BCL Industries Limited (524332) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the BCL Industries Limited Q1 FY '26 earnings conference call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Priya Sen from Go India Advisors. Thank you, and over to you, ma'am.

Thank you, Manav. Good afternoon, everybody, and welcome to BCL Industries Limited earnings conference call to discuss the Q1 FY '26 results. We have on the call Mr. Kushal Mittal, Joint Managing Director. We must remind you that the discussion on today's call may include certain forward-looking statements and must, therefore, be viewed in conjunction with the risks that the company may face. May I now request Mr. Kushal Mittal to take us through the company's business outlook and performance, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Priya. Good day, everyone, and thank you for joining BCL Industries Limited's Q1 FY '26 Earnings Conference Call. I trust you've had the opportunity to review our financial results and investor presentation, now available on the stock exchanges. At the outset, I would like to clarify that all financial results reported are on a consolidated basis, which includes the performance of our Svaksha Distillery, where BCL holds a 75% stake. Let me begin by first providing a strategic update on the company's ongoing transformation and growth journey. As part of our long-term vision to focus on a higher-margin and scalable business, we have made significant progress in the phased exit from our Edible Oil operations. During Q2, we successfully shut down the oil mill, solvent, rice mills, vanaspati, and packaged oil segments, all in line with our planned restructuring. A portion of our soft oil refining activities is being consolidated and shifted to our Sangat facility, which will cater to the institutional clients. And it will continue to operate alongside the biodiesel plant, which is currently in its trial phase and expected to be fully commissioned in early Q2 FY '26. We are also focusing on orderly liquidation of remaining edible oil stocks, with this process expected to complete by Q3 FY '26. This exit from the low-margin Edible Oil business is enabling us to redeploy capital and management focus more efficiently towards higher growth opportunities in the Distillery business. In parallel, we are advancing steadily in our core distillery business. We are proud to be one of the India's largest grain-based ethanol producers, currently operating with an installed capacity of 700 KLPD. Strengthening this leadership, our 150 KLPD expansion in Bhatinda is progressing well and on track for commissioning by year-end. Additionally, our wholly owned subsidiary, Goyal Distillery Private Limited, has all regulatory clearances in place for setting up a 250 KLPD ethanol plant. Together, these projects will increase our total distillation capacity to approximately 1100 KLPD over the next 2, 3 years, providing a strong platform for sustained growth. Our CapEx pipeline remains robust and on schedule. Beyond the distillery expansions, we are making steady progress on our paddy straw-based boiler, biodiesel plant, and maize oil extraction units, all set to be commissioned by mid-FY '26. The maize oil extraction facility was successfully commissioned in Q1, while work on a similar unit in Svaksha is progressing and is expected to be operational by Q3 FY '26. Additionally, the 75 KLPD plant is under trial and is expected to be commissioned in Q2 FY '26, further diversifying the product portfolio and reinforcing value chain integration. The company continues to pursue strategic diversification of its revenue base, strengthening the product mix and enhancing sourcing flexibility and competitiveness in evolving market. On the raw material front, the Distillery sector experienced encouraging developments with the resumption of FCI rice procurement at INR 22.5 per kg. This has brought a much needed clarity and stability in the feedstock availability. BCL operates its units with the capability to process both rice and maize, optimizing operations to maintain efficiency and flexibility in raw material utilization. Demand for both ENA and ethanol remains strong, supported by our offtake agreement and a strong consumer base in the ENA sector. The positive momentum comes against the backdrop of India's remarkable growth in ethanol sector. The country's annual ethanol production has now reached INR 1,800 crores. And notably, 42% of the ethanol now is being supplied from maize. This reflects the government's strategic push for feedstock diversification to achieve the E20 blending, enhancing energy security, reducing carbon emissions, and providing greater support to the farmers, thereby creating income and employment opportunities in the agriculture and biofuel sector. These favorable tailwinds are setting the stage for BCL's next phase of growth. With its expanding capacity and focus on efficiency, the company is well placed to grow revenue and improve margins. By staying disciplined on cost and execution, BCL aims to strengthen its market position and drive steady for long-term growth. Let me now move on to the financial and operational highlights for quarter ended June 2025. BCL delivered a total revenue of INR 823 crores for Q1 FY '26, a robust 25% increase year-on-year. The Distillery segment, which was the main growth driver, where ethanol volumes rising 11% to 55,461 KL; and ENA volume rising to 7,960 KL, up by 37% from the corresponding quarter of last financial year. EBITDA for the quarter stood at INR 56 crores with the Distillery segment contributing to INR 53 crores, reflecting a steady margin trends and operational discipline. Consolidated PAT reached to INR 33 crores, up by 32%. Our IMIL segment also performed strongly with approximately 4.36 lakh cases sold in the first quarter, supported by a sustained demand and robust market share. Looking ahead, we remain confident about sustaining this growth trajectory in FY '26. Our strategy to diversify the portfolio, improve raw material sourcing and optimizing costs would support both the top line expansion and margin improvement. As we evolve, our focus remains firmly on leveraging our grain procurement and processing expertise to create sustainable margins and long-term shareholder value. With that, I now open the floor for questions.

