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

Ladies and gentlemen, good day, and welcome to Triveni Engineering & Industries Limited Q2 and H1 FY '22 Earnings 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.

Good day, everyone, and a warm welcome to all of you participating in the Triveni Engineering & Industries Limited Q2 and H1 FY '22 earnings call. We have with us today on this call Mr. Tarun Sawhney, Vice Chairman and Managing Director; Mr. Suresh Taneja, Group CFO; Mr. Sameer Sinha, CEO, Sugar Business Group as well as other members of the senior management team. Before we begin, I would like to mention that some statements made in this discussion may be forward-looking in nature, and the statement to this effect has been included in the invite, which was sent to everybody 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, following an interactive question-and-answer session. I will now request Mr. Tarun Sawhney to open the call. Over to you, sir.

Thank you, Kevin. Good afternoon, ladies and gentlemen, and welcome to the Q2 Fiscal '22 results earnings call for Triveni Engineering & Industries Limited. The performance of the company in the half year ended 30th September has certainly been satisfactory. While the Sugar segment has witnessed lower dispatches in the half year, including in Q2, the average realization price has improved quite significantly, and the firmness has really started in the month of August this year. The distillery segment has continued its strong performance, which has been driven by higher dispatches and higher realization prices. The performance of the engineering business has substantially improved in terms of profitability, despite marginally turnover, which has been primarily driven by the big improvement in the power transmission business. Revenues from operations for the half of year to stood at INR [ 2,266 ] crores with a profit after tax of INR 184.77 crores, which is a growth of approximately 61%. The Board of Directors of the company approved the payment of an interim dividend of 125% for the financial year ending March 31, '22. I'd now like to cover the business segments of the company in a little more detail. The sugar business has -- let me start with the summary, of course, the sugar business, the UP government has announced increase in the cane price or SAP by INR 250 per tonne, for the upcoming season. In view of the domestic and international factors, sugar prices have improving very firm since August 21 this year. With sugar production for the upcoming season is anticipated at approximately 30.5 million tonnes according to our estimates, and this is after the diversion towards [ ethanol ]. As part of the engineering businesses are concerned, the profitability increased substantially, in view of the strong performance of power transmission business, and the order booking for the combined engineering businesses stood at INR 1,700 crores. The revenue from operations for this quarter [indiscernible] was INR 1,155 crores with an EBITDA margin of INR 116 crores and a profit after tax of INR 92.47 crores. The decline in the net turnover by 9% in the current quarter and 12% at the half year is mainly due to lower sugar dispatches like 21% and 24%, respectively. Having said that, the alcohol and power transmission business have achieved higher turnover in the current half year and quarter, compared to the corresponding period of the last fiscal year. The operating profit is in the quarter, higher by 35%, as I mentioned at INR 115.91 -- INR 116 crores. The share of profit from the associate company is higher due to accrual of significant exceptional income at this point must be noted as well. The debt of the total company stood at 15 -- I'm sorry, INR 515.54 crores, 32% lower compared to INR 761.43 crores in at the end of the previous corresponding quarter, September 30, 2020. The INR 515 crores comprises of term loans of INR [ 364.35 ] crores in and all these loans are with interest subvention or at subsidized rates of interest. On a consolidated basis, the total debt of the company are INR 581 crores term loans of INR 430 crores. The net cash position in the company is greater than INR 650 crores at this particular point in time. Looking at the finance cost, our average cost was 5.14%, very healthy, certainly below what our estimates were. And better than the previous corresponding quarter, certainly not better. Turning to the sugar business. For the quarter under review, we had 211,000 tonnes approximately of dispatches domestically, which was, as I mentioned, markedly lower in the 241,000 tonnes of dispatches in Q2 fiscal '21. Having said that, the domestic realization was 34,900 for the period under review, which is appreciably higher than 33,300 in the previous corresponding quarter. The turnover of the sugar business, therefore, was 16% lower due to the lower dispatches of 21%. The sugar inventory on the September 30, 21 stood at 23.93 lakh quintals, which was valued at INR 29.2 per kilo. There has been an appreciable and significant amount of heavy rainfall in the month of September and October, which has had an impact of delaying the start of the sugar factories in order to produce. And it may possibly have an impact on the yield of the plant crop. Although at this particular point in time, with