Dwarikesh Sugar Industries Limited (532610) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, and welcome to Q2 FY '21 earnings conference call of Dwarikesh Sugar Industries Limited, organized by Batlivala & Karani Securities India Private Limited. [Operator Instructions] I will now like to turn the conference over to Mr. Anupam Goswami. Thank you, and over to you, sir.

Good afternoon, everyone. Welcome to Q2 FY '21 Earnings Conference Call of Dwarikesh Sugar Industries. I will hand over the call to Banka sir for the opening remarks, and then we will take Q&A. Over to you, sir.

Very good afternoon, Anupam. Thank you all to the participants, who have spared their valuable time and come -- are attending to this conference call. Welcome you all to the Q2 FY '21 earnings call of Dwarikesh Sugar Industries Limited. Our results have been published yesterday. So I will quickly give you the snapshot of our results. We have had -- in the Q2, we have had a turnover of INR 418.62 crores. We had a profit before tax of INR 23.73 crores and profit after tax of INR 17.74 crores. Compare this with the corresponding numbers of the quarter of last year, where the turnover was INR 177.12 crores, profit before tax of INR 3.73 crores and profit after tax of INR 4.73 crores. So the numbers compare -- obviously, the numbers compare well. And even on a half yearly basis also, our performance in H1 FY '21 is relatively better as compared to the performance -- compared to our performance of H1 FY '20. So total income of INR 419 crores, EBITDA of INR 47 crores and an EBITD of INR 34 crores, profit before tax of INR 24 crores and profit after tax of about INR 18 crores. So this is broadly the summary of our results of this quarter. During this quarter, we have sold 11.32 lakh quintals of sugar, which includes exports of 1.99 lakh quintals of sugar. We exported mainly the white sugar during this quarter. This is as compared to 5.22 quintal sale of sugar during the corresponding quarter last year. We have had no exports of sugar in the corresponding quarter last year. So in terms of volumes, we have done better than last year. On a half yearly basis, again, 23.88 lakh quintals of sugar has been sold, which includes 8.05 lakh quintals of exports and -- which corresponds to 17.29 lakh quintals and export of 3.6 lakh quintals from the previous half year last year. So we have totally exported about 1,40,000 metric tonne of sugar under the MAEQ Scheme of Government of India. We have, on September 30, more or less similar stock levels, 17.66 lakh quintals vis-à-vis 17.15 lakh quintals on the same day last year. We have made a small beginning in stabilizing the operations of distillery. And from here on, we should have a better run rate. During the quarter, we have sold ethanol -- the quantity of ethanol sold is almost 90 lakh liters. And in the half year, 133.46 lakh liters compared to 9.92 lakh liters and 37.92 lakh liters in the corresponding periods last year. So the ethanol that we sold was primarily made -- not primarily, totally was made out of C-heavy molasses in this particular quarter. So we are commencing -- we have completed the expansion of our distillery capacity from 100 to 130 KLPD. Some approvals are awaited, and it's just a matter of time and we should start operating at higher rate from November, December onwards. So we are targeting to -- let me clarify, when I'm saying we are targeting the [indiscernible] it's for the ethanol season. So ethanol season typically commences on the 1st of December and ends on the 30th November. So during this season, we are targeting to sell about -- produce and sell about 4.5 crore liters of ethanol, all made out of B-heavy molasses. So that will be a significant step as far as we are concerned in improving our top line as well as the bottom line. And our loan profile is lean and trim as it was in the earlier quarters. We have -- all the term loans that we carry are all subsidized loans. We have a term loan due to the state government, which is about INR 100 crores, which bears an interest rate of about 5%. And distillery loan of INR 117 crores, on which the coupon rate is also subsidized. So our rating accorded by ICRA is A+. And for the short-term commercial paper program, it's the highest rating of A1+. So we are -- we can -- our crushing season has commenced for -- in 2 of our units. We started crushing on the 31st of October in our Bijnor district units and in the third unit, which is in Bareilly district, we shall be commencing operations -- crushing operations on the 7th of November 2020. So we expect this year to be -- this season to be a reasonably good season. Last year, we crushed about 374 lakh quintals of sugar -- sugarcane. So this year, the number should be slightly higher, if not the same because the area in the sugarcane plantation has been better, but much will depend on how the weather conditions are from here onwards. So that will determine the yield that the farmers will get from their fields and also the recovery pattern. So we expect to do good. Insofar as recovery is concerned, well, much lower. I would like to hate to admit so, but I think we have plateaued, but yet we'll continue with our efforts to improve our recovery as much as it's possible. So all in all, we are poised for a reasonable run in the future. On the policy initiatives, well, a lot of expectations are there from the central government. They have supported the industry big time, both the central government and the state government. But 3, 4 initiatives from the central government have been -- have taken at later time. Number one, is the export policy for the season 2021 and the subsidy for the same. Number two, there was MSP, the minimum selling price of -- ex-factory price was supposed to have been increased from INR 3,100 to INR 3,300 a quintal, which was approved by the group of ministers, but that has not yet seen the light of the day. We expect that also to be announced soon. Bokaro stock subsidy is another important sect, which that we wish -- we expect the government to take very quickly. And the fourth and the most important is the early disposal of all the subsidy claims that we have launched with the government for exporting sugar in season '19/'20. So all these initiatives, if taken well in time, will improve our cash flows. They will, of course, augur well for the industry because country is still reeling under the impact of heavy stocks -- higher stocks of almost 11 million tonnes to begin with for season '20/'21. So it's very important that at least about 6 million tonnes of sugar is evacuated out of the country. More and more sugar mills are now now taken upon -- I mean they have made a very encouraging beginning. There are more and more sugar mills that are going to use B-heavy molasses for making ethanol. So that should also result in some sacrifice of sugar production in favor of ethanol. And on the -- as far as the state government is concerned, we expect them to announce the SAP for season '20/'21 very quickly. So let us wait. We are keeping our fingers crossed. Let us wait and see how quickly these measures are announced. Thank you very much. And I would request you to please ask me questions. I'm ready to answer.

