Triveni Engineering & Industries Limited (TRIVENI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Triveni Engineering & Industries Limited Q3 and 9 Months FY '21 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Thank you. Good day, everyone, and a warm welcome to all of you participating in the Triveni Engineering & Industries Limited Q3 and 9-Month FY '21 Earnings Call. We have with us today Mr. Tarun Sawhney, Vice Chairman and Managing Director; Mr. Suresh Taneja, Group CFO; Mr. Sameer Sinha, President, Sugar; as well as other members of the senior management team. Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature and a statement to this effect has been included in the invite, which was sent to you earlier. I would also like to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner. We will start this call with opening remarks from the management followed by an interactive question-and-answer session. I would now request Mr. Tarun Sawhney to open the call. Over to you.

Thank you. Good afternoon, ladies and gentlemen, and welcome to the 9-month results of Triveni Engineering & Industries Limited. The overall performance of the company during the 9 months ending December 31, '20, has been in line with our expectations. The revenue from operations stood at just above INR 3,515 crores, which indicates a growth of 19%. Similarly, the profit after tax stood at INR 326 crores, a growth of 16%; and the PAT stood at just above INR 209 crores. The increase in turnover over the previous period is on account of higher sugar and ethanol dispatches. And consequently, the increased turnover of sugar has compensated for the decline in the Engineering business due to the lockdown and COVID-19 issues. Sugarcane started crushing -- the sugarcane season for Triveni started a little earlier during the current season where we crushed approximately 2.81 million tonnes of sugarcane in Q3 fiscal '21 at an average recovery of 10.19. The gross recovery, this is after the adjustment on account of B-heavy molasses, was 10.93. Until today, we have crushed 4.37 million tonnes of sugarcane at a recovery of 10.44. The gross recovery after the adjustment of B-heavy molasses being 11.18. Now this is -- there is a marked difference from last year. Last year, our crush to date was 4.09 million tonnes and, therefore, due to the early start and a better crushing capacity for all the units combined, we've been able to achieve a significantly higher crush to date. However, the recovery is a little bit lower. Last year, the recovery stood at 11.06 and the gross recovery was 11.55. Now the notable difference, of course, is the fact that last year, we were producing large quantums of raw sugar, which was produced at a very high recovery. And for the quarter under review, it's important to note that the company did not produce any raw sugar at all. The company has, under its alcoholic beverages vertical, forming part of our distillery operating segment, started producing country liquor towards the end of the current quarter at its bottling facility in the premises -- in our Alco-Chemical premises at Muzaffarnagar in Uttar Pradesh. The company holds an approval to bottle 52.8 lakh liters of potable alcohol on an annual basis, and this will be achieved in a phased manner, and this is the first approval for this business. The performance of our Engineering businesses was also most interesting. For the Power Transmission business, it was a muted quarter, but we are anticipating a clear catch-up during Q4 fiscal '21. The Water businesses performance was commendable during the quarter, and we're looking forward to very active quarters going forward. The outstanding order book stood at just under INR 1,000 crores for the combined Engineering businesses at INR 988 crores. The Board has approved the establishment of 2 new distilleries of 40 KLPD, which is a grain-based plant at Muzaffarnagar and a 160 KLPD molasses, juice, syrup and grain plant at our sugar factory at Milak Narayanpur, District Rampur, Uttar Pradesh. This is, of course, subject to the necessary statutory clearances, and this will raise our total distillation capacity to 520 KLPD and the cost of this to -- the combined expansion will be INR 250 crores. And this was approved by the Board at our meeting yesterday. We expect both distilleries to be up and running within the next 4 quarters, perhaps earlier. The company has also completed the buyback of 61.9 lakh equity shares at a price of INR 105, the total amount being INR 65 crores, and this was done in October 2020. Now turning to the financial highlights for the quarter. Revenues from operations stood at INR 1,123 crores with an EBITDA of INR 168 crores, signaling a 5% and 78% respective increase from the corresponding quarter of the previous fiscal year. For the PBT, the number was INR 145.8 crores, which was 119% increase from the previous corresponding quarter. Significantly, despite lower buffer stock subsidies by INR 9.85 crores, our finance cost for the 9 months has been significantly lower by 39%, mainly due to lower CC utilization by approximately 58%, and this is directly due to much better working capital management and a lowering of our cost of funds by 34 basis points. The total debt of the company on the 31st of December '20 is INR 550 crores, which is much better than the INR 1,544 crores on the 31st of December 2019. The INR 550 crore number as of December 31, 2020, comprises of term loans of INR 415.5 crores. And all of these loans are with interest subvention or at subsidized rates of interest. Our average cost of funds for the quarter was 5.66%. So it's a very substantial improvement quarter-on-quarter, et cetera, and indicates the improvement in the financial standing and balance sheet of