BCL Industries Limited (524332) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the BCL Industries Limited Q4 FY '24 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, sir.

Thank you, Muskaan. We thank the management of BCL Industries for giving us this opportunity to host the call today. From the management, we have today Mr. Rajinder Mittal, the Managing Director on behalf and instead of Mr. Kushal Mittal, along with their IR represented by Priya Sen of Go India Advisors. I will now hand over the floor to Rajinderji for his opening remarks. Over to you, sir.

Thank you, Mr. Nitin, and good afternoon, everyone. A warm welcome to the Q4 and financial year '24 earning con call of BCL Industries Limited. The financial results and the investor presentation has been uploaded to the exchange, and I hope you had the opportunity to review it. Before proceeding, it's important to note that all numbers discussed in the investor presentation and in my commentary, are on a consolidated basis. This includes the contribution from Svaksha Distillery, where BCL holds 75% stake. FY '24 has been a significant year this year, and we have established ourselves as one of the largest grain-based distillery in India post the successful commissioning of our 100 KLPD ethanol plant at Svaksha Distillery Limited. This development marks the completion of the second phase of the plant development and the total capacity at Svaksha now stands at an impressive 300 KLPD. This achievement highlights our commitment to growth and operational excellency, and I'm delighted to report that our overall distillery capacity has now reached 700 KLPD as previously guided. The company has been solely depending on utilizing maize for ENA and ethanol production. This quarter, owing to price inflation in both maize and broken rice, there has been a dip in the margins. That said, we expect the margin to improve going forward as maize crop has arrived in the yard and bumper crop has been forecasted in Uttar Pradesh and Punjab as well. The price has been [indiscernible] and we may expect a cool down in the raw material prices going forward. Last quarter, we announced our entry into the biodiesel segment. India has set a mandate for 500 biodiesel plants by 2030, yet currently stands at less than 1%. We see a significant supply gap that BCL is ready to address. In line with this, our plan to set up our biodiesel plant in Bathinda is on schedule. We have obtained all necessary clearances to establish a 75 KLPD biodiesel plant. We'll be using technical maize oil derived from our own product, that is a DDGS derived from our this distillery has primary raw material. All orders have been finalized and civil work will commence in the first week of June. The company is targeting the commissioning of biodiesel plant within next 12 months. Once the biodiesel plant is operational, it will support full vertical integration and enhance the value addition in manufacturing ethanol from maize. As India's biodiesel demand is anticipated to triple, BCL is positioned for substantial growth through specific initiative and government support, the company is expanding in ethanol and biodiesel market. To meet increasing demand, BCL is working towards raising its capacity to 850 KLPD in the next 2 years. Increasing its supply of bottled country liquor to meet the strong demand for its brand in Punjab. This physical BCL has sold over 12 lakh boxes of [ PML ], country liquor, more than double compared to the last year sales. We expect this momentum to continue in the future as well. Despite global volatility in edible oil market, BCL has maintained a steady performance in this segment. The company consistent results in the edible oil for the quarter are attributed towards vigilant monitoring of international market trends and conservative approach in this sector aimed at migrating potential losses due to the global fluctuations. Going forward, we are confident that as we expand our capacity and products offering, the company anticipated achieving full capacity utilization of the installed 700 KLPD distillery by 2024, '25 or the current financial year, which is expected to generate revenue exceeding INR 1,750 crores solely from the distillery operation. Currently, the company plans to gradually exit the edible oil business during the financial year '24, '25. Additionally, the company is awaiting approval for 150 KLPD ethanol expansion at Bathinda and intends to commence work promptly assuming the necessary clearance. Let me now give you an overview of the financial and operational performances during the financial year '24. During the financial '24, the company witnessed strong performance across the board. Total revenue reached INR 2,209 crores, making a 21% year-on-year increase. EBITDA for the period reached to INR 199 crores, representing a growth of 53% year-on-year. Net profit for the financial year reached INR 92.83 crores with a growth of about 47%. PAT margin reached 4.4%, vice versa 3.5% last year. In financial year '24, the distillery segment experienced remarkable growth in the ethanol production. We produced 129,949 KL ethanol during the financial year '24 and the revenue touching INR 853 crores. EBITDA from the distillery segment reached INR 178 crores, up by 85% for the financial year '23. In the fourth quarter of the financial year '24, revenue amounted to INR 614 crores, up 34% year-on-year basis, with an EBITDA of INR 52 crores and EBITDA margin of 8.5%, net profit for the quarter stood at INR 24 crores with a PAT margin of 3.9%, revenue from ENA segment grew by 33% to INR 57 crores, while revenue from the ethanol was INR 278 crores, up by 136%. We are committed to maintain a strong balance sheet by managing our debt wisely. Additionally, we are dedicated to ensuring the highest standard of governance and disclosure. Our aim is to provide industry standard returns and create value for our stakeholders. That concludes my update. You can now open the floor for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Agastya Dave from CAO Capital.

