BCL Industries Limited (524332) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of BCL Industries Limited hosted by Quantum Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Sharma from Quantum Securities Private Limited. Thank you, and over to you, sir.

Thank you Rituja. On behalf of Quantum Securities, we welcome you all to quarter '14 FY '22 results con call of BCL Industries Limited. We thank the management for giving us the opportunity to host this call. The management is represented by Mr. Kushal Mittal, Joint MD. I now hand over the call to Mr. Kushal Mittal. Over to you, sir.

Thank you, Prashant ji. Good morning, everyone. And thank you, everyone, for joining the earnings call for the fourth quarter and financial year ending 2021-22. I hope you and your family are all safe and healthy. Let me first talk about the key financial highlights for the fourth quarter. The total income for the quarter was at INR 510 crores, which increased by 18% year-on-year. EBITDA for the quarter was at INR 41 crores, which increased by about 53% year-on-year with EBITDA margins of 8.12%. Net profit was at INR 23 crores, an increase of 72% year-on-year and PAT company was reported at 4.49%. The financial year ended 2022, the total income stood at INR 2001 crores, which increased by 37% year-on-year. EBITDA stood approximately INR 146 crores, an increase of 51% year-on-year and margins were reported at 7.28%. Net profit was about INR 85 crores, an increase of 101% year-on-year, while PAT margins were at 4.23%. As you can notice from the financial performance, it was a very good year indeed for the company. The company has achieved its highest ever financial performance and growth across parameters like sales, volumes and profitability in the year. Now let's talk about the segment-wise update of the company. Starting with the Distillery segment. The revenues from the Distillery segment for quarter 4 FY '22, stood at INR 126 crores, which was a growth of approximately 18% year-on-year. While for the financial year '22, the revenues were at INR 516 crores, representing a growth of about 10% year-on-year. The work at our new state-of-art [indiscernible] is now complete, and the company has applied for all the required permissions for the commencement of production, some of which -- some of which have been granted and some of which are under process. The company has received major permission and the consent to operate, which was ratified by the West Bengal Pollution Board. And now the company is hoping to receive all of the required permissions very soon. Meanwhile, the work for the expansion of 200 KLPD ethanol plant in Bhatinda is under full swing. All of our major orders and advances were issued prior to the steep escalation in the raw material prices, which has allowed the company to not exceed its initial project cost that was decided on. The company has already availed over INR 40 crores in loans from Canara Bank against this project. And the loan of -- total loan of INR 120 crores will be applicable under the interest subvention scheme. Now we're all hearing about the rising fuel prices across all industries, and to hedge against these rising fuel prices, the company is setting up a boiler that will be fired on paddy straw. This will assist the company in diversifying its fuel use as paddy straw is one of the most difficult biomarkers to utilize. So there are very few buyers in the market for this fuel. This boiler, although has a very high CapEx of around INR 40 crores, will qualify for the state government scheme in which GST of the CapEx in the boiler will be refunded from the state government. With regards to the Edible Oil segment, the revenues for quarter 4 were approximately at INR 408 crores, which is a growth of around 27% year-on-year, while for the financial year ended '22, revenues were at INR 1516 crores, representing a growth of about 55% year-on-year. The company has been focusing on procurement of mustard seeds for the production of mustard oil due to a good mustard crop, which has increased the overall production utilization of our unit and our unit is fully vertically integrated. So when we go into the market to buy seeds, that is very beneficial for our company. In the recent quarter, we saw a slight dip in the demand because of the high volatility in edible price -- edible oil prices globally and the change in duty reductions and stock reductions in the market, which has created a bit of an uncertain environment, but we expect all of this to settle in the coming quarters. Lastly, the Real Estate segment, the company recorded a revenue of around INR 1.75 crores for the quarter in an intent to reduce the financial burden of the company and further CapEx the revenues utilized from the Real Estate segment will be continued to reduce our debt and also fund our CapEx. In conclusion, with the commencement of Svaksha Distillery this year, we expect a significant growth in our revenues from this division in financial year '23, which will be followed by the expansion in Bhatinda, which we're hoping and aiming to complete in quarter 4 of financial year '22, '23. So that will add a little to our revenues as well. Thank you. I would now like to open the floor for questions.

[Operator Instructions] The first question is from the line of [Gaurav Sukhdeva from Further Investments].

Congratulations for a great set of numbers for the financial '22. I want to know, sir, your other expenses for the quarter has drastically increased from INR 40 crores to INR 62 crores. What are the contributors for that?