the rains that happened as recently as this past weekend, it is uncertain to decide what the impact is on the yield. But there maybe potentially in the best case, only a marginal effect, but it is, we will wait and see. And the area closest to Uttarakhand have been most impacted. And Eastern UP itself has also been quite severely impacted by this unseasonal rainfall. At present, prevailing sugar prices are [indiscernible] INR 3,800 per quintal. For refined sugar and INR [ 375 for plantation sugar ]. Domestic sugar prices were subdued between May and July '21, and this was primarily due to the second phase of lockdown, due to COVID-19. But as I have mentioned, that sugar prices recovered appreciably from August 21 onwards. And with the start of '21 '22 season, we're expecting sugar prices to certainly be stable at refined prices in excess of INR 3800 -- INR 3,600 and [ plantation ] prices in excess of INR 3,500. So a very stable environment is being forecast from pricing going forward by us. Our co-generation operations achieved external sales of over INR 14 crores during the H1. There were no operations in Q2 fiscal '22 as this was our top season. From an industry scenario perspective, I'd like to point out that sugar season '21, '22, Uttar Pradesh is estimated to have an area of 23 lakh hectare, which is broadly in line with the previous year. Maharashtra's cane area is estimated, however, to increase by 11% from 11.48 lakh hectare to12.7 lakh hectare. The sugarcane area in Karnataka is also estimated to be marginally higher. The sugar production, in Uttar Pradesh is expected to be 11.35 million tonnes, pre-diversion, while in Maharashtra, it will be substantially higher than Uttar Pradesh at 12.25 million tonnes, Karnataka is expected to be a [ same ] on the 5 million tonnes. For season '21-'22, we have revised our estimate for the entire country's sugar production of 30.5 million tonnes, which is just a [ steep ] lower than we seen production in the previous year. However, we have considered a much higher diversion of 3.4 million tonnes towards ethanol production versus an estimated diversion of 2.1 million tonnes of ethanol of diversion towards ethanol in these previous sugar years. Within opening balance on the first of October '20 of 10.7 million tonnes and a approximate of 31 million tonnes, the closing balance is estimated to be 8.3 million tonnes, about 2.5 million tonnes. And I think this is 1 of the main factors, which has resulted in the increase in the firmness in sugar prices. In my estimation, a very healthy level, a closing balance level would be between 7 million and 7.5 million tonnes of sugar, and that is what we need to outperform for the future. Turning to ethanol. Contracts, the 350 crore liters have been executed till October 17, 2021, out of the 367.3 crore Liters finalized by the OMCs for the ethanol year 1. However, the total requirement was 457 crore liters to meet the 10% target. I would like to mention very briefly over [indiscernible] that if we look at the quantity of sugar that is being diverted towards ethanol, our projections in the next year with 2.1 million tonnes being diverted, 7.7% blending targets have been achieved across the country. Now if we take 1.3 million tonnes of extra diversion, taking to 3.4 million tonnes of diversion. In our estimates, that would equate to 2 percentage points increase so at least a 9.7% blending target achievable at parity levels in the subsequent -- in the coming year. And this bodes very, very well in my opinion for the ethanol blending program across the country. Looking at the international scenario as per industry report is estimated the global deficit could be in the tune of 3.4 million tonnes in 2021. And this is due to primarily a lower Brazilian sugar crop. Brazil has had a very poor season. There has been talks of [indiscernible] and drought and frosts as well that have damaged the cane crop. And there is some evidence to show that this damage will not abate even in the next crushing season. As per the latest Unica release, the cane processing for the Centre South region in the current season is down almost 7% from the same time last year. Unica has also reported that 36 mills have also finished their crushing season, which is a lot work for than expected practically. In Thailand, local cane prices and forecasts of ample rains suggest a production recovery to 10 million tonnes from 7.7 million last year. And this is a very good recovery for Thailand who will still return to the international trade market, and we'll see entire sugar on competing with any Indian exports as well. Looking at pricing. As of yesterday, the #5 contract from March concluded at $505.5 and the #11 raw contract for March 22 was $19.07 per tonne. This is at it has already come down but the recent ties but the low contract is as high as [ 50.7 ] and [ 20.6 ] per pound. It has come down, but these are normalizations. It is expected that about 1.5 million tonnes of contracts have already been entered into -- for export of sugar from this year, primarily from Maharashtra and partially from Karnataka. Turning to our alcohol business. Our sales for the quarter under review were substantially higher at 37,000 kilo liters versus 34,300 kilo liters in the previous corresponding quarter. Our average realization, of