Dhampur Sugar Mills Limited (500119) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to Dhampur Sugar Q4 FY '20 Results Conference Call hosted by Prabhudas Lilladher Private Limited. Before we begin, I would like to mention that certain statements in this call could be forward-looking in nature and are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management's beliefs as well as assumptions made by the information currently available to the management. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Biyani from Prabhudas Lilladher Private Limited. Thank you, and over to you, sir.

Hello, everyone. On behalf of Prabhudas Lilladher, I welcome you all to 4Q FY '20 Earnings of Dhampur Sugar Mills. I would like to thank the management of Dhampur Sugar for taking out time for today's call. From the management side, we have Mr. Gaurav Goel, Managing Director; Mr. Nalin Gupta, the CFO; Mr. Vinit Gupta, Chief GM Finance; and Mr. Akshat Kapoor, GM Finance. I would request Mr. Goel to discuss about the company's results and key industry highlights for the fourth quarter and what would be his outlook [Technical Difficulty] Hello?

Yes. Hello. You got [Technical Difficulty]

Yes. Mr. Gaurav?

Yes, I can hear you now.

Sir, you can take it forward.

Yes, sure. Thank you, all. Good afternoon, and a very warm welcome to all at Dhampur's Q4 FY '20 Conference Call. I would like to just give a brief on what has transpired over the last 3 months. COVID has hit the whole of India, and it has also hit sugar, but I would just like to thank the Government of India and the state governments for their proactiveness that all our sugar mills kept on running, and we had no stoppage at all. I would also like to thank in this call all our employees who, during these tough times, have come out and -- with flying colors and made sure that all the plants had run extremely smoothly. 3 of our sugar mills have now shut; and 2 sugar mills of ours, one is expected to close around the 7th of June and the other one will close 10th of June. I would now like to hand over the call to Nalin to take you over the numbers for FY '20. Nalin, over to you.

Thank you, sir, and good afternoon, everyone. I would like to take you through financial performance of the company. And after that [Technical Difficulty]

Sorry to interrupt. Excuse me, sir, your voice is breaking up, Mr. Nalin Gupta.

Yes, just a moment. Am I better?

Yes, sir.

So I -- coming in to my -- total revenues, EBITDA and profit before tax for Q4 FY '20 stood at INR 1,092 crores, EBITDA at INR 123 crores and profit before tax at INR 76 crores as compared to revenues of INR 879 crores and EBITDA of INR 197 crores and profit before tax of INR 142 crores in Q4 '19, respectively. Profit after tax from continuing operations stood at INR 107 crores in Q4 FY '20 against INR 117 crores in the same quarter last year. Profit after discontinued operations stood at INR 104 crores for Q4 and INR 215 crores for the full year. Our interest cost stood at INR 25 crores during this quarter and INR 100 crores for the full year against INR 90 crores of interest during last year. Now I'll take you through the business-wise performances. For the quarter ended 31st March '20, Sugar division reported revenues of INR 942 crores, contributing around 77% of total revenues as compared to INR 770 crores last year in the same quarter. EBIT in this segment stood at INR 50 crores as compared to profit of INR 10 crores in the corresponding quarter last year. Revenues from ethanol distillery segment stood at INR 181 crores against INR 139 crores in the corresponding quarter last year. EBIT for Q4 FY '20 stood at INR 46.72 crores (sic) [ INR 46.28 crores ] against INR 42.28 crores in Q4 FY '19. During the period under review, Power revenues stood at INR 69 crores with a profit of INR 21.95 crores in Q4 FY '20 as compared to revenues of INR 269 crores and profit of INR 118 crores in Q4 FY '19. Power realization stood at INR 3.16 per unit against INR 5.22 per unit in corresponding quarter last year. Lower revenues in this segment are mainly due to the reduction in power tariff. The company has made a repayment of INR 164 crores during this year. The long-term loans as on 31st March stood at INR 540 crores, including soft loan of INR 226 crores, SDF loan of INR 61 crores and loan of INR 42 crores, which is at concessional rate of interest. Now I would like to invite my team member, Vinit, to take you through the operational performance of the company. Thank you.

Thank you, Nalin. I will take you through the operational performance for the quarter and year-ended 31st March of '20. Sugar sales for Q4 were [Technical Difficulty]

Sorry to interrupt. Sir, your voice is breaking up.

