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

Ladies and gentlemen, good day, and welcome to the Dwarikesh Sugar Industries' Q1 FY '23 Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Tejas Sonawane. Thank you, and over to you, sir.

Thank you, Mike. Good afternoon, everyone. On behalf of Dolat Capital, I'd like to thank the management of Dwarikesh Sugar Industries Limited for giving us the opportunity to host their Q1 FY '23 earnings call. From the management team, we have with us today, Mr. Vijay Banka, the Managing Director. Without further ado, I'd like to hand over the call to the management for the opening remarks, post which, we'll open the forum for a Q&A session. Thank you, and over to you, sir.

Thank you so much. Very good afternoon to all. Thank you, friends, for participating in this conference. Our quarterly results have been out. We have posted profit before tax of INR 56.70 crores and profit after tax of INR 39.70 crores. So which is about corporate after taxes, 46% higher than the profit that we had locked in the corresponding quarter last year. Our top line has also grown well. And well we had briefs period during Feb -- well, firstly, let me take you through the other numbers. Our total income was INR 648 crores, EBITDA of INR 75 crores. We compressed the finance costs, they are at INR 7.77 crores and profit before tax of INR 56.70 crores. Tax provisioning has been about INR 17 crores and profit after tax of INR 39.70 crores. So our numbers compared well with the numbers of the corresponding quarter last year. So during the quarter, we sold 15.29 lakhs quintals of sugar, out of which 5 lakhs quintals of sugar is what we had sold for export purposes, and the rest was sold in the domestic market. So 10.29 lakhs quintals of sugar was sold in the domestic market, which is [ compared ] with 9.64 lakhs quintals of sugar that we sold in the domestic market in the corresponding quarter last year. We've been able to moderate our inventory level. Our inventory as on the 30th June is 13.3 lakhs quintals of sugar, which is as compared to 25.39 lakhs quintals of sugar on the 30th June, 2021. Our inventory is valued at INR 3,179 per quintal. We've had industrial alcohol, basically ethanol, sales of 156 lakh liters, which again is a significant improvement over what we had sold in the corresponding quarter last year, which was about 112 lakh liters. So the higher top line that you have seen is mainly a function of higher sugar sales and higher ethanol sales. And we have term loans outstanding of about INR 300 crores as on date. And one of the loans is the soft loan, which the state government of Uttar Pradesh had given, and there are 2 distillery loans, which -- all the loans are at subsidized rate of interest. And our crushing operations concluded on the 24th of May, the DN unit. The other 2 units had concluded earlier, the DP unit that had concluded on the 23rd May. And Dwarikesh Dham unit, it had concluded much earlier on the 20th of April. So we had similar crushing numbers during this season, 378.18 lakh quintals vis-a-vis 378.36 lakh quintals in the last crushing season, so approximately 18,000 quintals less sugarcane were crushed. And we sacrificed about 58,800 metric tons of sugar. This number is higher as compared to the number of last year -- last season, mainly because when the Dwarikesh Dham unit, we had -- in the Dwarikesh Dham unit also we have generated B-heavy molasses where in the previous season, we had generated C-heavy molasses. So the projects that we had embarked upon, the distillery project at Dwarikesh Dham unit, it was commissioned on the 24th of June, 2022. The first production of ethanol happened on the 7th of July, 2022. So from then till now, we -- till the month end, we produced about 39 lakhs liters of ethanol. So the plant is under stabilization. There are small issues, which are but natural and expected. So those are being ironed out, and we should be able to go full throttle in about a week or 10 days from now. So that's about it. I now open the forum for questions. Thank you very much, once again, Team Dolat, and I invite the participants to ask me questions.

[Operator Instructions] We have the first question from the line of Sanjay Manyal from ICICI Securities.

Sir, just few questions. If I look at your inventory at 1.33 lakh tons, then I believe currently the way you are getting the quota, it would be exhausted by October?

November.

Okay. Okay. November. Right, sir. And sir, what is our working capital debt as on June?

As on date, it's zero. We have surplus advantage.

Right. right, sir. And sir, I think the refining capacity, which we have mentioned last con call that you will be setting up the refining capacity. Can you give some details of that in the sense when it will be commissioned? And what would be the capacity?