[Operator Instructions] First question from the line of Dipesh Sancheti from Manya Finance.

Just my first question is after exiting the Edible Oil, how will the revenues from ethanol, biodiesel, and maize oil extraction evolve over the next 2 to 3 years?

See, with an addition of 150 KLPD of ethanol, it should give us anywhere from INR 400 crores to INR 450 crores of revenue on a yearly basis, whereas the oil extraction and the biodiesel sector in Bhatinda should give us around INR 250-odd crores in revenue. And this will further increase with the expansion coming in at Kharagpur, where we're first installing only the edible oil -- sorry, the maize oil extraction unit. And then the 250 KLPD ethanol plant at Goyal Distillery will follow afterwards.

What synergies are expected from combining soft oil refining at Sangat with the biodiesel unit?

See, we didn't have to install very many more additional machineries in installing a soft oil refining unit at our Sangat unit. And over there, since all the power and power plant is in-house, the production cost will be significantly lower. We had seen in the past, I'd say, especially 6 months that the biodiesel policy from the Government of India was not very favorable. There were certain changes that were made in an instant. So keeping that in mind, and ensuring that regardless of the biodiesel policy our unit stays running. We had a good consumer base for our soft oil refining business also. There's good institutional demand. So we decided to keep that portfolio of the business going. Processing costs, overhead cost, manpower cost over there are significantly lower. So to ensure that the revenue streams continue, we decided that we should continue with the soft oil refining business.

How is BCL managing the transitional risks, especially from the cash flows and working capital due to Edible Oil stock liquidation?

See, for cash flows, we've already surrendered our working capital with the bank. And we're liquidating the stock on a monthly basis, and we're trying to do it as soon as possible. There it is taking a longer time than we thought it would, since we had about INR 100 crores of stocks on the books with us. So we're hoping to do that in the coming quarters.

So by next quarter, most of the stock will be liquidated?

Yes, we're trying.

Okay. And with Edible Oil stock liquidation expected by Q3, does the company anticipate any material losses or marginal impact? And how is it managing the risk? Because there might be some price fluctuations or something?

Yes, there could be some losses on dead stock, and also when liquidating the stock there could be some stress sale. We're trying to manage it as best as possible to our abilities.

Can you quantify any number right now? Is it possible for you?

No, I don't -- it will not be possible for me at this stage.

No problem.

We are currently in the process.

I wanted to understand what is the maize price in the quarter which has gone, and the last 45 days of this quarter?

I'd say -- see, it's tough to say because there are always some forward contracts that we do. So on an average, I think the maize price last quarter would have been around INR 24, INR 25. And this quarter, it's around INR 23 to INR 24.5.

INR 23.5. So I mean, I remember from the last con calls that for every INR 1 drop in maize price, our margins increased to almost INR 4 to INR 5 a liter.

No. I think I've always mentioned around INR 2.5 to INR 2.6.

Sorry, INR 2.5 to -- yes. So now since that has dropped, can we see that Q2 will be much better than the Q1 results also because in terms of...

