BCL Industries Limited (524332) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the BCL Industries Limited Q1 FY '27 Earnings Conference Call hosted by InCred Equities. [Operator Instructions] This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Awasthi. Thank you, and over to you, sir.

Thank you. I would like to thank the management for giving us this opportunity to host their conference call today. From BCL Industries management, we have Mr. Kushal Mittal, GMD; Mr. Varun Gupta, CEO. Also from Go India Advisors, their IR, we have Riddhi Shah. I would now like to invite Mr. Kushal to initiate the proceedings with his opening remarks, post which we shall open the floor for a Q&A session. Thank you, and over to you, sir.

Thank you, Nitin. Good afternoon, everyone, and a warm welcome to BCL Industries Limited Q1 FY '27 Earnings Conference Call. I thank you for joining us today. I would like to begin by providing some recent updates regarding the company. It is unfortunate to report that on 19th June 2026, a fire incident occurred at one of our ethanol storage tanks at our Bathinda, Punjab, distillery. However, on the positive side, there were no injuries to any employees, workers or personnel, and the fire was fully brought under control on the same day. This resulted in a temporary shutdown of our 200 KLPD Ethanol Plant. I want to reassure investors that based on our assessment, full recovery of the resulting losses through insurance claims is considered virtually certain and no net financial loss has been recognized in this result. Against this backdrop, BCL Industries has commenced FY '27 on a steady note. Further strengthening our Distillery segment, on 30th June 2026, we completed the acquisition of the remaining 25% stake in Svaksha Distillery Limited, making the 350 KLPD distillery in Kharagpur, West Bengal, a wholly owned subsidiary of BCL Industries Limited. I'm pleased to say that we have concluded this acquisition well within the stipulated time line. Further, the newly added 150 KLPD unit commercial trials began at the end of June 2026 and was commercially successfully commissioned in the first half of July. The revenue impact arising from the temporary shutdown of the 200 KLPD unit is expected to be substantially mitigated by the ramp-up in production from the newly commissioned 150 KLPD unit at Bathinda. While realizations of ENA and ethanol supplies to private buyers remained under pressure due to oversupply, with ENA realizations declining to INR 58 per liter in quarter 1 FY '27 from INR 70 a liter in quarter 1 FY '26, the company continues to actively compete in the market to secure orders and maintain 100% capacity utilization. Despite the challenging environment, the Distillery segment margin improved to 12.4%, supported by the operational efficiencies and the vertical integration that has been due to the maize oil extraction unit and our maize oil refinery. Our 115 TPH paddy straw boiler continues to meet 100% of distillery steam and power requirements, further supporting cost efficiencies. Our Country liquor business continued to deliver strong momentum during the quarter. We sold 6,37,993 boxes in Q1 FY '27 with our volumes increasing 42% quarter-on-quarter and 46% year-on-year. The strong growth reflects continued traction of our country liquor portfolio. We launched Punjab Raspberry in Q4, which has great -- good consumer acceptance. Building on this momentum, we have launched Jamun Vodka in July 2026, further expanding our portfolio and strengthening our presence in the country liquor business. As previously communicated, we have completed our exit from the packaged oil business, including the formal closure of the Oil & Vanaspati Unit at a previous Bathinda location. This quarter results include INR 199.47 lakhs, representing profit on the sale of fixed assets, comprising building materials and scrap from our dismantled unit. We continue to operate our soft oil refinery and trading business, which remains part of our legacy operations. We have also commissioned our maize oil extraction unit at Svaksha, a fully backward integrated facility that enables us to capture greater value across the value chain. Now moving on to our financial performance for the quarter. Consolidated revenues from operations for Q1 FY '27 stood at INR 623 crores compared to INR 820 crores in Q1 FY '26. The reduction in revenue is primarily due to the closure of our edible oil unit and exit from the packaged oil business. EBITDA for the quarter stood at INR 66 crores, up 17% year-on-year with EBITDA margin improving sharply by 370 basis points from 10.5% -- to 10.5% from 6.8% in Q1 FY '26. PAT for the quarter came at INR 36, up 6% year-on-year with PAT margin improving to 5.7% from 4.1% in Q1 FY '26. On a segmental basis, our distillery business reported an EBITDA margin of 12.41% in Q1 FY '27, up from 11.8% in Q4 FY '26 and 10% in Q1 FY '26. ENA volumes grew sharply to 19,376 KL in Q1 from 7,960 KL in Q1 FY '26, reflecting continued diversion towards ENA amid the competitive ethanol environment, while the ethanol volumes stood at 37,787 KL for the quarter. To conclude, BCL Industries is strongly positioned to capture growth across our core distillery and refinery divisions. As we execute our strategic initiatives, we remain fully committed to driving long-term sustainable value for our shareholders. Thank you for your time and continued support. We would now like to open the floor for questions.