course, was also higher at INR 51.5 kilo liter versus INR 44.76 in the previous corresponding quarter. Both the distilleries have operated at high efficiency. The production has increased by 12%. Volumes have grown by 8%. The net turnover for the quarter has also increased by 28% as I mentioned. During the quarter, the company produced 77% ethanol from B-heavy molasses as compared to 26% in the last quarter. The company is well on track for its expansion plans, and I'll take a minute just to brief you on the commissioning stages. A new distillery with a capacity of 160 KLPD at sugar mill Milak Narayanpur will be commissioned at the beginning of Q4 fiscal '22. The new grain-based distillery of 60 KLPD will be set up at Muzaffarnagar, and this too will be commissioned in -- at the beginning of Q4 fiscal '22. The other expansions that are anticipated to take the total capacity of the company up to 660 KLPD will be completed in Q1, early Q1 of fiscal '23. The total cost, as I had mentioned in my previous call for the entire expansion, we had estimated at INR [ 250 ] crores. This includes the increase in material cost and pricing of raw materials that we've experienced over the few months. So we're very well on track of meeting the targets that 1 I had talked about the last time we had spoken on this call. Looking at the Engineering business. The power transmission business has performed exceptionally well. We've had our highest ever quarterly revenue of INR 54.36 crores is a marked improvement. And commensurately, a much higher PBIT of INR 20.83 crores. Our order booking has also closed appreciably higher compared to the corresponding quarter last year and stands at INR 161 crores. The higher profitability has been driven by volume, a favorable product mix, and cost control measures that have been implemented at the business unit. The water business also has good results with the PBIT, PBIT of INR 4.17 crores. And the order book is closed at INR 1,538 crores. The above -- these results include the operations of our [indiscernible] owned subsidiary, executing the market at [ Mathura water project ]. There has been some small delays in the normalization of activities that I had talked about in the last time we spoke, we've spoken about the water business having normal activities in the next coming quarters. We've certainly seen very positive trends towards sent with more contracts coming up for [indiscernible] sugar. And I think in this quarter under question. And certainly, by next quarter, we should be back into a state of great normalcy. And it all goes very well for the business because I believe it's very well positioned in a large number of upcoming tenders. Very briefly, if we look at the outlook of sugar. We expect that sugar prices will sustain, broadly speaking, at present levels, not giving some indication of that, and especially in the view of the increase in sugarcane prices that will be, that is payable by [indiscernible]. The export program from the northern part of the country needs to be watched very clearly. My personal view is without an export subsidy, it is highly contingent on getting good expected realization for exported sugar. And it's a bit, a little bit sense so there's no level of certainty. I do believe that if there is any additional subsidy in any form that is offered, PBIT or otherwise, you will have exports from North India. If it is it central that we do export the nation a minimum of 5 million tonnes to ensure that we have an excellent closing balance by the end of this coming sugar season. The ethanol production from the sugar mills is also intended to accelerate. I have briefly given an insight that we believe that 9.7 plus percent is easily achievable by the industry. I think a big driving factor is going to be the increases in pricing of ethanol, which is expected to be announced in the very near future. And I think that is something that is an important signal indicator for further capital expense and for the industry to commit to beyond 10% ethanol vending levels. The Government of India has announced recent qualifications to the monthly quota data release mechanism and to incentivize diversion of sugar for ethanol production. And this is from October '21 onwards. However, that's only a small package. I think direct price increase is what the majority of industry is after, and certainly what we are [indiscernible] in our application. Looking briefly at our engineering businesses, the domestic economic recovery of fiscal '22 is expected to continue. Our strong sector, the steel, cement, petrochemicals, oil and gas, fertilisers et cetera. These are all doing very well and which bode extremely well for the power transmission business. We've been focusing on business opportunities from Defense and actively participating in several tenders, which we expect to see a close out in Q3 and Q4. And the business is also equally focused on generating higher revenues from exports, which we anticipate in Q3 and Q4. And lastly, with respect to our water business, there are a large number of tenders which are in various stages of finalization. And we expect that to be complete by in during Q3 and Q4 of this fiscal year. So all of it really bodes well for a good close out for the year, and I'll be very happy now to take some questions.