Okay. [Technical Difficulty]

Sir, we still are unable to hear you.

Vinit, why don't we let -- Nalin, why don't you only carry on, please, with the ops also. Your voice is clear.

So -- okay. So I'll take you through the operational performance. Sugar sales for the quarter 4 in this year stood at 2.5 lakh tonnes, which includes raw sugar sale of 0.8 lakh tonnes as against 1.90 lakh tonnes, which included 0.3 lakh tonnes in Q4 FY '19. Sugar sales in this full year stood at 8.21 lakh tonnes, which includes 1.69 lakh tonnes as against 6.6 lakh tonnes last year, which included 0.52 lakh tonnes of raw sugar last year. Sugar realization this quarter stood at INR 32.38 against INR 31.41 per kg last year. For the full year, sugar realization stood at INR 32.65 (sic) [ INR 32.66 ] this year versus INR 30.68 per kg last year. Total inventory as on 31st March '20 stood at 4.66 lakh tonnes, which is valued at INR 29.39 per kg. The company sold 238 lakh bulk liters of ethanol ENA, which includes 215 bulk liter of ethanol, which is derived out of B-Heavy molasses at an average realization of INR 51.39 per liter during this quarter. The company, during Q4 FY '20, sold 39.66 lakh kg of ethyl acetate at an average realization of INR 55.11 per kg. The company sold 977 lakhs bulk liters of ethanol ENA, which includes 408 bulk liters of ethanol, which has been derived from B-Heavy molasses during this full financial year against sale of 899 lakhs bulk liter of ethanol, which included 207 bulk liters of ethanol, which was derived from B-Heavy molasses. During this quarter, Power segment generated 31.49 crore units of power against 35 crore units in the same quarter last year. We exported 16.33 crore units against 19.6 crore units in the same quarter last year. These were the numbers on broader level. Now I would like to invite the questions and answers from the audience, please -- from the participant members, please. This is all from the company side as of now.

[Operator Instructions] The first question is from the line of Nithin Ranjit from Capstock.

My question pertains to a news item which appeared in a website, which says we have been -- we have started producing ethanol from sugarcane juice. So going forward, will this be just normal? Or are we intending to scale that up?

So basically, I will answer that. Yes, we had applied for sugar cane juice, but UP Excise has not taken out a norm for that. So we were not able to do that. But that is one area that surely we would like to try out again next year. But this year, because there of no norms being fixed by UP Excise, we weren't able to do that trial.

Okay. And one more thing, this ethanol tender with the OMCs have bought up 3 months back, has that been awarded to us?

Yes. So we had also part -- so this tender has come out now twice. So the first one came out in end of August. So in that also, we had applied, and we had got most of our quantity. And then there was one more tender which came out in March. We had also applied in that. We have also got some in that. There is one more which is now being floated, which will end on June 22. So we also plan to apply in that. The reason for that is that the lifting from OMCs has been lower than what was expected due to this lockdown, and that is why a lot of quantity that we had applied in the first tender had got lapsed, and that is why we entered in Tender 2, and we will also be entering in Tender 3.

So the pricing for the same -- remains the same. It has been crystalized for the next 1 year, right?

Yes. So the pricing has been done. So the pricing is the same as what it is, which is INR 43.75 for B-Heavy and INR 54 for B-Heavy.

The next question is from the line of Aman Sonthalia from AK Securities.

Sir, whether we have taken the export losses in this account in the quarterly result?

So the export losses have been offset vis-à-vis the INR 10.44 per kg, which we have to get from Government of India. So as of 31st March, the export that we all have done, we have taken the INR 10.44 that we have to get from government as an income.

Okay, sir. And sir, how much we have taken the molasses pricing for accounting purpose?

So for C-Heavy, it has been taken at INR 4,000 per ton; and for B-Heavy, at INR 8,000 per ton.

And what it was last year, sir?

Last year for C-Heavy, was about INR 200 per ton; and for B-Heavy, was INR 7,100 per ton. INR 7,250.

Okay. And sir, how much volume we can expect from the sanitizer business for the current year, sir?

So again, very, very tough to answer the total quantity right now because as of now, the offtake was slightly low and slow. But just last week, the Government of India has allowed export of bulk sanitizers. So we will be part. So now we are hoping that our volumes will go up in the next quarter.

So sir, the margin is quite high compared to ethanol?