the company. As far as the sugarcane season -- let me turn to our operating businesses, and I'll start with our Sugar business. For the 2021 season, sugarcane crush was 2.81 million tonnes, as I mentioned, an increase from 2.57 million tonnes in the previous corresponding quarter. The sugar production has commensurately been higher at 2.86 lakh tonnes versus 2.79 lakh tonnes in the previous corresponding quarter. Our dispatches in the quarter under review were 2.57 lakh tonnes, and exports of approximately 14,000 tonnes also took place in the quarter. The average domestic realization was INR 32.78 per kilo, which was slightly lower than the previous corresponding quarter at INR 33.55 per kilo. And this is a factor due to the increase in production year-on-year. And of course, in the first quarter of the sugar year, as factories start producing, et cetera, there is pressure to evacuate sugar, start cane payments, et cetera. And it always leads to some kind of an effect. That, combined with, of course, a much higher crush in this sugar season, has led to some wavering of sentiment in Q3, which is the first quarter of the sugar year. Pursuant to the additional export allocation granted over initial allocation under MAEQ, the company has exported a total of 3 lakh tonnes against the previous -- against MAEQ '19/'20. The total sugar quota for export for sugar season in '20/'21 MAEQ is 1.82 lakh tonnes, of which 0.5 million tonnes of sugar -- sorry, 0.5 lakh tonnes of sugar has been contracted in January 2021. The remainder will, of course, be contracted as the time progresses, and there's plenty of flexibility that has been given by the Ministry of Food in GoI in terms of how to evacuate the sugar. There are possibilities of third-party evacuation. There are direct evacuation, raw sugar, white sugar, the trading of domestic quotas. So there's plenty -- it's a far more complex system that exists this year, giving a tremendous amount of flexibility to companies like us. During the 9 months of fiscal '21, the sugar revenue includes export subsidy of INR 57.66 crores pertaining to export sales made in the previous year. And likewise, for the 9 months of fiscal '20, the export subsidy of INR 93.22 crores was included. Further, the export subsidy of INR 40 crores was not booked by the 31st of December '19 for exports undertaken in Q3 fiscal '20. So it's important to note that in your comparisons over quarters. The sugar inventory as on the 31st of December '20, was 28.2 lakh quintals valued at INR 30.9 per kilo. The cogeneration operations, which includes our incidental cogeneration, achieved sales of just under INR 40 crores against just under INR 32 crores in the previous corresponding quarter, a growth of 24% due to the higher number of operating days and, of course, improved performance. Current sugar realizations at the mill gate for crystal sugar stand at about INR 31.5 per kilo and refined sugar at INR 32.5 per kilo. So they have sort of come down. There has been a little bit of pressure in January And in the start of February as well, there appears to be a little bit of pressure. But I'm very confident that this balancing, once the cane price situation gets more underhand, will get balanced out, and we will see a relative increase, a small increase to comfortable levels going forward. Turning to the industry scenario. For sugar season '19/'20, the country produced 27.4 million tonnes. And at the end of September '20, the estimated inventory in the country stood at 10.6 million tonnes. As per the latest estimates, the production for this season, season '20/'21, is estimated at just higher than 32 million tonnes, with about 2 million tonnes being reduced from this total due to B-heavy molasses or rather ethanol made from B-heavy molasses. The estimated sugar production will be just above 30 million tonnes. But that -- it's important to note that this is a 10% increase from the previous sugar season. And therefore, the 6 million tonnes of MAEQ for this year is a very welcome move in terms of evacuation of this extra stock. The sugar produced for Uttar Pradesh is estimated at 10.5 million tonnes versus 12.64 million tonnes in '19/'20. The lower estimate for Uttar Pradesh is primarily on account of lower sugarcane yields and lower sugarcane recoveries apart from significantly higher diversion towards gur and khandsari unit. Further, during this season, it is estimated that approximately 0.67 million tonnes of sugar will be diverted for the production of ethanol using -- from B-heavy molasses and some from sugarcane juice, approximately 82% increase from the previous sugar year. The estimated decline for the state of Uttar Pradesh as a whole is expected to be 17%. And when I turn to our numbers and our estimations, we will certainly be significantly better off than that reduction, and that is our present estimate. Maharashtra, on the other hand, is expected to produce 70% more and Karnataka 22% more minimum in this year, perhaps even 25%, 26% more. So there's a lot more sugar in Central and South India being produced in this year, which accounts for the substantial increase in sugar production for sugar season 2021. The government during this period has also announced an export subsidy of INR 3,500 crores to export 60 lakh metric tons of sugar under the MAEQ. Now this is, as I mentioned, a very, very welcome move by the government, and I anticipate that the entire 6 million tonnes will be evacuated in one form or the other to our coastal-based refineries and through export destinations. India is fortuitously in a unique scenario of being able to deliver sugar across the Eastern Hemisphere. And the demand in the Eastern Hemisphere is quite substantial. And therefore, India has been able to secure