery also if there is any input cost pressures there.

Not to sound too positive, and I think we're in a cycle where both the sectors that we are in are going through a phenomenal period, and we expect this period to continue because both the industries are import substitute industries. And for the Edible Oil sector, we have been very bullish on this industry for the past few years when everyone was ignoring the industry or was very negative on it. And we kept saying there will be a time when the government will have to go back to being indigenous in this industry because their financial model is not good for the economy, and that is exactly what we're seeing happening right now. With the mustard crop this year going up about 30% -- 25% to 30%, those were the estimates are, and the weather has been very favorable this year, a lot of [indiscernible] has coming into mustard cultivation. A lot of people have shifted from wheat to mustard where we are. And the crop that is incoming will serve us for the entire year. So that will help us increase our capacity utilization and our revenue in the Edible Oil sector. So we -- I think even with the government decreasing the import duty, the global demand skyrocketed. I mean the markets are at an all-time high when Edible Oils are concerned. And so it is time for indigenous oils to come into place, and that's what is happening. There's a shift happening, which will take a few years. But the sector is going through a very exciting period. And for the ethanol and the ENA sector, I need not say too much. Everyone here is very well educated on this sector. The government, for the 20% lending target, the demands are high. And even the ENA sector is very strong because none of the new plants that are coming across the nation have ENA licenses. The ease that has been done in the regulation for setting up a plant has only been done if you only want to manufacture ethanol. And thus, at BCL, we have the flexibility to manufacture both ENA and ethanol. And ENA market is extremely strong, and we expect that to also continue.

Good to know, sir. Sir, this mustard crop and all that you depend on, are you able to efficiently pass on the cost to the end customer, thereby retaining your margin?

Yes. That is done quite effectively in the industry. And if you look at our margins, actually our Edible Oil margins are better than the industry standard. If I compare our numbers to the bigger players and our EBITDA margins are -- were working at better numbers. So we can pass on that to the consumer, and we're doing very well in this sector.

Okay. Good to know. And then my last question is regarding your energy requirement. So do you have your own captive power plant, you depend on the [indiscernible] power plant?

No, we have our own captive power plants in our Distillery units. And so currently, we have about 10 megawatts at Bhatinda and 10 at Kharagpur. And Bhatinda is going to 20 after expansion. And the exciting part is that the new boiler that we're installing in Bhatinda is going to be run on steady straw so to help decrease the pollution. And in the northern states, new technology has come where a couple of boilers have been installed that run on straw. It's a relatively new technology with a high CapEx cost. But the Punjab government has also launched a policy where industries that set up a rice-based boiler will just be safe part of the GST back. And we have registered for the same policy, and we're installing that same boiler. So we're expecting very good things from the new power plant.

So -- and sir, just dependently, are you seeing the [indiscernible] let's say...

Can you please be a little louder?

Yes, yes. So I wanted to talk about coal prices because you think that globally, coal prices really shot up. So is that somewhere impacting you also? Or you are...

Yes, that is impacting us. Fuel costs in general are higher, and that definitely plays a huge role in the margins. As you know, there's steam and power costs involved in the process. But I think due to our good network, we're still able to source hot [indiscernible] at relatively good rate. But yes, there is a pressure on that part.

Okay. But you do so from India and foreign coal rate or you...

No, we are primarily -- we run our power plants on biomass, not as much on coal. So our supplies are local.

The next question is from the line of Nitin Awasthi.

Okay. So the volumes on the ENA and the ethanol front combined together, the distillation volumes, if I may call them, seem to have shot up. So have they actually -- what utilization are you running at? Because at deep level, it seems like you're either running at full utilization or higher than that?

See, the plants can run up to 110 [indiscernible]. And for the last quarter, due to the increase in demand and our plant has already gone into the tailings beforehand, we were able to work at full capacity utilization and slightly higher.

Okay. That explains the reasons for the higher volumes. So your new plant in Bengal, what would be the prices of ENA that you'll be able to garner there versus the pricing in Punjab?

See, Punjab, so currently, ENA prices are very strong across the nation. Punjab, I think this month, our average will be around INR 54. And in Bengal, we expect this to be around INR 57 to INR 58.

