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

Ladies and gentlemen, good day, and welcome to E.I.D.-Parry India Q2 FY '26 Earnings 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 Q2 FY '26 Earnings Call of E.I.D. Parry. We thank E.I.D. Parry's management for giving us an opportunity to host this call. On the call today, we have Mr. Muthiah Murugappan, Whole-Time Director; and other senior management team of E.I.D. 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.

Thanks, Sanjay, and good afternoon to everyone. I'll make a few opening remarks covering the global scenario as well as important Indian sugar scenario as well. Sorry, I'm getting an echo somewhere. Hello?

Yes sir, please go ahead sir.

Yes. Okay. I'm going to start by covering the global scenario. The global sugar market is projected to remain in mild surplus through sugar year '25, '26, primarily due to increased production in Brazil, India and Thailand. Favorable weather has supported higher output in India, 50% above normal monsoon during October, while Brazil continues to crush aggressively with a sugar mix of 53% despite dry conditions affecting cane quality. However, risks to Brazilian output persist due to lower CRS and productivity losses due to adverse weather in 2025. According to S&P Platts, global sugar surplus is expected to reach 2.23 million metric tonnes in '25, '26. Brazil's Petrobras' decision to lower the gasoline prices have also contributed to building raw sugar surplus and lowering of ethanol parity as well. However, with the price trading below ethanol parity on a sustained basis, the mix is expected to shift back to ethanol during the remainder of the crush. White premium values are expected to trade in the range of USD 80 to USD 110. The hedging activity by Brazilian and Thai millers and positioning by hedge funds will also have a large impact in pricing and hope shaping of sugar S&Ds in ensuing quarters. I'll now cover the Indian scenario. In sugar year '24, '25 India's net sugar production stood at 26.1 million metric tonnes, close to 29.6 million metric tonnes and diversion to ethanol was 3.5 million metric tonnes. Domestic consumption was about 28.1 million metric tonnes and exports was just under 1 million metric tonnes. Closing stocks were to the tune of 5 million metric tonnes. In Q2, which is July to September 2025, India's monsoon brought mostly above normal rainfall, filling reservoirs and supporting agriculture. Sugarcane yields have improved across major states with only minor setbacks from deep flooding in UP and Maharashtra. Sugarcane output on account of increased yields and crop is likely to move up by 15% at an all-India level for sugar year '26. With the sugar output expected to move up and consumption marginally expected to move up to 28.5 million metric tonnes, it's very likely that sugar pricing may soften. Moreover, ethanol diversion wherein green-based feedstock now account for more than 70% of the awarded tenders, ethanol diversion will likely only account for 3.4 million metric tonnes thereby putting the estimated closing stocks for sugar year '26 at a more than healthy 8 million metric tonnes level. Given these realities, it's very likely that the policymakers will consider greater than 1 million tonnes of exports for which official notifications are awaited. The current situation presents an extremely challenging time for the industry. On this account, the industry continues to make very active representation to the policymakers on revision of MSP, increasing the blend percentage beyond 20% in the ethanol blending program, higher allocation towards sugarcane-based feedstock for ethanol and on better pricing for sugarcane-based ethanol. Just last week, the government of Karnataka has declared an additional price of INR 50 per metric tonne of cane over and above our FRP to be borne by all sugar mills in the state on account of intense farmer agitations. This adds an additional burden to the industry, which operates in the state. It will be important over the coming weeks to monitor the position taken by policymakers in response to the industry's various representations. I'll now hand over to my colleague, Mr. Venkateshwarlu, to take you through the operating and the financial metrics of our company for the last quarter.