[Foreign Language] you mentioned that you are expecting a bumper crop for maize. So can you give a time line as to when our factories -- our plants will start receiving the new maize stock?

Very good question. I think with the farmers getting very remunerative price, and this is the only commodity. Without the support of the government is fetching the MSP price for the farmers. And with this, there has been a bumper crop in Bihar also, we have already started receiving the crop in both the plants. And I think we should be better placed in the current quarter. And in UP also, there has been a sowing of about -- increasingly the sowing of about 25%. And same is the position in Punjab. So this crop is almost round the year. With the finishing of Bihar crop, the UP crop starts coming. With the, you can say, diminishing our stock at UP, the Punjab crop starts coming. And with the diminishing the Madhya Pradesh -- so round the year maize is available. So the price and the, you can say the supply are governed by the, you can say, the production. So we are hopeful that the prices have already, you can say, cooled down from the peak level, and they are within the MSP. However, we have to adhere to the MSP so that the farmers get the better prices and there is no shortfall of the raw material for the farmers supply.

Sir, a follow-up then, if the availability is going to be all year round, at MSP, what kind of EBITDA margins can you generate?

I think there will be improvement in EBITDA margins. I cannot comment upon the right that what would be the percentage part of it. But there will be definitely improvement because the last year, [Foreign Language] that the government may differential [Foreign Language] rate of maize and broken rice [Foreign Language] that was a sudden stop. And the rice supplies from FCI source was stopped. So we were hovering around the [Foreign Language]. However, we had the benefit of [Foreign Language] they were designed in such a way [Foreign Language] the promoters' experience that we were able to process the -- every each and every kind of raw material. So we shifted it from maize. [Foreign Language] properties long-lasting [Foreign Language] basically rice is not even a very good proportion for the [indiscernible] plant. First it consumes a lot of water and then that coverts that water into fuel. So that was not a sensible idea. And government realizing that there is some, you can say, some gap between this policy and the execution and the environmental angle. So they filled up that gap suddenly, and we were not expecting. Everybody was, you can say taken as a shock, suddenly the supplies were stopped, maize supplies were not sufficient. There wasn't, you can say cooperation from the government side. [Foreign Language] there has been substantially increase in the sowing pattern of the maize [Foreign Language] benefit [Foreign Language] and there would be, you can say, quite substantial improvement in the working of the company. And [Foreign Language] our full 700 KLPD production is already commissioned, and we are utilizing this 100% capacity for the last 15 days. [Foreign Language] Bathinda 400 KLPD, we were utilizing 200 [Foreign Language] 100 KLPD add about a month back, that will also [Technical Difficulty] type of the working of the company.

Great, sir. One last question, sir, for the next 2 years, FY '25 and '26, can you guide us towards first the ethanol plus ENA volume numbers? And second, you have mentioned that next 12 months your bioethanol facility will be up and running. So net of what you will be using in that facility, what would be the total salable volume for ENA plus ethanol plus bioethanol?