relative premiums over New York, and that has been welcomed in terms of the evacuation of sugar. And therefore, despite the smaller or rather the lower subsidy that's been allocated, export subsidy by the government of India, we believe that the full 6 million tonnes will be evacuated. As on the 15th of January, the sugar in the country, production stood at 14.27 million tonnes compared to 10.89 million tonnes in the previous year. Sugarcane arrears is a very important factor, and I think a lot of policy determination is based on the growth or reduction in cane price arrears. For Uttar Pradesh, cane price arrears stood at just under INR 8,000 crores for sugar season 2021 as per the most recent government data and INR 1,406 crores for the previous sugar year. So a very substantial amount of arrears are building up in Uttar Pradesh at the present time. As per industry reports for the marketing year '19/'20, the final receipt of ethanol by oil marketing companies has been 173 crore liters against a contracted amount of 195 crore liters, which translates to approximately 5% blending. For this year, the tenders have been issued for 457 crore liters, of which the finalization has been 248 crore liters. 59% of the contracted quantity would be ethanol manufactured through B-heavy and 17% and 15% are from C molasses and sugarcane juice, respectively. Of the total ethanol contracted, 9% is from damaged food grains. So that, of course, is the latest introduction into the mix of raw materials that can be utilized for the generation of ethanol. The production capacity in the country has increased by almost 400 crore liters, and the government of India is targeting ethanol production supply targets of 300 crores to 350 crores for this year to achieve 7.5% to 8% blending across the country, a marked improvement. As per market reports, 0.3 million tonnes has already -- this is in reference to the MAEQ, has been contracted for export in the quarter under review. Coming back to ethanol, the central government announced a smart revision in December '20 of prices of C molasses, which increased by just under INR 2; and B-heavy molasses, which increased by INR 3.34 to INR 57.60 per liter. There was also a smart increase for sugarcane juice, ethanol derived from sugarcane juice, which increased by INR 3.17 per liter to INR 62.65 per liter. This augurs extremely well for the sugar industry and, more importantly, for the ethanol blending program, which is a real target and focus area for the government of India. Another recent development was the modified scheme for financial assistance by way of interest subvention, which was announced by the central government. This is for the enhancement of ethanol distillation capacity to establish distilleries, producing first generation ethanol from feedstocks or converting molasses-based plants to dual feedstock plants. It's expected to bring about an investment of about INR 40,000 crores. This, combined with the remunerative prices and the clear signals that the government would like to achieve the 20% blending target in an accelerated manner by 2025, certainly means that this investment in the short term by the industry is something that can be easily achieved, and we will certainly take steps towards that. It's equally important to note that when we had this discussion 3 months ago, we talked about initiatives that the government could take to hasten the ethanol-blending program and to increase these targets. So a lot of what I've just spoken about is very much in line with that. And I had also spoken about the expectation of quick movement from the government on this front, and we've seen that in just three months, there's been a tremendous amount of development that has taken place from a policy perspective and a tremendous amount of signaling from the central government to initiate this investment from private industry, all a very encouraging scenario. I'll spend just a minute on the international sugar scenario. Center-South in Brazil is estimated at 38.2 million tonnes, and the ethanol output has fallen by almost 9% in the same region. In Brazil, recovering fuel demand is raising the possibility of more ethanol production and less sugar, which would certainly support sugar prices in the 2021 season. When one looks across the globe, Thailand, South Africa, EU, Russia, there's a huge amount of problems in the sugar programs of these nations, especially in Thailand, where there's been a massive fall. The current crop is also quite bad. And of course, this assists the Indian export program to the traditional countries where Thai sugar, for example, had found its home. As per international reports, the deficit is -- for 2021 should be approximately 3.8 million tonnes of sugar compared to a deficit of 5.5 million tonnes in the previous year. And this, again, is expected to ensure that raw sugar prices certainly trade range-bound at the levels that we're at now, which is a very encouraging increase, a smart increase, especially since the lows that we saw in March at the time of the COVID lockdown. At that point, raw sugar prices touched lows of just about $0.10 -- around $0.10 in April '20 and rose to $0.154 per pound on the 26th of January. The increase has been on the back of this estimated huge global deficit and prices are now in excess of $0.16. On the 2nd of February, the March contract delivery prices settled at just about $0.163 per pound and the white sugar contract settled at $463.60 per metric ton. Again, the market is indicating very strong and smart moves towards the positive side. Turning to our Alcohol business. Our production over the previous quarter was by and large on par, whereas the sales were slightly higher. Our average realization per liter stood at INR 