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

Congratulations on good set of numbers. So I have 2 questions. What would be the transfer pricing for the B-heavy molasses? And how do you value inventory? What I understand, it is lower than last quarter given the fact that it is of single. Ideally, should have been higher. So what exactly is the methodology for the sugar [ industrialization ] ?

Yes. I'll explain this question to you. The drop price of the B-heavy molasses heavy is INR 850 per quintal. And as regards to your second question, as of 30th of June, we had a certain valuation rate and it was a blended rate between the sugar produced up to March 3, 21. And sugar produce in the first quarter. And obviously, the sugar produced in the first quarter because of very high recovery carries with very low cost of production. Now what happens in Q2 as the sugar gets dispatched, so normally is the sugar which is produced up to March 31, 21, it gets dispatched. So therefore, the quantum of high-cost inventory reduces in our total inventory. And therefore, the valuation grade comes down.

Right. Right. Understood. Just 1 thing on the export front. At what price do you look to export, if suppose government do not give any subsidy? And at what price you will look to export and what quantities do you think you would be able to, or you want to require [indiscernible]?

Well, let me take the first part of the question. I think at levels greater than INR 34 per ex factory that would be the starting point for us to consider growth got exports, given where domestic prices are today. In terms of quantum. Last year, we managed to do just under 200,000 tonnes of sugar exports, and that was very easily possible, although some of that actually was slightly traded quantity. We have 7 sugar factories. And so there is ample opportunity during the sugar season to produce even more than that quantum of sugar for export, not that we will, but you're asking a theoretical question. And so I'm offering a theoretical answer. There is the possibility of actually doing even more quantity than that, but it's all content pricing.

Okay. Okay. And INR 34 you mentioned is ex factory? Or...

Ex-factory.

Okay. Okay. And just 1 last thing, if you can elaborate your plans about later this year. What revenue [indiscernible] was somewhere around INR 300 crores, what exactly your bigger long-time plan to open the business?

Yes, that's an excellent question. So a write-down of [indiscernible] as of December '20 is in country liquor only IMIL, what is called the IMIL. That is certainly projected to grow where the alcoholic beverages vertical is a central part of our distillery and alcohol business. And we're looking at significantly higher levels as we move forward. This is very, very much a starting, start of the business. The volumes of IMIL was 3.65 lakh cases in Q2 fiscal '22. So these are still small numbers, but they are growing at a very, very rapid pace on a month-to-month basis. As we move into the winter months, the consumption level goes up to extremely high. And so we intend to participate in the growth in the market as well as to occupy a greater share in this particular market. At this particular point in time, we're running at near peak capacity levels of packaging, and where we have new bottling lines that are being installed by the year.

Any number you would like to say, down like 4 or 5 years, what could be this business, what could be the size of the business?

We tend to stay away from forward-looking estimates.

The next question is from the line of Rajesh Majumdar from B&K Securities.