Thank you, Muthu, and good afternoon to all the participants. It is a great pleasure to be part of the analyst call and to take -- to share the key information of the operation and financial performance of the company. I would like to share with you the key operating parameters of each of the segments. The crushing operations of Tamil Nadu Unit, Tamil Nadu, the Nellikuppam and Pugalur has been commenced during the quarter. And we crushed -- 2 units have got operated about 64 days and 21 days as the -- respectively. As far as the crushing is concerned, we crushed about 3.66 lakhs metric tonnes compared to the corresponding quarter of the previous year 5.62 lakhs metric tonnes. As far as the recovery is concerned, current quarter is the 7.97% against 7.6% of the corresponding quarter of the previous year. As far as the sugar production is concerned, we produced about 27,000 metric tonnes of sugar during the quarter against the 42,000 metric tonnes of the corresponding quarter of the previous year. Cane cost overall cane landed cost is INR 3,620 per metric tonne as against INR 3,491 per metric tonne of the corresponding quarter of the previous year. As far as the sugar segment is concerned, we have sold about 83,000 metric tonnes of sugar domestically compared to the corresponding quarter of the previous year, it was 93,000 metric tonnes. Sugar prices for the current quarter is INR 41.19 per kg against the previous period INR 38.47. We carried a closing stock of about 66,000 metric tonnes valuing at INR 38.50 at POP level. The sugar segment achieved a turnover of INR 368 crores as against INR 367 crores of the corresponding period of the previous year. All FRPs -- FRP paid on time to all the growers who have supplied the cane to us. As far as the Consumer Product Group is concerned, we achieved a turnover of about INR 169 crores during the current quarter, registering a degrowth of 30% over the corresponding quarter of the previous year of INR 236 crores, mainly on account of restriction on release quota of the sweetener category and the lower realization and fall in market price of pulses compared to the corresponding quarter of the previous year. The cogen operations. As far as the cogen operation is concerned, we generated about 307 lakh units as against 505 lakh units in the corresponding period of the previous year. We exported about 168 lakhs units against the 233 lakh units in the corresponding period of the previous year. The average power tariff for the current quarter is INR 4.04 per unit as against INR 3.94 unit in the corresponding period of the previous year. Revenue for the quarter was about INR 12 crores as against the previous year -- INR 15 crores in the corresponding period of the previous year. As far as the distillery operation is concerned, we sold about 409 lakh liters of which ENA is 170 lakh liters and ethanol is 233 lakh liters. The same corresponding previous period, we sold about 419 lakh liters, of which ENA was 159 lakh liters and 260 lakh liters was ethanol. As far as the price list is concerned, we realized at INR 67.50 per liter against previous year realization of INR 64.45 per liter. As far as the revenue is concerned, we registered about -- we achieved a turnover of INR 292 crores compared to the INR 281 crores during the corresponding period of the previous year. As far as the nutraceutical segment is concerned, Indian operations has achieved about INR 7.6 crores revenue as against the INR 7.25 crores in the corresponding quarter of the previous year. At the consolidated level of the nutraceutical business, including U.S. nutra operations, we achieved about INR 61 crores turnover as against INR 37 crores in the corresponding quarter of the previous year. The refinery business. We produced about 2.21 lakh metric tonnes of refined sugar against the previous period of 2.65 lakh metric tonnes. Refined sugar sales for the quarter was 2.54 lakh metric tonnes as against the 2.15 lakh metric tonnes of the corresponding previous period. The revenue is about INR 1,168 crores for the current quarter, corresponding to the previous quarter, it was about INR 1,117 crores. EBITDA for the current quarter is about INR 58 crores, corresponding previous period, it was INR 29 crores. As far as the PBT is concerned, profit of INR 31.42 crores for the current quarter, corresponding previous period, it was about INR 5.02 crores. As far as the long-term loans is concerned, it's 0 because corresponding previous period, it was about INR 200 crores. Short-term loans stood at INR 159 crores for the current quarter and the same was corresponding previous period, it was about INR 179 crores. That's all as far as the E.I.D.-Parry results is concerned. Now floor is open for the questions.

[Operator Instructions] The next question is from the line of Vaishnavi Gurung from Craving Alpha Wealth Fund.

My first question is on the sugar segment. Considering the issues pertaining to sugar and ethanol, whether mix is changing from sugar to grain. So how do we approach this challenge? Do we anticipate oversupply of sugar or underutilization of our ethanol capacity?

Vaishnavi, Ashiq here. Yes, the industry faces a challenge of overall higher ethanol capacities as evident from the recent data that flowed as part of the OMC bidding. Obviously, the country is facing excess capacity. But the excess capacity seems to be higher in grain-based distillery as compared to molasses-based. Having said that, the lower allocations on ethanol, especially in Karnataka, puts a strain on how we use our capacity utilization. Some of these volumes will shift to ENA and will be managed. But eventually, we need a policy decision to alleviate the excess capacity situation. The government is also seized of the fact that there is excess capacity today. I'm sure there'll be some work around the same.

One more question on the sugar and ethanol side again. This is more on the consumer business side actually. So considering our key segment on a stand-alone basis, the sugar and ethanol, which is currently facing the challenges. So do we see the consumer business as our leading growth segment going ahead?

Yes. This is Balaji here. I head the consumer business. The first half of the second quarter for the consumer business has been subdued due to reasons of lower release quota and because of the lower prevailing prices of dal which were almost 30% lower than the previous year prices. I think as we go forward, the consumer business will be moving into a growth phase with the larger release quotas coming to us in the third and fourth quarter and with prices of staples expected to stabilize at a slightly higher level as we go forward.

Sir, if you can put a number to the growth per consumer business on a year-on-year basis?

So we don't give guidance -- forward guidance Vaishnavi.

[Operator Instructions] The next question is from the line of Sanjay Manyal from DAM Capital Advisors Limited.