[Operator Instructions] We have first question from Mr. Arvind Joshi from [ Atelier ] Adviser.

I just wanted to understand what would be the economics of opting for molasses B-route? Any additional capital expenditure will have to be incurred? Or the molasses C-route plant and machinery would be identical and would be used for molasses B-route?

There is no additional CapEx required for this. The plant that we have installed, which is good enough for C-heavy as well as B-heavy. On the contrary, when one operates the plant on B-heavy molasses, the run rate is higher and one can go beyond the 100% capacity. So insofar as operations of the plants are concerned, B-heavy molasses is a more friendly feedstock as far as the distillery is concerned.

Okay. And no line balancing equipment is also required for additional throughput?

Very little. All that has been taken care of.

Great. Great. And sir, also I wanted to understand, are we converting our press molding to CPG because that is also opening us a big opportunity to get rid of our last problem area in the sludge that is left behind and has to be sold as fertilizer or stuff like that? So are we opting to convert that into CPG too at a later date?

No, not yet. But we have taken another small step in our distillery, small initiative. We are capturing the emission of carbon dioxide gas and that has been sold on commercial basis. So that is a step. So no carbon dioxide is now being let out in the air. And the entire emission is captured and sold on commercial basis. Although -- I mean the amount that will result add to our top line as well as bottom line is going to be minuscule, but then it's a welcome step. And as far as press [ molding ] is concerned, presently, we have -- we are giving it to our farmers. If -- I mean the project that you spoke about, considering the value addition seems very, very low. But then I'm sure things will get better, and we will also embark upon that as and when required.

And sir, finally, looking at the brighter days ahead for the sugar industry, are you looking at increasing your throughput for crushing capacity? Will the crushing capacity be increased over a period of time? Because increasingly, it will be quite profitable to have more and more sugarcane crushed?

We are taking -- every off-season, we do -- we spend some money for enhancing efficiencies and for debottlenecking our operations. So this is an exercise which happens year after year. So this -- if you have seen result -- has already resulted in increase in the crushing. Now for example, I'll tell you, if in a plant -- if my -- if our capacity is, let's say, 7,500 CCB. Earlier maybe, we have operated it at, let's say, 6,800 or on an average, 6,800 or 6,900. Now that's where we have improved upon. We are trying to operate at a higher capacity level. And insofar as adding another sugar mill is concerned that as of now not required because we are going to -- I mean in our existing plants only whatever vertical growth is possible we will take care of that.

Sir, is acquiring [ sick ] mills an attractive option now?

Sir, we don't have that appetite as of now.

So we have next question from Mr. Archit Joshi from Dolat Capital.

Sir, on the earlier comment that you made about certain actions that we are expecting from the central government. I think on Friday, we have seen our food and commerce minister saying that they are not -- they do not have any intent of extending the sugar export subsidy for '21. Any comments on that, sir? Is that an official news or the ordinance has already been passed? What will be the impact of that?