INR 58?

INR 57 to INR 58, yes, with the current prices. But right now, there is a huge shortage of ENA in the market because Brazil has gone -- Brazil supplies have gone down. And with the rise in COVID cases, a lot of the African nations and the Middle Eastern nations have been importing spirits for the manufacturing of sanitizer. So that's -- there's a shortage of ENA in the market currently. So the prices are very good.

With that INR 57, INR 58 and with the fungibility and capacity that you have investing also, could you do 18% to 20% EBITDA?

Yes, we're expecting better EBITDA margin at the Svaksha unit.

Okay. Noted, sir. So what is the price trend of DDGS right now?

See, DDGS, I think it depends on what protein you're selling at. So our protein percentage -- for our protein percentage, we're getting around, I would say, INR 26 on an average.

INR 26 on an average. Okay. Noted sir. And also, sir, there's a talk going on about maize getting a different pricing within the whole basket of grain distribution. Can you give us -- shed some light on that? They're talking about INR 55 rate for maize?

Yes. So in order to promote maize as a viable crop, as a viable substitute for paddy in the Northern region, there has to be a good industrial use of maize. See the Indian pharma, what they struggle with is the damaged maize that they're left over with. So the good quality maize is being procured by the feed manufacturers like Cargill and other companies. And if there's a little bit moisture that's in the maize and apotoxin increases, they're completely rejecting that a lot. And then the farmers struggles. And so damaged grain -- damaged maize can only be procured by the distilleries. And distilleries currently, it's unviable for us to make, if not from maize and sell it at the current price because maize has relatively lower starch when compared to rice. And the current market prices are around the same or higher when compared to broken rice. So the industry and the government are both invested in increasing the area under maize area, cultivation of the maize. And for that, there is a proposal that there will be a new price that set from maize-based ethanol. I don't know the inside news of anything, but I think we should have a policy of such coming in the future that is beneficial for the environment also not only the industry.

Noted, sir. Sir, last question from my side. The tax rate volatility that we see in the company, why does that seem to happen? And also, will Svaksha get some concession in tax rate going ahead when you start the new distillery?

No, there won't be any concession at Svaksha Distillery. And I think BCL, in the last quarter or 2, has stabilized. And I think we will continue the tax rate, the same 25%.

The next question is from the line of Karan Agarwal from Tusk Investments.

Am I audible?

Yes.

So I was trying to understand that, if I'm correct, FY '24, you will be close to 23 crores liters of ethanol, right?.

I'm sorry, your voice is a little...

Your voice is breaking.

Is it fine now?

Yes. Better.

Yes. So what I was saying is that, if I'm correct, you will be able to make 23 crores liters of ethanol by FY '24, right?

23 crores of both ethanol and ENA combined.

Yes, combined. And assuming an average realization of INR 54 per liter, you'll be able to meet close to INR 1,200 crores to INR 1,250 crores revenue from ethanol and ENA combined?

Okay. 1,200, yes.

Yes, yes. So assuming INR 54. And on the call, if I'm not wrong, you had mentioned that the revenue from the ethanol Distillery division will be close to INR 700-odd crores, right? So these 5...

INR 1,700, so that is including the byproducts also.

Yes. Yes. So I was coming to that. So this INR 500 crore delta is -- will be via byproduct side. You'll be selling DDGS in Q2, if I'm correct.

Yes.

Yes. And the second question, sir, would be that, of this 23 crore liters, what will be the mix between ethanol and ENA? Because as per my understanding, to be eligible for the interest rate subsidy, you need to utilize 75% of the plant to produce ethanol, right?

So that is plant-wise. That is not a company-wise policy. So for example, my merchandise expansion qualifies under the interest subvention scheme because I'm expanding that plant by 200 KL and the expansion that I'm doing is ethanol only. So it is only the expansion that is looked at for -- so then my entire plant will be on ethanol. So that's why I qualify for that policy. And then the same at [indiscernible], the expansion that I'm doing is ethanol only. So for the 100 KL expansion, I'll qualify for the interest subvention. For the current 200 KL, I won't qualify because I don't wish to divert 75% of my quantity towards up north, and I wish to have the flexibility in [indiscernible] SG&A demand is good there.

