E.I.D.- Parry (India) Limited (EIDPARRY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the E.I.D.- Parry (India) Limited Q4 and FY '25 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Manyal from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Hello, everyone, and a warm welcome on behalf of DAM Capital to the Q4 FY '25 Earnings Call of E.I.D.- Parry (India) Limited. We thank EID Parry's management for giving us this opportunity to host this call. On the call today, we have with us Mr. Muthiah Murugappan, Whole-Time Director; and other senior management team of EID Parry. I hand over the call to the management for opening remarks, followed by a question-and-answer session. Thank you, and over to you, sir.

Good morning, Sanjay, and thank you. Good morning, everyone. It gives me great pleasure to be a part of this call to share with you and update all of you on the global as well as the Indian sugar scenario and also talk about the Q4 performance of the company. I'll start with the global scenario. The '24-'25 global sugar deficit widened by 1.5 million tonnes to 3.9 million tonnes due to production cuts in India, Pakistan and Thailand, while the '25-'26 deficit projection increased to 1.5 million metric tonnes, signaling continued tightness. The '24-'25 raw sugar trade flow surplus rose by 726,000 metric tonnes to 2.92 million metric tonnes, with most of this concentrated within Q3 of 2025. The projected trade flows for white sugar in '24-'25 indicate a reduced surplus of 642,000 metric tonnes, down by 215,000 metric tonnes amid a shift to a deficit starting in 2026. The benchmark New York #11 May contract oscillated between $0.18 to $0.20 per pound, finishing the month 44 points higher. The weather forecast shows above average rains in center in South Brazil. In the short term, this could disrupt harvesting and reduce industrial yields. But in the long term, it could be beneficial for cane development. The U.S. Dollar Index fell significantly by mid-March amid tariff concerns, which could influence agricultural commodities, sugar included on the bullish side. The speculators' net stock position was reduced to the lowest level since mid-December 2024, mostly on fresh pine. New York #11 price forecast has been lowered from March '24 with the base case at $0.185 per pound, to attract demand amid a significant surplus estimated in raw sugar trade flows. White premiums remained volatile, ending April 4% lower with expectations to trade between $105 to $120 per metric tonne, reflecting the tightening white sugar surplus. While structural deficits provide long-term price support, near-term market dynamics remain balanced between Brazil's harvest progress, white and raw arbitrage opportunities and evolving weather patterns that could impact production. The market continues to navigate these competing forces with traders closely monitoring Brazilian crushing rates and potential policy shifts that may affect global trade flows in coming months. I'll now move to the Indian scenario. As of April 30, India sugar production stands at 25.7 million metric tonnes with 19 mills still crushing, predominantly in UP, Maharashtra and Tamil Nadu. While early season yields were impacted by weather conditions, improved recoveries on the back half of the main season have supported production. ISMA, the Indian Sugar Mills and Bio-energy Association has maintained its full season estimate of 30.3 million metric tons, contingent on an additional 4.5 million to 5 million metric tonnes from the May operations and the special season, which goes from June to September. Domestic consumption is projected at 28 million metric tonnes with 1 million metric tonnes being allocated for exports. 3.8 million metric tonnes has been diverted to ethanol production. On the back of this, closing stocks estimated at 5.5 million metric tonnes for the sugar year '24-'25. Looking ahead, with planting numbers looking good in the three key states and a normal monsoon, which has already started early expected, this augurs well for the upcoming main season crush. TN and AP, however, still will remain challenged because of lower planting. So given this -- or given that there will be a positive delta in crush, there is expected to be more sugar in the domestic balance in the upcoming year. On this backdrop, some of the key factors to be monitored from a policy and a regulatory perspective include, firstly, sugar pricing as the new season starts and as to whether exports will be considered given a larger crop and crush. On the ethanol side, we also need to monitor whether on molasses-based ethanol, whether there will be any pricing revisions at all as they have not been moved up in over 3 years despite consistent FRP increases. There's also an indication of more saliency and emphasis on grain ethanol. And lastly, on ethanol, whether there would be curbs or not on the import of U.S. ethanol will also need to be monitored. Whether the curbs will be lifted would need to be monitored as part of the ongoing trade discussions between the two countries. I now hand over to Venkat, our CFO, to take you through the operating parameters and performance of the company in Q4 and FY '24 -- '25, sorry.