Yes. Yes. So the Other expenses have significantly increased. And the main reason for this is, if you look deeply there is a 79% increase in our finished good stock which has increased from about INR 54 crores to INR 97 crores. And as I mentioned in my speech, this is -- the main reason for this is that there's a lot of uncertainty in the market with the import duty action and there might be some stock -- there might be some stock legalities in place. So in times like this, a small distributor does not to have too much inventory in hand and they like to keep smaller inventory. So this is why our finished good inventory has increased significantly in the quarter. So that has led to an increase in Other expenses also. But this is normal. We expect things to settle in the coming quarters, and this is in line with the industry trend.

Okay. And what is a bigger contributor in the raw material prices, which has also increased from 82% to 87% in terms of percentage from revenue?

That is everything. We've seen prices of everything increase, the raw material, all the imported oils. We've seen that increase in price in them, then we have mustard crop, which was a bumper crop this year -- I mean we fetched rate for mustard seeds in the market that's never seen before. There has been an increase in steel prices, there has been an increase in grain prices as well, but we're hedging that by doing our own milling for our distillery. So there has been an increase all over.

Do you think this will settle in the coming quarters, sir?

Yes. I expect this to settle. I expect that is related to decrease. But to be frank, we don't see the prices decreasing steeply in the quarter. We were expecting a decrease in the prices of edible oil but even despite the import duty reduction, there has been -- there's a shortage of supply globally which is not allowing the prices to fall too steeply. So we expect the volatility to decrease, but we don't expect the prices to decrease too much.

The next question is from the line of Nitin from Incred Equities.

Sir, firstly, you mentioned your hedging but on the raw material side, you're hedging your costs by doing your own rice milling. Could you shed some light on that? Because when I go through your numbers, it seems that this quarter, you have differentiated yourself from your peers because just the state you operate has seen sharp increase in the ENA prices. And you should see a lot of production to ENA. And you were able to basically garner a good amount of profitability based on that. So is that the case? Or is it both? Is it a clear mix of both?

Yes. As you correctly mentioned, if you look at our investor presentation, there has been a slight shift. Earlier in the quarter, we have diverted 60% of our production towards ethanol. But this quarter, there is a very good demand for ENA in market, so accordingly our ENA sales increased in the quarter. And also what differentiates us is we have been in the grain business for the past 3 decades. We understand grains better than our competitors, we feel. So we could see that there would be an increase in the grain prices this year. Mainly, there were a few reasons. One, there was an increase in export and also, there was the crop of paddy last year was very good. So there was very little broken being made in the rice mill. And we could see that before others, I feel. So what we did was we participated in tenders. We bought a lot of paddy, where we could find, which was old line stock. So that paddy is not picked up by a conventional rice miller who wants a longer grain, who wants less broken but we don't really care because you wanted raw material for our own distillery. So in participating these tenders and setting and starting -- diverting our rice mill -- for this distillery has helped us a lot. And one other thing that we're doing, which will differentiate us from our competitors will also be setting up a rice straw-based boiler. See, this is a new technology and rice straw is the hardest fuel to burn in the world. But there's also a lot of rice straw available in the market at a much cheaper rate than [indiscernible] or coal. So this will also help us hedge against the rising fuel costs in the market. So we're trying from all end, from our procurement side and from selling side to fight these inflation pressure that everyone is facing.

So what was the average price of rice that you procured, if you adjust it for your own milling, those bags comes roughly at 18, 19 bucks.

That would be -- see, that depends on what rice brand rate I am settings. When I do my own milling, I have to set up -- it's not how we secured from the market. A paddy crop contains husk, rice bran and rice. So that all depends the what rate I'm setting for husk and what rate I'm setting for bran, because I'm consuming most of them in my own units. Now if I were to set it at current rates, I think it will be around 18. But it will be hard for me to give a correct comment on what it was last quarter sitting today because it is so much opportunity.

Understood, sir. And what is the reason that -- the state you operate in normally used to be a popular ENA state. What is happening they have suddenly shifted the dynamics to get deficit ENA state and prices of ENA to shoot off, can this last?

Punjab -- there is a lot of -- from what we know, a lot of -- there has been a very much increase in the ENA market in the demand in the ENA market because of higher consumption. And we have a good clientele that has stuck with us because of our quality, because we have consistent production. So they keep buying from us. Then another thing that we've heard is some states in the South, a few distilleries had to shut down temporarily because of raw material prices are increasing significantly, which has not happened in Punjab, especially where we are sitting, we can -- it's the right belt, Malwa. So we can procure broken and husk at a good rate. So I think that was another reason. A few distilleries, I believe, had to shut down in Karnataka and Tamil Nadu, so.