So I had -- actually, I'll follow up on the first question from [ Sanjay Manyal ] and then I'll go back to my question. You said that the net realization in the factory would be INR 34 for exports to be viable. Are you referring to the Maharashtra mills or the UP here mills? Because for the UP mills, the additional INR 2 in inverse rate involvement, as I understand. So when you say INR 34, are you talking about the Maharashtra mills or the UP mills?

I am only talking about Triveni Group. I can't speak for any other sugar mills. So if we get INR 34 ex factory for Triveni, we would contemplate exporting sugar. Rates above INR 34 per kilo ex factory. My understanding is that Maharashtra has entered into export contracts well below INR 32 for that 1.5 million tonnes that is already been committed. And certainly at levels of INR 32, I have been told that Maharashtra will, without the subsidy, will enter into export contracts.

But it is a bit surprising because the domestic prices are so high and inventory position is already down sharply over last year, and considering the fact that we're expecting 30.5 million tonnes as against the earlier forecast of 31 million?

So no, it's not surprising, frankly speaking, because it's all a matter of net realization and cost of funds taken into account. If you export today, you will receive the money within 30 days, whereas if you hold the sugar, the average holding time is let's say, 6 -- 7 months. So there is a delta in terms of holding cost that has to be considered. The second point, of course, is that the increase that you get in your monthly quota from the central government. And that, too, has its financial impact as well. The third are the operating benefits of producing raw sugar. The raw sugar cost of production is significantly lower, you are able to crush at higher rates, and therefore, there are operational efficiencies, which were quantified after that. So we are comparing what our prevailing of predicted sugar prices and looking at what would could that price be for raw sugar, which would be a comparable and that is INR 34.

Okay. So about [ $0.20 ] per pound -- And if -- what you are seeing find out really over next year in terms of Brazil and prices actually go up to let about [ $0.25 ] per pound, then India can actually export 7 million tonnes?

I don't see why not. I think it's a price is close to $0.21, which will be high for the market because the market has only had a recent high of about [ 20.8 ]. But at those levels, and provided we have a favorable exchange rate, which is a very important element in this because the exchange rate, which is dollar-rupee, which is at INR 75 plus now, was a period of time in the very recent past has been seen INR 33.5 -- INR 73.5. And that, of course, is a negative factor as far as exports are concerned. The realizations fall. So these are -- these are the factors that 1 will have to look.

Right. But around 20 is comfortable for 4 million tonnes, I think, it's been $20.75.

Around $20, it's dependent on exchange rates. But yes, I think we will certainly see higher exports. You have to consider the fact that at levels of $0.19 then there no new export contracts that have been entered into the last few weeks. So if we come back about $0.20, there will be opportunistic placements that will certainly happen and we will be able to go for 1.5 tonnes to potentially 3, 3.5 million, 4 million tonnes. But for us to reach 5 to 6 million tonnes, which is what I think is absolutely necessary. We either need the world market to increase substantially, which is a bit of a challenge given where the prices has been in the last 30-odd days or we need some kind of government interest.

And my second question was -- yes, I...

I just want to add that there is sufficient time for that intervention. We haven't even really seen the start of the crushing season in North India. So there's plenty of time for that decision to be taken by GOI.

Okay . Got it. Got it. And my second question was, why is the government not announced an MSP when they announced the cane price side. I mean it is really, 1.5 months since the cane price hike was announced for a month. And we still see [indiscernible] or MSP hike. Whereas the cost of production for everyone has gone up between INR 2 to INR 2.5 per kg, right? So I mean right now prices are good. But so investors will be more happy if there is the base so that the things go downside is also known by the market?

Well, investors will be happy and operators like us will be happy as well. The option of that is we will have greater certainty and [indiscernible] as well. I don't have an answer to that. This is a decision that is based at [ Krishi Bhavan ] Ministry of Food makes that decision as well [indiscernible], they have chosen not to increase it. Having said that, the industry associations and we too at Triveni are pushing forward our perspective that it is vital that in the landscape where cane prices both at [ FAP ] and SAP and Triveni where both of them have risen, it is important to raise the MSP as well. There is an off chance that it will happen this year.