Yes. Yes, this was the initial remark of the honorable minister. But if you have seen his subsequent speech, he's mentioned that he is considering -- he is evaluating the problems and the difficulties of -- difficulties, problems and challenges faced by the Indian sugar industry. And I'm sure in the process of evaluation it will definitely become very clear to all concerned that the immediate problem of the industry is to evacuate the excess stock which the country is carrying. So I'm hopeful that some positive action will happen on this front, although I would have loved the scheme -- we would have wished this scheme has been announced in September itself, so that we could all have geared up our production planning, we could have calibrated our production processes accordingly to manufacture raw sugar because in international market, raw sugar is the one which sells the most. But yes, we can make subtly changes -- we can yet make subtly changes in our plant operations and manufacture raw sugar as and when the policy is announced.

Right, sir. Just an addendum to the same question, sir. If suppose the export subsidies don't come through and the opportunity that we had to sort of offload the incremental sugar we are producing in the exports market, will there be a revision in the monthly release quota, so that we can sell the same amount of sugar in the domestic market?

I think so, yes. That is a very natural and -- natural corollary that because quotas are determined based on the stocks that the sugar mills are carrying, the production, et cetera. So if -- technically speaking, if the exports do not happen, which I don't think will be the case, so if they did not happen, yes, the entire equation of releases will undergo a change. Because the releases will have to be -- the government will have to -- will release only as much quantity as the country require -- as much as the country requires and plus as much which -- I mean the kind of quantity which will not induce any big drop in the sugar prices. So with that in mind -- but I'm sure, yes, the releases of all sugar companies will undergo a change. But I hope and pray that, that will not happen.

Right, sir. Sir, just and one another clarification. You said that the 4.5 crore liters that is earmarked for this year in terms of ethanol production that you are planning to manufacture entirely from B-heavy molasses. So my question is, is this allowed? I mean, earlier, I think there was an allocation for C-heavy molasses based ethanol and B-heavy molasses based ethanol and diversion of sugarcane -- the entire of sugarcane quantity towards manufacturing B-heavy molasses was not allowed. Please correct me if I'm wrong on this part.

No. Now if you have heard the pronouncement of various government officials and coming out of Food Ministry, they want us to do more and more B-heavy and even if possible, make ethanol out of sugarcane juice directly. See the idea is to have lesser sugar production, so that this problem of burgeoning stock is not there on the government of the country and also on the industry. So that is not going to be an issue at all.

Right, sir. Sir, 1 last question. Sir, if you can just give us a breakup of what the sugarcane areas are in Uttar Pradesh and Maharashtra?

I don't know about Maharashtra. In UP, we have -- in UP, sugarcane areas today stand at around INR 6,600 crores or INR 6,700 crores, mainly coming out of a few select companies. The rest of the companies, the amount involved is much, much -- is insignificant, I would say.

So we have next question from Mr. Gaurav Jhanwar from Systematix Shares.

Verily, I have couple of questions. First of all, I would like to know about the inventory. How much was the inventory in the last quarter, sir? And what was the...

On 30th November, we were carrying an inventory of 17.66 lakh quintals of sugar vis-à-vis 17.15 lakh quintals of sugar that we carried on the corresponding date last year. And on -- this 17.66 lakh quintals was valued at INR 3,015 a quintal.

Okay. And sir, in this current quarter, have we accounted the subsidy -- export subsidies, like -- and how much was it is?

Yes. By the nature of the subsidy, we have exported about 1.99 lakh quintals in this quarter. So as much as is related to that export, that subsidy gets accounted.

Okay. So that has been accounted in this last...

Yes, yes, on accrual basis -- now you see when it was MIEQ, it was different. It was sometimes reduced from the cost of production and all. Now it is directly in other operating income.

Okay. And sir, the last question, do we have any plan for new ethanol plant or like what do we see the future for the industry?

No, the future of ethanol is very bright. So from a low run rate in season in 2019/'20, we will have a much higher run rate in the coming season, ethanol season. So we will be using B-heavy molasses. 2 of our plants -- of the 3 sugar plants, 2 of our plants, we'll be running them entirely on B-heavy molasses. So when we do that, we will sacrifice significant quantity of sugar production. Then we are left with the third plant. The third plant, there the molasses is -- the molasses that we are going to generate will be the C-heavy molasses, which will be -- the plan is now to be to give it to meet our levy sales obligation. So if you are aware, the UP sugar policy requirement is that 18% of the molasses generations is to be given for country liquor purposes. Now 18% is to be computed on, assuming on whatever is your crushing multiplied by 4.85% or your actual production of molasses, whichever is is lower -- whichever is higher, sorry. So there, we will be using -- the plan is, as of now, is to sell the C-heavy molasses insofar as the requirement of country liquor is concerned from that unit and also -- and the rest of the molasses, if any, we can -- we always have an option. We can either make it by way of B-heavy or we can sell the C-heavy molasses as well.