See, Q2, I think will be better than Q1 when our margins are concerned, also because of the maize oil extraction plant now being started. But we've seen some correction in the DDGS prices in the past couple of months. Now they're starting to increase again. So I think margins will improve in Q2. By how much it's tough to say as of today.

Just wanted to understand how has been the government outlook, because their policy on the biodiesel has been very fluctuating. But the policy on ethanol has been the same? Or are you seeing a push from the government, the same kind of push from the government, which used to be?

No, we've seen immense encouragement from the government in the past few years, where ethanol is concerned. And I think it was rightfully done so. You will see the farmers' income has significantly increased, crop diversification is happening. So all those objectives of the government are slowly being achieved. And the government has always been supportive of the sector, and we hope for the same moving forward as well.

So assuming that biodiesel, there's no clarity of policy. Still the kind of the maize oil extraction plant which we are planning at our Goyal Distillery, will that have enough buyers?

Yes, maize oil could be -- there are many industrial uses of this oil, and it can go into animal feed industry. So we're not very concerned about the buyer.

Last question on the property and the land which we have. Since now Edible Oil, most of it will be cleared, when do we expect that we will be realizing the potential huge land bank which we have, and how will we get the revenues and reduce the debt?

See, first, we are very focused on liquidating our stock. Currently, the factory is not only just full with the Edible Oil stock, but it's also stocking up a lot of maize for our Distillery. We had run out of space as we had done a lot of buying during the harvest season. So first, our focus is in lifting up all of the stock and cleaning the land, and then we'll focus on the next step.

Okay. Because you recently shifted your corporate office also.

Sorry to interrupt you, Mr. Dipesh. May I please request you to follow up? We have our next question from the line of [ Balamurali Krishna ] from Oman Investment Advisors.

I think this quarter we will have some uptick in the volumes of Distillery. So is there any particular reason, going forward, we can maintain the same volumes?

No. Volumes, we plan for running on full capacity. So that's the primary reason.

Fine. So when it comes to exiting Edible Oil business and adding the 75 KLPD of biodiesel plant and 150 KLPD in Bhatinda, so we're expecting around INR 700 crores from this additional capacity. So the margins will be around 10%. And we'll lose the Edible Oil revenue at an average of INR 1,000 crores per annum, right?

I didn't understand the last part of the question.

Edible Oil revenue we will lose INR 1,000 crores per annum --

Sorry to interrupt you, Mr. Bala, your voice is quite muffled, can you please use handset?

Yes, I'm using handset. I'm asking that -- so we'll lose the Edible Oil revenue of INR 1,000 crores, right?

See, we will lose -- yes, of course, some portion of the Edible Oil revenue would be lost. But as I already mentioned, we're continuing with the soft oil refining for reasons mentioned earlier. And that could give us some revenue. It will be significantly lower than the INR 900-odd crores that we used to do from this business. But we're making up for that lost revenue by higher-margin businesses in terms of 150 KLPD distillery and also the oil extraction and biodiesel plant.

Regarding this oil extraction and biodiesel plant, suppose if government policy is not favoring. If we are continuing with the only maize oil extraction only even at Bhatinda and Kharagpur, so what would be the revenue potential of the 75 KLPD maize oil extraction?

No, see, oil extraction can be continued. It can be sold in the market as it is, the maize oil. So we're not very worried about that. We haven't started any work at the biodiesel facility in Kharagpur. Only in Bhatinda we've established one. So unless and until there's a long-term policy for biodiesel from the government, we will not establish a biodiesel plant in Kharagpur.

Yes, I understood. But regarding that only, if we are continuing with the maize oil extraction only, what is the revenue potential at Bhatinda from it?

The revenue potential depends on the price. Currently, it's around INR 85. So see, the revenue increase will not be there as much, because the revenue we are gaining from the maize oil being extracted, some of that is being lost in that DDGS value going down. But it's a higher-margin business. So I think we should look at the margins and not just the revenue from the Maize Oil Extraction business.

Lastly, on Goyal Distillery. So what is the update on that? So when we can have that KLPD on stream? And what is the CapEx plan for this?