So this time around, you had a price realization of INR 55 plus. Do you think this will go upwards in the next quarter? These prices?

Yes.

Thank you. The next question is from the line of Abhishek Maheshwari from Sky Ridge Wealth Management.

Congratulations on your numbers. A couple of questions. So first is edible, you said there a slight dip in demand for edible oil, you're talking about the March quarter or this Q1?

See, since the March quarter, we are experiencing a dip in demand. And that is a trend in the market. There are a few reasons for it. One is the change in duty reductions which are happening. So that breeds a lot of uncertainty. So no small distributor wants to hold stock in hand. Secondly, in the summer months, we -- it is normal to experience a dip in demand in general because consumption goes down as opposed to monsoons or colder months. And so we are seeing a dip in demand. But a big positive for the company is that now we're primarily working on mustards. And that is more profitable for our company than working on these imported oils because of the bumper mustard crop, we were able to procure a good amount of mustard. And so that is being processed in our own oil mills in our own solvent and in our own refineries. And this is the market trend after I say about 2 decades when indigenous oil is cheaper than imported oil. And that's where our company benefits. So in the coming quarter, yes, our revenue in the sector might go down, but our profitability will -- we will sustain our profitability because we are processing in indigenous oil, which is our specialty.

So you mean the INR 1600, INR 1700 crore revenue that you're doing edible oil that might come down a little, but we'll be able to maintain our margins.

Yes. We might even improve our margins.

Okay. Improvement would be wonderful, actually, because if we are losing revenue and margin remains the same, it has an impact on absolute profit.

We differ from the bigger companies. We are master in processing indigenous oil. We don't -- we will be very happy if import was to stop in India, and that is when we will really compete. So that the scenario is happening slowly and slowly, and we are to benefit.

Okay, sir. And sir, coming to distillery. So since revenues from edible oil might see a slight dip, it can be hedged by distillery which is a witnessing good demand. And I'm seeing that you are not -- have reduced your ethanol production during the quarter in favor of ENA. So -- and you have explained that, I think in previous question, but doesn't ethanol generally have fixed contracts like OMC issues, your tender and you have the supply in this many quantities? So I mean can you explain how you're able to just divert from ethanol to ENA?

There are two things. Overall, the tendered quantity for this financial -- sugar year, which is the ethanol year, we have tendered less quantity when compared to the previous year because we were thinking that there might be an increase in the rice prices, and so we want to divert towards ENA. And also, there is clause where a little bit of a deviation can be made very little, so we utilize that for this quarter. We might have to make it up in the next quarter we're seeing. It all depends on how the OMCs also request us for materials. But we -- both these parts had an impact.

Okay. But long term wise, I think there will be a stable mix between ethanol and ENA because it's not like stop focusing on ethanol?

Only towards ENA in the middle of the contract, that won't be possible. But see that's also another thing where these new units that we're setting up in Bathinda will help us. The unit is going ahead of schedule. So once that unit is set up, we can divert the current 200 KLs towards ENA only. And the new unit that has come, the 200 KLs will divert that towards ethanol. And that's our specialty. We are -- we have the flexibility to shift between E&A and ethanol, and that's prevalent at both our units in Bengal and in Bhatinda, and that will be to our benefit.

The next question is from the line of Rushali Jadav from MIB Investments.

Sir, the use of 20% ethanol blending in the engines, auto engines requires the new specifications and we need to do some changes related to the fuel lines. So what are your thoughts on it? Do you think that this is a risk for our company?

No, I don't think that's a risk because -- to be honest, I'm not an auto engineer -- so I don't know what all changes need to be made. From what I know, it's happening in a lot of countries globally, and the Automobile Association has given their consent that they are willing to participate in this scheme in the future. So I don't see that being as a risk. And the government has set their mind to it. I mean they're not going back on what they set their mind on increasing the blending percentage to 20% and even taking it further in the future. So I don't see that being a risk.

Okay. And sir, is there any disadvantage of using a biomass as a fuel over coal?

No, there's no disadvantage. It all depends on what the fuel's caloric value, and we're very situated currently in Bhatinda is financially viable to use biomass instead of coal. So we have been doing this in the past as well.

The next question is from the line of [ Arundhati Sharma ] from Valentis Advisors.