No, we were actually contemplating setting up the refinery during this off season. But unfortunately, the machinery vendors, et cetera, suppliers, they are all extremely hard-pressed and it will not be possible. We would not want to disrupt our regular crushing. So we're going to start the process sometime in January '23, so that we are fully prepared for setting up -- I mean our refinery will be operational during the season '23 -'24.

Okay. And what would be the capacity of -- what will be the percentage of...

In one plant we'll produce refined sugar.

So about 1/3 could be the...

Yes, 1/3 of the production, you can say so. But one must also keep in mind that in the coming season, since we're going to be using huge and nearly 20% -- 20%, 25% of sugarcane juice will be diverted for ethanol, so the sugar production will accordingly come down.

Right. Right, sir. Sir, on the -- if you can give some color about the fact that if we are looking to set up any -- or if we are looking to spare any grain-based distillery or are we contemplating anything like that?

No. You see, we are examining it, but as I mentioned in my earlier earnings calls also, we are self-sufficient, self-reliant in so far as our molasses requirement is concerned. We will neither be able to spare molasses beyond what we are sparing for contributor processes nor will we be required to buy molasses from outside sources. So we are -- our production metrics is such that we will have enough molasses for more than 300 days of working of distillery at both the units.

Right, right. No, my question, basically, what I was trying to understand that is it not possible to set up a grain-based distillery -- stand-alone grain-based distillery maybe not inside your complex, but somewhere outside where the availability of grain is sufficient, maybe in East UP or maybe in any other states where the availability is sufficient?

No, we haven't -- we aren't contemplating anything like that. If at all, with some minimum investment, we can equip our existing distillery such that they are able to use grains also as feedstock so that in an unlikely event of there being molasses being scarce, which I don't think so, we can switch over to grains.

Right, right, sir. And just a bookkeeping question. What would be our molasses inventory and at what price it would be valued?

No, our molasses inventory is valued at INR 1,030 a quintal. And we have -- one moment, I must see how much molasses we have. We have molasses in both the distilleries. In DN -- DD units, I had mentioned, we will have molasses enough to produce about 220 lakh liters of ethanol, out of which 38 lakh liters of ethanol, we have already produced. And then Dwarikesh Nagar unit, we will have molasses enough to produce ethanol until September, October, after which we will obviously have a shutdown of our plant for annual maintenance before we embark upon the next crushing season.

Okay. Okay. And just last one, if you can give some guidance on the income tax rate for '23 and '24?

See, the income tax rate, we must assume that it will be anything about 30% because we have -- anyways, our cash outflows are going to be lesser because we have some large entitlement available. So our cash outflow will be lesser. But so far as the deferred tax adjustment, et cetera, is concerned, the effective rate will be 30%-plus before we switch over to the lower regime in about 2 years' time from now -- lower regime of tax.

So from FY '25, maybe we can switch over to the 25% tax.

We are in '22-'23, '23-'24 possibly, yes, yes.

We have the next question from the line of Pratik Tholiya from Systematix.

Sir, just firstly, if you could just shed some light on the monsoon and subsequently the acreages in your command area because what we are hearing is that monsoon has been rather very weak in the entire UP. So if you could just give some more color on that side?

Sure. Well, the monsoon has been rather weak this time, but we had some good rain in the last 3, 4 days. So we have to look at this problem from Bijnor district point of view as well as from Bareilly district point of view. Now Bijnor district, most of the area is irrigated, except for some small pockets which are rain-fed. So we don't see much of a problem there. Area under sugarcane cultivation, in any case, is higher than what it was in the last year. In Bareilly district, yes, inadequate rainfall would stunt the growth of sugarcane. But we are hopeful that with some rain coming in the coming days, I think we should not have any issues on that scope.

So sir, net-net for us as a whole, the cane availability would be better than last year or flattish?

Flattish to better. Flattish with an upward bias, I'd say.

Okay. Okay. Understood. And sir, what is the current sugar prices prevailing in the market?