Margin is okay in that business. Yes, the margin is higher than that. But out here, the issue is not the margin, the issue out here is more of how to get offtake. So that is the plan that in the next Q2 and -- in the -- in Q2, we are hoping that, that sales should go up because of exports.

So it can be 20%, 25% of our total alcohol sales, sir?

Amanji, I don't think it will be that much. I think that is still a very large quantity. As you know, that we will be doing about 9 crore liters -- 9 crore to 10 crore liters is what we will produce. So we are hoping to at least do 30 to [Technical Difficulty]

Hello?

It is still new for us. Can you hear me?

Yes, yes.

Because it is still new, so we are not expecting it to be that much, but about 30 lakh to 35 lakh liters is what we are hoping that we can achieve in Q2 and Q3.

Okay, sir. And sir, since the consumption has come down a lot, sir -- and going forward, the cold drink sales and ice-cream sales may suffer. So what will be the consumption of the country for the current sugar year, sir?

Amanji, again, what we all have felt is that it should go down by about 1 million to 1.5 million tonnes. So India's offtake was expected to be about 26 lakh tonnes. Now for Dhampur, we are taking it at 24.5 lakh tonnes for the whole year. We all have seen slight drop, but it is not that large. I mean, if you all see that vis-à-vis offtake that we were expecting of about 21 lakh to 22 lakh tonnes per month, right now it is at about 18 lakh to 18.5 lakh tonnes, which we do believe that post-July, when this lockdown has started to open up, things have started to move a bit more. So we do believe that in Q2 and Q3, this -- slight bit of this offtake should come back. That's why we have taken about 1.5 million shortage or an offtake number to come down for FY '20-'21.

And sir, one more question regarding the export, whether -- how much export do you expect the country will do in this current sugar year, sir?

So till -- I had -- we had a meeting on this. Up till now, we have already done about 3.9 million tonnes. My number for total exports will be 4.2 million to 4.5 million tonnes.

For the current sugar year?

Yes.

And sir, next year, but the -- since then -- in this year, the -- Maharashtra and Karnataka have shown a very low figure. Next year, since the monsoon is quite good in Maharashtra and Karnataka, so what's your expectation for the next season, sir?

Amanji, you're asking a question I can't even tell you right now as to how much I will do at Dhampur for next year. As far as India -- I mean as far as India goes, yes, it'll -- it is seeming to be higher, but again, very, very early days for us to be able to comment as to how much higher it will be from this year. So I think that by -- in August, I think I will be able to give you a slightly better number on this.

And sir, since we have 2 distilleries. So sir, are you planning to produce directly ethanol from the sugarcane next season?

So out here, Amanji, even this year, we had done a tender for -- with the OMCs to supply some amount of quantity, about 60 lakh liters is what we had hoped to supply to them from sugarcane juice as a trial basis. But unfortunately, the UP Excise had -- wasn't able to come out with their norms for the same due to this lockdown, and we weren't able to do this trial. So I'm hoping that next year, again, we will do a trial on this. Exactly how much of quantity, will be totally dependent on what is the total sugarcane we expect in UP and in the whole of India.

And sir, the last one is, sir, what is the opportunity realization, if we don't make sugar and make directly ethanol from the sugarcane. So what is the price we are getting?

Yes. So basically, out of sugarcane juice, the whole point is that what is the sort of yield which I will get out of sugarcane juice. And that is why there is one thing on theory. As on theory, what it shows is that it should come to approximately a price of about INR 32 to INR 33 per kg of sugar if I -- I mean if I make it from sugarcane juice. But unfortunately, because we weren't able to do the trial, so I don't have the exact number right now. But on paper, it is showing about INR 32 to INR 33 per kg of sugar if I do from sugarcane juice if I was to get the yield of almost INR 600 per liter. So that is the sort of norm which is there. But I will -- again, these are all on paper right now. We are talking to certain mills which have done these trials. We all are taking their data, trying to study it. And then -- but for surely next year, again, we would like to do at least a partial trial for Dhampur on sugarcane juice.

Sir, whether it requires some modification in the plant also, sir?

Sorry to interrupt you, Mr. Sonthalia.

We all had already done that. So there was a bit of an issue -- I mean the only thing which had to be changed was certain pipelines had to be added, but that work we had done last year itself.

We'll move on to the next question that is from the line of Madhav Marda from Fidelity Investments.