So we have next question from Mr. Sanjay Manyal from ICICI Securities.

Sir, just want to know what would be the sacrifice of sugar this season when we do the B-heavy?

See, last year, we sacrificed approximately 53,000 quintals of sugar in favor of ethanol. So that was just the beginning that we made. So this year -- I mean this is a plan as of now. Of course, this plan is subject to changes in future if warranted by the circumstances. So the plan is to run 2 of the plants entirely on B-heavy molasses. And if we do that, we will sacrifice about 3.5 lakh quintals of sugar, sir. So vis-à-vis 53,000 quintals, we will sacrifice approximately 3.5 lakh quintals of sugar in the coming season.

Right, sir. And sir, what would be the -- what could be the crushing this season? Last year, we produced 4.5 lakh tonnes. What is the expectation this time? What kind of crushing would happen? And what could be the production of sugar this time?

See, in my sugarcane remark, I mentioned that as against 374 lakh quintals that we crushed last year, we may be crushing marginally more sugar in the coming -- in the season 2020/'21. So -- and assuming the same recovery rate, our -- I mean it's anybody guess how much we'll produce. I mean if the numbers are the same, 375 lakh quintals and if the recovery is the same, so we will be sacrificing 3 lakh quintals more, so which means 4.5 lakh quintals would become 42 (sic) [ 4.2 ] lakh tonnes.

Right, sir. And sir, any plan of any capacity addition from the sugarcane juice to ethanol? And what is the dynamics according to the new pricing?

No, we are -- we have not yet -- I had also mentioned in my earlier earnings calls that producing ethanol from juice directly entails a lot of CapEx, insofar, as ramping up distillery capacities are concerned. So we will first want to utilize our -- optimally utilize our existing distillery capacity, which is at 130 KLPD. We want to maximize its operations and utilization of the capacity. And then we will take the next logical step. So we will have to balance many other factors, availability of molasses -- and of course, insofar as sugarcane juice usage is concerned directly for making ethanol, there are no barriers as such, but capacity will have to be ramped up.

Right, sir. Right, sir. And sir, so you would be able to exhaust your entire molasses? Or will there be anything left and you will be selling?

We might be -- we may have some balance. We will have to wait and see. I mean you see -- the idea is to -- run the distillery to the maximum extent possible. So while our weighted capacity is 130 KLPD, we will try and see how much we can maximize. If we can maximize our production and do better than what our targeted production and sales number is, we may end up using a little more molasses from there, from the third unit also.

So we have next question from Mr. Ritesh from Girik Capital.

Sir, if our opening inventory is about 11 million tonnes and production is somewhere 31 million tonnes, 32 million tonnes. So we'll have another inventory going up at the close of the season, if there is no exports?

Yes, exactly.

So in that situation, export subsidy has to come. Otherwise, sugar price can't sustain even at the...

MSP level. Yes. I agree with you. I agree with you totally.

Okay. Okay. Sir, just a few days back, there was this announcement of INR 63 liter from 100% juice. So I believe if it is INR 63, so sugar is -- effective sugar price is INR 37, INR 38 in that case?

No, I've not looked at that actually because we are not -- we have no plans of making ethanol directly from sugarcane juice. Honestly speaking, I have not looked at the economics of that. But so far as B-heavy molasses is concerned, if you have seen the prices have been increased from -- by INR 3.34 a liter. So the earlier equation was of INR 31. I mean, the earlier B-heavy molasses price would equate to about INR 31 of price of -- INR 31 per kg of sugar. Now this price will equate to about INR 33 a kg of sugar.

Okay, which is current ruling price?

Yes, which is -- yes, current ruling price is around that much.

Okay. Okay. When do you expect export will be allowed or this subsidy will come in again?

I think it's taken longer than what usually -- we have seen in the past, the government has been very nimblefooted and they have announced policies quickly and well in time. I mean the last export policy was announced in September 2019. Perhaps the paucity of funds -- because of the outbreak of this pandemic, COVID, all that -- I mean, maybe that has what has delayed the process. Having said that, I must say that the government is also equally aware that unless sugar is evacuated out of the country, there is going to be a big problem staring at the industry because it will obviously have a cascading effect. It will be difficult to -- the price -- MSP will find it difficult to hold fort. Then same price payments will obviously get delayed. So these are, I mean, immediate consequences of exports not happening. So I'm sure some reconsideration and rethinking on this will happen and exports will be allowed very soon.