And who do we sell ENA to? Do we have a -- I'm sorry, I'm new to the call, so I might not know so which is why I'm asking. Are we...

Your voice...

Is it okay now?

No, it's very...

I'll get back in the queue. That will be the best. I'll try to reconnect.

The next question is from the line of [ Miu Liam ] from [ ProfitmaSecurities ].

Yes, sir. I just -- I have one question. So I just want to -- what is our company long-term and short-term goals, sir?

See, for the short-term goal, that is to keep increasing our revenues and profits from the Edible Oil sector and bring the yearly revenue from this sector close to INR 1,700 crores from the Edible Oil sector alone and keep the profit margin at an industry base. And for the Distillery sector, it is to make a company a 700 KL company and do that at good speed at very good execution and a very low finance cost. So for example, the Svaksha Distillery expansion is happening without any fundraising from a bank. And the Bhatinda expansion is happening with an applicable interest rate around 4% after the interest subvention scheme. So those are the targets for now. And for the long term is to remain as the largest -- one of the largest grain-based techno manufacturers in the nation and become a pioneer in the industry and also be long-term debt-free.

The next question is from the line of [ Mira Ghoshal ] from Insync Capital Partners.

I wanted to ask what is the difference -- I mean, what percentage of revenue do we like see foresee from Edible Oils? And what percentage do we see from ENA and ethanol?

See, I think post our expansion in the Distillery sector, we expect both the sectors to give us 50-50 in their revenues. So that's what we're aiming for, and I think that's what our expectations are.

Okay. And since there has been a lot of traction in the Edible Oil segment, especially in exports, where do we start in there? Like exports, how do we foresee?

We, as a company, are -- in this sector, we think India itself has such a huge demand. That -- to cater that also, it's such a big challenge. And we're focused on the Indian consumer and indigenous oil for the Indian consumer. And with the government policy of import substitute oils coming into place and with the cultivation of the Indian oil seeds increasing in the next couple of years, our focus is on that, and I think that will be a big growth driver for the company.

Okay. And there has also been some news about some price increase in edible oils as well. So are we going to benefit from that in the near term, at least next 2, 3 quarters?

Sorry, price increase or decrease?

Some aspects of there was a price increase as well.

There has been some -- see, in the last 1.5 years, edible oil prices have appreciated, and that is good for the company because when edible oil prices increase, the price for the oil seed increase and the farmer gladly switches to cultivating edible oil seeds, as you're noticing on mustard this year as there's a bumper crop coming in. And that is beneficial for a company like us as we are from -- we expertise in edible oil seed to the final [indiscernible]. So when the farmer decides to increase the edible oil conservation, we are direct beneficiaries of that.

[Operator Instructions] The next question is from the line of [ Jatin Kumar ] from Alpha Capital Management.

First of all, congrats for a great set of numbers. Sir, my one question, sir, is my -- in terms of long-term risk on this ethanol government policy because there is some kind of worry also that India is a poor country. People don't have food to eat and government is allowing food to be used to convert to ethanol. So any worry on that? Or the government is -- they may change this policy and all, sir?

So [ Jatin ], for the educated in this sector, there is not much worry on that because just today, if you -- actually, just this morning, I was reading the Hindu BusinessLine. And there was an article on that, that said that, see, we know this. But I'm -- we know this, and we've been talking about this for a while. But just for everyone's knowledge, it was an article on Hindu BusinessLine that everyone can read, which said that the government intends to keep this policy of surplus, right, ongoing where we're buying rice from FCI and converting it to ethanol, because the stock limit, the stock that India needs, even if there's a famine in the country, is at 7 lakh metric tons of grain. The current stock that FCI is sitting on is 53 lakh metric tons. So there's a huge difference between what is needed and what they have, and that is being bought at a very expensive rate. So the ethanol policy is a very good solution for this. The government can't tell the farmers to stop cultivating because, now, as we're experiencing, more and more barren land is coming into cultivation instead of the other way, the government has to subsidize agriculture as that is the case around the world. And Indian grains are not exported because of the higher pesticide use in the country. And even if they are being exported, there's not much demand across the world when it comes to the grain that the world itself is grain surplus. So this -- for those reasons, we are not worried about the long-term aspect of this policy.