I just wanted to understand that with lower crude oil prices, is there a chance that the government reduces the ethanol offtake because the price for the blending...

We all are not seeing that happen. We all are not seeing that. See, the policy of Government of India is very, very clear. This is being done for a long term. It isn't being done for a short or a medium term. So I don't believe that will happen. The offtake which has come down is because of the lower sales of petrol. It is only because of that in the last 3 months, we have seen slightly lower offtake, but it is not because the OMCs weren't wanting to lift it, but only because the forward sales were lower.

Okay. All right. And the UP power tariffs, is there any discussion around that going back? Or it's a permanent sort of change, the reduction which has happened?

So as you all know that we have filed a court case on the same because of the fact that we do believe that the UPERC order is wrong. The fuel price that they all have taken is very, very low. That is, even if we see from -- CERC has taken the price of gas to be INR 1,700 per tonne for UP while UPERC has taken it at INR 1,000 per tonne. So we have filed a court case on the same, but unfortunately, because of this lockdown, the -- I mean the hearings haven't happened. But I am still very positive of an outcome which should be fair to both, I mean, to the cogenerators because we have invested a lot of money. So let's wait and see, but the matter is now in court. So we are not expecting -- so anything which will happen will only happen out of court.

We'll move on to the next question that is from the line of Ankur Arora from HSBC Global Asset Management.

Sir, essentially, I had just the same question which the previous participant just asked. But do you think the [ 5.1 billion ] liters of ethanol pick up by OMC will pick -- will hold this year or not. You just implied that probably they will. So that's it. Nothing much.

Thank you so much.

We'll move on to the next question that is from the line of Keshav Lahoti from Angel Broking.

Sir, I just want a clarification as you've told that the OMC right now has...

Sorry to interrupt, Mr. Lahoti. Sir, your voice is echoing.

Is it good now?

No, sir.

Yes, better. No, I can hear him. It's -- I mean it's fine.

Okay, sir, you may please proceed.

Okay. Sir, you mentioned that the OMCs have raised 3 tenders and you have also participated in the third one because the first one has lapsed. By lapsed, you mean that OMC has not picked up the quantity they have originally tendered due to the shortage of demand?

Yes. That is right because this tender which happens is for every month and for every quarter. Because of this lockdown, the lifting which happened in March and April was lower, and that is why they have come out with a new tender, and they have come out with one more because there are certain depots which weren't able to lift and there are certain which were still in shortage. So the ones where the tender hadn't happened or they all still needed more, out there, they have -- they all have done fresh tenders for the same. So that is how they all are trying to balance out because in the first tender, everybody tendered for depots which were closer to them. And now we have also gone slightly further on those tenders. So that is how they all are trying to see. First, the maximum was in UP; then it came to Delhi, Haryana, Punjab; and now, we've also moved to MP, Rajasthan. So we all are just going more sort of towards the port side because there the total tendering was lower in Tender 1 and 2.

Okay. Sir, is it fair to assume whatever ethanol you will make -- OMC will pick up whatever the ethanol is being made by you as the handling rate in India is right now at 4% or 5%, even if, say, the demand goes down by let's take a massive fall of 50%, then OMC can do a 10% blending. So they won't be able to pick up whatever the sugar we will make, right?

See, there is no issue. We believe with all the dialogue that we've had with OMCs, we do realize what are their problems, and they've been extremely, I think, helpful. And even they all are trying to see as to how to take the blending rate higher. So I do believe that it will be slightly lower than what we are expecting, but it won't be very, very much lower because there are certain states where there was no blending happening with the blending which has started now.

Okay. Okay. Sir, what is the -- how much have you tendered to the OMCs contracted, ethanol?

Nalin, would you like to answer that or Akshat? What is the exact amount of tendering to OMCs? I know that in Tender 1, we had done 8 crore liters; and in Tender 2, we had done -- we have done 65 lakh liters. So 8.65 crore liters in all we have tendered in Tender 1 and Tender 2.

Okay. Can you give some idea how was the sugar consumption was in April month like-on-like whether it was down by 20% or, say, 40%?

No. So if I -- I mean like if I actually see -- if I see the quota which has come for April out here because it is very tough to not be able to give an exact amount because the March quota had been extended to April. So -- but I still believe it should be in the range of about 19 lakh tonnes is, I still, believe should have been the offtake in April itself.