Yes. [Foreign Language] basically now ENA and ethanol, we have got a dual licensing. So we operate our units on the basis of demand and supply. So we have got that kind of flexibility. We can do 700 KLPD ethanol and we can do 400 KLPD of ENA. There is no limit for ethanol manufacturing. There is a limit for manufacturing as per [indiscernible].

That's why I asked for the combined numbers, ENA plus ethanol as one number.

We'll be utilizing our full capacity. So 700 x 330. So that will be our total number. So 700 x 330, it will be around about 23 crores liters of ethanol and ENA both. So I can't spell out that what will be the, you can say, contribution of ENA or ethanol. But certainly I can comment about 70% will be ethanol and 30% could be ENA.

Okay. And bioethanol, sir?

Bioethanol, this biodiesel. Bioethanol means biodiesel.

Biodiesel, sir?

Bioethanol is the spirit base. And this biodiesel is the, you can say, vegetable oil base. So there are two different aspects. And the processing is also quite different from that. So what we have done is that since we are operating both the plants on maize. So in maize, we have some technical oil which can be affected from that. So which we are already doing it. So now the technical oil will be converted into biodiesel, for that we don't require any kind of raw material. The raw material for the extraction plant will be the DDGS and the oil -- the fats which will be derived from this DDGS will be converted into biodiesel. So we don't have to buy any raw material as regards this. So it will be only processing charges, and that will be a huge potentially. I think as per our estimates, will -- you can say, a shield the company from coming competition, and you can say it will be a backward integration or forward integration.

Sir, can you quantify it?

Quantify, I can't. I don't have the figures as of now ready with me. But I can say INR 83 per liter is the price, for this supply of biodiesel. And if I take it 75 into 330 working days, so it will be round about 2 crore liters per annum starting from the next financial year.

Starting from FY '26?

'25, '26. Because as I mentioned, that we're taking about 11 to 12 months to complete the project. The machines have been already ordered, and the civil work has already commenced. And all the requisite approvals are with us. So we don't foresee any delay in the front, we should be as per the schedule of 12 months that will maybe the first week of the next financial year.

[Operator Instructions] The next question is from the line of Bala Murali Krishna from Oman Investment Advisors.

So first question is regarding this Svaksha 100 KLPD. I think that numbers are not included in this Q4 results sector, right?

Yes, yes. Because we started our plant somewhere mid in April. So the stabilization has come this last week only. So the first 15 days around trial and the -- now we are achieving 100% capacity of 100 KLPD from about two week back.

Okay, sir. So from 100 KLPD, we can expect INR 250 crores of incremental revenue in this year?

Definitely about INR 270 crores or INR 280 crores will be the incremental revenue from this 100 KLPD.

Sure, sir. So regarding this is maize procurement, I think government is planning to form a corporation that will procure from farmers and supply to the ethanol producers. So any update on that when we can get that? And if it is realized, then whether it will be a little bit beneficial for us so we can get maize at lower price or there won't be much effect on our business?

No, no. You can still -- let me explain the things. The NAFED has been given the task for procuring this maize on account -- on behalf of this distilleries. But you see that our company, we are born and brought up in grain only. So we don't require that kind of export from support from NAFED or other. So the new incumbent which are not familiar, may have some benefit because we -- if you procure the raw material or maize, through NAFED, it is a costly affair because NAFED will procure at MSP, take it to their godown. All these spending will be done, whereas we have links. Now you can see in all the states where the maize is being produced and transportable to the -- both the plants. So we have got good links so we don't have to put an extra money or extra expenditure on that. So the direct procurement is -- or which defer as compared to the maize being procured through NAFED or any other agency.

Understood. And regarding this, sir, the price increment actually in the last call, I was speaking to Mr. Kushal. So we expected that there will be some good jump in the margins because of the pricing improvement of the INR 71.86, which is almost 9% incremental for the previous year revision. So there is a price improvement of 9% and we have this additional boilers. So we are also expecting some savings from that also in this quarter. But surprisingly, we could not be able to get that done. So that much of 10% hike in the raw material was there to mitigate this one, sir? Or is there anything else we're missing in, sir?