Sir, what is the farthest date where that has to be done otherwise you have to put the panic button on?

No, it has to -- we -- from what we understand, what we hear, it's all here say again, is that immediately after Diwali we should expect some announcements. So even now -- although it's already late, but even now we can make subtle adjustments in our production planning and start manufacturing raw and enter into deal. And the international prices also seem good at this point in time, right, so you can see.

Right. And sir, 1 last question. Sir, this is going to be a problem that the sugarcane yield would be good and acreage also will be good because it is the highest profit. So what is the solution of this?

See, there are 2 issues coming out of this. One, the short-term, short-term is the stock levels that we are carrying. That can be addressed by incentivizing exports, at least for the next 2, 3 years. And then again, the government has very correctly identified that ethanol blending program is the program for the future. And they are providing all kind of impetus for this program. So we will -- I mean, okay, there has been significant increase in the ethanol supplies we are expecting in the season. So this number will gradually go up. So we expect a sacrifice of 2 million tonnes of sugar in favor of ethanol in season '20/'21. This number can be higher in the coming season. So a combination of all these measures should put the industry back on reign.

Sir, is anyone putting 100% juice to ethanol plant?

Yes, of course, they are doing. Of course, they are doing. Of course, they are doing. I mean in Karnataka, there is a sugar mill which dedicated a plot, a portion of their crushing capacity totally for generating sugarcane juice from which they made ethanol, and it was a very successful experiment.

So this season will have something from 100% juice to ethanol?

Yes, yes, yes. More, of course, more. There's data available, and I can -- our association comes out with the data, how much portion was -- how much of ethanol was made from juice directly, how much from B-heavy, how much from C-heavy. So I'm sure these numbers are available in the public domain.

And sir, anyone doing in UP?

I'm sure people will try this time. There are -- they've -- what we hear is they're going to do. We -- for us, our first objective is to maximize and optimize our expanded capacity now. Once this is taken care of, we'll take the next step -- next logical step.

Sir, we have next question from [ Mr. Shri Shankar from Entrust Capital ].

Sir, in the global environment, because of this COVID, et cetera, how much is the sugar demand growing? That's my first question. Second is because of the excellent monsoon that we have had, we can safely expect that sugar production in India also will be robust for next season as well. In this environment, how do you see the entire global as well as the Indian environment leading to a lot of -- or rather forcing a lot of producers to go in for more of an ethanol production if that is possible?

Yes, absolutely, it's possible, sir. Yes, let me explain. You see globally '19/'20 was a deficit season. And '20/'21 is expected to be again a mildly surplus season. I mean there might be some surplus in the global production. But even globally, if you look at, we are carrying almost about 6.5 months of stock. The entire world is carrying about 6.5 months of consumption of sugar. So that's a large number. So in the days to come, well, in India, as you rightly said, we are going to see bumper production in season '20/'21 and maybe '21/'22 as well. So the -- insofar as the demand destruction is concerned because of the outbreak of COVID, we have suffered a demand destruction, but the amount was not very substantial. Initially, we thought the demand destruction could be about 1.5 million tonnes, but maybe it was about 1 million tonnes or so. So we are seeing India's consumption numbers being close to over 25.5 million to 26 million tonnes. Now, there is a definite requirement for us to step up our consumption. You see insofar as our average sugar consumption is concerned, per capita consumption of sugar in India is concerned, it's about a 17 kgs or so against a global average of 21 kgs. So there is scope for improvement in consumption of sugar. So our association has taken upon -- has launched a campaign to talk about the good effects of sugar. There has been a lot of negative publicity in the past on the consumption of sugar. So we're trying to break that myth, and we are trying to tell people that sugar consumption is after all very good. So similarly, efforts are being made in other countries. Other countries are also very enthusiastic about ethanol blending program. Maybe it's not caught up in a big way in Thailand, but generally, the ethanol blending program is gathering momentum. And I'm sure in the times to come, sugar companies will be more of an ethanol companies and less of sugar companies.

Like in Brazil. Yes?

Yes. Yes. Yes, absolutely, absolutely. So I think sugar companies deserve to be re-rated.

Sir, yes, sir. So sir, when you mentioned 17 kilos per capita consumption, I presume this is sugar, including khandsari and jaggery? Or is it only sugar?

No, it's only sugar, sir. It's only sugar. It's only sugar.

What is our consumption per capita, including sugar, khandsari and jaggery because we seem to consume...

No, I know that. We tend to consume that, but I wouldn't have that number with me right now. But comparatively, consumption of khandsari or jaggery is much lesser. So I mean, sugar consumption is obviously the -- it's a major sweetener consumed in the country. So it's a major sweetener. So I don't think the number of khandsari sugar consumption and jaggery consumption is any significant at all.

