E.I.D.- Parry (India) Limited ($EIDPARRY)

Ladies and gentlemen, good day, and welcome to E.I.D Parry Q4 FY '26 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. [ Abhishek Mehra ] from DAM Capital. Thank you, and over to you, sir.

Hello, everyone, and a warm welcome on behalf of DAM Capital Advisors to the Q4 and FY '26 Earnings Call of E.I.D. Parry. We thank E.I.D Parry's management for giving us the opportunity to hold this call. On the call today, we have -- we have Mr. Muthiah Murugappan, Whole Time Director and CEO, along with the senior management team of E.I.D. Parry. I hand over the call to the management for opening remarks, followed by a Q&A session. Thank you, and over to you, sir.

Thanks, Abhishek, and good morning to everyone. It gives me a great pleasure to be a part of the analyst call to share an update on the global as well as the Indian scenario, and explain further on Q4 performance and FY '26 performance of our company. I'll start with the global scenario. Global sugar markets are softening with a clear downward price trajectory and a shift back to surplus conditions. White sugar prices have corrected from USD 500 per tonne level to about -- in 2025 to about USD 420 per tonne level by early 2026, while raw sugar has declined from about $0.18 per pound to about $0.14 per pound in the same period. This reflects improving global supply with total production of 196.7 million tonnes, exceeding demand of 193.8 million tonnes in '25, '26, led by higher output in India and Thailand, partially offsetting mixed trends in Brazil and the EU. Overall, total balances are moving from deficit to surplus and exerting downward pressure on prices and limiting export attractiveness. On the India front, sugar year '25, '26 estimates are as follows: post production, 31 million tonnes; diversion for ethanol, 3 million; domestic consumption, 28 million; exports of 0.7; and closing stocks of 4.25 million tonnes. Domestic sugar trends indicate a recovery in production led by key states. With an all-India output methyl ethanol diversion reaching 27 million tonnes as of March 31, driven primarily by Maharashtra and Karnataka, which grew in excess of 20%, while Uttar Pradesh remained flat. At a balance sheet level, internal consumption has revised -- has been revised almost 28 million tonnes, keeping the overall availability comfortable despite the 3 million diversion to ethanol and limited exports of 0.75 million. Further exports have been banned till September 30. Seasonally, the trend reflects the shift towards the western and southern states, which are driving incremental output, while UP remains stable, but not the primary growth driver. I now hand the call over to Mr. Venkateshwarlu, CFO, to take you through the operating and financial performance of the company.