As I explained earlier, and you will see that these EBITDA margins as compared to any other ethanol plant are still in a better, better position. And that is because of the rice-straw boiler and our, you can say, the grain buying policy or the grain buying [indiscernible]. As I've already explained, that this policy of, you can say, given a maize preference as compared to the damaged food grains was floated -- that just came to a surprise to everybody. The stoppage of FDA rice, then the differential between the damaged food grain and the maize. So everybody -- you can say the market started hoarding these and you can say, given that they will have to buy. So that gave a temporary jump to the prices or the availability of the raw material, which has now stabilized. So as I mentioned, the last quarter was affected with that. But now the things have stabilized and all the raw materials have been tied up. We expect better results in the current financial year or current quarter as compared to the last quarter.

Okay, sir. And lastly, on the CapEx, sir. So this year, we can expect this INR 270 crores of incremental revenue. And for the FY '26, so from the biodiesel plant, we are expecting approximately 275 KLPD, and 150 KLPD of Bathinda expansion when we can -- when it will get realized? And I think we can expect around INR 350 crores from that also. And when it can be realized, that could come?

So we are expecting the -- this environmental clearance and other statutory clearance very soon. And as soon as -- you can say we have those kind of, you can say permissions. There will be -- we'll be taking a very minimum time in putting that 150 KLPD because land and other utilities are already available in the company. Technical was no problem. And tying up funds is also not a problem. So we hope that we could take both the projects in the biodiesel and 150 KLPD commissioned in the next financial year, that's '25, '26.

Okay. And lastly, I think we have some greenfield expansion plans in the Madhya Pradesh and somewhere else after these capacity additions, 150 KLPD. So any update on that, sir?

Yes. We are thinking, but we don't have any concrete plan. But we are just going for a survey to make our presence in Madhya Pradesh because the -- in Madhya Pradesh we've got lot of, you can say, raw materials and is the heart of the country from where the transportation, the logistic costs will come down. So that is still under the thinking, that's still not anything concrete on the file that just you can say, we are surveying the project.

[Operator Instructions] The next question is from the line of Dipesh Sancheti from Manya Finance.

Sir, I had a couple of questions. What is the average price of maize for this quarter?

This quarter, I think the landed cost would be around about, say, INR 3,000 per metric tonne for both as compared to, you can say, last quarter, it should be around, I don't really have the exact figure, but as per my estimate, it would be around about INR 24,200. So there is a reduction of about [Foreign Language] reduction in this quarter. Definitely that will help us to perform better.

And do you think post elections the restrictions on damaged crops will be going so that -- I mean once it gets lifted, so we might ship to even FCI crop later or we will stick to maize?

No. Actually, basically [Foreign Language] you have to understand the government [Foreign Language] and government endeavor giving a differential price to the maize, that to about INR 7 a liter, which is a quite high 9% to -- near to 10%, 11%. So we'll be shifting -- we have decided that we'll on maize throughout the year and maize is not a problem for the procurement [Foreign Language] forward integration, so that to reduce the cost of raw material, we are going for the oil extraction, fat extraction from DDGS and convert it on to biodiesel. [Foreign Language] and in Punjab especially, the Punjab government is holding this cultivation of maize due to the water scarcity, due to the power scarcity and so many other factor that the water level going down and crop diversification is [indiscernible]. [Foreign Language] state government [Foreign Language] here this groundwater is being extracted so that -- from that, this cropping pattern changes to the cultivation of maize. So I think in the long run, we'll be more benefited by this policy change in the policy for the stoppage of the use of the groundwater for the cultivation of the paddy and rice. So that's too much of supply. I think we will stick on maize only.

Since you're a market veteran, I actually wanted to ask you that if you can elaborate how the company would adapt to government policies if they were to change -- if there was a government change or how will the company mitigate the risk?