The next question is from the line of Ashish Pandey, an investor.

My question is related to the sanitizer market which you have entered into. Have you done any analysis regarding the size of the market and the profit margins or ROE that you can accelerate by catering to that market?

Yes. As I said, even in the earlier question is that we do believe it's a growing market. But the offtake or the volumes that we've been able to do are still fairly small because we are a new player in this case. We do not have the distribution of the other large FMCGs. So that is what we are trying to develop. Also because this happens only through a licensed trade. There are authorized dealers only who can pick this up from you. It can only go to the chemist shop. It is only recently that UP government till 30th June have allowed it to be sold even through the grocery stores. Only last week, Government of India has allowed exports of the same also. So the market is there, but I think it will take us some time to be able to capture that market and to create a network for the same. We all have started this only 2.5 months back. And we do believe that this is a product or an area that we will keep on growing. I do believe that the demand isn't going to go away. So yes, it is a product. Margins in this, as of now, are very, very good, even though we have kept our prices lower than even what the Government of India has sort of prescribed, but that is also because of the fact that we all do believe that this is a long-term game that Dhampur wants to play.

May I know, sir, how much you have invested in this business segment so far?

So there is no CapEx at all. Our total, we all didn't have to do any major CapEx at all. The only thing is that we started a new bottling line at our Asmoli plant. The total CapEx that we incurred on that is about INR 9 lakhs.

INR 9 lakhs, that's it. Okay.

Yes.

And sir, may I know whether you're making more margins than your regular ethanol supply to government OMCs in this segment of sanitizer?

Yes. The margins are higher. The margins are higher. But as I said, because the volumes are so low, so they are not really having an impact as of now on the P&L of the company. But yes, over a period of time, we do believe that the margins in this are, for surely, higher than what we get from the OMCs or from our ENA sales.

We'll move on to the next question that is from the line of Sanjay Manyal from ICICIdirect.

Just a few questions on the Distillery side. What I believe your revenue numbers are pretty good on a full year basis, 27% growth in the Distillery segment, but your profitability numbers in the segment have been down. I believe that's mainly because probably the B-Heavy pricing is -- the transfer pricing is higher, but that profit should have been sitting in the Sugar segment. So can you just quantify what kind of a profit of Distillery segment of -- because of the transfer pricing has been sitting in the Sugar segment?

So out here, there were 2 impacts. If you remember that last year, the price of the feedstock molasses was very, very low in the whole of India. The transfer pricing which was done for that was at INR 2,150 -- was at INR 210 per tonne was the transfer pricing that had been done. This year, even for C, the transfer pricing which has been done is at INR 4,000 per tonne. So because of the feedstock price, we all have seen that the profits have come down in this segment and have gone up in the Sugar side. Nalin or Akshat, would you like to just quantify what is that amount which has got transferred from Chemical to Sugar? Nalin, you are on mute. Nalin, you are on mute. We can't hear you.

I'm sorry. I'm sorry, Sanjay. So last year, we transferred 25,000 tonnes of sugar. This year, we sacrificed 5,59,700 tonnes of sugar towards B-Heavy-derived molasses. Now as Mr. Gaurav said, transfer pricing was 800 -- INR 8,000 per tonne this year against INR 7,250 per tonne. So due to this, the impact on sugar costing is of like INR 200 -- overall impact is INR 200, which went into the costing of sugar. So as of now, we are holding most of the stocks against the current year production, which is almost around [ 60% ]. So that is going into the inventory side, right, Sanjay?

Okay. Okay. So I was actually just trying to understand that out of the INR 126 crore profit in the Sugar segment, what would be the quantity of the B-Heavy profitability here? And as you mentioned that there will be some in the inventory probably sitting in -- which will be liquidated once -- which will be realized once liquidated, I guess?

Yes, that's right.

That's correct, yes.

Okay, sir. And just one thing -- one more thing. You mentioned that quantities -- full year quantity of Distillery segment would be somewhere around 10 crore liters, whereas we have a capacity of 400 KLD which generally, whether 330 days or 300-odd days, would be somewhere around 13 crore liters. So why we can't really produce -- when there's so much of demand of ethanol from the OMCs, why can't we produce 13 crore liters rather than just restricting to ourselves to 11 crore liters.

