BCL Industries Limited (524332) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to BCL Industries Limited Q2 H1 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, Samarth. Good afternoon, everybody, and welcome to BCL Industries Limited earnings conference call to discuss the Q2 and H1 FY '26 results. We have on the call Mr. Kushal Mittal, Joint Managing Director; and Mr. Varun Gupta, Chief Executive Officer. We must remind you that the discussion on today's call may include certain forward-looking statements and therefore must 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 question and answers. Thank you, and over to you, sir.

Thank you, Priya. A warm welcome to everyone joining us today for BCL Industries Limited quarter 2 and first half FY '26 earnings con call. The results and the investor presentation have been uploaded on the stock exchange, and I hope you've had the chance to go through them. At the outset, I would like to note that operational updates for BCL Industries are presented on a consolidated basis, covering the performance of Svaksha Distillery Limited, in which BCL holds 75% stake; and Goyal Distillery Private Limited, a wholly owned subsidiary of the company. Before we move to the operational and financial highlights, I would like to begin with a very important announcement. It gives me great pleasure to formally introduce Mr. Varun Gupta, who has joined BCL as Chief Executive Officer. He brings extensive experience across leadership roles and diverse industries. With his onboarding, BCL has further strengthened its leadership team. His strategic insight and management expertise will play an important role in driving the next phase of growth. I now invite Mr. Gupta to share a few words.

Thank you, Kushal ji. Hello, everyone. I'm delighted to be a part of BCL Industries at this pivotal stage in its growth journey. The company has built a strong foundation through operational excellence, strategic diversification and disciplined execution. As we move forward, my priority will be to work closely with the leadership team to build on this momentum, enhance performance and drive sustainable growth to create long-term value for all our stakeholders. I now hand it back to Kushal ji to take you through the highlights of the quarter.

Thank you. The journey of BCL Industries has been marked by resilience, adaptability and operational strength. As a part of our diversification strategy, we have steadily pivoted towards the Distillery business, which has now emerged as our core growth engine. Our biggest strength lies in our state-of-the-art facility that allows us to operate on multiple grain-based feedstocks while seamlessly switching between ethanol and ENA. Although the recent OMC allocation has been lower than expected, BCL will now try to maximize both ENA and IMIL sales in the market to try to make up for the loss of revenue due to the low allocation of ethanol. Our margins remain stable, reflecting the strength of our operating model and the flexibility of our product mix. Although ethanol demand remained rather flat during the period due to industry-wide oversupply, our ability to balance production between ethanol and ENA helped maintain stable operations and margins. During the ethanol year '24-'25, oil marketing companies have received 904 crore liters of ethanol against contracted 1,131 crore liters. Grain-based ethanol accounted close to 600 crore liters on a pan-India level. With grain emerging as a primary contributor to the ethanol supply, the continued focus on grain-based ethanol fares well for BCL Industries Limited. ENA has continued to deliver a strong performance, supported by strong demand from our PML portfolio and steady offtake from leading bottlers across the nation. We have now fully exited the Edible Oil segment with liquidation of remaining inventory expected to conclude by the end of the financial year. Our Maize Oil Extraction & Refinery segment continues to perform well and is expected to sustain its momentum in second half FY '26. Let me now share an update of the ongoing projects. The 150 KLPD ethanol expansion at Bhatinda is progressing well and is in advanced stage with completion on track for Q4 FY '26. The paddy straw-based boiler at our Sangat Distillery is also moving as planned and is expected to be operational around the same time. BCL has long been a pioneer in using agriculture waste as fuel, and we already operate a 60 tonne per hour paddy boiler. Building on this foundation, we will be commissioning an additional 55 tonne of boiler alongside with it. Together, these 2 boilers will meet the demand and energy requirements for our 550 KLPD plant at Bhatinda. The Maize Oil Extraction unit at Bhatinda was commissioned in the latter half of Q1 and the same for Svaksha is on track to be commissioned in Q4 of this financial year. Looking ahead, we are consolidating our presence in IMIL segment and have introduced Punjab Special Whiskey in glass bottle in Q3 FY '26 as a premium IMIL offering. Additionally, we are preparing to enter the IMFL value segment within the next 2 years with initial plans to launch products in vodka and whiskey categories. Our focus remains steadfast on maintaining stable margins and translating operational efficiency into superior shareholder returns, supported by our continued emphasis on process discipline, raw material efficiency and energy optimization. Let me now take you through key operational and financial highlights for the first half. Our distillery operations continued to deliver steady growth during the period. Ethanol volumes stood at 1,07,211 KL compared to 1,00,919 KL in the corresponding first half of previous financial year. ENA volumes increased to 20,089 KL from 11,206 KL in the corresponding period last year. On the financial front, ethanol revenue for the first half stood at INR 727 crores compared to INR 719 crores in first half of last year, while ENA revenue grew sharply to INR 139 crores from INR 80 crores last year. EBITDA for the Distillery segment came in at INR 113 crores compared to INR 102 crores in the first half of last year, reflecting a growth of around 11% with margins stable around 10.5%. In the Refinery segment, revenue for first half stood at INR 486 crores compared to INR 452 crores in the first half of last year, marking a growth of 7.5% year-on-year. EBITDA improved to INR 13 crores from INR 9.3 crores. On a consolidated basis, total revenue in the first half increased to INR 1,544 crores from INR 1,409 crores, registering a growth of 10%. Year-on-year EBITDA for the period stood at INR 125 crores compared to INR 113 crores last year, reflecting a growth of 11% with margins maintained at healthy 8.1% versus 8% in the previous year. Profit after tax grew to INR 65 crores compared to INR 54 crores in first half of FY '25, marking a growth of around 20%. That concludes my updates. You can now open the floor for question and answer. Thank you.