[Operator Instructions] The first question comes from the line of Deepesh Sancheti with Maanya Finance.

At what price are we selling ethanol to private players?

Ethanol to private players is primarily Reliance. And I think the average price is INR 58 ex-factory.

Ex-factory. And that is from FCI rice or that is from maize?

No. So the private ethanol procurers, they don't have the FCI rice. So that's mostly from damaged food grains.

Okay. And at what price are we getting the damaged food grains, because then we lose out that FCI rice advantage, right?

No. See, FCI rice is allocated against the allocation that we received from the government OMCs. So 40% of our allocation from the government OMCs, we had to procure FCI and then supply ethanol against the same. So for Reliance, we can procure grain from the market. And mostly besides FCI, our plant was running on maize. So for previous quarter, I think the procurement cost was around INR 22 to INR 23 a kg.

For maize?

For maize.

And what was the reason of the fire? Have we come to know about the reason of the fire? And how are we working on avoiding that in the near future for the rest of the plants?

See, we were quite grateful that there was no loss of life or even an injury. All the systems were working in place. Since we are dealing with an explosive item like ethanol, I think the cause of fire was maybe a static charge that was created by something maybe from the cloth of a person working nearby. So moving forward, the company has set up more facilities to prevent such an accident, but it was an unfortunate incident that occurred and it is quite rare.

True. True. Okay. And post achievement of the E20 blending target, what is our visibility on demand of grain-based ethanol going forward? And how are we thinking of the pathway about beyond E20?

See, the demand for grain ethanol next year should improve slightly because the sugar -- ethanol from sugarcane will most likely not be allowed and only molasses-based ethanol will be there. And you see the growth factors going forward for the ethanol industry are, of course, flex fuel engines, which is a long-term play. And besides this, we are quite hopeful on a good isobutanol policy coming in the near future as well. And sustainable aviation fuel also would be another value addition for the ethanol industry. And also, we are seeing from the government of India that now ethanol can be used as a source of cooking, which is -- because ethanol is a very clean fuel, even when it burns inside our homes. It's even cleaner than the PNG. So it's a very good source for cooking energy as well. So I think there are many avenues for demand creation in the future, but it will take some time.

Right. And any update on Goyal Distillery of bio-CNG or even the biodiesel?

So, bio-CNG, I think there's a very favorable policy that has just been announced a few days ago. And the company is actively looking into the sector to invest in. Still, the technology from paddy straw is little tricky, mainly the selling of the byproduct that is made in the process. And for biodiesel, again, the prices are not as favorable. So the company is not manufacturing any biodiesel.

And about Goyal Distillery, the 250 KLPD, which we plan to install?

See, the project for now, we are holding on to it. We want to see how the industry further evolves in the coming months and then make a decision.

Right. So if I could just understand what is the unit economics, just as in what is the selling price, what is the cost price and what is the EBITDA in terms of our ethanol to the government, ethanol to private players and ENA? Because since the ENA prices have reduced and ENA was our biggest go-to-market, especially when ethanol from the government demand was less. What is the unit economics? And what is the EBITDA basically on -- if you can just mention the EBITDA also is fine on each product.