Thank you, Muthiah, 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 of the segments. Sugar operations. The crushing operations in Karnataka and Tamil Nadu and UP, we have completed in Q4. So on an average, we have run about 77 days against 76 days of the corresponding quarter of the previous year. As for the cane crushing is concerned, we crushed about 17.7 lakh metric ton against 17.62 lakh metric ton of the corresponding quarter of the previous year. As far as the recovery is concerned, for the current quarter, we are at 11.19 against 10.89 of the corresponding quarter of the period. As far as the sugar crush is concerned, in the current quarter, we produced about 1.7 total lakh metric tons of sugar against 1.55 lakh metric tons of the corresponding quarter of the previous year. So cane cost for the current quarter is at [ 4,087 ] per metric ton as against the 3,768 per metric ton of the corresponding quarter of the previous year. This increase is mainly on account of the FRP increase, about INR 150 per metric ton, which is announced by the [indiscernible]. As far as the sugar volume is concerned -- as far as the bio field is concerned, we sold about 97,000 metric tons, which includes about 8,000 metric tons of the exports, against the 73,000 metric tons of the corresponding quarter of the previous year. As far as the sugar is concerned, we have -- for the current quarter, it's [ 13 and rupees 28 ] [indiscernible] [ 13 and rupees 22 ] [indiscernible] of the corresponding quarter of the previous year. So we maintained at the closing stock at 1.92 lakh metric tons for the current quarter, which is valued at [ INR 89 ] per kg against [ 1.83 ] lakh metric ton of the corresponding quarter of the previous year. As far as revenue from the sugar is concerned, about INR 466 crores for the current quarter as against to INR [ 408 ] crores of the corresponding of the previous year, registering an increase of about 14% on account of the exports and the higher release quota for the current quarter. As far as the [ cogen ] operations is concerned, we generated about INR 1,499 lakhs units as against INR 1,450 lakhs units in the corresponding period of previous year. As far as the power exports is concerned, we exported about 8 45 lakhs unit as against 7 32 lakh units in the corresponding period of previous year. As far as the power tariff is concerned, we could able to realize the [ INR 4.50 ] per unit for the current quarter as against to INR 4.38 per unit in the corresponding period of the previous year. As far as the revenue is concerned, for the current quarter, about INR 66 crores as against INR 58 crores in the corresponding period of the previous year. As far as the distillery operations is concerned, we produced about [ 4 52 ] lakh liters during the quarter as against INR 4 38 lakh liter of the corresponding quarter of the previous year. As far as the sales is concerned, [ 4 0 4 ] lakh liters we have sold the current quarter as against the [ 3 18 ] lakh liters in the corresponding previous quarter. So the composition of [ 4 0 4 ] lakh liters applicable [indiscernible] liters of ethanol. As far as the price list is concerned, average relation is at [indiscernible] current quarter as against the [ INR 66.98 ] per liter as compared to the corresponding period of the previous year. As far as the revenue is concerned, for the current quarter, we achieved about INR 275 crores revenue as against INR 268 crores during the corresponding period of the previous year. As far as the new operations is concerned, we assured a turnover of about INR 13 crores in the current quarter as against INR 9 crores in the corresponding period of the previous year. The increase is due to the more exports to the U.S. as the U.S. tariff has got [indiscernible] 10%. At a consolidated level, turnover was about INR 50 crores as against INR 60 crores in the corresponding period of the previous year. So next -- like a consumer product group, CPG division. The consumer product group has achieved a turnover of INR 115 crores during the Q4 as against INR 195 crores of the corresponding period of the previous quarter, registering a decline of about 48%. The decrease in CPG revenues has stemmed from a purposeful operating model recollaboration with a deliberate shift to towards the better channel optimization and an improvement in the margin profile of the business. I'll move on to the refinery operations. With the production in the refinery for the current quarter is about INR 1.69 lakh metric tons against 1.17 lakh metric tons in the current funding previous year. As far as the sales is concerned, we've rolled about 2.3 lakh metric tons, the same as in the previous corresponding quarter was about [ 2.03 ] lakh metric ton. As far as revenue is concerned, the current quarter, about INR 1,006 crores, INR 1,006 crores against the INR 1,019 crores in the corresponding previous year quarter. Loss for the current quarter, after accounting of the other costs, about INR 293 crores, against the loss of INR 99 crores in the corresponding previous year quarter. Inter-corporate deposits are [ 0 ], as far as [indiscernible] is concerned, INR 593 crores. I also wanted to update the straighter from the CSR, the closing operation because we have intimated to the stock exchange by the year [indiscernible] as on 31st March about the closure of the operations. So at the same time, we will also operate -- inform all the statutory authorities in the first week of April. As far as the labor settlement [indiscernible] is concerned, the final settlement for all the management stock is completed in the 1st of April 2026. The remaining contract was completed by up to 15 [indiscernible]. The next activity what we have taken from the exit [indiscernible]. The unit is located in the [indiscernible]. So we obtained the SC directive, principal exit like exit [indiscernible] from the authorities on the 20th April. Exit formalities are commenced, and they're expected to be completed by 30th September '26. As far as the balanced loan payment is concerned, so 49 million [indiscernible] to INR 460 crores paid to the bank as on 24th April. This was funded through E.I.D Parry equity is about INR 338 crores, and the cash available with the [indiscernible] as on 31st March '26. The further payment to the banks on the 15th of April 2026, about 29 million, equivalent [indiscernible] crores. This center has been funded through investments of E.I.D Parry. So with these 2 centers of the investment, yearly has increased so far by 15 [indiscernible] about INR 600 crores into the payment obligations of the [ PSR APM ]. So another 1.4 million scheduled for the payment in June [ 26 ]. This will be funded through internal receivables from the PSR APM. So the liquidation with the above all the loan obligations of [indiscernible] will get completed by 24 -- by 30th of June '26. As far as the liquidation of the plant [indiscernible] is concerned, discussions are initiated to the vendors. We're also exploring to call for the tenders from the interested parties on the mission which is required.