Okay. And in all prices are linked to what SAP or [ FAP ]. So if the [ FAP ] has been hiked by INR 5, you can expect a similar hike in [indiscernible]? Or how should we look at that?

The SMR pricing, there's no publicly given formula. But it is a complex set of issues. It is -- what I can share with you is it's certainly not connected to crude. That's the ministry has been amply clear out. There are many constituent elements in the rising impact. 1 of them happens to be the prices gain. There are other elements as well. I think the government will also look at prevailing sugar prices in order to look at the ethanol price because there is an opportunity process, there are 2 elements. 1 is the cost of cane. The second is the opportunity cost of making sugar or diverting to [indiscernible] and instead of ethanol. And those are important things for the government to consider in establishing the ethanol prices. The varies ethanol prices.

Okay. And what would your expectation be for the ethanol?

But for any follow-up, maybe I request you to rejoin the queue, please.

I'll just answer that question. It's impossible to want to say, but I do expect that during the course of November, we will get the pricing. So it's not too long in the, in the future. You will know in the next 30-odd days.

The next question is from the line of Karan Agarwal from Tusk Investment.

Could you please highlight, what are the reasons why Triveni dispatched lower sugar this quarter?

Yes. We dispatched lower sugar this quarter because we are subject to the quota mechanism, which is by the Government of India. The government of India prescribed a quota per sugar factory. We have 7 sugar factories. And they have strived this quota on a monthly basis, and it is based on the stocks that are in hand and the anticipated consumption levels. Our quota this year compared to last year are different because in the last year, Maharashtra production was much lower. And so the UP miller to meet the consumption across the country got a higher quota. In this year, the sugar production in Maharashtra was higher, and therefore, the total amount of sugar proportionately given to each and every factory was commensurately a little bit lower. And that is the primary reason why our quota was slightly lower compared to the previous year.

I have 1 more question, which is about the current inventory that we have as of date, how many months do you think we'll take to inventories -- to liquidate this inventory?

We anticipate that we will liquidate this inventory by January.

And previous year, it was, when it was liquidated by?

So previous year, we went up to end of January as well, early February.

The next question is from the line of from Ambar Taneja from Geomatrix Capital.

My question is, you just mentioned that you will be looking at exports for at a net ex-mill price of about INR 34. So I mean, assuming some linkage between #11 and your ex factory, where would you say that the March contract price has to rise in order for you to get offers for a INR 34 ex-mill kind of number? And number 2, industry-wide, this year, we have seen ethanol blending used 3.4 million tonnes of sugar as per the latest estimates, what would you have out a guess for the next year -- next October, if we were having a chat, how much do you think we could achieve?

Sure. Okay. To answer your first question, there are 2 elements. Firstly, I'm assuming that the rupee-dollar would be INR 75-plus okay, not below INR 75. And if we saw the #11 March contract come closer to $20.3, $20.4, I think that we could easily get offers in this in range. and provided the about INR 74, sorry, INR 75 and INR 75.5. At that level, we could start to see some interest. There are 2 reasons. The first is that if we reach $23, -- $20.3, $20.4, it is a significant departure from the $0.19 that prevailed through the month of October. And so therefore, sugar would have broken out into a new band. And then there is, of course, sufficient volatility that exists in the market, and it will create more appetite for Indian sugar. So I think those 2 are very important elements in getting this INR 24 realization ex-factory. Now turning towards your question of the [ advanced quintals ] of 3.4 million tonnes of sugar being diverted towards ethanol production. For the subsequent year, it's a big question mark. And the reason why it's a the question mark, is it really depends on what the constitute is of the 3.4 million tonnes. How much of it remains has B-heavy and how much of it is used. For us to achieve higher diversion rates, we need to have a much larger [indiscernible] set of program. And therefore, we need juice pricing to go up. And so it's really dependent on the pricing that we see, not just in the month November, but then, of course, in the following year as well. By the pricing in the November is important is because any company across the country that is looking at setting up a distillery, we will look at this year's pricing as a benchmark for the future, and that is absolutely quite as important. I don't see cane production -- sugar cane production coming down. Rightly speaking a little bit of [indiscernible], et cetera, et cetera. It will be replaced by the all the variety. And that is why I can't even addressed it in my opening remarks. For us, I mean, yes, there are isolated incidents of [indiscernible] across the country. But with strong variety of replacement programs, you are able to mitigate that risk. Now then you have a good quantity of cane, forecast not just this year, next year and beyond. The real question is how much gets diverted towards ethanol. That function is purely based on prices. And so my hope would be that we would achieve much higher levels of closer to 4.2 million tonne diverted in the following year, but that is only possible if there is [ fresh ] investment in capacity that happens over the next few months, and we have better pricing.