See after the announcement of this additional exports of -- export of about 12 lakh quintals, the prices have moved up by about -- before that, the prices were in the region of INR 3,450 to INR 3,460 a quintal, now the prices have moved up and they are over and above INR 3,500 per quintal.

Sorry, I didn't get that. INR 3,500?

Yes, per quintal, but we do expect some improvement in the price in the coming days.

We have the next question from the line of Achal Lohade from JM Financial.

Sir, a couple of things I wanted to check. One is in terms of the variety of sugarcane, we hear that there were some issues with [ 238 ] and the flooding and consequent yield drop and all. Can you help us understand your perspective on this? How much is 338 out of your total cane crushing? And how do you see -- are you also working on any other variety, which can replace this 338 over the next 1, 2, 3 years?

Yes. The variety 0238, which is touted to be the wonder variety and which has, in fact, given wonderful results for sugar mills in UP, it is becoming a little prone to the red rot pest attack. So -- and this is more pronounced in the Eastern UP and the Central UP. It's less pronounced -- in fact, the impact is not felt at all in our Bijnor district unit. It's very minimal. So in Bareilly unit, yes, it stunted the growth of sugarcane and the recovery also has suffered. So we are working on a plan to replace this particular variety, and we expect that the density of this variety will come down by about 70% in the next -- by the third season from now. And we expect about 12% to 15% replacement in the coming season itself -- for the season '21 -- '22-'23. So we are working on that very seriously. So we will have replaced that variety -- 0238, replaced by other variety to the extent of 70% in 3 seasons from now. Now the varieties which are going to replace this particular variety are 15023, 118, 1412, 121, I think. So there are 3, 4 varieties, which are equally good. In fact, 1,5023 is supposed to be -- It's said that it will perhaps have more sugar content than to 0238. So we are working on those -- that particular variety. Of course, real results will be known only when we will get the supplies of that particular variety in big numbers. In so far as Bijnor district is concerned, we are working on improving the longevity of this 0238 so that what we are doing is we are encouraging the farmers to use a good amount of pesticide, follow good irrigation practices, good agronomic practices. So there, there is no threat of this variety being prone to any pest attack or anything like that, but we are ensuring there, again in a phased manner, we will try and replace this variety.

Understood. Understood. Is it the case with all the other sugar mills? Or you think the other mills are lagging behind?

No, you have to divide this into 3 parts. So the Central UP is more prone, Eastern UP is little less prone and the Western UP, not so much prone.

Right, right. Understood. Sir, my second question was, given the rain deficit as of now in UP, do you see a risk to the yields? Have you seen in the past any inadequate rains having an impact on the yield or the recovery rate?

I answered this question a little while ago. So in Bijnor district, most of the area is irrigated -- the area under sugarcane cultivation, except for some quarters, which are dependent on -- which are rain-fed and therefore, dependent on rain. So that's the scene in Bijnor district. In so far as Bareilly district, yes, rainfall is very much required. And we've had some recent rain in the last 3, 4 days. We do expect that the deficit should be made good in the month of August.

And if it was to make it up in August, there is no impact on the yield as such, right, yield or recovery rate?

No. It will be mitigated substantially.

Understood. And in terms of the exports, can you help us understand what is the current status? How much has already gone out? And is it possible to know how much of that is white sugar and raw sugar?

See, so far we are concerned, we've exported about -- we have -- in the first tranche, we exported about 25,000 metric tons, which was captured in the results of FY '21-'22. In '22-'23, we have dispatched for exports, 15,000 metric tons of sugar, which -- we expect that shipment will happen in a day or 2 from now. So we do INR transaction. So except for collecting documents, et cetera, we are not so much concerned about the actual shipment because, I mean, it has to happen, and we have to get the document so as to establish a [ trade ] of export. But we get our money upfront. So there is really no problem. As far as countries concerned, ISMA had last met in the month of July, and we had discussed a number of 9.4 million tons of sugar already having moved out of the country. So we expect by 30th of September, with this additional 12 lakh tons being allowed, we should complete export of about 110 lakh tons of sugar. And I don't have a breakup of white and sugar, maybe -- immediately, I don't have the breakup. Maybe I can get it and share it with you.