The first question is from the line of Bala Murali Krishna from Oman Investment Advisors.

So the first question is regarding the maize prices. So what was the maize price last quarter and how it is shaping up? It's ranging around INR 18 per kg. So how it will help boost the margins?

Thank you. So actually, the real prices, I'm not aware if they're around INR 18. Prices we are getting are around INR 23 landed at our units. So that's the price we are getting for maize. And in previous quarter, maybe it was INR 1 to INR 2 more than that. But now with the mandate that 40% of our supplies have to be through FCI rice, overall, in the blended margins, I don't think there will be that big of a positive impact. Since now it's mandatory for us to restrict our maize-based ethanol to maximum 60%.

Okay, understood. But there is a substantial drop in the maize prices since September starting from the INR 24 to INR 25 to INR 18. And in some areas, it's selling -- purchase price is less than INR 18 because of the FCI rice mandate and less demand for the maize. But I think we are working on the forward contract. So we are not able to see that reflection in our numbers or in purchase price. So how long these forward contracts are running and when we can buy maize at the cheaper price?

No, I'd like to clarify that as per our knowledge of the market, where we continue to buy and procure grains daily, the prices landed on a factory level are not INR 18. Maybe they could be INR 18 for heavily damaged material, raw material with very high moisture. But for us, that's not the case.

Okay. Fine. Understood. So on the short-term borrowing side, I think it's increased substantially by more than INR 100 crores by September end. So what is the reason for that? We are not going to commission 100 KL pretty soon. So I don't think that it is the raw material cost. Could you just clarify?

No, we were -- ending of last quarter, we were sitting on a significant stock of raw material since we had decided -- made a decision to procure quite heavily during the last harvest, looking at the prices then. So the increase is due to an increase in the raw material being held up on our premises. And ever since the stock has been coming down, so the working capital has been decreasing.

So on the distillery front, so the allocation is very less for all distilleries. So I think we have got around 50% to 60% of allocation. So 20% will be from DDGS or some other products. So what is the plan for the remaining 30% or balance capacity? Are we going to produce the complete ENA or we are waiting for some other cycle of allocations going forward?

See, yes, agreed, the allocation has been low, and that is a challenge for us as a company. Although we are expecting another cycle sometime in the future, we don't think it will be significant enough to increase our allocation significantly. So hence, the company will now have to focus on ENA, which, since we are expecting a supplier to increase in the market in the coming months, will be a little challenging and could impact our margins adversely. I just want to be transparent there, but we will have to now focus towards ENA.

Okay. Understood. So in that case, the 150 KL per day, which is coming on stream in Q4, and in future we have Goyal Distillery, so the utilization levels of these capacities would be a little bit tougher even in future because some other distilleries are also coming on stream. So allocation going forward would be in the similar range, right?

See, unless blending is to increase, yes, there could be some challenges in the coming years, in the coming times. But of course, we at BCL have been ready for this, whether that is with our paddy straw-based boiler, whether that is with our maize oil extraction or our -- so we have been ready for the competition. And with the flexibility between ENA and ethanol, we will continue to try and achieve as much capacity utilization as possible. But with that, unless there is a revision in the blending rates or the introduction of flex fuel vehicles, for the time being, we have decided to put the Goyal Distillery project on hold.

Okay. That's a conscious decision. Lastly, on the refinery revenue. So this quarter, we have seen INR 180 crores, either from maize oil extraction or the balance inventory of the edible oil. So going forward, how you will see in the coming quarters this refinery revenue to shape up? And I think we can sustain this INR 700 crores run rate going forward also that we may achieve INR 2,500 crores top line. What is your thoughts on that one?