47.8 per liter, which is higher than INR 46.8 per liter of the previous corresponding quarter. Commensurately, we've had a higher PBIT as indicated in the results that have been shared with you. During the current fiscal year, 39% of the distillation capacity has been used to produce ethanol using B-heavy molasses, whereas it was only 15% in the previous year. The profitability of the distillery in the 9-month period is lower than the corresponding period of the last year due to a much lower raw material, which is molasses price relating to ethanol sold in the previous year. The distillery has received contract of 9.86 crore liters during the ethanol supply year '20/'21. I'd like to point out that well over 90% of this contract will be supplied from -- by -- ethanol from B-heavy molasses. With the approval of the 2 distilleries, as I had mentioned, the aggregate distillation capacity of Triveni Engineering will go up to 520 KLPD. Turning very quickly to our Engineering businesses. Our Power Transmission business had a muted quarter, and this was due to some COVID-related delays in terms of dispatch, delays from Q3 that have been pushed forward to just Q4. So we anticipate that there will be a tremendous amount of catch-up in quarter 4. The outstanding order book stood at INR 160 crores, which included some long-duration orders of approximately INR 55 crores. The business has had strong inquiries from Defense and is hopeful of concluding more such orders in the coming quarters. The Water business had an excellent result. A PBIT of INR 5.2 crores for the quarter under review. The above results are consolidated with the wholly owned SPV of our Mathura project, which was awarded to us by NMCG under the Namami Gange program. Despite lockdown and COVID-19-related issues, the company has performed well. And due to the pandemic, the order finalization has been slow, but we participated in a large number of tenders in the quarter under review, and we expect positive results to follow in the next few months. The outstanding order book stood at INR 827.5 crores, of which INR 467 crores is towards O&M contracts, which are for a longer period of time. If I look at the outlook for both of our business segments, the Agriculture as well as Engineering. As far as sugar is concerned, the recovery levels and yields in Uttar Pradesh are lower. They are a slight cause of worry, and this is due to climatic conditions and potentially due to a very long season last year. And therefore, the amount of time given for growth and the timing of the plantation of the crop last year is showing some weakness in this year. However, I guess, by that logic, if one looks at this year, we're anticipating a smaller crop in Uttar Pradesh. It augurs very, very well for the coming year of '21/'22 -- sugar season '21/'22. There's also been an increased amount of diversion towards gur and khandsari. Last year, due to the COVID lockdown, which came into effect in mid-March, gur and khandsari units had completely shut shop. And so for the tail end of the season, the last portion of the season, there was absolutely no diversion that happened and all that sugarcane came to the sugar factories. At this point in time, it's almost business as usual, and so we're seeing a few more gur and khandsari units operating in Uttar Pradesh. So the diversion levels are back to their usual levels. The company is actively pursuing a varietal substitution program to reduce our dependence on Co 0238, the miracle variety. There are a large number of sugarcane varieties that are now available in North India and to Triveni Engineering in our farms and in our test and sample plots, and we fully intend to ramp up the diversification of our sugarcane portfolio, which has a twofold benefit: number one, it allows us to mitigate the risk of Co 0238; and it also allows us to introduce some general varieties and, therefore, perhaps even reduce our cost of cane because general varieties are priced INR 10 per quintal lower. The Government of India has come out with an excellent and timely export scheme, as I have mentioned, and I fully anticipate the 6 million tonnes of sugar being exported. It -- the MAEQ of 1.82 lakh tonnes has been allocated to the company. As per the guidelines, the company may and can apply for higher quantities as well. Last year, we had applied and exported the bulk of the additional quantities that were allocated to us. And I think these export programs are very useful, and we'll see in the month of February and March exactly how much has been contracted in the country. I expect the bulk to be contracted then. And then if there's an opportunity, there is scope for players like of any to gain the pending amount. As far as the Engineering businesses are concerned, as far as the PT business, Power Transmission business, the deliveries of deferred orders from Q3 to Q4 with scheduled deliveries of Q4 are expected to have a significantly higher turnover and profitability in Q4 fiscal '21. The company believes that the order booking is getting normalized, and with the easing of COVID-19 and travel restrictions, both the supply of product customers and order booking should improve dramatically in the coming quarters. We're exploring a variety of new product segments and geographies to further improve our turnover and profitability. In the Water segment, as I mentioned just a few minutes ago, we participated in a large number of tenders, and we expect a positive outcome in some of those tenders over the next month. We do -- we expect some subdued activities in some of our new business opportunities in fiscal '21, but the business has geared up to tackle all of these issues quite commendably. So thank you very much. I'd now like to open up for questions.