Thanks, Venkat. I think we've also uploaded the presentation -- quarterly presentation on the BSE, and hope you will have a chance to go through that. We are now open for questions.

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

So the first question is on the consumer goods business. So now going ahead, what's the plan over there in terms of -- so we have the sweetener division, and now you are focusing on some adjacencies. So what would those products look like? And basically, when you say value added, what should we define the margin profile of those products as opposed to the rice and pulses that we were doing?

So Gautam, thanks for the question. So going forward on the CPG side, we -- the strategy is to have a stronger margin profile on the business model. I think as we indicated, some of the rice and pulses, et cetera, are pretty low-margin products. And we have -- we focused to some extent. We're focusing on those products only in sort of few channels. But in terms of the margin accretive products and value-added products, they will be more on the brown line, which is [indiscernible] a couple of variants of brown sugar, premium rice. So this is all in the line of sweetener. And newer product launches also in the remote products, which are being planned for later in the year. A lot of these value-added products move the business into the 30-plus percent gross margin level. And this is really the intent in terms of how we want to move forward.

Okay. And we were looking at some acquisition, was right? You mentioned in the last call. So has there been any progress made on that? And are we still looking at it? Or is there a shift in strategy for that also?

So Gautam, I think on the last call, we had sort of outlined that we will specify the sort of segments within the food FMCG space, which we're going to be looking at. I think the investor presentation covers that. I've been talking about ethnic snacking and culinary convenience. These are segments which we are looking at further in terms of how to enter these segments, and these are combinations which we are having as well. But these are the segments of focus as we look at beyond the sweet products and sweetener there.

Okay. And secondly, on the Nutra division. So now how should we look at this division? So there are 2, 3 products that we are focusing on. So what would be the scale of strategy over there? And what would be the general margin profile of this business once everything stabilized?

So Gautam, on the Nutra piece, Nutra India continues. There are no new product launches planned. We obviously have the algae processing and exports, which we do, that will continue. I think they had a reasonable performance, and I think we will continue, now with some of the tariff issues being settled, we'll continue to progress that piece. I think there will be more action on the Valensa front, where we have also communicated 2 products launches, one on the [ prostate ] side as one -- as well as one on the term health side. So this scale up will happen in Valensa going forward. I think what we will see in Valensa is an expansion of top line as well as stronger bottom line performance. As mentioned, we have -- we oriented the strategy a little. We've also had some organ management restructuring, a stronger operating team is in place right now, and they're driving this mandate forward.

Okay. And just one last question. So just like how we've seen the West Asia crisis, post that, have not seen any change on the ethanol division. When you are interacting with some government bodies in terms of either improving the mandate from E20 or in terms of pricing also, do you see anything positive happening this year?

[ Ashiq ] here. I head the Sugar and Biofuel division. Obviously, most of the news around this is in the public space. The good development has been the government sharing their intent through the BAS aspect for E30. We would -- we have been telling this for the last 4 to 5 quarters, expect positive action from the government. We are -- it will become visible during the allocations that will come up in the new ethanol year. We remain firmly positive that the crisis -- one silver lining would be the improvement in ethanol blending percentages because it's good for the fuel security of the country.

Sir, any thoughts you had on pricing revisions?

Government -- our last feel of the situation was that there may not be too much action on pricing, but there will be an action on increase in blending percentages.

Next question is from the line of [ Rishab ] from RBS Investments.

Post the restructuring that has happened, I just want to understand for the share, every INR 100 that operating cash is generated, how we'll be allocating capital now across the existing segment? Could you share some thoughts on where you're doubling down more? And also, is there any strategic divestments left? Or are you looking to continue all the existing businesses?