Good morning, sir. Congratulations for good results. My first question is, what is the difference in cost between the local oil seed and the imported oil? And second one is, what percentage revenue growth can be expected in the Edible Oil segment for the next 3 years?

See, firstly, it is hard for me to comment, compare edible oil seeds to imported oil because what we're importing is the crude oil and edible oil seed is in its rawest form. But when you're talking about the finished product, right now, the indigenous oil, mustard oil, is about 7% to 8% cheaper than the soya bean alternative, which is imported. So that is a great thing for us. And so for the revenue growth, in the ethanol sector, I think we've reached a good stage in terms of numbers. And this year our aim is to try and repeat this number again. But in the next few years, as more and more indigenous oil seed production increases in the country, we are aiming to reach about INR 1,800 crores from this sector in terms of revenue from our current unit. So that's our goal.

Thank you. The next question is from the line of Nitin Awasthi from InCred Equities.

Thank you for the follow-up. This thing you mentioned is setting up a new power source, which is using the paddy stock. Now where is this going to be set up? In the Bengal unit or the Bhatinda unit?

No, this will be in the Bhatinda unit, this is for the 200 KL expansion that's happening.

Okay. And how is the sourcing of this material? Because I believe there is no route or sourcing as of now because this will be something where the farmers we will be burning in the field.

No. So we're already signing a contract with professionals who will help us with the sourcing. So what the sourcing of this is, see, it was being burned in the field because there is no good price for it. And now since the power plants are being set up that will use this as a fuel, there are people who have provided farmers with tonnes of balers who help bale it. And we've signed a long-term contract with one such professional company who will help procure us fuel for the entire year and will help us store it, and will also help us feed it into our boilers. So to understand fuel management -- for the entire year, the procurement has to be done within 45 days, which is the harvest period. So that's about 1,50,000 tonnes of fuel, and you can store it for which we've already purchased 35 acres of land right next to our distillery to help store it. And so fuel management is a big part but we have a contract in place with experienced people in the field and they'll help us in the first year. And from there on, we'll learn and then we'll set up our own management team.

So if you do the old school math on ethanol, the power cost used to be around [indiscernible] but the coal prices used to be same. And now, of course, it has gone up. But would that be the power costs, which we will still incur through this source? Or would it be lower?

I think it would be a little lower, not too drastically lower but lower than what it used to be before. Because also paddy straw is cheaper and there's less caloric value in it. And since this is a brand-new technology, and we are one of the first going into this. So I expect that there will be some learning costs in the first year as well, which is completely normal.

Sir, what are these permissions which are pending? Because I think you are behind schedule on your West Bengal plants because you were -- you had ambitions of running it in the first quarter of this financial year of '23, but you're behind schedule. So these policies are lacking and by when do you think they'll complete?

Yes. So there are about 7 recommissions and we are a little behind schedule -- I do acknowledge that, but we are working to bring the plant into commissioning as soon as possible. So we have received permissions from the pollution board, which is a big one, from the electrical board for the operation of a turbine. The big permissions that are still pending are fire and excise. And both these files are moving very well. And I think we should receive them in the next 15 days or so.

Wow. So Q2, we can expect the whole quarter to be operational?

Yes, we're hoping for that. .

And last question from my side, the time line for the expansion of the Bathinda unit, you mentioned that you wish to commission it in Q4. So at least in the first quarter of FY '24, I think we should be completely running it, but also overall the expansion plan of the West Bengal Unit.

See, for the West Bengal unit, the 100 KL expansion will start to work once the 200 plant is commissioned and is running successfully. And then we'll start work. So I don't have a date for that as of now.

Thank you. The next question is from the line of Bala Murlikrishna an individual Investor.

Yes. I want to know the deadline for the Bhatinda plant.

Sorry to interrupt you, Mr. Murali, may I request you to speak louder, we cannot hear you, sir. Mr. Balamurali, may I request you to speak a little louder and repeat your question, sir. As there is no response from the participant, we will move to the next question, which is from the line of Abhishek Maheshwari from Sky Ridge Wealth Management.

Yes. So just I have a couple of more questions. I'm sorry I missed it. What did you say when you're commissioning your Bhatinda 200 KL PD? Is it second half of this year September or October?

We're aiming for quarter 4, so our aim is to commission it by November of this year.

And so 200 KLPD coming by end of this Q1, right?

Yes.

And the supply chain for these new capacities, we have already speaking to the suppliers for the sales?