[Operator Instructions] The next question is from the line of Sanjeev Damani from SKD Consulting.

And congratulations for a very good set of numbers. My first question is regarding my understanding about raw released and refined sugar if you can kindly explain. You did mention something, but I could not understand much about it. So can you kindly tell me that?

Can you restate your question?

Sir, I wanted to understand what can be termed as raw sugar, then finish the sugar, and refined sugar. And what are the costing differences in that process?

Very significant differences. Raw sugar is not fit for human consumption. We had a [indiscernible] levels, color levels, higher than 600 [indiscernible]. We have plantation wide sugar that's available across India. It is crystalline sugar, white crystal sugar, that is typically sold, the majority of sugar produced that had [indiscernible] value of up to 150 [indiscernible] let's say, 50 [indiscernible] to 150 [indiscernible]. And then you have refined sugar, which has [indiscernible] levels some 45 [indiscernible]. That is what is typically traded globally and considered as white sugar. The -- as I mentioned to you, we have international benchmarks for raw sugar because raw sugar is not traded domestically. At present, raw sugar trading internationally at $90.7, and refined crystal sugar is trading at $505 per metric ton. The price of traditional white sugar varies across the country, depending on where you are. In Uttar Pradesh it is typically a INR 1.5 to INR 2 per kilo higher. At present, prevailing prices in Western Uttar Pradesh are approximately INR 36.75 per kilo.

Sir, I wanted to understand the costing part at factory level, when we export raw sugar, do we incur less cost to export raw sugar?

We don't think that the cost in ex-factory level, we are not exporting raw sugar right now. At this point in time, we're not exporting raw sugar.

Okay. Okay, sir. Okay, sir. And because -- I mean I presume this way that when you export raw sugar, you are not able to [ export ] molasses. Am I correct or I'm wrong about it?

You also get molasses.

We get molasses. Even when we export raw sugar, we get molasses at our plate.

The next question is from the line of Karan Agarwal from Tusk Investment.

Thank you, sir, for taking another question from my side. If I -- if I'm not wrong, you said that the prices -- the sugar prices are going to stabilize around INR 37 per kg, is that correct?

So what I had said was that our anticipation for the following year is INR 36 for refined sugar, and INR 35 for plantation white sugar. For the average next year.

Average for next year. Yes. So in the following 2 months, do we can expect that the commercial prices of white sugar to gradually come down because the new crushing [indiscernible] question is underway, is that correct?

Yes, you can say from the level that we're at now, which is a peak. And frankly speaking, this is it's a wrong point in comparison because we have just finished with Dussehra. You've got Diwali, the biggest holiday season that is coming up and prices tend to inflate coming up to Diwali. And then the [indiscernible] come to a normal rate, which is still a very respectable increase from where the prices were in early August of this year.

So INR 35 is the average we can assume going forward next year?

For plantation white and INR 36 for refined.

INR 36 for refined. I've got it. Almost 50% of Triveni sugar is refined, and 45% to be precise.