So Rishab, thanks for your question. I think now we will -- post the restructuring at the refinery, I think we will be continuing with the existing sugar and biofuel operation, the CPG as well as the Nutra operations, I think that's the plan. In terms of capital allocation, there will be a focus on the CPG segment. A lot of the investment there really goes into the ANSP program. There's no real CapEx as such. The only CapEx that we're doing this year is largely the new [indiscernible] facilities at [indiscernible] 45-odd crore CapEx, which we're doing. There are no other CapEx plans. I think it is -- just given the industry situation, given perhaps the more macroeconomic situation, I think we will hunker down and run for cost and efficiency in terms of the core business. And in terms of the CPG business, of course, invest in brand building, expansion of distribution and strengthening of the marketing mix.

And in terms of the [indiscernible] product, just a follow-up, I think you have a great caliber strategy of focusing more on the higher-margin segments. So is it reasonable to assume that in since we have been in this segment seems quite a while now. So at least in the next 3 to 4 years, can we assume a significant share of profits or revenue share [indiscernible] 25% coming from this segment? Or how should one look at the segment scaling up now? Or it is too early to say?

So the intent is to breakeven within the next 6 to 8 quarters and exit this decade with a good single-digit percentage EBITDA on the business.

[Operator Instructions] We will take our next question from the line of Rajakumar Vaidyanathan from RK Invest.

Can you hear me?

Yes, we can.

Sir, just a couple of questions. So the first one is there was some recent [indiscernible] September 2023 tariff ruling, which many of the coming sugar companies have taken advantage of. Just want to know, is that award not applicable to E.I.D Parry?

Can you repeat the question?

No, no, I think -- some of the other 2...

Some of the other...

The folks you are supplying for...

Yes, it's not applicable to us because largely our power exports are through EX.

Some of our peers have been in benefit of it, you're right.

Because I saw you -- maybe was mentioned in the tribunal order at [indiscernible].

You want to comment?

Maybe you have done it in the past, like is not now maybe -- because the orders applicable, I think way back 2010 something like [ 2003 ].

We are exporting more on exchanges, but the [indiscernible] also preset. So we had some units where a [indiscernible] agreement, we may get a little benefit for those periods. But you are to assess that those years.

Okay. But any reason you're not taking cognizant of the benefit in this quarter because other companies have already approved that benefit that reason in marketing.

We have not taken cognizant [indiscernible].

Okay. But is it a substantial amount?

I don't think it is a substantial amount.

Got it. So the second question is what is the outlook for the sugar planting in Tamil Nadu for sugar mill?

We have planted roughly about -- we are looking at about 10% to 15% increase in the planting.

Okay. And even the recoveries are better, right, in the current year compared to the previous year?

We have a good upside on recovery. If your question is relevant to Tamil Nadu, we had about a 0.5% improvement in the [indiscernible] that I think is in the mid across multiple sugar units in TN because we have had a good weather. Karnataka also had a good upside in utility. So those 2 are big positives for us.

And do you expect this momentum to continue in the upcoming years? And do you see increase in planting based on the periods of good performance?

Tamil Nadu will be constrained because of attractive or the other crops. The government has been focusing on paddy per se, as you are aware. Having said that, we look at portion of improving from where we are in terms of planting and also expect some upsides on recovery.

Okay. And lastly, any good the fuel blending if it goes beyond 20%. So what would be the impact for [indiscernible] and particularly E.I.D Parry? Will be participant on upside? What is your outlook on that?

Any increase in the ethanol blending percentage would benefit the sugar in the same. And our base assumption is that government would want to support the sugar industry. We will benefit by higher allocations in Karnataka from the OMCs. What it would translate this probably increase the capacity utilization. We -- as Muthu pointed out in the earlier thing, we would we have produced about 16 crore liters, we would probably trend towards 17 crore liters improvement in the ethanol blending percentage.

Okay. And lastly, any word on MSP [indiscernible] you heard anything?

Not really. I think given the inflationary pressures, that looks unlikely.

[Operator Instructions] Next question is from the line of [indiscernible], an individual investor.

The company has a grand vision of diversifying into a food company. But other than sugar, I don't see any growth anywhere, no significant operation we are at. When do you think Parry will turn profitable actually? Is sugar and refinery -- sugar refinery has gone, that is one big stone of the neck. But the other divisions are also not showing much improvement.