See, it's different. So FCI rice, ethanol that's sold to the government, is not very profitable. It's almost at cost, but there's a 40% mandate. But the maize-based ethanol that is sold to the government OMCs is quite profitable. And ENA and ethanol that is sold to private players in the market, they're about the same. The margins on that is about the same. So on an average, this is our -- about 12% is our EBITDA margin on an average.

So per liter, I can assume that on maize-based ethanol as well as on ENA, even at these prices, we are getting about 12 -- I mean, what, INR 9 to INR 10 per liter?

Yes, on an average, on an average.

On an average. I'm not including the FCI-based ethanol. I'm just saying about the maize-based ethanol and ENA?

Yes, yes, correct. Correct.

Great. Congrats again.

The next question comes from the line of Abhishek Pale, an individual investor.

Kushal sir, 4 days back, Mr. Suresh Gopi has given a written reply in the parliament that diesel and ethanol mixing because of ethanol's lower flash point, they are not considering this blending. So I think in one of your updates, you said that the isobutanol blending is being actively pursued. So you may want to just visit that. There's an article in The Hindu as well and there is a written...

No. There's a difference in the 2 statements. One is whether ethanol can directly be blended into diesel, which was rightly clarified that there is a difference in the flash point. Now ethanol and isobutanol are 2 different products. Ethanol can be used to manufacture isobutanol. And I don't think there's any statement that has been made, which says that even isobutanol is not -- isobutanol can be blended with diesel.

Right. You are right. I was just trying to understand whether that is also being shelved or not. So thanks for clarifying that. Sir, second question, this whole E20 related problems, right, which is being widely -- I mean, it's all in the media. I don't know how much of it has meat or whatever. But it seems like the government is on a back foot when it comes to the E22 or E27 kind of mandates, which they were pursuing, right? So, I mean, my -- the reason for my question is, do we see that the ethanol capacity offtake will increase unless and until we have a huge stock of flex fuel vehicles coming into the market. Till that point in time, do you see that the offtake is going to increase any further? Just a visibility kind of a question.

See, firstly, when talking about isobutanol, I think there's still active trials and testing going on for a policy to be introduced. So I don't think that has been shelved. There's a big difference in these 2 statements that were made. Again, I say, ethanol in diesel is very different from isobutanol in diesel. So yes. When you talk about government being on the back foot or not, see that I can't comment on. I can speak on behalf of my company or even the industry. E20 has been going on for 1.5 years. If there was any major damage to vehicles that would have showed in the 18 months since when E20 -- or more than 18 months since when E20 has been going to the pumps and to the consumers. Yes, demand creation will happen from a few places. Maybe due to the pushback, blending could be -- further blending could be delayed or shelved. I'm not sure about it. But besides that, I think biofuel industry as a whole has a very, very good future. India's food grain is still at record amount. We don't have enough space for this year's stock as well. Farmer income is a must for any government. So I don't think this is a policy that will be derailed for very long. There will be a demand creation from isobutanol. There will be demand creation from SAF. And I think in the coming months, we'll see quite a few launches of flex fuel vehicles, and we'll see E87 being available at even more pumps. So I think demand creation will happen. The pace at which it was happening earlier will slow down, that is realistic, but I think there will be good demand coming in the future times.

Okay. And sir, one last question on biodiesel, if I may, please?

Yes, please.

Yes. So sir, as you have seen, biodiesel, I mean, somehow the government -- the tenders, right, there is not enough of biodiesel being blended. Is there any specific reason why we are not seeing that happening? Because, I mean, we are also planning for a 75 KLPD unit at Svaksha. Am I right in saying that if my memory serves me well?

So, see, that project has been brought on hold for now because biodiesel rates are not as remunerative. And I think the reason behind that, that a lot of the raw materials for the biodiesel industry, their raw material, raw material for the raw material is imported. So the government, I think, maybe realizes that because the biofuel sector, the main aim for biofuel sector is to improve farmers' income, which it has done in the past few years very successfully. Now since a lot of the raw material to the raw material for biodiesel sector is imported, the government has not focused on it as much. And that's why the isobutanol is being tested because the government wants to promote indigenous raw materials, which will not only help the industry save the ForEx, but most importantly, improve farmer income.