Thank you, Muthu, and good morning to all participants. It's a great pleasure to be part of the analyst call and to share the key information of the operational and financial performance of the company. I would like to share with you the key operating parameters of each segment. The sugar operations, the crushing operations in Karnataka, Tamil Nadu and Andhra Pradesh, we have successfully completed for the quarter. In crush, we have run about 122 days overall in Q4 against the 156 days of last year. We crushed about 17.4 lakh metric tonnes of cane against the 19.79 lakh metric tonnes for the corresponding previous quarter. The gross recoveries are improved. We are at 10.89% for the quarter against the 10.69% corresponding quarter of the previous year. We produced about 155,000 metric tonnes against the 204,000 metric tonnes of the corresponding previous quarter. So overall cane cost is about INR 3,768 per metric tonne against INR 3,504 per metric tonne of the corresponding quarter of the previous year. The increase is mainly on account of the FRP increase from INR 3,150 to INR 3,400. As far as the sugar volumes is concerned, we sold about 103,000 metric tonnes, including our consumer pack division against the 105,000 metric tonnes of the corresponding previous year. Average selling price was about INR 39.37 excluding the consumer pack against the INR 37.50 for the current period -- previous period. We carry closing stock of about 1.9 lakh metric tonnes and valued at INR 37.50 to INR 38. So as far as the revenue is concerned, from sugar operations, we've done about INR 408 crores against the INR 415 crores of the corresponding the previous quarter, registering a degrowth of about 2%. So mainly because of on account of release quota. As far as consumer pack is concerned, we achieved about INR 195 crores of the revenue. This is including the non-sweetener portion of about INR 65 crores and the sugar is about INR 130 crores against INR 135 crores of the corresponding previous period. As far as the Co-gen is concerned, we generated about 1,456 lakh units against 1,746 lakh units in the corresponding period of the previous year. As far as exports of power is concerned, about 732 lakh units as against 903 lakh units in the corresponding period of the previous year. The average power tariff for the current quarter is about INR 4.3 per unit against INR 4.84 per unit in the corresponding period of the previous quarter. As far as revenue is concerned, about INR 57 crores for the power for the current quarter against the INR 77 crores of the corresponding period of the previous year. It's a good story on the distillery because we produced -- we sold about INR 3.89 crores of alcohol against INR 3.31 crores later of the corresponding previous quarter, of which about INR 1.31 crores is ENA, about INR 2.57 crores latest is ethanol. The realizations are good. The current quarter realization is about INR 66.98, about INR 67, against the previous year's realization is about INR 64.49. So though there is no increase in ethanol prices, but average realization have increased. So, mainly the contribution has come from the price increase in ethanol in Tamil Nadu and Karnataka. As far as the revenue is concerned, about INR 268 crores against INR 224 crores of the corresponding previous year quarter. So as far as the Nutra segment is concerned, the Indian operations, the current quarter turnover was about INR 9 crores against INR 10 crores in the corresponding period of the previous year. The consolidated level, the turnover is about INR 60 crores against the INR 70 crores in the corresponding period of the previous year. As far as the refinery business is concerned, the total revenue is about INR 1,019 crores against INR 899 crores of the previous period. So as far as the loss is concerned, about INR 99 crores against INR 9 crores in the corresponding previous period. Refined sugar production is about 1.17 lakh metric tonnes against previous period, 2.49 lakh metric tonnes. Refined sugar sales is about 2.05 lakh metric tonnes against the previous period is 1.5 lakh metric tonnes. So, intercorporate deposit, which is given by the INR 200 crores per year, it remains the same. As far as external borrow is concerned, about INR 590 crores against the previous period is about INR 95 crores. So as far as EBITDA is concerned, for the current quarter, it's a negative before exception of about INR 38.12 crores, against the corresponding previous period is about INR 56.21 crores is a profit. PBIT, before exception will be about INR 49.31 crores current quarter compared to the previous period, which is INR 45.53 crores of profit. PBT is about INR 99 crores negative against the INR 9 crores of the corresponding previous year loss. So that's it from my side. So the floor is open for the questions.