I have a few questions on the ethanol part. One is what kind of a -- so what -- we broadly understand for 20% blending levels government has allocated approximately INR 1,100 crore liters of ethanol. What allocation have we got? And will we be able to utilize our capacity to the full? And if not, then -- is it like private OMCs also will sort of -- we will get some allocation from them also?

We have got about 69% allocation of the bidding that we did on the OMC side. We do engage with private players also, both Nayara and Reliance. And our current position is we'll be able to deliver similar capacity utilization like last year, which is upward in the range of 90% plus, thanks to the combined allocation that we have been able to garner. We have a capacity of about INR 18 crore liters in a year. We will deliver about INR 17 crore liters the current estimate.

And if you also can elaborate on -- given the fact that ethanol price hike has not come in the last 2 years, what is your expectation on that? And what kind of margins have been there? Because I think FRP and sugarcane cost is continuously rising, so how the margins have over the last 2, 3 years have shaped? Has it been too much of strain at this point in time? And how the EBITDA per liter sort of have moved, I believe, downwards?

Yes. The ecosystem changes continue to happen as you guys would have seen in the news. So we recalibrate ourselves with every change that comes. On a 3-year last 3-year time frame, I think even on the last call, we said that we did make ethanol investments with a particular expectation on return on capital. I think that's got significantly impacted because of the changes in the government policy that's happened over the last couple of years. We expect the scenario to improve on the back of support from the government. We are very sure the government is fully seized of the matter, while the MSP has not come through, we are still positive on the ethanol pricing that the government will step in and address.

[Operator Instructions] The next question is from the line of [ Gautam Dedhia ] from Nalanda Securities.

Just one question, on Slide 17 you were talking about some channel consolidation in the Pulses segment over the next 2 quarters. So can you just elaborate what is happening over there?

Yes. So this is Balaji again over here. So what we are working on is we have 2 channels right now, separate set of team selling sweeteners and non-sweeteners. So there is some rethinking on that. And there is a consolidation of this channel in terms of the team size and the channel partners. So because the channels are being merged and one set of channel members are going out, there is a correction that is being taken in terms of the whole numbers. And this will come back once this channel merger is complete.

So this won't affect the volume that we are selling, right?

It won't in the long run and the long run and with the end of the year, the business will be back to its normal volume. But in the short run, there will be some correction that will happen and that is what was highlighted.

Gautam, good question. Q3 definitely has a volume impact because we are going through this rationalization. Whilst we're doing this rationalization, we're also strengthening our commercial terms in the market across the staples segment as well as the sweetener segment. And I think strengthening the commercial terms should also keep our working capital in line with our intent to build a more efficient business model. We will see an impact in volumes for Q3. I think by the time we get into the Feb time frame, we should be back on track. These exercises can take some time -- scaling as opposed to do it much later when the business is much larger.

So are we expecting any cost savings from this exercise also?

No, no. So this is more prudent and efficient business model construct. That's what we are expecting from this. This is a growth business. It's going to need investments in terms of A&P expenses, in terms of talent and in terms of its scale up. So this business will have to be in an invest and growth phase. So it would be unwise to start looking at -- will be prudent on the way we manage cost, but the focus will be on the enablers for growth.

And just one more question. So you said the white premiums, you expect them to be in the range of $80 to $110 per tonne. So at that level, do we breakeven at the refinery? Like what is the breakeven point for -- like how does it translate from white premium to refinery spread?

Suresh Kannan here. Typically, we export refineries need between $115 to $120 of white premium to breakeven on a full cost basis. So currently, because of the supply surplus that's been explained by Muthu to the earlier part of the call, we have a big overhang on the supply side, which is resulting in white premiums being depressed because there's enough competition from the low-quality whites coming out of several geographies.

The next question is from the line of Ritwik Sheth from One Up Fin.

Sir, just one question. Sir, in your opening remarks, you mentioned that FRP prices have been increased by INR 50 per tonne. Sir, what is the kind of crushing that we expect in FY '26 from Tamil Nadu?

Ritwik, good to speak to you again. No, government of Karnataka has announced an additional price over and above the FRPs that we've been paying in the state. This is a development -- actually, it's a development which is a week old. Actually under a week old, it all transpired over the weekend. So we're just keeping you guys apprised of it because, of course, it impacts the industry at large. So this is a Karnataka issue. So we crush -- last year, we crushed about 21 lakh, 22 lakh tonnes of cane in Karnataka. Ideally, we'll go a little higher this year.

Okay. But has this been implemented or it's still under consideration?

No, no, it's been implemented. It was implemented on the back of some intense agitation. So I think the industry has -- we've had to go with this.

The next question is from the line of Vaishnavi Gurung from Craving Alpha Wealth Fund.

My question is a follow-up question on the impact of quarterly volume you mentioned. If you can explain that?

Sorry, can you ask the question again? It wasn't clear.

Am I audible now?