So we have next question from Mr. Udit Gupta, individual investor.

Sir, how many days is a distillery allowed to operate, sir? See the permission that we had...

Typically, excise gives license assuming that we will run the distillery for 350 days.

Okay, sir. But the earlier was 330, right?

Yes. Earlier, it was lesser. I don't recall the number of days it was. Now, typically the distillery licenses -- I mean the excise gives permission assuming that you're going to operate for 350 days, which is very much possible if you use B-heavy molasses as your feedstock. If you have to use C-heavy molasses as your feedstock, obviously what happens, let me explain to you technically. The effluent generation is higher in case of C-heavy molasses. And therefore, the slop burning, the incineration, et cetera, those capacities, there is load on the capacity to burn the slop actually. So I have mentioned it in my previous remarks that B-heavy molasses is the more friendly feedstock as far as the distillery is concerned.

So, sir, if we use B-heavy, then 350 is possible for us?

350 days is possible. Yes.

And sir, we are looking for...

Yes, sure, please carry on.

Sir, we are looking at doing only B-heavy this year -- this season?

Yes, we want to do. The plan is to do exclusively B-heavy.

Okay. And sir, you also said that the effective capacity goes up if we use 100% B-heavy. Sir, then what does our effective capacity become, sir, if it's like 130 KLPD?

That again is subject to the approvals from the various departments in the government. But safely, one can operate at 110% capacity.

110%.

Yes.

And sir, this 20% of the -- 18% of the quota that we need to give for these alcohol companies, sir do we give that as molasses or do we make ethanol and give it to them? Like...

No, you can make it as ENA. You can make ENA and give. So if you do ENA and give, the value addition is definitely there or you can give you it as molasses also, right? If you give it to them....

Sir, normally, sir, normally...

Normally, you get 120 -- yes, please.

Sir, what does our company normally do, sir? Does it give molasses? Or does it give the ENA?

It depends. It depends. If the companies are more focused on producing only ethanol out of B-heavy in their distillery plants, they would rather give molasses or vice-versa and some companies give ethanol. So some kind of a trade-off is to be arrived at.

So it's -- there's nothing hard and fast as such?

No, nothing, nothing, nothing.

And sir, after this expansion is done, sir, what is the processing cost of ethanol now for us, must have fallen?

If we run -- if we have a good run rate, obviously the conversion cost will be lesser, if we have a good run rate. If we have a good run rate, the conversion cost can be INR 10 a liter.

It can be. If going forward, like next season it could be around INR 10?

Yes, if you have a good run rate. I mean if you have a checkered run rate, if you have lower capacity utilization, obviously the cost of conversion will go up.

I get it, sir. And sir, in the offseason, sir, we do some annual maintenance work in our plants?

So of course, in the sugar plants, 6 months -- almost about 5 to 6 months are used for carrying on off-season maintenance.

Sir, how much is the cost approximately for us for that, sir? It would be a significant cost amount?

No. See, different -- it all depends on the age of the plant. So older the plant, your cost is obviously going to be higher. If the plant is -- sugar plant is younger, your cost is going to be lower. Then typically, what sugar company, sugar mills do is based on their experience in the past season, so if they have experienced any bottlenecks, if they have faced any frequent problems, so the attempt is to ensure that those bottlenecks are debottlenecked in the off-season. Frequent stoppages, interruptions in production and they are all taken care and their lasting solutions are found. So some modification jobs are also taken up based on the experience that sugar mills have in the previous season. And besides that the regular maintenance is always there.

Sir, what would be the amount that we would have just done, sir, in this off-season?

See, regular maintenance cost is about approximately INR 15 a quintal of bag produced. And besides that, we have identified jobs, like I explained it little while ago. So those could cost a few crores of rupees. So they can be more depending upon the experience. And plus we also take up some efficiency enhancement repairs as well as CapEx. So there is no -- there is nothing definitive about how much cost there can be. It depends...

Sir, it's not about can be -- for this year, can you tell me the figures, like we would have just completed it?

I wouldn't know it of, and I can check and get back to you on that.

Okay, sir. And sir, is that full amount already charged in the September quarter or does it get carried forward?

Every single penny incurred has been charged.

Has already been charged in the September quarter?

Yes, yes, yes. We don't carry forward anything. We don't carry forward any uncharged expenditure.

[Operator Instructions] We have next question from Mr. Anupam Goswami.

Given the good run rate of sugar quota during the first few quarters, so what's your guidance on the rest of the 6 months? How -- what are we looking at for the FY '21?