See, out here, there are various other norms, which have -- we closed down our plant during monsoons or get down. There are some [indiscernible] because of the shortage of lifting which happened, we had to run our plant at lower capacity in the last [Technical Difficulty]

Sorry to interrupt, sir. We are not able to hear you.

Sorry, now can you hear me? Is that better?

That's better, sir.

Yes, sir.

Yes. So it is basically because of these reasons of lower offtake that we had to bring down our capacities and due to certain shutdowns that we had planned for. So because of these 2 reasons, but yes, you are right, the 12 crore liters is our target. We all will see over the next 6 months as to how much of that we can make up as to what we have lost in the first 6 months. So 12 crore liters is what we are taking to be our capacity right now.

And Sanjay, to add on, we have already increased production this year by 25% in Distillery.

Vis-à-vis last year.

Vis-à-vis last year, yes.

Right, sir. Sir, on the sanitizer, we though have huge opportunity, you mentioned, volumes are pretty low. But what could be the pricing because government norm is somewhere around, if I'm not wrong, [indiscernible] that's the restriction of the pricing, which is probably mostly for the branded players. Are we -- means, what kind of realization we would be getting here in terms of...

We have -- so we have kept our pricing. So basically, the government norm where they all had said that -- they all had said that for 200 mL, they had put up a price of INR 105 per -- for 200 mL bottle, the price was INR 105, which was fixed by UP government. We have sort of brought it down, and our 200 mL price is right now at about INR 70. Our 5 liter price is at INR 600. So we have kept our pricing far, far lower than the government norms.

Okay. But are you like into the branded thing or you are supplying it to the most of the branded players?

No, we all are -- we all like have our own brand. But for exports, it will be done in bulk. But right now, the supply that we all are doing is out of our own brand, Dhampure.

Right, sir. So sir, can this opportunity be somewhere around INR 1,500 crore to INR 2,000 crore kind of an opportunity for the industry. If that happens, then it means -- what I understand there would be only sugar companies which will be supplying alcohol-based sanitizers -- pure alcohol or alcohol-based sanitizers. So is it safe to assume that bulk of the opportunity will come to the sugar companies only?

See. I think that there are also others who can make it from ENA. So we -- there are also suppliers of ENA to others. But for surely, this is a new opportunity for sugar, which wasn't ever there. Exactly how much of that market we'll be able to capture will be tough to say right now. But as far as Dhampur goes, we are fully in sync with it that this segment is something that we want to concentrate on and to grow over the next 1 to 2 years.

Right, sir. Right, sir. Sir, just one last, probably, is there expectation of sugar export subsidy this year, means the coming crushing season? Do you have any discussions with the government? Or you think there will be something which could come now? Or how would be the demand/supply scenario if it doesn't come?

I, for surely, believe it will come. I think that the Government of India for the last 3, 4 years has been very, very proactive. They all do realize that India has a huge amount of stock, and the stock has to be exported or there will be issues of storage of cane price, everything else. So I do believe that, again, in FY '21 -- that in '21, again, 2021, exports again will happen from India. Dialogues have started, but still because government is extremely busy right now trying to tackle bigger issues, but I, for surely, believe sugar is in their mind, and we will see export again happening in 2021.

And sir, have we been able to sell our quota in April and May? Or is it completely...

Yes, we all have been able to sell our quota both -- for March, April, May, we have been able to sell our full quota.

And sir, just last -- any discussion -- means what we heard in the news that there is a possibility of MSP increase. Do you think -- what is your sense of how much it could increase, whether it would be INR 32, INR 33?

Again, Sanjay, I don't have an exact answer. But yes, the dialogue for MSP has happened in the last 1 to 2 months. Government is, for surely, thinking about it, but I think it can be anything from INR 1 to INR 2.

The next question is from the line of Mithun Jain, an individual investor.

So sir, as everyone is talking, next year, again, we will be coming up with high amount of production. And so how the industry is looking to deal with this flux? Like, are they going to go for the ethanol production by cutting down the sugar production? Or -- because the entire thing is looking to come back again what happened in 2019. So how the industry is looking to address all this entire situation?