See for now, the company is planning on commissioning the 150 KLPD unit at Bhatinda first, which we're hoping to do by December of this year, and next year to begin work at Goyal Distillery.

Yes, I'm telling that 75 KLPD in this quarter will come, and 150 KLPD Bhatinda will come in Q3. So that is the additional capacity we are planning for this year, right, sir?

Sure.

Lastly on the one part. So I think the realization of ethanol has dropped. So we would have used the FCI rice also for producing ethanol. So what is the breakup between maize and FC rice, how much we would have used? How much percentage of ethanol was derived from FCI rice, could you just quantify that?

See, FCI rice prices have increased by INR 2.5 per kg from what we previously used to work on. So that is the reason for the decrease in realization. And I'd say about 30% to 35% of our capacity was based out of FCI rice. The rest was either DSP or maize.

So going forward also, we'll maintain a similar ratio of raw material. And DSP, I think there is some changes in policy. So is it anything beneficial to us -- Central Government has reduced the content to be maintained for FCI, so is there any benefit from that product?

Yes. See, I think it's a policy that is -- I think that will be a positive in terms of raw material availability. But let's see how it is executed, and whether that is pan-India or region-wise. So we are awaiting on that.

We have our next question from the line of Majid Ahmed from Pinpoint Capital.

Yes. Sir, my first question I have is, what has led to the realization dip, sir? Like would there be any kind of dip in terms of realization and margins?

No, I don't think there was any dip in the margins. I'm not sure what is being mentioned here. Our EBITDA margins have -- our Distillery business has more or less been consistent with even our corresponding quarter and even our previous quarter. So I don't know where the dip is.

Because there was an 80 bps of decrease in margin contraction. I just wanted to know, is it because of an increase of other expenses or the gross margin has gone down?

FCI price rises have increased by INR 2.5. And 0.5% here or 80 bps here and there, I don't think that's too significant. We have given consistent margins on the business in the past, and we're continuing to do so.

Going forward, it will increase I suppose.

So if you were to look at our EBITDA margin this quarter for BCL only, it was at 10.07%, whereas for previous quarter, it was at 10.5%. So that's a 43 basis point decrease. And if you were to compare that to the corresponding quarter, that is a decrease of 36 basis points. So I mean, 36 basis points or 45 basis points here and there, I don't think that's too big of a deal.

Secondly, sir, going forward, do you see the realization in the Distillery business, ethanol would it remain the same? Or do you expect any increase going forward as well?

See, we expect it to increase, yes, with our Maize Oil Extraction business kicking in properly, and also our -- hopefully, the Biodiesel business performing from, I think, hopefully, next year onwards from November when the new tender is expected. So that should definitely help the margins of our business. See, earlier, we used to extract this maize oil in 2 other facilities. So there was a lot of freight involved, a lot of steam and power costs and all of that was involved. Now our overheads, our power costs and everything have been significantly decreased with this facility starting in our Sangat unit, and later this year, hopefully, in our Kharagpur unit as well. So that should also bring in a big positive for our margins.

So going forward, for ethanol, you're looking to maintain between 9.5% to 10% EBITDA, or even more due to operational efficiency?

We are hoping margins to improve certainly. But with the incoming of FCI rice, the market has stabilized. And I think it's a big positive that the market has stabilized around this EBITDA margins. So I honestly don't see a significant increase in the EBITDA margins from the Distillery business. I think there could be a stabilization period as opposed to what we saw earlier when there were huge fluctuations.

Sir, regarding Grain Processing business, are we looking any sort of margin improvement to any operational efficiency or anything?

What is the grain processing business, by that you mean...?

Sorry sir, regarding this Real Estate business?

So regarding Real Estate, what do you mean to ask?

Sir, would the revenue be remaining the same or would it increase Real Estate?

We don't have that much inventory left in Real Estate. So revenues would be quite minimal moving forward.

Finally, sir, like do you see any competitive pressure or any sort of oversupply kind of issue in the market?