That would be wonderful, sir. And just one more question. In terms of the -- for your distillery, how much of the sugar is under B root and C root as of now?

No, we are in this season, '21-'22 season, we did not generate C-heavy molasses at all. Now C-heavy molasses, according to me, is a thing of past now. So all our -- all sugar mills are now generating B-heavy molasses, because the ethanol made of B-heavy molasses, the prices are remunerative. So the question of generating C-heavy molasses, as such, does not arise, except for some mills who perhaps may be generating C-heavy molasses to fulfill the content liquor requirement, but we have generated B-heavy molasses even for fulfilling the content liquor requirement. So that's it. What exactly was your second question on this?

And so in this B-heavy, how much sugar have we sacrificed? Is it 1.7%? Is it 1.8%? And what maximum can we sacrifice?

It depends, like, 378 lakhs quintals we have crushed in the last season, and we have sacrificed sugar production of 58,800 metric tons. So that translates to -- one moment, so roughly 1.55%, 1.56% of sugar we have sacrificed.

And how much maximum can we go to? Can we go to 4%, 3%? Is it doable theoretically?

Not in B-heavy molasses. In B-heavy molasses, the range is from 1.3% to 2%. I mean 2% also, if you sacrifice that kind of sugar, one is always running a risk of formation of crystals during the off-season. There's a particular bridge beyond which one cannot go. If one goes beyond that particular bridge, there is a possibility, small possibility of deterioration in the quality of molasses.

[Operator Instructions] We have the next question from the line of Nikhil Gada from Abakkus.

Sir, my question is on the exports front. First of all, could you help us with the realization that we got for this export order?

So we -- the first time we did exports, we had got a [ Port Kandla ] rate of about INR 34,500. And this time, the rate was closer to INR 35,000 a metric ton. So the transportation, logistics cost, et cetera, is about roughly INR 2,000 a metric ton. So ex-factory realization is about anything between INR 32,500 to INR 33,000 a metric ton. Now the big advantage when one is doing exports is we are producing raw, so there is a saving in the production. But it's -- production cost also comes down and then the recoveries are also better and then because of the export, there is faster cash flow rotation. So all these result in a benefit of another INR 1,500 a metric ton. So the realization is accordingly anything between -- I mean if you equate, it will be about INR 34,500 a metric ton, which is what has been the domestic market price.

Exactly, sir. So the reason to ask this is that since we have done -- sort of upfronted a decent part of the sales of our sugar, and if we felt that the sugar realization was going to increase from here, so any specific reason that we went ahead with this large chunk of export?

No, no, I'll tell you, we cannot be so much futuristic. We cannot think so much [Technical Difficulty] in our business. So you see, now the sugar prices can be better in the month of August, September and October, okay? Once the new season starts and we will sell sugar as much a quota as we are going to get, okay? Nobody can sell more sugar than what the kind of quota they're going to get. So we will sell that kind of sugar. And once the new season starts and with the arrival of Maharashtra sugar in the market, the prices again will be subdued for a couple of months. So in fact, we have largely benefited because our cash flow movement has been that much more faster. So I don't think that we [ should have ] taken a call like that.

And then with the inventory that we have at hand and you sort of mentioned that by November, we'll be able to exhaust it. So then the quota this time around will be much lower than what we had same quarter last year, right?

No, this quarter, we already have the quota for the month of August. July quota we have received, we sold. August quota, we have received -- August quota we have received. So it's more or less the same quantity that we have received in the earlier quarters.

I understood, sir. And sir, just on the crushing part, if you could highlight in terms of the recovery rate, you've given it from a sugar season perspective, but from the quarter perspective, if I look at for 1Q FY '23 versus 1Q FY '22, was there any fall in the recovery rates?

See, it's very difficult to answer this question. Nonetheless, I'll give you the numbers. See, crushing during FY -- Q1 FY '23 is 79.42 lakh quintals vis-a-vis 75.16 lakh quintals in the corresponding quarter last year. So we -- our crushing is anything between 5% to 6% -- 5% and 6%, okay? Now sugar production during this quarter was 8.96 lakh quintals as compared to 9.01 lakh quintals in the corresponding quarter last year. Okay. In the corresponding quarter last year, in our DD unit, we have generated C-heavy molasses. So the numbers cannot be strictly comparable. I mean we cannot jump to the conclusion that the recovery is lower during this quarter. On a gross basis, yes, the recoveries, I'd say, still have been a little on the lower side. It's mainly because the summer months were extremely hot in UP.