Yes. So with our suppliers, we have a very good network who have showed us that there will be no problems. In [Gadakpur], we've already received a good amount of raw material because we had the beginning production soon. And in Bhatinda also they said there will be no issues at all, and Bhatinda is good belt operator. And for fuel, we signed long-term contract with a good company who would help to procure rice straw for the entire year.

Okay, good. And on the demand side, is there enough demand for us to be able to sell our products, the risks, optimal utilization and a couple of points.

Yes, demand will not be an issue. As you know, 20% blending ethanol, most of it, the government wants some grains now. In that end, current supply is around INR 50 crores, INR 60 crores. The government wants it increased multifold. So that's not an issue. ENA demand is very, very good in the market in both Punjab and Bengal we speak. So that's not an issue. And DDGS, which is not a good byproduct. So that depends on the poultry industry. So that usually sees it's up and down. Right now, we're seeing lower demand, but that changes so that also would not be an issue, we think.

And sir, lastly, any revenue and PAT margin growth guidance for FY '22? Because that you should do better since the distilleries are coming. Also margin, maybe 5.5%, 6% can you do reasonably?

Yes, as more distilleries revenue share increases, so will the overall margin. I don't expect the distillery margins to increase much further currently. Year ago maybe Bengal has better margin conditions compared to Punjab, but now it's the other way around. And that keeps shifting in the market. Two years down the line, West Bengal will be more profitable when compared to Punjab. The West Bengal is still a deficit state but overall, I don't see the industry margins going up any further.

Okay. But any consolidated revenue growth of that margin you're targeting for FY '23?

No. We think we're still targeting a growth for the coming year. We will try to sustain the edible oil revenue numbers, but we see profitability increasing there slightly. So our target is for INR 2,500 crores of revenue for this financial year.

Okay. Great. And at least we'll be able to maintain 4.5% margins, if not more.

Yes.

But it should not go down.

[Operator Instructions] The next question is from the line of [ Dipesh Vuchedi from Mani Finances ].

First of all, congratulations on having such a good results. And thank you again from the entire shareholder community for the dividend and being gracious enough for not expecting a dividend. Now my one question was about the West Bengal plant, again. We have been having certain delays. I want to understand what is the financial implication of this delay? Are we losing any money apart from the opportunity cost?

Of course, there's an interest involved -- and our opportunity cost is a big thing. Those are two big costs with the production being delayed.

Apart from that, is it that we bought any grains and those grains will have a shelf life and they might become..?

We have grains that we have bought. But the grains are usually on credit anyway, it's a 60-day credit that we work on. And it's not -- they're well placed in covered silos, so they won't deteriorate whilst in the silo. So that's not a problem. But yes, we have bought about a good amount of grains to help us in the start.

So when do we understand that -- like we've been giving a lot of dates, a lot of months. When do you think that it will start, I mean, on a reasonable expectation?

Yes, by the end of this quarter we are hoping.

By the end of this quarter. Okay. And is there any changes in the ENA or ethanol prices?

ENA prices have appreciated significantly in the last quarter and moving on because of the increase in raw material price. The ethanol prices are the same.

Okay. ENA prices, what are the ENA prices right now? In West Bengal and Punjab.

In Punjab, as we speak, it's around INR 58 to INR 59. And in Bengal, it's around INR 54 to INR 55.

The reason I'm asking this is because I was on call with the E.I.D. Parry and they mentioned that the ENA prices have dropped from 61 to 54. Is that true -- in Tamil Nadu of course, but have you seen a similar trend in West Bengal or Punjab?

No, we haven't. I don't know about Tamil Nadu to be honest.

Okay. Okay. And going ahead, I mean, how do we see our finance cost reducing with internal accruals? Or are we going to do another preferential issue?

No. The internal growth of the company is earning good cash flow. The CapEx in Bhatinda is under the interest subvention schemes so the applicable interest rate will be 4% on that loan. And we're utilizing working capital very well. So all this is contributing.

Okay. So what is right now the cost of capital for us -- average?

It's around 7.3%.

7.3%. And what is the gross debt?

Gross debt for -- the total loans?

Total loan book, yes, total loan. How much is the total loan on the company?

INR 200 crores.

INR 200 crores. Out of this, how much is working capital?

Working capital is INR 120 crores.

This is including the INR 200 crores? Or is it apart from -- I mean, INR 200 crores is term loan or...

Includes.

Includes. So INR 80 crores is about term loan.

Yes.

