The Sukhjit Starch & Chemicals Limited (SUKHJITS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to The Sukhjit Starch & Chemicals Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aman Setia. Thank you, and over to you, sir.

Thank you, ma'am. Good evening, ladies and gentlemen. I am Aman Setia, Senior VP Finance and Company Secretary of The Sukhjit Starch, extend a very warm welcome to all of you joining us for today's call to discuss our Q1 FY '26 results. Dear investors, we truly value your ongoing support and commitment. I trust you have reviewed our Q1 FY '26 financial results, which are available on the stock exchange as well as on our website. Today, joining us from the management team are Mr. Dhiraj Sardana, Senior VP and CEO; Mr. Bhavdeep Sardana, Senior VP and CEO; and Mr. Rakesh Chawla, Senior VP and CFO. For an overview of our financial performance, I will now hand over to Mr. Rakesh Chawla.

Good evening, everyone. Thank you, Aman ji. I'm delighted to welcome all of our stakeholders to today's call. I would like to provide a summary of our financial results for the quarter year ended June '25. In this quarter, the revenue from operations reached INR 367 crores. Our EBITDA reported at INR 19.89 crores with an increase of 14.11% Q-over-Q and EBITDA margin stood at 5.24%. In terms of bottom line performance, our net profit for the quarter was INR 4.75 crores, up 94.67% from the previous quarter. For a more in-depth analysis of our operational performance, I will now turn the call over to Mr. Dhiraj Sardana.

Good afternoon, everyone. I'm pleased to share some thoughts on the broader industry environment as we begin in FY '26. The year has commenced on a promising note, and we are encouraged by early signs of recovery across key sectors. The starch industry, in particular, is showing initial signs of stabilization in raw material pricing. This is being supported by the government's proactive initiatives to boost maize cultivation aimed at meeting rising demand from industrial and poultry segments. These efforts are expected to ease supply side pressures and contribute to a more balanced and predictable input cost environment in the coming quarters. We've also seen stable finished good pricing and a notable uptick in offtake, which signals strengthening demand across end user industries such as food processing, textile, paper and pharmaceuticals. With improving maize availability and supportive pricing dynamics, we remain cautiously optimistic about the outlook for the second half of FY '26. The macro environment continues to evolve. And while challenges remain, we believe our industry is well positioned to benefit from structural tailwinds and policy support. Now I would like to hand over to Mr. Bhavdeep Sardana to share some more details with you. Thank you.

Thank you. We are pleased to present our operational and financial performance for the first quarter of FY '26. We recorded a mute start to the year, however, with encouraging momentum across our core business segments. During the quarter, we saw stable pricing and increasing offtake. These trends, combined with rising consumption in the country and better raw material availability, reinforce our confidence for the second half of the fiscal year. Looking ahead, our focus remains on deepening customer engagement, driving innovation and embedding sustainability across our operations. These pillars are central [indiscernible] to reflect our commitment to delivering and enduring value to all stakeholders. In conclusion, we are confident in the trend [indiscernible] of the geopolitical and the tariff [indiscernible] for our business, and we are confident that the opportunities that lie ahead will add value. Our strategic initiatives, coupled with disciplined execution, position us well to navigate the evolving landscape and deliver consistent performance. Thank you, and I now welcome any questions you may have.

[Operator Instructions] Question is from the line of Shivkumar Prajapati from Ambit Investment Advisors.

My first question is on the industry front. I just want to understand like what pace is the industry growing? And it would be helpful if you could post the volume figures for the industry versus what volume growth did we register for the quarter?

Those are [indiscernible] exact volume numbers. But yes, we are growing. The industry typically grows minimum at the rate of GDP. So that answers both your questions. As far as -- to give you a global perspective, [indiscernible] is at 50% of that is China.

Sorry to interrupt you, sir. But your audio is breaking.

Hello. Am I audible?

Yes, sir.

Okay. So I've answered your question, a, that our industry grows at the minimum at the rate of GDP. It can grow faster also depending on which sector is growing, et cetera. I cannot share with you the volume figures of our company that is secretive and confidential. However, we have grown in volume. Thirdly, I would like to give you a perspective that the Indian starch industry -- Indian starch per capita consumption is lower than that of China, and China is [indiscernible]. So we have relatively a very big opportunity to increase our consumption over time.

Understood, sir. And sir, next question is, did the early monsoon had any impact on our business? And sequentially, we have done better. So is it attributable to raw material correction? Or is it from the realization front?