[Operator Instructions] The first question is from the line of Sanjay Manyal from ICICI Securities.

Congratulations on a good set of numbers. I have a few questions about the export. So you have mentioned that you have exported or you have contracted some quantities this year. At what price you have contracted these quantities and whether they are white or raw?

So we don't disclose the price that we've contracted them at, but suffice to say that we've contracted at very, very good levels in terms of the prevailing market. And the contracts that we have entered into are only for raw sugar as yet.

Okay. Okay. And you have still sufficient quantities left to be contracted? And as prices are prevailing at $0.16, somewhere around that, and I'm sure you are getting the movements premium over that. So how it would translate into the rupee terms, if I just try to see the current prices?

Sure. So effectively, if you include the location premium that India is getting and the VHP premium for raws that are coming, for Uttar Pradesh, let me talk about Uttar Pradesh, this does not include the transportation to the port, et cetera. You're looking at gate realizations somewhere around INR 2,700 to INR 2,750 per quintal.

Okay. And including the INR 6, then it will become INR 33, INR 34, you're saying?

Yes. But you have to then deduct the cost of transfer of the sugar to the port, which will vary. So it could be anywhere between INR 150 to INR 175, INR 180 per quintal.

Right, sir. Right, sir. And sir, if I just may -- the current position as far as the recovery rates are concerned, what I understand, as on 31st December, it was 40 basis-point-odd below the like-to-like recoveries. How do you see that we end the crushing season with what kind of recoveries? Means, whether it will be down by 20 basis points or you see more than that?