Understood. Sir, just last one, if I may. Sir, on the -- now with the new ethanol distillery up and running, any ballpark number that you can give -- what can be the peak amount of production now with from both the units together in ethanol?

We can do 11 crore liters a year from both the units once -- if you consider 1 full year, we can do about 11 crore liters, 5.5 crore liters each from both the units.

And this is after optimizing all the...

Yes, yes, yes. We have some teething problems, but they will all get ironed out in quick time from now.

We have the next question from the line of Anupam Goswami from B&K Securities.

Congrats on the good set of numbers. First question is on the recovery of the next season that is going to come. So how do you see the recovery this time because last time, [ sugar ] was a little affected with the current rains and the monsoon and what is expected going forward? And you've mentioned that you have about 12% to 15% of the replacement of new variety. Where do you see the recovery? Is it flattish? Or is it any way higher than the last season?

No, from season to season perspective, I definitely expect that our recoveries will be better in the coming season. I mean we have -- let me assure you that we are just not happy with the kind of recovery that we have had in the last season. It was 12.01% on gross basis as compared to 12.32% in the previous season. So a drop of 31 basis points. We are definitely not happy with that, and we are working on it, and we expect that the recovery will be better in the coming season.

And this drop was mostly due to the rainfall, right?

Rainfall and red rot attack in Bareilly command area. So our recovery drop in the -- both the units in Bijnor district was not so much. There is the recovery drop in the Bareilly unit, which was actually more prone to the red rot attack, There, the recovery drop was more pronounced. It was 65 basis points.

Okay. So when you say that the recovery could be a little higher next season, so these 2, rainfall and red rot disease, that factor might be a little less next season, right?

Yes. I mean it's too early to talk about the impact of the rainfall, but if there are good rains in the month of August, the problem can be mitigated largely or at least to a substantial extent. From the perspective of red rot, yes, we are bringing about varietal changes in that particular unit -- command area of that particular unit. So we expect 12% to 15% replacement of the variety 0238.

Understood, sir. Understood. Sir, my next question is on the really long term. Since we had a very good year last year also in terms of production, very high production and also a slightly higher production even next year. So last -- how the export dependency do you see -- how much export -- can we do export at the same rate of the current season next?

Yes. You see, you are very right. Last year, all the favorable factors colluded and India has become a kind of a powerhouse in so far as exports is concerned, and we expect that 11 million tons of sugar will be exported, so which is a phenomenal achievement. But yes, you are right, this kind of performance cannot be repeated year-on-year basis. So we have -- ISMA has assessed the numbers. So India is estimated to produce about 35.5 million tons of sugar in the coming season. And in order to maintain the 6 million tons of closing stock as on 30th September, 2023, we have requested the government to allow export of 8 million tons of sugar. We have asked -- requested for export of 8 million tons of sugar. So the prices -- international prices, they vary substantially, sometimes the prices are good, but sometimes the prices drop a little. But generally, considering the better prices that are now prevailing and plus the rupee-dollar parity, which is favorable for exports, I mean an early announcement of export policy will help sugar mills to enter into contracts at the opportune time. So '22-'23 season should not be a problem if the government allows -- announces an export policy early. But yes, from the long-term perspective, yes, more and more sacrifice of sugar should happen in favor of ethanol, which is what we have requested the government that the major sacrifice will come if more and more mills use sugarcane juice as feedstock for making ethanol. That is where the real sacrifice will come. That is where I think, as a country, we should be able to cut down the sugar production by about 30% or so.

If the export prices stays about [ 18.5 or 18 ] or so, is 8 million tons possible from India?