Right. Sir, if I may continue with this, would it be okay? The way we -- if I understand correctly, we extract maize oil, which was our sole purpose of setting up the biodiesel unit, and we had plans to consume it for making biodiesel. So I mean that is something -- maize we are not importing. It's locally produced. So then why are -- why probably we are not getting the tenders? Is that just because of the pricing? Or what would be the reason? I'm just trying to understand it from our context, not from...

So, prices for biodiesel are very, very low. So that's what.

Okay. Okay. But sir, if I may, have we read this -- I mean, you must have surely read this to the ministry or the OMCs or the partners whom we are working with. Is there a feedback coming from the side as government is considering upping the price just to ensure -- I mean, you are talking about security, right, energy security. So this is something we are not importing. So is that a consideration that is being given?

Yes, I'm not a part of the government, so I can't comment on the...

No, no. I'm just saying that have you read it this to the partners that we are working with in terms of procurement or that we don't have a way of communicating this?

No. Of course, the queries have been raised. The concerns have been raised by the association and different players in the industry, but what is happening inside, how will I be able to tell?

Right. That's a fair point from your side...

Our next question comes from the line of Gautam Karwan, an individual investor. The next question comes from the line of Bhavesh, an individual investor.

Good set of results. My first question is regarding the IMFL segment. So regarding the strategic time line to enter the high-margin IMFL segment over the next 2 years, management has previously indicated plans to construct a malt plant. So could you please provide an update on whether this project is on track? When is the construction formally scheduled to begin? And what is the total estimated CapEx for setting up this?

Thank you. So the malt unit is still under consideration and conceptualization. I think the first step should be entering the IMFL business which we are working on. And hopefully, next year, we'll be able to enter that business as well. When you say high profit, I think it's -- personally, I think country liquor for a company like us is always a more profitable business since IMFL is a very, very competitive landscape. But yes, that is the natural step for the company. So we will go ahead with that. And the malt unit, I don't have any set time lines as of today.

Got it. And regarding the 250 KLPD grain-based plant at Fatehabad, so it was highlighted by Rajinder Ji in his interview with ET Now in the month of July that the management is on the verge of finalizing the vendors and technology partners and will begin the construction by August. So is the plan still on or you're keeping this on hold?

No. So yes, you're very right, that statement was made. But post a few days after only, we saw a huge social media backlash against the ethanol policy. So the company is -- we're holding the orders and the advances. Let's see. We want to wait and see the future road map as well. As I mentioned, there are a lot of things that can happen in this industry. And post that, orders -- pretty much the machinery orders are finalized and everything. All we have to do is press the start button, but we want to wait and just evaluate for a bit more.

Got it. And last question is on the expected sale of land. So when can we expect the sale of land where the edible oil plant was commissioned? And along with this, have we repaid any debt? Because I have seen that there has been a disclosure today from the company regarding the release of pledge of 75 lakh shares, which were earlier pledged with SBICAP. So that has been fully released. So could you update on these 2 things?

Yes. See, as you can tell in our numbers also, the finance cost has decreased for the company. Our working capital utilization is quite low as opposed to what it was in the past. We have paid off a few small loans. And with the financial health of the company improving, our banks did agree to unpledge our already pledged shares. And the company is further reducing our working capital limit by another INR 50 crores in August. So it will be done in the month of August. So yes, we are working on decreasing our debt with better cash flows in the company. For the land sale, I honestly do not have any update as the real estate market where we are in Bathinda is quite slow. So we are also in no rush to sell off the land, and we'll wait and see what takes place.

[Operator Instructions] The next question comes from the line of Srinagesh with Shubh Capital.

Congratulations for the good numbers. Sir, I have just a couple of questions. What has been the trend in DDGS realization?