So for us, the -- it's not an exact comparable, and the reason it's not an exact comparable is because last year, we were producing raw sugar as well, which was at a much higher recovery. For the quarter under review, we weren't producing any raw sugar at all. At the end of the season, we anticipate no more than a 5% decline in total sugar production or approximately 5% decline in sugar production for Triveni.

In terms of recovery because if suppose recoveries are, say, 20 basis point down or 30 basis point down, then probably it will increase the cost of production by INR 1 or so, if I'm not wrong. So if it is -- if you can just tell me in terms of recovery what you're anticipating the recoveries at the end of a season?

So in terms of a balanced recovery compared season-on-season, okay, so par-on-par, we anticipate a reduction of about 0.3.

Okay. So that will be INR 1 cost of production increase?

That's not -- I didn't say that. I mean that's the calculation which you'll have to work out. We're happy to assist you to work that out as well off-line.

Sure. Sure. Sure, sir. Sir, just one last thing on -- if you can elaborate a bit more on the CapEx plan in the sense what would be the total capacity or total volumes you will be [indiscernible] in distillery after the entire CapEx is completed? And can this CapEx come on stream before the next crushing season?

Sameer?

Well, to supplement this, as we mentioned, our capacity is going to go up by 160 KLPD for the molasses/ethanol thing, and this will come up well during this season. And as Mr. Tarun Sawhney did mention, it will be done within 4 quarters and maybe earlier. We are targeting to do it right in the initial stages of this season. Similarly, for the grain-based thing, we believe that it can be done in this calendar year.

The next question is from the line of Ambar from Vachi India.

Just one question, I wanted to reiterate. So the effective reduction in recovery is 37 bps on a like-to-like basis. Is that correct, assuming that we strip away the effect of the B-heavy diversion?

No, it's not just B-heavy diversion, it's also production of raw sugar as well. So it's going to be slightly less than 37 basis points.

Slightly less. Okay. And second question is that I see that you've got quite a healthy realization compared to some of the other companies that have reported results. So I'm guessing -- you did mention that you did not make any raw. So that's probably part of that. But on a cost of production, could you give me a ballpark number, how much cheaper is it to make raw sugar versus white sugar? How much difference does it work out on a cost of production basis?

Certainly. Suresh?

Very roughly speaking, it makes a difference of approximately INR 100 between raw sugar and white sugar.

INR 100. So approximately INR 1 a kilo. Okay. And then last question, just the -- actually, the phone company cut me off when you were answering the first question. But just to reiterate, at current prices, you said, ex factory, can be about INR 2,700 a quintal without the subsidy and then another INR 200 to get it to the port. So effectively, for the company exporting, it should be about INR 3,100. Is that right?

Well, it's approximately 27 -- INR 2,700 or INR 2,750. It's in that range right now.

In that range. And then you have to bear the transport cost to the port, right?

Correct. Your mathematics is correct. You deduct the transport, you add the INR 6 per kilo.

Does it make a -- not a substantial, but does it make any material difference if instead of doing it this way, you want to trade the certificates or some of the other routes that you are saying? Because I'm guessing not. Everything will ultimately equalize, right?

That's the -- you would imagine that it would, but it's a market-based phenomenon. So you do have times where one route is more profitable. At this point in time, if you were to sell the quota, it's approximately INR 3 a kilo.

The next question is from the line of Kunal Mehta from Vallum Capital.

Sir, for this quarter, could you please give us an indication of -- also for the quarter coming ahead -- from a cost of production perspective, what will be the average cost of production for this quarter also and for the coming season?

Sure. We don't give -- we can't give you any projections for the coming quarter. We typically don't do that. But for this quarter, I'll let our CFO handle that.

Our cost of production for this quarter is approximately about INR 32. And it's because of the fact that in the initial part of the season, the recoveries are lower. But as we go along and when the recoveries are improving, you would find this cost of production would sufficiently come down.