Perfect. If there's any other question I'll be in the line. Thank you so much and congratulations again.

[Operator Instructions] The next question is from the line of [Jairam Galani from Money Bee ].

Congratulations on good numbers. Can you please talk about the total revenue from DDGS and its volumes? And my second question will be, has realization increased compared to last year.

So for the first question, if I heard you correctly, you were asking about DDGS volumes and their revenue?

Yes.

So yes. So DDGS currently, we're seeing a decrease. So about 100 metric tons of good quality DDGS is produced on an average by our unit and currently, the prices are around INR 23 to INR 24 per kg for it. They were -- they had gone up to INR 39. So we see this increase and decrease, and we don't -- we expect the prices to go up again in the coming months, as you know demand for eggs and chicken increases once the temperatures decrease especially in North India and in the monsoons. So that's about DDGS, And the second question was?

My second question was, will we have the realization increase compared to the last year?

Realizations we hope to increase our margins slightly in the edible oil sector, as I had mentioned. Revenues in the edible oil sector, we are aiming to sustain the numbers that we showed this year. And with Svaksha coming in, we expect the distillery sector to give us better revenues as well.

The next question is from the line of Bala Muralikrishna, individual investor. Mr. Bala, please go ahead with your questions.

[Technical Difficulty].

Sorry, your voice is echoing.

In earlier con call, management told that we can 200 KL capacity by the end of this fiscal year, FY '23. So now we are hearing that West Bengal is a little bit delayed and so what would be the expected capacity by the end of the fiscal?

See, West Bengal, we are aiming to start by the end of this quarter. And for Bathinda 200 KL expansion, we're aiming for quarter 4 of this year, and the Bhatinda progress is going very, very well as we speak. I think we'll be able to achieve that target. And so by the end of this financial year, we expect to have 400 KL in Bathinda and 200 KL in Bengal, a total of 600 KL.

Okay. But in West Bengal one more 100 KLPD capacity that will be in the next fiscal first quarter?

I haven't -- I'm not at the liberty to give you a date for that as of now because we'll be starting works on that site. Once the 200 KL is commissioned and is working well, for the 100 KL, so post that, we'll start our expansion.

Yes. One more thing, as oil prices are decreasing, edible oil price, will we see any dip in revenues or will the [indiscernible] upcoming quarter.

We will see some dip in revenues, as I had mentioned, in the edible oil sector, but the thing is we expect the demand to go up in the coming quarters also. So -- but with the indigenous oil being available, we expect our margins to improve.

The next question is from the line of [ Dipesh Vuchedi from Mani Finances ].

One question was regarding the risk of -- I mean since there is a global grain crisis going on, do you sense the government is banning exports. Do you see any inherent risk because of this in the procurement of gains?

No, we don't see much risk because see what we're buying is damaged grain for most of our goods. And damaged grain is a byproduct of a rice mill. And so we -- especially in terms of rice, India is still very surplus. There was a statement which was met earlier that India might be banning the export of rice, but then the government made it clear that export of rice won't be banned because the stock is still way above the needed stock. And also, at the same time, the FCI rice policy -- conversion policy, they're still working smoothly, so we don't see anything from that end as well.

Yes, because we procure from the government quota also, right? I mean the government has some, in its own storage, and we procure from that. We don't see any risk that procurement will be affected?

Not at all, because of the rising damaged grain prices in the market, what we did was -- the government actually made it flexible for us to shift up what we diverted towards damage food grain ethanol. So there are two types of ethanol we supply. One is from damaged food grains and is one from the FCI rice. So they are procuring damaged food grain for the FCI rice. So we, in fact, we increased our quantity towards FCI rice, and there was full support from DFPD, the OMCs. So we don't see that as a big risk.

Okay. You don't see that as a risk.

To understand what other people won't tell you because we understand grain very, very well. See, earlier what happened was India was dependent on Punjab and Haryana primarily for its paddy and Punjab and Haryana had one crop a year. Now we've seen, especially after these farmers unrest and after the lockdowns, when a lot of the labor went back to their home states, states like Bengal, Jharkhand, Odisha, Bihar where there's a good amount of water. These states can grow 3 crops of paddy a year. And earlier, those farmers were not aware that there is something called MSP. Now all those farmers are educated and you have this farmer unrest to thank for it a lot, too. And now they understand what is MSP, and now they are say why is it like Punjab and Haryana, can the government procure MSP and why not is ours being procured for an MSP. And earlier it was tough for the Government to handle one crop from Haryana and Punjab a year. And these states, with the amount of land they have, if they start doing 3 crops a year, that's a lot of paddy to handle. So from that end, we don't see in the long run any supply side pressure in the raw material end.