[Operator Instructions] The first question is from the line of Rushabh from RBSA Investment Managers.

I just have a question on the EPG division on the non-sweetener side. Strategy-wise, are you looking to enter this organic or chemical-free category seriously over the next 2 to 3 years? What is the thought process given that we have good access to farmlands from our group companies?

So, this is Balaji. I head the Consumer Products business. As of now, we are present in the conventional staples business, and we don't have any plans right now to enter the organic or chemical-free staples at this point in time. Maybe in at some future situation, we'll consider it. We haven't yet optimized the supply chain to the extent of going up to the farmers. As of now, there are no plans for that right now.

And secondly, I'm just looking at one of your slides in the sweetener category. The distribution reach has increased by 10x over the last 4 years, while the revenue has gone up only 3x. So I believe there's a lot of potential to increase the revenue per distribution reach. So what steps are we taking to increase that? And what are the new products that we're adding in the non-sweetener category in this coming year?

So I think the outlet increase is always higher than the revenue increase because the incremental new outlets don't contribute to revenue in the same proportion as the existing outlets, which is a normal understanding. So that is the reason why you see that discrepancy. And in terms of new products, we are still working on our new product plans, and we will come back to you as and when they are ready.

[Operator Instructions] We take the next question from the line of Sanjay Manyal from DAM Capital.

Just want to understand about the availability of sugarcane for the next season, given the fact that the rains have been good and water levels have been pretty decent. So it seems that production could be a bit higher. So what could be the crushing number for us, and how would that translate into the ethanol volumes for the next year?

This is Ashiq here. I'm heading the Sugar and Biofuel business. Current timely monsoons in Karnataka and Tamil Nadu is giving us a lot of comfort. We are still in the stage of planting progress. Probably by the end of next quarter, we'll have a good view of any upsides that could be there. Currently, we are holding a neutral outlook with a positive bias.

Okay. Okay. And sir, just also want to understand if you can give some bit about the ethanol volume and how much now could be the proportion of grain ethanol or maize ethanol? And how are the economics in maize ethanol, or for that matter, grain ethanol in South India?

Sanjay, because as far as -- if you look at it, our distillery capacity is about 582 KLPD. So that will give you about 18 crores liters or so, okay? As far as the composition of ethanol and ENA is concerned, so that's -- it will be -- dynamically we'll be deciding it, which is more lucrative, okay? As far as the ethanol is concerned, to the extent of the OMC commitment, we'll be honoring it. So, balance, we will be diverting into the ENA. As far as the grain is concerned, you are aware of it because we have only 1 facility at about AP, that is about 3.5 to 4 crores liters which we produce. That also depends on the -- which -- whether it is a syrup or the grain, or something. It's a multiped distillery. We can't comment anything on that, the '25, '26, what could be the grain exactly depends on the availability of the cane and the government outlook on the price increase in case of ethanol and the B-heavy.

So, Sanjay, Muthu here. To your question, in terms of the economics of grain ethanol in South India, I think it's helpful for the economics when you actually have an integrated facility because your sugarcane ecosystem gives you a benefit on fuel. And ideally, we've had lower-than-expected cane feedstock in AP. But as that situation improves, then that would certainly benefit the operations. In terms of how stand-alone ethanol distilleries are faring in the South, there isn't too much public data available on that. So it's hard to comment. In a broader sense, we are hearing more saliency and emphasis on grain ethanol. This is a change from when the Ethanol Blending Program was conceptualized. In the last 2, 2.5 years, there's been more of a saliency towards grain, which is what we are seeing right now. But that said, we are moving into a period of abundance on the sugarcane side after 2 years. So given all of these are agri feedstocks, we will have to wait and watch whether this increased saliency towards an emphasis on grain ethanol will remain or there will be a shift towards sugarcane. Again, given these are agri-based feedstock, these tend to usually be dynamic situations.