Okay. Okay. So if I understood you correctly, sir, going ahead as the recoveries improve, this cost of production will come down from INR 32 which we have in this quarter. So we may land up to somewhere in the range of, let's say, INR 31 and INR 32. That would be the right estimation, sir?

I think it could be a little below INR 31 also.

Got it, sir. Got it. And sir, secondly, on the export front, sir, I wanted to understand -- just wanted your perspective on this. So in the marketplace, if the entitlements for exporting sugar are being traded at INR 3 per kg, then from the perspective of the opposite person who is -- let's say, who's buying the entitlements, I mean, how does it make commercial sense? I mean could you please help us understand? Of course, at this level of prices, it may make some sense, but any perspective would be very valuable on how this is going around.

So the normal trade would be that if you buy the quota from any mill, you would buy sugar from the lowest-cost seller, which would probably be Maharashtra, and you would export the sugar, bear the cost for transportation, et cetera, and attain the INR 6 from the Government of India. Now that -- a portion of that is given back and that would be your profit for the mill that sells that quota. So it's simply a function of buying sugar cheap, exporting it and sharing the export incentive.

Got it, sir. Got it. And sir, just from your future export commitment perspective, sir, do you think that -- with respect to the prices which are trading in the range of $0.16 plus, so is it possible for mills to contract at even higher than that rates for the other geographies? For example, I think, last year it was the case where a lot of mills had -- of course, at the fag end, a lot of mills had been able to have $0.16 plus, maybe a $0.01 more for exporting to a lot of these countries on the Eastern, Southeastern side. So does it look likely, sir, this year also or...

So -- no, I think last year's numbers were much lower, substantially lower. And if you remember, in April of 2020, we had touched lows of $0.10. So a huge, huge difference between then and now. Having said that, this is the exchange-traded price. There are location-based premiums, and there are high-fold sugar-based premiums that will go on top of that. That number changes day-to-day. It's traded based on where the demand exists and who -- how much are people willing to pay for it. It's also fluid. It's not exchange traded. And so therefore, there's no way of being certain what that number is. It is a negotiation between buyer and seller. But certainly, there is a positive amount that gets added on top of this $0.163 number, for example.

Got it, sir. Got it. And just final 1, 2 questions from my end. So just wanted to understand your cost of production on the ethanol side for this quarter. And how much -- what is the composition between B-heavy and C-heavy? And how much are we going to -- so going forward, how will the composition be? If there is any meaningful increase in B-heavy do we envisage?

Yes. I just announced that in my opening remarks and it's in the investor report as well. During the current financial year, we've done 39% using B-heavy molasses, which was 15% in the previous year. Of the just under 10 crore liters that we have contracted, 90% plus is using B-heavy molasses.

Okay. Got it, sir. Got it. And just last question from my end. Just accounting on the -- I wanted to understand. So when I look at the Q2 results, when I study the inventory situation, last quarter, we had an inventory of roughly, I would say -- last quarter, we had an inventory which was costing us around INR 27-and-change, INR 27.4 per kg and -- so from a revenue -- from a profit-booking perspective, so since we liquidate this inventory on a cost in, cost out per basis, so liquidating this inventory at INR 27.4 versus a realization of INR 31.7 or something, the spread which you realized is somewhere around INR 4.8. That's how we look at it or maybe as the production ramps up, you average it out?

No, no, it's not that. We still have some inventory of last year's low-cost sugar with us at the end of the quarter under review. And so in the preceding quarter, there was sugar of the new season sold and the accounting for that will be at that cost of production.

That is the reason in the investor brief we have said our stocks are valued at INR 30.9. It is a mixture of new sugar as well as old sugar.

Right, sir. But when you're looking at the cost of production, when you're looking at COGS in this quarter, the COGS for this quarter would be a function of this quarter's production and the inventory which you're carrying on books which you would -- which you have sold. That's the way one would look at the COGS?

No, no, no. This cost of production which I told you just now only pertains to the sugar season 2021.

Understood, sir. I think -- actually, I have a few things to understand. I'll take it off-line, sir. No problem, sir. All the best -- very best for the coming quarters.

Thank you.