I meant to be in the short term because. I -- I mean this prices will come only in the short term. There's no need to procure the grains and keep it in our stock expecting anything of this situation coming up.

That is not practical.

They're not practical. Okay. Now one more question was about the edible oil. Now edible oil prices, they have started coming down. Will this affect our profitability?

See, profitability, I don't see it affecting us because now we started processing a lot of mustard, and mustard for our company is more profitable than imported oil. So although, yes, prices are decreasing and increased in volatility, creates uncertainty and there might be a decrease in the revenues, but our profitability we expect to improve because we are processing indigenous oil.

Right. But the amount of stock we have or if the prices comes down, will it affect our profitability in that case? I mean, stock in trade or something?

Not too significant. We don't sit on too much inventory, to be honest. So it's not too significant.

Okay. And last thing about the real estate. Now this quarter, we had some sales. What -- and as you are planning to get out of real estate in future, how much more sales do you expect going ahead until the time we get out of this business? Ballpark figure, not -- I mean exact.

About INR 20 odd crores.

INR 20-odd crores?

Yes.

So the EBITDA margin would be the same, which we had in this quarter, about 60%, 70%?

Yes.

The next question is from the line of [ Vivek Chaturvedi ] an Individual Investor.

I just wanted to check the Svaksha distillery, which is going to start operating in the second quarter. Will it be profitable after depreciation and interest? Or -- I mean that would come in the second year fully.

No, I think it should be profitable from the start because the interest is the loan taken on is only of INR 55 crores. So that shouldn't be too significant. So we expect to be profitable.

Okay. And how much would be the indicative turnover for the 3 quarters from the Svaksha distillery?

Yes. In average quarter, we expect about INR 120 crores from that unit.

Okay. So that would be about INR 350-odd crores that unit and the balance INR 650 crores you're expecting from the existing Bhatinda distillery.

Yes, we're hoping to get one quarter of the expansion in Bhatinda.

Okay. So that is how we are expecting that turnover also to increase the same?

Yes.

The next question is from the line of Dinesh Kotari an individual investor.

Sorry, I joined late, I have 2 questions. One is regarding the boiler. I want to know the findings to get the boiler started? And the second question is, why the promoter is not taking dividend, that's my questions.

Yes. So the boiler, I didn't understand, are you talking about the power plant expansion in Bhatinda?

The paddy straw.

That power plant, we expect to commission in November of this year. But it's a new technology, power plant, and we -- it's a big, big project. So we're hoping for November of this year while we start the new distillery expansion in Bhatinda commissioned. And the promoters, we are putting the -- there's a lot of CapEx happening currently. And we want to enrich our investors who've put their faith in us. And we understand that not everyone always puts their faith in a smaller-sized company like ours. But we want to reward the investors who have put their faith and given us moral support. And there's a lot of CapEx happening so we deem fit not to take the dividend this time. But once all this CapEx is complete, we'll come out with a proper dividend policy, and that's when the promoters too will take the share.

The next question is from the line of Varun Murali, an individual investor.

So my first question, this is regarding your Bhatinda expansion. Just wanted to understand, there is HMEL refinery also nearby, which has gone through a market expansion. So with all this ethanol blending program, do you think that it's a source of advantage for you to have such a massive refinery nearby wherein some of it can be given at short notice, maybe the ethanol? [Break]

Ladies and gentlemen, please stay connected on the line. We lost some of the line of the management. Ladies and gentlemen, thank you for patiently holding the management line is reconnected. Thank you, and over to you, sir.

Sorry about that. So I think that question was complete. Is there any more?

Sorry, I had asked a question, so I'm not sure you had responded on the main line. So this was around the Bhatinda expansion. Since you are like now doubling our capacity. Also wanted to check with the HMEL refinery nearby, which is again a massive refinery. So do you think it's a source of advantage for you that refinery nearby to supply ethanol to at short notice is required?

No, that's not too much of a disadvantage to be honest, because we don't supply to ethanol refinery. We supply it to depots because it's just mixed in their planting, so refinery is not a big purchaser than the depots. But yes, because of the refinery, there has been a lot of growth in Bhatinda which has allowed us to get a lot of talent, which wasn't possible in the last few years. And also, there has been big depots in Bhatinda, because it's at the border of Punjab, Haryana and Rajasthan. So that goes to our advantage, but refinery doesn't -- it's not -- the refinery in particular is not very advantageous.