Right, sir. Sir, just one more thing on the ethanol part, this is almost like a second year where we haven't really received any hike in ethanol prices. What is the -- I mean I'm sure your discussions must be happening with the government about the policy, because till the time the 20% blending was not met, I think the government was pretty keen to increase the prices. Do you think it's a halt from that perspective that there is no increase in prices? So probably -- this 20% probably blending will stay here and will not move forward?

So Sanjay, I think you're asking a couple of questions. I think the last time and Venkat, correct me if I'm wrong, we saw an increase on ethanol offtake prices was late 2022. So we're almost going to be 3 years without any increase in molasses-based ethanol prices, barring some marginal increases on the C-heavy price. It is not very material. So that is a challenge, given FRPs go up consistently every year. And last year, they actually went up by 8%. So this is what has challenged the industry and also brought EBITDA margins down significantly on the back of recently controlled CapEx programs. I think this has been well represented by the industry body to the policymakers. I think they have also been receptive in their listening and I think they do understand. It really remains to be seen in terms of what kind of policy calls are taken around this. I can say that we remain hopeful given that there is an abundance of cane coming up and so on. In terms of the blend, I think we're up to about 18% right now. And the auto industry also is seemingly prepared for up to a 20% blend. So whether this blend will move up beyond 20%, again, that's something which is on a concrete basis yet to be determined. We are also concerned, I will say, by the fact that there are conversations as part of a broader U.S.-India trade discussions that the lifting of curbs on import of U.S. ethanol is being considered. We don't know the outcome yet, but I think the industry body has officially also expressed their concern on this matter to policymakers across the board. I think such a move will certainly be negatively impactful to the industry at this point in time.

Right, sir, in the same context, if I can just understand the economics means, what if the import of ethanol happens to India, what would be the landed price? And will it be so much difference? I mean, is there a significant difference that those imports are attractive?

I think if you look at the U.S. -- current export prices of U.S. ethanol, I think it equates to about, I would say, the early 40s. I did check this earlier this week. So of course, ethanol is subsidized in India. And I think U.S. prices are currently much lower. So that obviously impacts the economics.

[Operator Instructions] We take the next question from the line of Yash Visharia from Mavira Asset Management.

Am I audible?

Yes.

Sir, just wanted to get your sense on the consumer products business. So how are we seeing this business grow over the next 2 to 3 years? What is the road map that the company is envisaging on this business?

So yes, so the consumer product business we will -- our focus on the consumer product business will continue with sustained aggression on distribution growth and volume growth. Branded packaged food business in India is growing at about 12% annually. We will be trying to beat that estimate in terms of our growth rates, and we will continue to keep focused on building the brand and driving the distribution.

Sure, sir. So are we focusing on any specific geographies, like only South India or we want to grow pan-India? How are we seeing the growth there?

So right now, we are present in the South of India. And as the market demand picks up, we will be expanding across to other geographies. Right now, we are present in the South of India.

Okay. And sir, are we planning to tie up with any of the giants like, say, DMart or any other quick commerce for pickup in the volumes?

So these are channels, and we don't do tie-ups with them, but we are present in all these channels in e-commerce and DMart, our products are being sold. Like a conventional channel, we will be managing them.

Understood, sir. Understood. So sir, basically, apart from sugar and distillery, can we say that maybe 3 or 5 years down the line, the consumer products business will be one of the important core segments for the company in the growth?

Yes, definitely.

[Operator Instructions] We take the next question from the line of Ritwik Sheth from One Up Finance.

Sir, just a couple of questions. Sir, firstly, on the debt front, sugar business and refinery, would it be possible to give the split for long-term and short-term debt?

Yes, Ritwik. As far as the sugar business is concerned, we have about INR 850 crores as a short-term debt, about INR 205 crores is the long-term debt. So, as far as the refinery business is concerned, about INR 590 crores is the short-term debt, and the INR 200 crores will be the long-term debt. So long-term debt is basically from the ICD, which is given by EID Parry.

So, external debt is only INR 590 crores, which is completely short-term?

Yes.

And sir, what is the outlook on the refinery debt and refinery business as well for FY '26, if you could give us some flavor on that?