See, where ethanol is concerned, yes, there has been a huge expansion that has taken place in the past couple of years. Unprecedented competition has come, there's no denying on that. But a lot of these units that have come are of smaller capacity and they don't have the flexibility. Most, I'd say, 95% of the units now don't have the flexibility between ENA and ethanol. So that also is a big differentiator. I think, yes, there is competitive pressure. Definitely, there is. But in our opinion, units that have scale, units that continue to innovate, units that keep a check on their cost and they will continue to do well. So that's why BCL, keeping in mind that this competition is coming, we had our paddy straw-based boiler installed and commissioned 2 years ago. So the order was given 3 years ago. We're doing another paddy straw-based boiler. Keeping this competition in mind, I think we are the pioneers now in the country, I can confidently say when it comes to maize oil extraction. A lot of our peers are now looking to see how it's being done and copy us. Looking at this competition in line, we thought of biodiesel and setting up our refinery there. So BCL will continue to innovate, and try to remain ahead of its competition when it comes to procurement efficiency, and producing efficiency, and achieving scale on our units. So yes, I think this will work to our benefit moving forward as well.

The next question is from the line of Abhishek Khare, an individual investor.

Sir, couple of questions. The expansion that we are doing with the 150 KLPD expansion and the Goyal Distillery expansion, what do you expect would be our capacity utilization when these plants are fully operational?

See, any expansion that we go for, we aim for 100% capacity utilization, and we'll continue to aim for that moving forward as well. And I'm quite confident of achieving 100% capacity utilization.

So 150 KLPD would be live by 2027 Jan?

No. We are targeting to finish it by year-end, so in December of this year.

And Goyal Distillery?

Goyal Distillery will have a start date of early next year. So I cannot give you a completion date as of today. I think once we’ve started work on site, I'll give you more clarity on that. So -- but approximately 18 months from the start date.

Right. And sir, we are halfway into Q2. So when do you expect our biodiesel plant, the 75 KLPD biodiesel plant to start?

See, the biodiesel plant, we have done the trials, and we're quite confident of a successful commissioning. The current issue is that there is no new tender from the OMCs to procure biodiesel. So before the tender, we have to first register ourselves to be a participant in these tenders. And the last time the registration was opened, the company did not have a consent to operate. So we were not able to register ourselves. Now we have all the necessary permissions in hand. So once the new tender has been released, we will participate in that.

Sir, one more question regarding the pricing of ethanol. I mean, as you have seen, the price of maize-based or grain-based ethanol has not changed. Government hasn't changed that. The news, if it is to be believed, currently, the petrol prices, which is not mixed with ethanol, right, it is at a lower price than actually the ethanol, right? So do you foresee a scenario wherein the government takes, or the oil companies are forced to take a stance, wherein they are actually not procuring ethanol as much because of the price arbitrage. Do you see where I'm going with this. Do you foresee a scenario?

See, no, I don't foresee such a scenario. One, because if that scenario is concerned, then ethanol blending should go up when prices have hit $100 a barrel. See, this is not just a policy for the OMCs to be more profitable, the ethanol policy. The ethanol policy is serving a lot of purposes. One, you have to understand that India has now become a grain surplus country, and there is no use for this grain. We're producing much more rice than we -- we have 36 million tonnes of surplus rice, the government doesn't know what to do with it. We're producing all -- sugar we are surplus in. So how do you best utilize this production and ensure that the farmer is being paid in a timely manner, at a good price for their crop. So you have to ensure that industrial demand is created for this crop. And I think that is one of the biggest reasons why ethanol policy was brought into the country, and it's starting to show. Maize prices that were at INR 11, INR 12 a kg are now easily at INR 24, INR 25 a kg. The farmer has earned. There's a lot of crop diversification that has happened towards maize, especially in areas where water trouble was already low. Maize is a crop that requires significantly lower water as opposed to paddy. It is also a policy for India's energy independence. I will give you an example. During COVID, when the edible oil prices crashed significantly, countries like Malaysia and Indonesia, which were big exporters of these edible oils, instead of decreasing their biodiesel mandate, they increased it at a time like that, because they had to ensure that their farmers produce gets sold at a good price and their farmers are not stressed in a difficult time. Similarly, I believe in India, regardless of the petrol prices, the ethanol policy is a long-term policy, and not just made so that the OMCs earn more profit.