Okay. The second question was around augmenting the capacity at Svaksha, from what you outlined earlier in the call, I present that work hasn't really started. So just wanted to check, given the rise in on these commodity prices and you had also articulated how that had been an advantage with respect to the earlier expansion that you've already started. So is there any thought process around like waiting for prices to cool down and then commence the expansion at a later date? Or do you feel comfortable right now given a lot of incremental cash flow from the expansions coming?

Yes. So prices, we don't really pay much attention to when deciding our CapEx, especially at Svaksha so because to add another 100 KL, there's no power plant expansion that's happening. We are -- the current power plant will suffice our needs. So in that sense, we don't really look at the raw material prices. I think we're comfortable at the current -- there is declining, but we're not waiting on to further decline. What we're waiting on is to successfully come into full production and full smooth business because we were experiencing that -- the working conditions there are not as easy as Punjab, where we're situated and where we're very experienced. So if we want to first stabilize in 200 KL, and then we can do our work for the 100 KL.

Okay. And one last question, if I may just push my luck here. Again, I'm not sure whether you will be in a position to answer this because I think as a public shareholder, one of the things that we had seen in the March quarter was one of your large public shareholders decreasing the stake. So do you have any color around this as to whether because they are like a 14% shareholder in the company, whether there is something?

An external shareholder.

The next question is from the line of [ Gaurav Sachdeva from Further Investments ].

Sir, I wanted to know that after commissioning of all the distillate plants, do the company have any other CapEx plans or the company will go into consolidation phase for a few years?

See, for now, this is what we have our sights on. And as entrepreneurs, I can't tell you that I can't tell you with full confidence that we might stop after this. But right now, we're focused on this fully. And after that, we'll see what to do. But this is our focus for now. And I can't say that we will consolidate or anything, I can't really comment on that.

The next question is from the line of [ Nidhi Radha from NM Financial Services ].

My question is that on the boiler, which we are putting at Bhatinda . So what is the CapEx cost for these paddy straws and how much cost will be saved because of this new boiler, which are we implementing?

CapEx -- the boiler that we are installing is around the -- boiler itself is around INR 40 crores, whereas if we were to replace this boiler with a conventional boiler that runs on for coal, it would be around INR 22 crores to INR 24 crores. So it's almost double the CapEx. But the fuel cost. See, we have signed a contract to procure paddy straw at INR 2.51 per kg whereas the current husk prices in the market are around INR 7.5 to INR 8 a kg. And when -- see husk has also a more caloric value. So when contributing activity for that, the paddy straw should be around INR 3.2 when compared to husk. So the payback period would be -- we expect payback period to be 1 to 2 years.

Okay. And so -- so any roughly, you can also let me know that what is the demand for the bottling business? And how much are we planning to increase in that in the coming year?

Bottling business, we have no plans to increase. The current demand is -- we're participating in the quota system of the Punjab government, and we don't expect or plan to expand this.

The next question is from the line of Sushil Kumar, an individual investor.

I just have one question regarding the incentives at both these locations available on the ethanol blending policy, what kind of incentives would we get?

See this -- those projects fall under, Bhatinda falls under the interest subvention scheme. So the applicable interest rate to be 4%. Besides that, the Bhatinda boiler, the CapEx HTST part, the state GST portion will be refunded. And there are no other incentives at both these plants.

[Operator Instructions] Next question is from the line of Ganesh Kotari, an Individual Investor.

I have a question regarding the industry. I want to compare the mustard seeds with farmer. Farmer, backward integration takes almost 10 years to do the backward integration. So I just wanted to understand for the mustard seed, what is the backward integration? Is there any plan for backward integration? And how much you take for this?

Backward integration as in contract farming?

In terms of contract or in terms of our plans?

We don't have plans to backward integrate in this sector.

[Operator Instructions] The next question is from the line of [ Gaurav Sachdeva from Further Investments ].

Sir, do you have any estimate of interest figures for FY '23 for finance costs basically?

Finance cost for FY '23, to be honest, I don't have -- I have to speak to my CFO and get back to you for that exact number.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Yes, I would just like to conclude by thanking everyone again. Thanks to everyone who attended our company, who takes interest in our company who's invested in our company. And I would just like to say that the company is going on a very good track. And just hoping that you are all there to join us for our ride as we continue to grow. Thank you.

Thank you. On behalf of Quantum Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.