See, it will have to be, again, a mixture of a lot of things. One will be B-Heavy, one will be sugarcane juice and one will be sugar exports. We will have to do all these 3 things like what we've been doing for the last 2 years. If we see that the total B-Heavy supply has been almost 3x to what it was in FY '19 to FY '20, it has gone up by 3x. I believe this will even go up further in FY '21 because as we all do realize that this year Maharashtra and other southern states had lower cane. So they'd not do B-Heavy. B-Heavy was mainly done by the northern part of India. So I do believe B-Heavy will go up. Sugarcane juice is going to be again set and will happen. And the third most important thing, these 2 things will be done, but the third most important thing is exports again will have to happen in FY '21.

Okay, sir. My next question is regarding the production in -- around the world, which is Brazil again. They are committed to do more of sugar and less of ethanol because of their margin getting hit by crude prices behavior. And what is your take on this because, again, they will be producing more than what they had produced in 2019, they had produced in 2018. And this time, they will be at least around 35 million to 36 million tonnes as per the reports that are coming up. So definitely, it will create pressure on the prices, international prices. Is it still will be feasible to do that? Or will be more feasible to convert the entire -- the sugarcane juices into ethanol or some part or portion of around, say, 40%?

See, for surely, what you are -- mostly you are saying is totally right. Brazil, I mean, there were -- in FY '20, there was expected to be a shortage of almost 6 million tonnes in global -- globally, but that has totally been done -- that totally has been taken by Brazil. They are going to produce 35 million to 36 million tonnes, and that is why we've also seen global prices come down drastically. For surely, this is a challenge that India will have because of our higher cost of cane. But we all do look for support from government because they all have been doing that for the last 2 to 3 years and like I do believe that will carry on. We will, for surely, maximize the amount of cane that we divert to B-Heavy and to sugarcane juice. But even after that, there will be a huge surplus of sugar which will be there in the country, which can only be done by way of exports, not anywhere else. So export is a must for FY '21.

Okay, sir. And apart from that, what -- like what is the CapEx involvement to go directly from the sugarcane? Is there any special involvement required -- CapEx required to do that or everyone can produce sugarcane?

I mean I don't know about the others, but for us, the only investment that we had to do in some pipelines, which was done last year itself. So we have no CapEx that we need to do next year if we all were to go from sugarcane juice.

And any impact from the locust invaders?

No. Thankfully, in [indiscernible], it didn't come to our area, even though we were fully -- we all have done our planning for it. But by God's grace, it didn't come to the western part of UP.

Okay. And looking at the repayment of the long-term loan, which has been done good. I think we have covered around INR 184 crores. And how you're looking forward to reduce the borrowings? Is -- that will be the first step?

I mean now -- yes. So our borrowings right now are at INR 540 crores. Out of that, INR 225 crores is the soft loan that we got from Government of UP, INR 60-odd crores is what we have our SDF loans which are at a rate of almost about 4% to 4.5%, and we have one other loan which we had done our expansion of our ethanol plants of INR 41 crores. So if you take these 3, our total is almost at INR 300 crores. So our long-term loans which are at about 8.4% are only about INR 200 crores, INR 220-odd crores, which will be repaid over the next 1.5 to 2 years.

Okay. And sir, since -- how we are managing to do the working capital obligation since we are holding lots of things as the inventory. So how we are looking to be okay with the working capital obligation, which is like paying -- repaying back the working capital that we have borrowed?

We have sufficient stocks and cash flow to do that. We have limits from our banks. So we have no issues at all with working capital as of now.

The next question is from the line of Aman Sonthalia from AK Securities.

Sir, my 2 more questions here. How much margin we are getting in country-made liquor -- this is -- liquor compared to ethanol?

So country liquor right now, our margins are almost the same as what we have from there. Right now, for the last 3 months, they've been a bit higher because our volumes have come down due to the lockdown. So because of lower volumes, our fixed costs which are there were higher. But for surely, in the next Q2 and Q3, our plan is to get the margins to be same as what we have with the OMCs.

And sir, what was the recovery if we won't make B-Heavy molasses?

So what we have -- as of now because 2 of our plants are on, but it is at the last stage, we -- I think our total will be -- if we don't take the B-Heavy impact will be about 12.15% for the whole group.

And what was it last year, sir?

12 -- was 12%.

Okay. It's 0.15% more than last year?

[Foreign Language]

Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Gaurav Goel for his closing comments.

I would like to thank all of you to be on the call with us. If you have any further questions, please feel free to speak to us at any point of time. Thank you once more.

Thank you, everyone.

Ladies and gentlemen, on behalf of Prabhudas Lilladher Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you, everyone. Thank you.