Sure, sir. Great to know, sir. And sir, one question on very near term, in next coming few quarters, because you're already running at, say, full capacity and new capacity will take some time to come. So can we expect some kind of less growth or no growth for coming few quarters? Or we should be expecting growth in coming few quarters also before the big capacity comes in?

The growth as in terms of revenue or...

Yes. Both, sir, revenue as well as bottom line, profit and revenue?

Yes. So we expect growth. So first, growth drivers should be Svaksha Distillery, which we're hoping to commission before the end of this financial year. That is a 200 KLPD plant. It is a subsidiary of BCL, where BCL owns 75% of the equity. So those revenues and the bottom line from that plant will be reflected on our balance sheet. And secondly, to another 200 KLPD expansion in Bhatinda that we're expecting will be very -- the work is ongoing at a very good speed. And we're seeing November, but I think the expansion will be done before that and the plant will be commissioned before that because with us being in Bhatinda and having our entire team there and the weather condition is being very good there, work can be done at a very good speed in comparison. And a brownfield project is always done at a much faster speed. And another 100 KL, we expect to add in quarter 4 before the year-end. So these are all the growth drivers for the company in terms of revenue and the profit. And at the same time, as I've been mentioning, the edible oil sector was going back to indigenous. We expect to keep increasing our capacity utilization quarter-on-quarter as we are seeing in our numbers, and that has a direct impact on our revenues and profits.

Sure, sir. And sir, last question would be, are we -- have we entered into some long-term contracts already with -- for the ethanol? Or they will be done once the capacity comes only?

See, the contract that we've entered is we are eligible to participate in the yearly tenders, and we participate in the yearly tenders.

The next question is from the line of [ Dipesh Manchete ] from OMNI Financial Service.

Yes, am I audible?

Yes.

Yes. How is the edible oil policy, which the government has launched today and even the President also said about? How is it going to help our company?

See, to understand -- so we at BCL, we are fully vertically integrated in the Edible Oil sector. So our expertise has always been converting the edible oil seed to the fund of buyback. So we have our own oil mill, our own solvent extraction unit and our own refinery. So our expertise is always buying the edible oil seeds from various [indiscernible] and converting it to the final product. And when the indigenous seed production increasing in the nation, our oil mill and our solvent comes into a greater capacity utilization, which is being worked at under capacity utilization currently. And that is very beneficial for a company like us.

Also, I wanted to know that -- do we expect our margins to be better? Because this time, the margins of the Edible Oil was slightly low, even though the sales increased drastically. Do we -- is it because of the less seeds availability?

I think it's -- the numbers I'm seeing...

I'm saying quarter-on-quarter.

Quarter-on-quarter also, there's been about the same from what I can see. I think at 3.45% compared to 3.4%. So I don't see much difference, and there will be a slight difference quarter-on-quarter. I mean it's not fixed margin, but I think our margins are still better in comparison to our competitors and even the bigger competitors.

Right. And one more question about the Distillery about ethanol. Which machinery are we using? And what is the life of these machines? Are we taking from Praj? Or are we taking from imported machineries? Is there a longer life for them? Because we are planning a bigger expansion almost 3x, so what will be the life of that project?

A lot of -- some machineries are imported. Some -- mostly are not. And the life also depends on what machinery we're talking about, right? So like fermenter or a destination plant, they have a longer life. Power plant has a different life. And so it's hard to comment in general on that. But I can say that our Kharagpur expansion has been -- our Kharagpur, 200 KLPD has been set up by Praj. And -- but our Mahindra units, we have worked with an Indian company called Vascon Engineers in the past, and we're continuing to work with them. We believe their plant is equally as good and shouldn't cause us any problems.

Okay. And one more question is, are we looking at any raising of money by preferential issue or in future by equity this year, planning such a big expansion?