See a healthy monsoon will affect the incoming kharif crop. We are hopeful that the kharif crop will be very good. As far as price correction you are referring to, are you referring to the maize price which for rabi crop or you are referring to the prospective kharif crop?

Sir, so rabi crops.

Rabi. Rabi crop has already harvested. The price which we saw was a result of good availability and timely intervention of Government of India for supplying rice to the ethanol player.

So that means we did not book any kind of inventory loss. Is my understanding correct?

Are you -- we have not booked any inventory loss.

Okay. Okay, sir. And sir, my next question is there's a ratio...

You've asked -- you said two questions. You are on question #4. If there are others, can you come back into the queue.

[Operator Instructions] The next question is from the line of Naitik from NV Alpha Fund.

Sir, my first question is, in the last call, you had mentioned there's some pricing pressure in terms of starch -- terms of starch prices. So just wanted to know, now you mentioned that the prices have settled, but if you could share Q-o-Q, have the price increased or they are there where they were? And how is the China exports affecting the same?

Yes. So thank you, and I recall having the conversation. Yes, there has been a price stabilization and a minor price increase. What's helped the industry is the rationalization in the raw material pricing during this period. And we are hopeful that bottom has been tested. The next couple of months will give us an idea of the resilience in pricing as well as Government of India's negotiations with U.S. will lead to some inputs on maize pricing as well, whether Government of India agrees to ethanol imports or it agrees to GM maize imports for ethanol production, all that will have a bearing on raw material pricing, and that will have an impact on our finished goods pricing. As far as exports is concerned, I believe some [indiscernible] but exports out of India have not started in a very big way. But there has been a positive change over the last two months. So I'm hopeful that with price stability and Indian maize pricing being competitive in the local area, where the export opportunity will be there for certain units.

Right. Right, sir. Got it. Sir, my second question is if you could give some sense on what sort of utilization we were working on? And given that there was some sort of overcapacity across industry, are we still going ahead with the 400 TPD? And if yes, I mean, any progress on that?

So most of the -- we handled our expansion in a very different way. We chose to look at the different products which we were targeting, the value-added products, we have commissioned those. One product is left that we will commission by the end of this financial year. It will probably spill over. There's a lot of background noise in your -- at your end.

Sorry. I've just -- okay.

Yes. So I was -- what I was saying was that we have chosen not to finish all expansions. We have chosen to prioritize finished good products expansions, which are of value addition in nature and which will add to our bottom line. So we have fast tracked those. Only one product is left, which I think in the next financial first quarter, we should have that complete. But we've also added in the meantime, 200 tonnes [indiscernible] and we are hopeful that as and when the supply and demand improves, we'll be able to test that capacity. And then it will take us another maybe two quarters after we decide to finish the balance 200 tonnes capacity grinding expansion.

Right. Right, sir. Right now we are at, say, 1,800 [indiscernible] and what would be the utilization?

So we are targeting 85% by the end of this year. We've been running at 85%, and we are hoping that we'll continue with this 85% by the end of the year. We fluctuate between 78% to 85% depending upon seasonality, certain product mix, et cetera, et cetera. But we are hoping to target about 80%, 85%. Between 80% and 85% for this fiscal.

The next question is from the line of Darshil Jain from ICICI Securities.

I have a couple of questions. So firstly, could you provide more details on how maize procurement costs have trended this quarter compared to previous periods? And what impact this has had on your gross margin?

Sir, you were totally blanked out. Can you repeat that, please? I missed the second part of your question.

So how has the maize procurement costs have impacted your margins? So that was the second part.

Okay. So we've -- if you can see our margins have improved and there's been a positive effect. And with the fall in finished good prices and raw materials, which in the previous quarter did not correct as much, it corrected in the last quarter whose results we are discussing with you. So that factor and stabilization in prices and renewed demand have started to help our industry and our company, and we are hopeful that this journey will continue in the next couple of quarters.

Understood, sir. Secondly, with the ethanol producers competing for maize, how do you assess the risk of future price volatility? And what procurement strategies are in place to mitigate this?

See, since we are a well-hedged company in terms of locations, supplying -- supply of maize is not an issue. The question is [indiscernible] pricing. Now with Government of India coming in and releasing surplus rice to ethanol players gives us an opportunity to take maize at softer prices and not have another stakeholder of industrial maize in the market. So we tend to benefit from that strategy. And we are also working with government agencies, including the planning of various state governments where we are on maize development. And with Government of India's plans of increasing maize production to 70 million tonnes. In the short term, there could be certain gaps. But I think in the medium term, this will play out. And with government capping it for now, its ethanol mixing, we will get some kind of a better mix of supply and demand for industrial maize.