Yes, yes, yes. I mean, at least, you see, maybe not from the UP state, but yes, Maharashtra, Karnataka, yes, it's kind of -- I mean contracts for about 8 million tons is perfectly possible, mainly because number one, Maharashtra -- the sugar mills in Maharashtra, they save on the transportation and logistics costs. And #2, their comparison with the domestic prices, that of the prices prevailing from mills in Maharashtra and Karnataka, which is about INR 200 a quintal lesser than the price at which sugar is sold by the UP sugar mills in the domestic market.

We have the next question from the line of Shailesh Kanani from Centrum Broking.

[Technical Difficulty]

Sir, your voice is breaking.

Yes. Sir, the question was -- is it audible for now?

Yes, it's okay.

Sir, my question was with respect to sugar industry expansion, and you had mentioned that, we have kind of implied the complete crushing capacity with respect to distillery facilities. So are we planning anything on that front for increasing our crushing capacity?

Yes, we plan to increase our crushing capacity. So we will commence the process sometime in January, so that our capacity gets expanded as we enter the season '23-'24.

Okay. And what kind of capacity expansion we are looking at, sir, on that front?

We are going to add some [ balancing ] equipment and all. And what is 21,500 TCD now can go up to 24,000 TCD or so.

Okay. And feedstock for the same command area would increase accordingly for that?

There is going to be some increase, of course, in the command area in so far as cane availability is concerned because, you see, if a sugar mill is able to draw more sugarcane per day, so the diversion of sugarcane for the alternative sweeteners, it comes down. So the sugarcane availability for the sugar mills become higher. So that is one benefit which the sugar mills get when they increase their capacity. And secondly, of course, we will also -- this will also ensure that we do not end up crushing in the hot months of May -- in the month of May. So this will help our recoveries also.

Okay. Actually, broadly, what I want to understand -- wanted to understand is that how easy or how difficult it is to increase the TCD, given that it would depend upon the availability of feedstock. So there are no hindrance or there are no bottlenecks or there are no concerns on that front, right?

No. Let me tell you where we -- in a phased manner, where we have increased the crushing at our Dwarikesh Nagar unit. So from within the same command area, we have been able to have enough feedstock.

Okay. Fair enough. Sir, second point was again on the rainfalls front. Which would be the time where we get a more balanced or more pragmatic view on how has been the rainfall front? Because I understand right now, it is still early season. So what is the time frame by which we'll get a better idea about the deficit or the surplus of rainfall for us?

So we will have a clarity -- we will have clarity by September end because we don't want rains in the month of September there, not excessive rains at least. More than the lack of rain, the extra rain that we get in the month of September is more counterproductive.

Fair enough. Sir, just last question from my side. So on the international front, any latest figures you are [ looking ] about Brazil's production because I believe our first half has been good for Brazil -- production has been good on first half of July, it has picked up. So any revised figure or estimates for the year where Brazil is going to end this year?

No. As of now, the international prices indicate that somehow [ India ] is going to occupy a important space in the production metrics of Brazil, which means ethanol production will be higher. Some minor adjustments are always possible, but the centerstage will be occupied by [ economic ] production metrics. So -- but Brazil production could go up a little higher, but we have an indication that the production might be lower from European Union. So a lot of factors play and more clarity will come in the days to come.

Okay. So 34 million tons, 35 million tons was the initial assumptions. We are working on the same assumption, 34 million tons, 35 million tons?

Yes, more or less.

[Operator Instructions] We have the next question from the line of Sanjeev Kumar Damani from SKD Consulting.

Sir, I wanted to have the closing stock as on 30th June of sugar, ethanol and molasses. Can I have it?

One moment, sir. Sugar is 13.30 lakh quintals. One moment, sir, sugar stock is 13.3 lakh quintals. Molasses stock, I don't have the number offhand, but just a moment. Ethanol is, we go hand to mouth, sir. Hardly any stock, sir. Let me explain, sir, the month of June and thereafter, the supply of ethanol to the ethanol depots, these are considered to be lean months. So ethanol depots are always hungrier and more eager to lap up whatever ethanol we give them. So our closing stock of ethanol is a lean pin.

Actually, I wanted to know this also, whether we have to push the OMCs to lift or they readily come for [ purchase ]?