No, no plans. No plans.

The next question is from the line of Ravi Naredi from Naredi Investments.

Sir, what is our CapEx plan for financial year '23 and '24?

See, for the next financial year, we're adding 200 KLPD at Bhatinda and another 100 KLPD Kharagpur. So the CapEx for Bhatinda is around INR 170 crores. Out of which, INR 120 crores loan has been sanctioned by Canada Bank. And for the Kharagpur expansion -- Kharagpur, 200 KLPD. The plant is being set up completely by the cash accruals of the company, and no loan has been taken. And for the 100 KLPD expansion, we're in talks to the bank today about INR 45 crores.

Okay.

So total of around INR 65 crores, INR 70 crores.

For further update, there is no plan so far, right?

None at all.

[Operator Instructions] The next question is from the line of [ Mukesh Kotari ], individual investor.

Pardon me for some basic questions. Because you are one of the largest grain producer of grain-based ethanol for business, what is the cost dynamic between sugar-based ethanol and grain-based ethanol? And what volumes do the margin levels between these 2 alternatives match? Considering that -- I mean it's not tender base and the cost of producing ethanol to sugar-based is lower than we might not be competitive in the market.

Actually, [ Mr. Mukesh ], firstly, the sugar-based ethanol, depending on the source whether that is sugarcane or beehive molasses differs, and only I believe beehive molasses is the only ethanol from the sugar industry that is cheaper than grain-based ethanol. And I can't speak for the margins of the sugar industry because I'm not part of it. So I think it will not be right for me to say on it as I'm not a [indiscernible]. But see, the sugar industry is already subsidized by the government. It's a highly subsidized industry. So you either subsidize something one way or subsidize it the other way where the grain-based distillery industry is not subsidized. So I don't think that would have in our price of our ethanol being a little INR 1 higher than the beehive molasses will not make us competitive because it's the cash flow of the government and we have to subsidize that industry heavily. So I don't see that as being a trouble.

Okay. No, considering the fact that even the minimal price for the grain, so I'm saying if the costs are very, very different between the sugar-based and grain-based, then we might end up uncompetitive, right?

No, no, sugar, that is not the case. It's mostly sugar-based ethanol, depending on the source is higher than grain.

[Operator Instructions] The next question is from the line of [ Mosing Alan ], individual investor.

Sir, I have one question regarding the recent news that government has [indiscernible] on ethanol meant for blending. So what will be the impact of the GST report on the company's bottom line?

Yes. So actually, what -- I should clarify the news a little. So initially, the rule was that the PSUs being BPCL, UCL and HPCL, they could buy ethanol at a DST rate of 5%. And if there were other oil suppliers like Reliance or, what is the other one, private players, private players, the applicable rate was at 18%. And so that has been changed to 5% now for the private players. So initially, the private players were not buying ethanol because it didn't seem -- it wasn't viable for them to buy. But now they started buying ethanol. So that in general, it has increased the demand of ethanol for us, but that has been the impact of that.

The next question is from the line of [ Vinod Karpal ], individual investor.

Sir, do you have any plans for expansion in Edible Oil business because we have been talking a lot about the ENA and the ethanol? Any plans on the ethanol if you want to make them 50-50 potential?

For the Edible Oil unit, Edible Oil sector, firstly, our target is to increase the capacity utilization of our current unit, 200%. And after that, we're going to see the industry trend, and I'm very bullish on it. And if we are to expand, it would be via the acquisition base.

The current utilization is [ 90% ]. Is it fair to say?

See, the utilization, currently, I would -- it is increasing and the refinery is working at 100%. The solvent is almost -- is working at a very good capacity utilization. So I would say it's around 80%.

[Operator Instructions]

I think if there are no further questions, we can end the call.

Sure, sir. As there are no further questions, I'll now hand the conference to Mr. Nitin Awasthi for closing comments.

Firstly, I'd like to thank the management again for giving us this opportunity and also this time the participants for healthy conversation that we had during the con call. And thank you all, and that's all.

Thank you very much. On behalf of InCred Equities, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.