So -- that is the reason, you can say that we basically the government change of policy, this is an irreversible policy as regard the using of blending of ethanol in the petrol or biodiesel because we have to reduce the carbon emissions in the coming years. We have to increase the farmer's income. So now policy change could be that there could be a free pricing, maybe 2 years back, 3 years when the government is satisfied that we have got ample supply. So for that, we are going for this forward and backward integration. There is a reason. So in that question, our raw material costs will come down if we are able to extract the oil from the maize and then convert that into biodiesel. So nobody is thinking about that. So we have started executing that plan. So that is kind of thing. The second is that our power and this, you can say, steam requirement, process steam requirement, we have converted that from the rice-straw is available in [ furnace ] in a cheap fuel. So fuel cost, we are -- you can say, targeting -- the raw material costs we are targeting. We have got to reduce the raw material cost, put lesser burden on the ethanol, divert some profits to the our extraction units and then biodiesel unit. So all this it will be integrated complex of [ timed ] in India. So that is the reason that we are trying to enhance our capacity so that the, you can say, the manpower cost, our per liter comes down, our finance cost per liter comes down. So all these tricks we are taking set, and I think we'll be able to manage the -- any price fluctuation or any change in the policy in a much better way.

Great. Great. And even the biodiesel will also be from maize only?

Yes, yes. So we would have to buy any raw materials. So that will be -- this will be the -- you can say that DDGS which we derive after extracting of the ethanol from waste, whatever the residue. That will -- that is going to the poultry and cattle-feed. So poultry and cattle-feed industry does not require the fat contents. So they only want the protein. If we extract the vegetable side from that DDGS, the product of protein will go up. So we'll be able fetch even the better price of DDGS. And this vegetable oil or you can say the maize oil will be available with the company by spending just the processing cost, and converting that into biodiesel will be further value addition.

Great. And this biodiesel will be in Punjab itself.

It is in this Punjab unit itself. And after this successful commissioning, we propose to put that unit in the Kharagpur also.

Okay. It makes sense because the same raw material can be flown in for the biodiesel also?

Yes. This product of the distillery will be the raw material for the extraction plant. And the finished, you can say, product that is vegetable oil will be the raw material for the ethanol plant.

Right. And we have already completed all the purchases of paddy-straw?

Yes, the paddy-straw is already -- the full year stock with us. So that's about 15, 20 days [Foreign Language]. So we don't have a much of time. But the -- we have got the entire full year fuel with us at a much, much cheaper price. So that will be, you can say, taking care of our enhanced fuel cost or you can say the other parts.

Right. And post elections, what -- how do we expect the demand for country liquor going? Because generally elections are -- I mean, the demand goes up, but post elections, do you think it will remain?

[Foreign Language] round the year, [Foreign Language] the country liquor, I think [Foreign Language] 1.2 million cases [Foreign Language] our target is to achieve 2 million cases. So which will -- I think we'll achieve very comfortably because of this country brands are now well established and we have got great demand. And even we are enhancing our capacity of the bottled plant.

Right now, what is the damaged grain prices going on right now?

Damaged food grain hovering around about INR 25 to INR 26 a kg in Punjab as well as in West Bengal. And whereas the landed cost of this maize is around about INR 23 a kg. So there is about INR 3 per kg difference between the -- both the raw materials.

This quarter, how much ENA did we make in terms of percentage? How much percent was ENA, how much percent was ethanol?

I think ENA [Foreign Language] I don't have the exact figures, but [Foreign Language] capacity utilization [Foreign Language]. But I think ENA [Foreign Language] basic the differential [Foreign Language] so that is, you can say, we are not able to, you can say, supply them at a cheaper rate. [Foreign Language] damaged food grain [Foreign Language] most of the plant manufacturing ENA or operating on damaged food grain. So they don't have the ethanol plants. So damaged food grain [Foreign Language] ethanol rate INR 7 liter [Foreign Language]. So that's the reason that we have augmented our plant in such a way that even we can produce 700 KLPD of ethanol alone. [Foreign Language] ENA [Foreign Language] target [Foreign Language] why will try to produce ENA, though we are producing for that to retain our customers.

So we can take that opportunity whenever we want.

Yes, yes. That is always there. Within -- for 12 hours, we can shift our production from ethanol to ENA.

And just last question was regarding...