No, no, no. Sir, there has been no problem now. All the issues which were hitherto there have all been ironed out. And in fact, there is pressure from the food ministry and from the oil marketing companies that we should fulfill our contractual obligations come what may, and, if possible, give them additional quantity of ethanol. I think the country as a whole has achieved a run rate of 10.17% blending [ 3 ] week ago, okay? That's a healthy rate, but this rate can turn into less than 10% rate if the supply in the next 3, 4 months is de-ramped. So we are left with 4 months, July -- no, July is over, August, September, October, 3 months, we are left it. So -- and November also, yes, 4 months. So if the supply has to be as brisk as it was in these months, so that country as a whole is able to achieve more than 10% blending.

Sir, I want to confirm with you that government has recently allowed INR 1.50 extra per liter for molasses in all categories. Is it correct?

Yes, sir, it has announced, but with a covenant that we should fulfill the contractual obligations, only then we get the increase.

Okay. So on the completion of the contractual agreement, we'll get extra payment also.

Correct, correct, correct.

Now, sir, I also hear that open market prices for ENA has gone up to INR 56 or INR 55 or INR 59. I'm now confused about it...

No, no, it's not the case, sir. I have not heard of such sharp increase in the price of ENA. But I mean, we don't much track the prices also because we have already fulfilled our obligation of giving B-heavy molasses for content liquor purposes.

So this year, sir, you only made B molasses. So what about levy? How did you supply the levy molasses?

So there is a formula, sir, it is [ 18% ] in case of C-heavy, in case of B-heavy, it is 13.06%. There is a reduced quantity of B-heavy molasses because obviously, content liquor manufacturers, if they use B-heavy, their production of ethanol -- production of spirit, ENA or whatever it is, will be higher. So the obligation is to give them lesser quantity of B-heavy molasses, so it's equated between B and C.

Okay, sir. And sir, what about making ethanol directly from juice or syrup? Are we thinking about it?

Yes, in the coming season, we are going to do that, sir. In the coming season, we are going to use juice for making ethanol directly.

Sir, based on last year's historical data from 1 ton of sugarcane, which costs you about INR 3,500, if I'm not mistaken or wrong, so how much ethanol we will be able to make from this quantity, and what will be our revenue of directly made -- this thing at the rate of around 65 liters, we will be supplying this. So can you kindly explain?

Sir, it equates to a price of, you see, 1 ton, you get about 81 liters in terms of ethanol, okay, from the sugarcane. So it equates to a price of nearly INR 3,500-plus per quintal of sugar. So -- and this price is going to get ethanol price already, there is a INR 1.50 -- I'm talking about the historical price of ethanol for season -- for '21-'22, not the increased price. So -- and then we expect further improvement in the price of ethanol...

Next season. Next season, you are anticipating higher price allocation?

Yes, yes. And we have requested the government to pick the higher price for ethanol made from Juice directly because that is where the real sacrifice of sugar will happen. That is where we can see the possibility of sugar production coming down by about 30%. We are at a gross level here of 40 million tons sugar-producing nation now. And our consumption is 27%, 27.5%. So we have to moderate our production substantially.

Right, sir. So I mean if I'm not wrong, sir, this INR 3,500 cost will yield us almost about INR 5,000 directly. Am I right, sir, somewhere? If suppose we get 65 liter -- 81 liter approximate, so with this 1 ton produced, we can make -- now what is the molasses that we get in terms of rupee, whether we consume or sell outside when we process 1 ton of sugarcane?

Sorry, sir, actually, these are all -- they involve a lot of mathematics and lot of...

Okay, okay, okay, sir. No problem. I thought 1 ton of...

I cannot explain to you in simple terms actually.

But sir, 1 ton of sugarcane when processed, how much bagasse is available, sir? How much kg's of bagasse or...

30% of bagasse is available. Typically, 1 unit of sugarcane has 30% bagasse in it, about 14% of sugar, out of which about 12% of sugar is possible to extract and then it has about 4% to 5% of molasses and the rest is water.

Just the last question is, 1 lakh -- sir, you told me 13.0 lakh quintals. So it is amounting to 1,33,000 metric ton of stock right now as on June. Am I right, sir?