So refinery revenue, I think along with the maize oil extraction, should stay around this level for the year.

Okay. And this INR 700 crores run rate will also continue in quarterly level, right? So maybe INR 500 crores -- INR 700 crores overall revenue run rate will continue going forward also, right?

Sure.

The next question is from the line of Deepesh Sancheti from Maanya Finance.

Now my first question was regarding your Goyal Distillery, which you said you have put on hold. Then going forward, what is the CapEx which we have in line? And how much of it will affect our -- I mean, how much of debt will be reduced? Since we will not be taking any debt for the Goyal Distillery, that's why.

Yes. So see, for now, the company is incurring 2 CapEx, one being the maize oil extraction plant at Svaksha Distillery in Kharagpur, for which we have not taken any debt. And the second being 150 KLPD ethanol unit at Bhatinda, for which we are yet to take any debt, but we have a sanction of INR 70 crore loan from SBI, and we will avail that in the coming weeks.

For the 150 KLPD, right?

Yes.

Okay. And what about the biodiesel. For biodiesel also, we had taken a debt. So that is in line, I mean, for...

Yes. For that, it's already -- this was done, I think, a few quarters ago. We had availed a debt of INR 50 crores.

So how much is the total debt right now? And...

So BCL, the long-term debt is around INR 220 crores, in which I'm also adding the INR 70 crores, which we will avail -- sorry, in INR 220 crores, I'm adding the INR 70 crores, which we will avail. And for Svaksha Distillery, the long-term debt is around INR 90 crores.

INR 90 crores. And what is the cost of debt on average, because some of the debt is only for -- was at around 4%.

Yes. So I think an average cost will be around 6.56% maybe. I don't have the exact number. But out of this INR 310 crores that I've just listed, INR 150 crores is under interest subvention, on which the applicable interest after interest subvention is around 4.5%.

Okay. INR 150 crores, right. Okay. Just also want to understand what are the ENA prices? And our utilization in distillery for ENA was around 8%. Going forward, where do you see this coming, from 8% to what level?

No. So I think latest was around 15%, and we are working towards increasing this every month. We could sense that maybe allocation would be a little low. So we have been trying to increase our ENA sales and not letting any buyer go. So we are hoping to increase this in the coming quarters as well. But while we try to increase it, of course, there will be some pressure to reduce the prices further. So that will remain a challenge.

Hello?

Yes.

Yes. So what are the ENA prices now? In this quarter, what was the average price which we sold at?

I think around INR 67.

INR 67, and it was completely produced by maize?

No, sometimes maize sometimes rice, a mix.

Is FCI rice allowed to be used for ENA?

Damaged rice.

Damaged rice. Okay. And what is the price of the damaged rice which you procure at?

I'm sorry.

What is the price of the damaged rice which we procure?

Around INR 25.5.

INR 25.5. Okay. That's good. Okay. And also, now in this quarter, we saw a little bit of loss on the real estate. Can you just tell me what was the reason of this? And secondly, how much real estate is still to be sold? And how much of that will help for the debt reduction?

So I think the loss is mainly -- so there was a big repair that we had to undertake during the monsoons for the infrastructure, the roads inside our colony. The leftover stock, I would say the current market price would be around INR 18 crores.

INR 18 crores. Okay. And what...

Sorry to interrupt, Deepesh. The next question is from the line of [ Neeta Thakkar from Finstock Investments ].

Yes. So my first question is what pricing trend you are seeing for DDGS in the quarter? And how strong has the demand been for the same?

So DDGS has been consistent. The prices have been consistent. There is good demand for maize DDGS in the market since a majority of the distilleries are now producing a mix of rice and maize. Since we're producing a lot of our ENA from maize, we have a higher blend of maize in our DDGS. So we're seeing strong demand. Around INR 15 to INR 16 a kg would be the DDGS price.

Okay. And sir, with ENA, so what factors contributed to the notable spike in the ENA production during this quarter?

See, there was a good demand in the quarter. Usually, we see in the winter months that the demand does increase. And of course, as a company, we could foresee that in the future, maybe the allocation for ethanol that we'll get would decrease. So we made a conscious effort to try and take as many buyers on board for ENA, so that in the coming months, we build a good relationship and try to increase our ENA volumes even further.

Okay. Got it. And sir, what had caused for a Q-o-Q drop in ethanol volumes?

I mean there is a slight drop, I think, from 55,000 KL to 51,000 KL, which is quite normal. Our ENA volumes increased by even more. So I mean, our plant can run at the rated capacity, which both plants are currently running at. Sometimes there's shutdowns of 1 or 2 days. So it's very marginal and it's routine.

Okay. So it's routine, nothing one-off or anything, right?