Ritwik, Suresh Kannan here. I think refinery business went through challenging times in the second half of FY '25, basically on account of the fall in the -- drastic fall in the white premium that happened because of increased supply that came out of European Union, Ukraine, and to some extent out of Pakistan as well. But going forward, in FY '26, there is a spillover effect of that as we start the financial year. However, as what Muthiah explained in his commentary, there is a tightening of the supply as same happening on the refined sugar is concerned. Most refineries took break because of the low white premium situation. So there is a correction as far as the supply side is concerned. So we are seeing the white premiums going back, may not be up to the levels that what we witnessed in FY '24, but definitely much better than the FY '25 level. So that will increase the run rate of the refining operation. That will also help us to service [indiscernible].

Okay. Got it. And sir, on the crushing, I'm not sure whether you mentioned in the opening remarks, but what is the crushing that we expect for FY '26 for EID Parry?

Ritwik normally, we will not look at -- tell about the futuristic, but as was Ashiq mentioning that this time, the monsoon is good. But we can come back to you maybe in the September or something, what should be the probable crushing.

[Operator Instructions] Next question is from the line of [ Manoj Shah ] from [ Lax Gov Investments. ]

Just wanted to check on what will be the capacity utilization for ethanol because recently new capacities have come, and what you expect in FY '26 capacity utilization?

As Venkat pointed out, we have 582 KLPD. We are currently running at about 90% plus capacity utilization. We expect that to continue, and our endeavor is to move the needle substantially up because the business -- the benefit is there in utilizing our assets efficiently, and we have an opportunity unlike the sugar business. So 90% to 95% is the kind of capacity utilization we are looking at.

Okay. Regarding the sugar refinery, there was some impairment taken up in this year. Can you comment a little bit on that? Is it -- why an impairment has been taken? And also, there is some news that government will have some control over raw sugar also, there are some news, if you can comment on that.

So I'll take the first one. There's been an infusion, which has been made, and that is for debt reduction and improving the net worth. At the same time, the impairment has also been taken because of the challenged financial performance of the business. You will have seen the spreads, I think Suresh Kannan spoke about it, have drastically come down. This has led to, as Venkat described, a very weak financial performance. So we were required to take this impairment.

So basically, we have assessed the future cash flows to be lower than the book value. So you have taken impairment based on that?

Yes, it's usual cash flow-based formula which has been used, yes.

Okay. And second part on this raw sugar, there was some news that the government would have some control over on that as well. There is some news, if you can comment on that?

Suresh, you might want to comment. I don't think so.

In the sugar control order, they have brought in some amount of control in declaring the raw sugar with manufacturers. And also they have brought units larger than, I think, 500 TCV for Jaggery crushing, Khandsari into the ambit. We believe both are welcome move to make the sugar balance numbers, and create a level playing field amongst various players. And as an organized players, we are open to the direction in which they are moving.

I'm not sure there's much of an implication on the refinery. I don't know, Suresh Kannan, if you want to clarify.

Yes, yes. Basically I wanted to [indiscernible].

The sugar control order is basically for governing the domestic production, as refinery is entirely on export. So either in the imports through an advanced license or through special economic zone, these do not come under the [indiscernible]. So we are...

We take the next question from the line of [ Manasvi ] from ICICI Bank.

Am I audible?

Yes, please go ahead.

I would like to know from the sugar segment, if you can highlight on what has been the key reasons because of which there has been the negative income, and how exactly EID Parry is planning on mitigating the same in the upcoming financial year?

Can you stop, the background noise is coming. We are not able to hear you properly.

Is it better now?

Yes. Can you please ask your question again?

I would like to know if we go for the sugar segment, like if you can highlight what are the key reasons because of which there has been negative income for the FY '25? And how is EID Parry planning to mitigate the same in the upcoming financial year for the sugar segment?

I'll try to take the question. Fundamentally, the challenge has been on sugar realization because the government has been holding the MSP, while the FRPs have been going up year-on-year. As already pointed out, we continue to shift our portfolio towards refined sugar and institutional sales, coupled with our foray into consumer products. The should shore up the realization to help us manage the pressures on cost line. The other challenge we continue to face is on the release quota. The government has a particular methodology and they have been refining it over years, in terms of giving us a quota of sugar that we can sell. We continue to work with the policymakers in terms of helping the industry in giving higher release quota, which will automatically take care of the business pressures. The last one is obviously from the supply side. As already pointed out by a gentleman earlier, we have a positive bias towards cane availability, and increased crush base will also leverage the cost in the P&L and will give better results. Broadly, at a large view, these are the three ways in which we are looking at approaching in terms of resolving the pressure.