Yes, 1,33,000 metric tons.

Yes, out of this is, you told us that 58,000 metric ton is just now going, so you'll be left with...

No, no, no, sir. We have -- our 58,000 metric ton of sugar for export has already moved out of our mills on the 30th of June, [ 2022 ]. So the entire 1,33,000 metric tons of sugar is available to us for sale in the domestic market.

Okay. Got it, sir. Just last question, sir. I mean these days, we have to push to sell our sugar as per quota or there also, there is a good demand? People lift it -- distributor or stockists, they lift the sugar easily or we have to push to sell?

Sir, the prices have been flattish. So there has been some effort involved in selling. But I mean, sugar gets sold on cash. There is no credit that is extended on sale of sugar.

So during the winter also there was no demand, now what -- now the situation in summer also.

No, there wasn't a very -- I mean, well, the pipelines may have had adequate stock. You see, when do the traders buy and procure more sugar? When they, #1, once if the pipeline is empty, and #2, if they think that the days ahead, the prices are going to rise, that is when they try to replenish their pipeline, they fill it up. So it's a function of demand and supply, yes. But other than that, the expectation of the availability of sugar in the future.

Congratulations for very fantastic results and all the best for future, sir.

Thank you, sir.

[Operator Instructions] We have the next question from the line of Nimish Sheth from GT Advisory.

Congratulations, very good numbers. Congratulations to you and your team for getting the new distillery started on schedule.

We are also -- it's all because of your blessing, good wishes also.

That will be there. Now we want to give you more blessings and that's possible if you give us a higher dividend payout. So we are hoping that you -- now with so much cash flow and not too large a CapEx ahead of you, you will focus on paying down debt using some of your profits towards funding of your finished goods inventory and of course, a good payout to us.

Sure, sir. We will be -- we have been liberal and we will continue to be liberal in our payouts. And -- but one quarter is not -- doesn't give you an indication of...

I'm not talking about [indiscernible], you do have a new -- you have a 100% increase in your capacity of ethanol, and that is a good cash flow business. And, given a stable outlook for the cane in your region, I think you should have good cash flows at least from the ethanol business.

Let's hope so, sir.

We have the next question from the line of [ Udit Gupta ].

[Technical Difficulty]

We couldn't hear the start of your question, request you to kindly repeat it.

Sir, the sugar inventory that we're holding on 30th June, sir, so what is the valuation of that, sir?

INR 3,179 per quintal, sir.

Okay. And sir, next year, as you said that we can produce about 11 crore liters of ethanol, in '23, how many liters are we expected to produce, sir?

Sir, our second plant has just begun operations. So we will have the benefit of this plant running for 3 quarters, not exactly full quarters, 2 quarters-plus. And the first plant for about 4 full quarters. So from first quarter, from our first plant, we'll get about 5.5 crore liters. And from this plant, let's say conservatively about 3 crore liters, so 8.5 crore liters is what we expect to produce in FY '22-'23.

Okay. And sir, what is the processing cost of ethanol per liter for us? And is it expected to come down [Technical Difficulty].

No, processing cost, it depends. It's about -- it varies between INR 10 a liter to INR 15 a liter depending upon what the efficiency levels are. So we -- I mean, it's of course, it's not that the processing cost is lower for sugar made from ethanol -- I mean, ethanol made directly from sugarcane juice because there's going to be bagasse, consumption, et cetera, et cetera. So -- but well, the range is between INR 10 to INR 15 a liter, sir.

And that is not expected to come down, like, it'll be similar to...

I mean, if we are efficient, yes, it will come down. It will be towards the lower end of the range that I had given just now.

That was the last question. I would now like to hand it over back to the management for closing comments.

Thank you very much. Thank you, everyone, for participating in this investors conference and earnings call conference. I'm delighted to share our views with you all. I'm happy to receive questions from you. I look forward to your continued support and guidance and encouragement in the times to come. I now hang up with the assurance that we will continue to be as efficient or in fact, more efficient than what we presently are. Our job is to turn out -- churn out as good performance as is possible, given the constraints, given the parameters of the industries within which we operate. Thank you very much. Thank you once again.

Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.