Right. And my reason for asking that question was because you are very closely working with the government, what sense are you getting and your answer kind of explains that part. One last question, if I may squeeze in, please. Regarding biodiesel, right, there is some teething problem like we had with ethanol, when the blending was just getting started or it was at a very nascent stage. Have you got a sense of what those teething problems are with biodiesel? And is there anything that we have planned or thought ahead to stay ahead of the game, and not have those problems for us to...

Biodiesel policy has been a little up and down, I think, in the recent past but I think over time, there will be a sustainable and long-term policy that will come in this sector as well, as the government is looking for -- to promote biofuels in all variations, whether that's BioCNG, biodiesel and ethanol. So I think over time, a good policy will come. We are quite confident of that. In the meantime, as I already explained, we have ensured that a part of that facility can also be used for soft oil refining, which will be supplied to our institutional consumers, so that the established facility does not remain idle.

So sir, if say, for example, my maize oil extraction plant runs at full capacity, I don't have a tender for biodiesel, right? Will I be able to recover the cost that I incur? And would I still stay positive in terms of margin, even if we only operate the maize oil extraction plant?

Even if we only operate the maize oil extraction plant, I think it's still a profitable venture, because the value addition given from the maize oil extraction surpasses the value loss in DDGS price.

The next question is from the line of Vikas Khundeja, an individual investor.

My first question is that you said that around INR 100 crores stock left in Edible Oil. So in the last quarter, you did almost INR 300 crores business. So in this INR 100 crores left after you have already maybe already done some business in this Q2 itself. So how much business you have already done for payment?

I don't have the exact numbers of this quarter, and for quarter 2. And I don't wish to share any exact numbers from quarter 2 at this given stage, please.

Right now, there is so much noise on the social media, especially regarding the E20 petrol. Many people complaining the reduced efficiency of the vehicles, and they -- it may create some pressure on the government to reduce the blending. So what if the government reduce the blending from E20 to E15 or may be E10, so can the company handle the situation when the demand's reduced?

No, I don't see such a thing happening. Honestly, I don't spend time thinking on what ifs and what... [Foreign Language] The ethanol policy is a long-term policy. And whenever something new is being done, it will always face positive responses and negative responses. So yes, there is some negative feedback on the blending policy, but I don't think it's a policy that the government will back from. I give you an example, when Bardha Dam was first built, there was a backlash from the public that [Foreign Language].

That was old time, actually. All you need to just add that the ethanol is pricier than petrol. But the government is continuously increasing the MSP of the grain. So --

Sorry to interrupt you. May I please request you to rejoin the queue? We have our next question from the line of Saket Kapoor from Kapoor Co.

Sir, can you provide me how was the realization for ENA been for the state and the average realization for the country for the last quarter?

ENA prices have been stable around INR 66 to INR 67 a liter, I think, in most of the states across the nation.

Post the June exit, sir, how are the prices trending generally do we have any seasonality effect for the ensuing quarter or...?

They have been mostly stable. They have been mostly stable.

Prices have remained stable currently?

Yes.

And sir, currently, for our ethanol price realization, what are we realizing in terms of the per liter value for ethanol as the contracted value?

It's around INR 6 to INR 7 a liter.

This is the margin you are mentioning?

Yes.

What is the realizable value, sir? At what price are we realizing ethanol sales?

See, maize is being supplied at INR 71.86. DFC is around INR 64, and I think surplus food grain is around INR 58.50.

Right. And you are mentioning about the tendering from the OMCs currently. So I think so they come up with their program for a longer period of time. So for us, how much have we locked ourselves with the capacity, for how many years for the contracted value, and number of liters?

No, this is yearly basis. So we participate in the tender on a yearly basis. So what you are referring to was an LTOA that was bought for some units. Since we have ENA plants as well, we did not participate in the LTOA. So we bid for our quantity on a yearly basis.

So what are LTOAs, sir? I'm not aware.

LTOA was Long-Term Offtake Agreement, which was done with some units. But even if a unit was of 200 KLPD capacity, the LTOA was only done for about 50% to 60% of their capacity. So...