Next question is from the line of Yash Visharia from Mavira Asset Management.

Sir, just sorry if that's a repeat question, but with respect to this subsidiary, Parry Sugar Refinery India Private Limited. So, we have an exceptional item of INR 427 crores for the year of FY '25. And we are again infusing around INR 350 crores in the same subsidiary. Is that understanding correct?

That's correct.

Okay. Sir, so what is the reason for writing of INR 427 crores and again reinfusing the such big amount in the same company?

I think Yash covered this earlier. The impairment has been done on account of poor financial performance. I think that was looked at, and I think we were required to take that impairment. In terms of the infusion, it is to strengthen the net worth of the company and also bring about some debt reduction. This is the reason for the infusion.

[Operator Instructions] Next question is from the line of [ Manoj Shah ] from [ Lax Gov Investments ].

Sir, my question is to make the sugar business viable, what should -- how much the minimum selling price should be increased? Like you are touching in the market somewhere around INR 37, INR 38. And based on your cost of production, where it should -- how much it should be increased so that the sugar business becomes viable?

Yes, Venkat, do you want to go first?

Go ahead. No, no.

So Manoj, if you ask that question to industry, I think we'd have a really, really big ask around that one. If you look at most commodities pricing, even if you look at the domestic bill, oil and ghee and whatever else, pricing has significantly moved up in the last 5, 10 years. Sugar, unfortunately, has remained very range bound and we -- the sort of window shortens between the FRP increase and the price. So, I think this has constantly been represented to the policymakers. I would say something into the early 40s would only be near meaningful. However, it still continues to be a deliberation with them on the MSP. So, we'll have to wait and watch if anything is considered at all.

So do you expect anything to come before this next sugar season starts?

No, I think it's not come around for quite some time. It continues to remain a deliberation. I think Ashiq spoke about release quotas. There's also export allocations, ethanol diversions. These are how the sugar balance and pricing is really managed in our country. It's also essential commodity. So maybe it's perhaps in their own right policymakers also have intent to keep pricing affordable and range bound. So, it will continue to remain in deliberation. I think there has been -- there are areas where in which we are hopeful policymakers will make some positive upward revisions. But also, with programs like EBP, so on and so forth, they have been good moves made by them as well to strengthen the health of the industry.

But can you comment that there -- through ISMA, you are in some active dialogue with government on this or it's nothing happening on this front as such, any representation from the industry through ISMA?

So, Sanjay, MSP has always been a point which ISMA has taken up with the authorities, and they've always given us patient sharing. It's never off the table in terms of discussion.

And in light of higher sugar production for next sugar year, how do you see the movement in prices because you will have higher cane production, which may again further depress the sugar prices. So how this will impact the profitability?

So, if you go back to my opening comments, I stated this as the first point to watch out for, precisely what you have rightly picked up also now. Yes, with more sugar coming into the balance and with these kinds of release quotas and sugarcane ethanol not being given as much of an impetus, there is certainly a risk of downward sliding of prices. Now which is why perhaps into Q4 of F '26 and Q1 of F '27 -- Q1, Q2 F '27, having an export program will certainly be something I hope the policymakers will consider strongly to ensure that pricing remains reasonable for us for the processors.

Any indication on Ethanol Blending Program moving higher from 20% to 25% or higher than 20%?

Again, as mentioned earlier, this is a conversation. As far as we know, the auto industry is certainly prepared for a 20% blend. Beyond 20%, I'm not sure if we have enough insight whether they are prepared. There's also talk of flex fuel and higher blends, but these are in smaller pockets. But up until 20%, I think the industry is prepared. We're at 18% right now. We still have to catch up 2%.

[Operator Instructions] Ladies and gentlemen, that was the last question. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you all for your patient listening. We look forward to meeting again during our Q1 F '26 results in a few months' time. Thank you.

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