Yes, our quota should be better. Now most important factor is the announcement of export policy. As I had explained to one of the participants, I mean, if you assume that there is no export, then obviously, the entire quota, which is now being allocated, will undergo a redistribution, okay? Because from the same -- higher amount of stock, the same quota used to be allocated. So it will depend upon that. But having said that, if we compare like with an apple-to-apple comparison, if you may, we will stand to benefit in the coming season insofar as quota is concerned because we are going to be predominantly using B-heavy molasses for making ethanol. So some weightage we will receive there. So our quota can get better.

Okay. Okay. Sir, my next question on the average realization of the distillery as you have achieved in this quarter, sir? And what kind of breakup -- or how much liters in 9 million liters that you have mentioned, how much would be in -- for B-heavy?

No. The entire quantity of ethanol that we sold is made from C-heavy molasses. So the realization is the INR 43, INR 44, whatever it is. See, this has been manufactured from the molasses that we generated in season 2019/'20. And as I had explained in the earlier season, whatever B-heavy molasses we generated and whatever ethanol we made out of that, that has already been sold in the previous quarters. So in this quarter, whatever has been sold, has been sold from what has been manufactured from C-heavy molasses.

Okay. Sir, you mentioned there was a slight slow in pickup of the ethanol by the OMCs. How has that progressed now, sir?

No, that has become near normal now. Now that has become near normal. See, we faced disruptions in the first quarter because ethanol supplies, we were -- I mean our nearby depots were full. Their tanks were overflowing. So there were some distribution issues in that -- in the first quarter. Things have become normal. And I mean, 90 lakh liters of molasses approximately that we have sold in Q2 bears testimony of the fact that the things are back to normal.

Okay. Sir, my last question is on your debt repayment plan in for FY '21 as well as in FY '22.

See, we have no plan to prepay our debts for the simple reason that our term debt that we are carrying is all subsidized debt. So there is one debt of about INR 100 crores, which is from the state government, which is at 5% rate of interest. So on that -- the total debt that we had availed was INR 134.48 crores. It was repayable in 16 monthly installments commencing from July 2019, yes, okay? So those installments -- monthly installments will get paid on time. And the distillery loan of INR 117 crores, it's repayable. There is -- we are presently under moratorium period. Its repayment will start from 31st of March 2021 and it will get repaid in 20 quarterly installments. Other than these 2, we don't have any other term loan obligations.

So we have next question from Mr. Pratik Tholiya from Elara Capital.

Sir, firstly, congratulations on a very strong set of numbers. Even, in fact, on the balance sheet also, as you see in the debt reduction, I think which is mainly coming on the back of reduction in your working capital. Sir, very encouraging numbers here from your company and congratulations on that. Sir, my first question was actually just the continuation of the previous thing. Sir, you mentioned that almost this 9 million liters that you have sold this quarter is only C-heavy, correct?

Correct. Correct.

Sir, any idea on this and the exact reason why would you go for only C-heavy molasses and not...

Yes. Yes. So last year was our first year of operations of expanded distillery capacity to 100 KLPD, right? So that was the first year. So we had no experience of making ethanol out of B-heavy molasses. So we had, in fact, bid for smaller quantity of ethanol from B-heavy molasses and the rest of it was from C-heavy molasses. But the -- with the experience that we have gained we have become wiser, and we will be bidding for mostly -- we are bidding only for B-heavy molasses. We have, in fact, some stock of C-heavy molasses that we are carrying, a very small quantity of that. That will use up and make ethanol out of that. So hereafter, the focus is going to be on making ethanol from B-heavy molasses.

Okay. So we can expect 80%, 85% would be from B-heavy or even higher than that?

Higher than that. Higher than that.

Higher than that.

Yes.

Okay. Understood. Understood. And sir, secondly, on the export front, India is currently not entering the export market. So the prices -- what are the prevailing export prices right now, global prices of sugar?

$0.15 per pound. $0.15 per pound. They've been oscillating between $0.145 to $0.15.

So those -- that roughly would translate into somewhere around INR 23, INR 24 per kg?

It will translate to about INR 345 -- USD 345 a metric tonne. So 345 into 74 or 73, whatever you take, yes, about INR 25,000.

INR 25,000, okay, okay.

At core delivery, core delivery. But you never know, once Indian government announces exports, this international prices could see a big swing, one way or the other.

Downward swing, correct.

Mostly downwards. Mostly downwards.

And this -- Sir, that was my actually next question that, suppose the Indian inventory does not hit the global market, so how much can this global prices go up, so that our industry can directly, at least some of the guys -- some of the industry players can directly export at those prices without even needing government subsidy?