Understood, sir. Understood. And lastly, could you share more details on the scale of the expansion or expected commissioning time lines and additional capacity being added? And furthermore, what would be the total CapEx planned for this expansion? And how are you going to fund that? Is it through internal accruals? Or are we going to take on debt? Or is it a mix of it?

[indiscernible] Any internal debt for this expansion. We have completed 200 tonnes of expansion. 200 tonnes of expansion, we are going slow because we are prioritizing on finishing the end product rather than the grinding capacity. So our focus has been on that. We've completed most of the products, only one product is pending at one location. So we will complete that first and then take on the balance 200.

[Operator Instructions] The next question is from the line of Aditya from Securities Investment Management.

Sir, just wanted to understand one thing. So if I look at the last couple of quarters, we have been seeing the finished goods pricing is on a lower trend. So just wanted to understand what is leading to lower finished goods prices?

See, as was discussed alluded to by one of the [indiscernible] a lot of starch industry was also exporting due to certain geopolitical changes, starch industry exports had halted in the previous couple of quarters, causing a disruption and oversupply in the [indiscernible] So product of one or two -- sorry, prices of one or two products corrected in India, and that led to a kind of softening in prices across the country. However, that has started to change. [indiscernible] Hope that this trend, the stability in pricing is going [indiscernible] to see margins going up from here on.

Understood. So just wanted to understand now is the higher maize price the major reason for the drop in margins or the lower finished goods prices? I mean which of these are two of the major factor behind the drop in margins?

Both. Both. Both. It was a combination. It was a combination. Higher maize price made Indian starch manufacturers uncompetitive in the export market, and that caused a lot of problems.

Understood. And sir, just the recent news I heard was that China has also started allowing exports of their maize products. So how would that then affect the Indian exports...

I mentioned this to you that due to -- when I said due to geopolitical changes, so China entered the ASEAN after having stayed away for 10, 15 years. But saying that, Indian starch manufacturers have restarted to export. As a company, we are not doing it, but our colleagues in industry are, and they have restarted exporting because Indian maize is competitive.

Understood. And sir, just wanted to understand now out of the total Indian starch production, how much of would it be catering to export markets? And how much is it for domestic consumption?

I can't say. I can't -- I don't have that figure. I will not be able to give you because a lot of manufacturers are not listed and I don't have access to unlisted players' data. I will not be able to tell you that.

The next question is from the line of Shivkumar Prajapati from Ambit Investment Advisors.

I have two things. First is like I've seen stocks-to-use ratio, a global ratio that people track. So it is at around 26 -- 22% for '25, whereas four years back, it was around 26%. So this ratio is lower, which shows that there is a shortage of corn. So if I say the stock of corn is around 275 metric tons, whereas the consumption is over 1,200 metric tons. This is one thing. And I just relate it with another -- a company with the name of Regaal is coming with an IPO. So just want to understand about your view. Like is this an indication that the good times are ahead for this industry as a whole?

See, I don't know what your question is. I'm trying to make sense of. So you -- sir, you have mentioned that some ratio -- your voice broke in between 22% and 26%. You were alluding to shortage versus demand. Can you just expand on that?

Yes, sure. So basically, there's a ratio. So if I say maize ratio, the stocks-to-use ratio for maize globally is at 22%, whereas four years back, it was around 26%. [indiscernible] So right now, what is happening, if I look at the stock globally, so it is around 275 metric tons, whereas the consumption, that is the demand is over 1,200 metric tons. So...

So you are -- what you are referring to is not 275 metric tons, it's 1 million metric tons, number one. Number one. And that is only for one season at one point in time. India has seasonal maize. You can Google and check there's rabi and kharif crops. And Indian manufacturing, Indian industrial maize requirement alongside poultry feed requirement drives majority of the growth. And there has been adequate maize available. Price of maize has been an issue in about two quarters ago. Price of maize has corrected in India. It is still higher in India as compared to global pricing, but it is at a softer level now. And there is no shortage of maize. Your second question, you were not audible at all. Can you please ask your second question again?

Sure. So second question is company Regaal is coming with an IPO. So I just want to hear your view, like how does the company differs because they are also into starch, into starch making and this maize processing.

[Foreign Language] So I have no idea about them.

[Foreign Language]

It has nothing to do with us.

Okay. No worries. No worries, sir.

The next question is from the line of [ Riddhi Vora from SAS Capital].

Sir, I have a question that could you share your plans regarding the product portfolio diversification? And are you exploring any opportunities to introduce new starch-based products or derivatives?