No.

The next question is from the line of Varun Thakkar from FYERS Asset Management.

If you could just expand on the maize oil extraction unit business that BCL is getting into and soft oil refining. What is the TAM for it? Just expand on that part of the business, if you could?

So maize oil extraction is the extraction of oil that's present in maize. And further soft oil refining is -- since we had established a biodiesel unit along with it, since biodiesel prices currently are not viable, so we had made a provision, along with the biodiesel unit, to install a refinery since we've been in the edible oil business for many years, so that we keep some part of it and refine oil and sell it in bulk. So we kept that provision, and we're continuing to operate on that.

And what is the addressable market for this or, let's say, the serviceable market for this business?

No, it's a huge market. This is bought by various packages or traders. So this has a big market.

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

My question is related to the order that we have received for ethanol. So currently, we do around 50,000 kiloliters of ethanol per quarter and around 10,000 to 12,000 kiloliter of ENA per quarter. And once the 150 KLPD distillery comes online in quarter 4, our ethanol capacity would be around 65,000 kiloliters per quarter. But the order that we have received from the OMCs is like 107,000 kiloliter for the entire year. So roughly, that is 30,000 kiloliter per quarter. So that leaves a gap of around 35,000 kiloliters of unutilized capacity for ethanol. So just wanted to understand that how much of this 35,000 kiloliter of capacity can you port over to ENA? Because right now, we are only doing 10,000 to 12,000 kiloliters of ENA per quarter. So how much of your ethanol capacity is fungible, that means it can be used to produce ENA? And like from 10,000 to 12,000 kiloliter of ENA, how much can you increase it further to compensate for around 30,000 or 35,000 kiloliter of loss of ENA -- sorry, ethanol?

Both at BCL and at Svaksha Distillery, we have 200 KLPD each production capacity of ENA. And yes, as you rightly mentioned, allocations for ethanol have been lower than expectations. And with the new capacity coming in, unfortunately, we didn't have the CTO in hand, so we were not able to participate for the newer capacity that came in. We will have to try and increase our ENA sales in the market. As of yet, I can't comment on what level we can take that to. I think we'll have a greater understanding in the coming months. But yes, we have to price our product very competitively in the market and try to gain as much market share as possible.

Okay. So you do not have an idea as of now that from 10,000 to 12,000 kiloliters of ENA, like to what level can you increase? Because the unutilized capacity of ethanol is going to be massive, around 100,000 kiloliter per year. So...

So I mean, we are trying to increase our ENA sales, and I think we'll do that in the coming months. And besides that, there will be another additional cycle from the OMCs also, which we're expecting. And hopefully, we'll be able to get some further allocation in that. So we'll try to work at as much higher capacity utilization as possible. With that said, yes, ENA prices will have to be very competitive.

Okay. And there were these items related to the government allowing ethanol exports. Have you heard anything on the ground from the government?

Ethanol exports, I think that's more of a long-term initiative. For now, that has not created much of demand since Indian ethanol is higher priced as opposed to other countries. So for now, I don't see that creating too much of demand.

Okay. And sir, on the biodiesel side, so when do you expect tenders for that? Any outlook on this? Because our plant is ready for biodiesel. And apart from the maize oil extraction, I think the biodiesel part is lying idle, right?

See, as explained earlier, along with the biodiesel, we had set up a refinery. So we're utilizing that part of it. There was a biodiesel tender that came out last month, but with the prices being around INR 82 a liter, we didn't feel right to participate in the tender as the prices were not viable. So unless there is an upward revision in the prices, we chose not to participate in the tender.

Okay. I understand. And sir, my last question. So currently, our business model, be it ethanol order book and its prices, ENA regulations, alcohol-related regulations and biodiesel order book and pricing, like it is exposed to government policy. And unfortunately, there are lots of government policy flip-flops. So there's high risk for our business model. So what is your plan to try and reduce the exposure to the government policies? Any comment on that?

See, ethanol will continue to remain a sector that will be driven by government since it's a petroleum product. And ENA is relatively free market and demand is increasing in the market. And yes, it's government regulated in terms of permits and licenses and red tape. But beyond that, I think we are working towards increasing our bottling as much as possible. As already mentioned in my speech, we have just launched a premium country liquor product in glass bottle, whiskey. And in the coming 3, 4 weeks, we'll be launching another country liquor product. So we're trying to increase our bottling business as well.

Sir, how has been the initial feedback of your latest products, the bottle products?

It's good. I mean, it's just launched a month ago. So of course, it takes time. But overall bottling business has been growing significantly since the past 3 years. And I think the initial responses have been good.

Okay, sir. And any visibility on the land bank that would get freed up after you move from the Sangat facility? And on the valuation front...