No, I'm not an expert to say how much the prices can reach. But I have spoken to some experts, who were of the opinion that if Indian government dithers on announcing the export policy, the international prices could see -- touch about $0.16 per pound, $0.16 per pound. So maybe $0.01 more than what it is presently prevailing. So on what basis they told this number, I'm not very sure about that, but it can go up a little. White sugar prices that are presently prevailing is around USD 400 per metric tonnes. So that's for INR 45 -- or lower than INR 45 for sugar. So -- well, that price again can go up a little if no export policy is announced from India.

Sir, we have next question from Mr. Jaspreet Singh BA Capital.

Sir, if I correctly understand one of the comments, did you mention that we can run the ethanol plant for 350 days at 110% capacity?

Sir, it's like this. The state excise gives us permission to run the plant for 350 days on the rated capacity, okay? So if my rated capacity is 130, they give me permission to produce ethanol up to 130 x 350 -- 130 kiloliters into 350 days. So this is how it typically functions. And if one -- if the plant has inbuilt capabilities to produce 10% more, which normally all plants have, so for that, again, a permission is required from the state excise authority as well as the Pollution Control Board.

Okay. Sir, do we have the permissions for this?

No. We will be applying for it. We will be applying for it.

Okay. Getting in the season would be easy, is it?

Yes, yes, yes. You see here, again, there is a bit of a technicality. See the excise here is considered to be an year ending on the 31st of March. So 31st of March, you can always take advantage of that.

Okay. Okay. Okay. And sir, secondly, could you please briefly touch upon the ideology of converting -- the method of converting B-heavy from direct sugarcane use into ethanol? Is it -- how much is the CapEx required? And what is the kind of days which are required for that?

No -- sir, see, the technology is, by and large, the same. If the plant is capable of using C-heavy molasses and making ethanol out of the same, it can as well use B-heavy molasses and also juice for making ethanol. All you need is storage tanks, pipelines, et cetera, et cetera, for making that. But you will need larger distillery capacity. For example, if -- let's say, if one of our plants where our distillery is located, that's a 6,500 TCD plant and there our distillery capacity is 130 KLPD. Now 130 KLPD can support a crushing of only 2,500 TCD per day, which means the rest of it, I will have to -- and that can also happen only during the season. The rest of it, I'll have to make sugar there. So it's very simple. If you have -- if you want to do out of juice, you will need very, very large distillation capacity.

Sir, we have next question from Mr. Anupam Goswami.

Sir, wanted to know your molasses transfer price this quarter?

No, it's the same for the full year for the season as such. It's INR 300 for C-heavy molasses and INR 625 for B-heavy molasses.

INR 625 for the?

Per quintal, per quintal. So this is based on the sugar content, and it's eventually linked to the ultimate output of ethanol.

Okay. Okay. Sir, have you received your export subsidy for the previous quarter?

No, we haven't. We are -- out of our claims of INR 145 crores of export subsidy, we have received only about INR 27 crores. INR 118 crores is still receivable.

Okay. Okay. And sir, lastly, on the export side, sir, what's your view? Will that be announced anytime in December? Or if that has less chance now, given that the sugar quota is also -- you have mentioned, the highest sugar quotas has been coming out, so there's still a chance in that?

No, we hope and pray that sugar export policy is announced because that alone is the solution for evacuating surplus stock that the nation is carrying.

So even if that is announced, will a subsidy like last year 10.44 per quintal...

Will depend. Will depend. I don't know. I mean I cannot step into the shoes of the government and visualize how much subsidy they will give.

Sir, there are no questions in the queue now. Now I would like to hand over the floor to Mr. Anupam Goswami. You can go ahead, sir.

Thank you, everyone, for participating in the call. I will hand over to Banka sir for the closing comments. Over to you, sir.

Thank you, everyone, for participating in this conference. Our company is indeed grateful to you for providing us guidance and valuable support from time-to-time for the confidence that you have reposed in us that our sugar industry, as you are all aware, is a highly regulated industry, not just in India, world over it is a very regulated industry. So we are dependent on multiple policy initiatives that the government announces from time-to-time to crop up the fortunes of the industry, so that the payment to the farmers is made on time. We, on our part, have control over a few things such as operating efficiency, et cetera, tight fiscal control management, which we are trying our best to do. So within the freedom that we enjoy, we will -- we shall strive to turn out the best possible performance. Thank you very much, once again, for supporting us.

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for your participation and for using iJunxion Conference Service. You may disconnect your lines now, and have a great day ahead. Thank you.