Yes. So thank you for a very valid question. Very pertinent. So, product mix, I will not give you the exact breakup, but I'll give you a good sense of it where we are heading. We are seeing complexity of manufacturing in the FMCG space. We are seeing complexity and a higher quality assured supply as personal care, as FMCG transcends into personal care as lifestyle and changes in food habits for a more healthier lifestyle happens. So we are catering and changing our production capacities to align with our customers making that shift. Now whether it is highly assured pharmaceutical-grade products or qualifying existing products and increasing the quality assurance around the existing infrastructure, also working with customers in reducing and making, say, a low moisture product or making a product with a certain attribute, but it being the same product, but changing the specification to suit our customers' overall product mix, our customers' overall recipe. So we have started partnering our customers in a much more micro -- at a micro level to work with their recipes to create specifications, especially for them. So when there is a downturn, there is a certain USP for us to always be associated with our customer and have certain assured business. So that's where we are planning. That's what we have been doing. And it will take us another, I think, two to three quarters more to add one or two attributes to our product portfolio such as this.

Okay. Okay. And additionally, how are you approaching the development of new customer segments or entry into untapped domestic or international markets to broaden your revenue base?

Yes. So our plan for the global markets is the same. So if we are working with an MNC in India and partnering them with them on R&D, that affords us an automatic qualification to supply to them at a global level. So that mitigates the cost of any logistics, that automatic supply. So then you are put in the same -- on the same platform as a global manufacturer in Europe or U.S., and you could be supplying to MNCs base in Africa or in Middle East or in somewhere in ASEAN. So we have started working with these companies, our existing customers in working with them on R&D projects, and we are hopeful that it will enable us an opportunity to work with them globally.

Okay. Okay. And further, like how do you assess the demand environment for March and its derivatives across key end users, industries for the remainder of FY '26?

See, I feel that going forward, the demand for the starch industry is going to remain robust. The paper industry, packaging sector is growing. You see the number of the -- if you see the results of the paper companies, the listed ones, the ones who are making quality paper, writing and printing grade and who are waiting for the MEP to play out. I think paper as a sector, food as a sector, FMCG, personal care, all these sectors with our India as a consumption story is going to do well. Our MNC companies, barring this confusion over tariffs. Our FMCG companies are looking to manufacture in India for -- brands in India for a global market. So excess capacity out of from their plant will go abroad. So that I'm sure Government of India will do what it takes to protect the interest of the Indian manufacturing. And I think in the next few weeks, we'll have clarity on tariffs. And once that is done, I think India will be exporting again in a very big way, starch and starch products, while our internal demand remains robust.

Okay. Okay. And additionally, what is your outlook on finished goods pricing? Do you expect stability or any upward movement?

For now, we are stable, but prices have to go up as we end towards a closing season and shortage of maize in between the new rival crop coming in, I think prices will go up. And government has announced a new MSP, which should kick in at the time of the kharif crop. So that will also have a play. So if raw material price goes up, finished goods prices should also rise. So we are hopeful that the supply-demand metric would be favorable for price rise going forward as we go into later in the year.

The next question is from the line of [ Isha Murthy from M&A Ventures ].

So my question is like could you share who are your top 5 customers? And like how significant are they to your overall business?

I'm sorry, I can't share that. That's confidential in nature. All our -- I will not be able to share that, but we are well diversified in terms of customer mix, product mix. We work with various sectors. Like I said, textile is there, paper is there, FMCG, both in the personal care space, food sector, pharma sectors, and we are trying to grow in all our sectors on the value-added side.

Okay. Also, like how does your company manage the raw material pricing pressure while dealing with the customers?

See, we get into various -- we have to -- we buy maize at what price it is available. We know when to buy, and we try to keep our costs low. When we're talking to customers on finished good pricing, whatever we sell as spot is sold on spot pricing, but larger organized players get us -- get into quarterly contracts, annual contracts, sometimes, but mostly quarterly contracts with us. So you win some, you lose some, but then eventually, the prices tend to stable out.

Also could you share the type of contracts you have in place right now?

To talk about that. It's confidential in nature, but we have a fair mix of all types of contracts.

Ladies and gentlemen, we'll take this as the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, ma'am. I, on behalf of The Sukhjit Group, would like to express my gratitude to all of you for joining us today and sparing your precious time for us. We look forward to your continued support in the future and hope to see you [indiscernible]. If you have any further query, you may kindly reach out to our Investor Relations partner, Orient Capital. Thank you so much, ladies and gentlemen. Have a good day.

Thank you. On behalf of The Sukhjit Starch & Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.