The next question is from the line of Anupam Goswami from B&K Securities.

My first question is from a follow-up of earlier question. So you have mentioned that -- for the country to increase its blending program, juice program has to incentivize. Do I -- according to my understanding, the juice, the margin in the juice segment is a little lower than B-heavy program. So does it mean that the juice prices has to go up at least equaling to B-heavy prices on the margin level, where then we can see a higher blending, and higher meat of the requirement of the higher blending.

You are absolutely correct.

Okay. Should right now, it is not very profitable for [ NIM ] to go for the higher juice instead of the B-heavy right? We are doing it just to lower our sugar inventory?

At this particular point, the margin from the B-heavy is higher than that of juice. You're absolutely correct in that understanding.

But now to set up a juice per unit, what is the thought process? What is the motive in that just to decrease the sugar capacity -- sugar stock?

It is to -- it's a commercial decision. It's based on a return. It based on a project return. Now whether you decide to push juice through it or push B-heavy through it, it's the same technology and the same process. You don't have a different plant that processes C-molasses and B-heavy molasses. And it;s from same technology across the board. It's just the size differs. So we always have the possibility of buying molasses from the open market as well.

Okay. Okay, sir. So my next question on, do you have any distillery, we have seen the EBIT margin going up to [ 34% ], even though we have about 70%, 75% blending towards -- diversion towards [ B ]. When can you see a margin which is more about like the industry standard or how the industry leaders are doing about 40%, 45% to that level? And what is our cost of production in this distillery segment, the cost of production of ethanol precisely?

You see, if you look at this question, the output price is fixed. It's dependent on the product mix. We do about 77% to 80% of [ DLE ]. Therefore, the output pricing is very low. On the input pricing are the pricing of molasses, which is dependent on the [ standard ] pricing policy that various peers may be following, which will be different from ours as well as the conversion cost. Our conversion cost is a little under INR 9 on a trended basis. And that would be, I would say, on par with everybody else, 1 of the most efficient operators for achieving the [indiscernible] kind of environment. It is based in a nutshell based on your transfer price. So there is no benchmark per se because you can change your transfer price to reflect a higher profitability in 1 business at the cost of another business.

Right. And the size of [indiscernible] cane price goes up, then its sugar division will have a higher growth. Okay. So my next question is, if the export prices go up, do we see domestic prices also forming at the time and if government will come in between and put a cap on the domestic prices?

I don't see the government putting the capital domestic prices in any time in the near future. I do not believe that there is a marginal increase in international sugar pricing that it will have a commensurate positive impact and in India. We make -- if we are able to maintain the prices at elevated because of the [indiscernible] holiday fees that would be a good achievement.

[Operator Instructions] The next question -- It's from the line of Sanjay Manyal from ICICIdirect.

Yes. Just a follow-up question. Sir, do you have -- So as small in Q3, what I understand your...

I'm sorry, you broke up. Would you repeat -- could you repeat the question, please?

My question is do you have sufficient molasses by the end of September to these INR 3 crores?

To produce INR 3 crores, but if you look at that number, is it for the quarter? Because we have sufficient old molasses, which will last us until November. And in November, our units are starting and there will be new molasses, coming into play.

It seems like we lost the connection for the current participant. As there are no further questions, I now hand the conference over to the management for closing comments.

Ladies and gentlemen, thank you very much for joining us for the Q2 fiscal '22 results of Triveni Engineering and Industries Limited. I hope is that when we speak next for the Q3 results, we will have substantial developments within the industry. There will be a brand-new ethanol policy, which is something that is eagerly anticipated. We will know the results of the rain on the recoveries as well as projected crushes for to predict us even in a better position, to talk about anticipated production levels across the board. And those are important points. In fact, you may see a return to normalcy, hopefully, across our engineering businesses after the COVID lockdown, which is abated. Thank you very much for joining today, and I look forward to speaking to you in approximately 3 months.

Thank you. Ladies and gentlemen, on behalf of Triveni Engineering & Industries Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.