Yes. So thank you for the questions. So maybe let me -- let me start with your first -- the first point, which you made in terms of product line. It's largely sweetener focused. I think that is obviously a core competency, and that's how we've gotten started on the CPG business. So I think we are really doubling down. We have -- we are the market leader there. So I think it makes sense to strengthen that position. As you know, launched into the staples category. We've recalibrated the strategy there to focus on certain channels. There's also more products on the seed products and sweeteners there in which we are looking at. I also spoke in response to an earlier question around newer categories, which we're looking at, which is ethnic snacking as well as culinary convenience. So -- there certainly is a broader vision. But you're right. For now, I think the -- and the revenues are really focused around the sweetener segment, where we're consciously doubling down, with the intent of strengthening the business model and strengthening the margins on the business. But over time, and I think in doing so, it will enable us to really attract that capital to grow the business out further. So I think that's the intent from a CPG perspective. Now in a broader sense, I think you have pointed out from a profitability standpoint, the refinery was, of course, a constraining element. We have addressed it. There were some conversations around the TN operations, and I would put AP into that as well, where cane has been changing. This has been a drag. So we're really running here for -- we are running very tightly on cost and efficiency. So over time, I think we will have to manage this piece better, bring costs down, improve our working capital management to stem the losses which are coming from this segment. I think our Karnataka operations remain a very, very critical and area of focus. They are a very positive EBITDA generating. We looked at the metrics and we certainly compared to best in class in the industry. And I think we will continue to focus on Karnataka, which will drive the core part of the company in terms of profits and cash flows.

I have 2 more questions, significant questions. Number one is whether -- like are we looking at acquisitions in the food business or snacking business to grow the product line?

So as I mentioned, there are 2 areas of interest for us, one is ethnic snacking and culinary convenience, and we are working out how best to launch into these spaces. But I think the -- I think strengthening the current business model is very, very important in order to build a stronger business model and also to attract capital for growth, which is really why we're focused on that.

The biggest concerned for the [ Murugappa ] group is that [indiscernible] E.I.D Parry, both have become vulnerable for takeover. I look at [indiscernible] market cap, they hold 56% of E.I.D Parry. Look at our market cap, 41% of the equity in E.I.D Parry is held in public. Don't you think we are under a takeover attack?

So look, I mean, this is not something which I would like to comment on here. I think we're here to really discuss the E.I.D Parry operation.

I'm sorry to interrupt sir, your voice is breaking.

Yes. So sir, to your question, I think I will retain from commenting on this because this is not really in the context of the discussions here today, which is to focus on the E.I.D Parry operations. Don't have anything to...

I'm talking of E.I.D Parry's survival.

E.I.D Parry 40% held by promoters, 60% public. So quorum rule, 56% held by [indiscernible], how can they take over the [indiscernible]? Anyway, this is totally not [indiscernible]. So I don't think there is any such takeover.

I think in like a strong player acquiring some considerable portion of the public equity can influence some mature institutional investors to sing also. I'm concerned. I'm talking more a concern. I'm not acting as persons. I'm worried about E.I.D Parry's existence.

Because some are public listed companies, because of course [indiscernible] held by the promoters.

Anyway if you are satisfied, I have nothing to get worried about -- stronger ramp.

Sir, we're not concerned. As you know, the promoter group has owned and run these businesses for a very long time. We've seen multiple cycles. We've also seen a very challenging restructuring, which is done of the refinery. So I think we are very, very long-term players. So we are not seeing a concern. You're free to watch, but we're not seeing a concern. But as I said, I would refrain from further discussing it here because we are here to talk about the E.I.D Parry performance.

As a shareholder, I am concerned about when we will resume paying the dividends.

So as I said, sir, I think we are working towards a strengthening of the business model. You have seen actions that we've taken through the year. And I think it's in our endeavor to strengthen the business operations going forward.

So next year, possibly?

Sir, as I said, I think it's in our endeavor to strengthen the business operations of the company going forward. I can't really give you any time lime on this.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference back to the management for closing comments.

Thank you all for logging into the Q4 and FY '26 conference call. We look forward to connecting again at the end of Q1.

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