BCL Industries Ltd (BCLIND) Q1 FY23 Earnings Concall Transcript

BCL Industries Ltd (NSE:BCLIND) Q1 FY23 Earnings Concall dated Aug. 16, 2022

Corporate Participants:

Prashant Sharma — Quantum Securities Private Limited — Analyst

Kushal Mittal — Joint Managing Director

Analysts:

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Nitin Awasthi — InCred Equities — Analyst

Dheeraj Jain — Individual Investor — Analyst

Karthi Keyan — Suyash Advisors — Analyst

Utkarsh Somaiya — Individual Investor — Analyst

Dipesh Sancheti — Manya Finance — Analyst

Manish Aggarwal — Edison Energy Limited — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the BCL Industries Limited Q1 FY’23 Earnings Conference Call hosted by Quantum Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Prashant Sharma from Quantum Securities Private Limited. Thank you, and over to you, sir.

Prashant Sharma — Quantum Securities Private Limited — Analyst

Yeah, thank you, Renju. On behalf of Quantum Securities, we welcome you all to quarter one FY’23 result conference call of BCL Industries Limited. We thank the management for giving us the opportunity to host this call. The management is represented by Mr. Kushal Mittal, Joint MD.

I now hand over the call to Mr. Kushal Mittal. Over to you, sir.

Kushal Mittal — Joint Managing Director

Good afternoon, everyone and thank you, Mr. Sharma for the introduction. We’d like to extend a warm welcome to everyone attending the earnings call to discuss the first quarter of the fiscal year ’22-’23. I hope you and your family are all safe and healthy.

Let me start off by taking you through the key financial highlights for the first quarter. The total income for the quarter was at INR378 crores, which declined about 16% year-on-year. EBITDA for the quarter was at INR32 crores, which is a 14% increase year-on-year. EBITDA margin for the quarter were at 8.36%, 221 basis increase year-on-year. Net profit was at INR18 crores, an increase of about 5% year-on-year and PAT margins were reported at 4.68%, which is increased about 95 bps year-on-year.

Coming on to the operational highlights of the first quarter of the financial year, I would like to start with the distillery segment. The revenues from the distillery segment for quarter one stood at Stood at approximately INR96 crores, which was slightly lower by 2% against the same period previous year. This is primarily because routine 10-day maintenance shutdown that the plant took. BCL Industries continues to experience very good demand for both ENA and ethanol, thanks to the company’s experience in the grain of over three decades. We are able to stabilize our EBITDA margins in the sector despite overall raw material increase that has been faced by all. The company has used its vast experience in the trade to hedge against the global grain prices as well. The company further utilized its in-house maintenance procured paddy as tenders to supply husk and rice for its distillery sector. On the expansion front, the company has obtained all necessary information for the commencement of Svaksha Distillery and was able to commence production from July 1 at 50% capacity, but due to some initial issues at the power plant, the company has had to take a shutdown for about 15 to 20 days and is hoping to come into full production starting September 2022. While the production stabilizes at Svaksha, the company has successfully obtained the orders to supply Ethanol to OMC’s and also to Reliance. We’ve also received the FCI allocation of rice against the supply and we have already started to supply DDGS from this unit. The supply of Ethanol will start from the second half of August as we have some stock ready for us and the orders are now pending, the only thing that is pending is some special permits that are issued from Bengal government. Meanwhile, the work for the expansion of 200 KLPD at Bhatinda is under full swing, the company has availed over INR60 crores from Canara Bank against this project and this loan is applicable under the interest of subvention scheme. To hedge against rising fuel costs the company is setting up a boiler fired by paddy straw in this unit, which will help the company in diversifying its fuel needs as paddy straw is one of the toughest biomass to utilize and hence very few buyers are there in the market. The boiler qualifies for state government scheme in which SGST on the capex of the boiler will be refunded to the company. The capex on this boiler is around INR40 crores. With regards to the edible oil segment, the revenues of the edible oil segment for Q1 were approximately INR260 Crores and the company has been focusing on procurement of mustard seeds for the production of mustard oil due to a good mustard crop, which increased the overall segment production utilization, this is also evident in the increased EBITDA margin of the sector. The company has also seen a slight dip in the demand because of high volatility in edible oil prices globally and the government curbing on inflation. So in this situation, there is a low demand when volatility is very high, but the company expects this to settle in the coming quarters. Lastly in the real estate segment, the company recorded revenue of INR1.4 Crores. In an attempt to reduce the financial burden, we will continue to utilize the real estate to liquidate debt, which is visible in the earlier results. Thank you. I would now like to open the floor for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] First question comes from the line of Abhishek Maheshwari from Sky Wealth Management. Please go ahead.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Yeah, hi, thank you for the opportunity. Am I audible?

Kushal Mittal — Joint Managing Director

Yes, yes.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Yeah, hi. Congratulations on the good margins, but the revenue depreciation that we saw this quarter, I think Q-on-Q consecutively 33% decline. Can you explain in edible oil level, can you explain how much this of of margin effect?

Kushal Mittal — Joint Managing Director

Yes. Firstly, I have always been — in our industry, we never tend to compare quarter-on-quarter results because these are cyclical industries and it is always more accurate to compare year-on-year results and we have said this previously and I continue to say this again. So — and whereabout — see in the edible oil industry, what has happened is the government has started curbing on inflation and edible oil sector is one they are targeting to bring the prices down and there has been a very high volatility globally in terms of the edible oil prices and when there is such high volatility the people are expecting that the prices might reduce a bit then there is no distributor or retailer who would want to stock anything. So that is why there is a low demand, which was evident in our commentary previously also that we were saying that we expect little bit this quarter.

And secondly, in the summer months always there is low demand. So there have been two factors and we don’t want to sell our product at a loss. So that is why naturally there was a decrease in the revenue from the sector and we have surpassed our EBITDA margins, what we were saying in the past, we surpassed that and this is only because now there is more edible oil seeds available in the market for us to crush and process and as explained because we are fully vertically integrated, it is always more profitable for us to buy indigenous edible oil seeds and then process them in the oil mill or solvent or refinery instead of importing more and more oil and just refining it and selling it.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Sir, we are very happy with the margins. I’m not disputing that but even in year-on-year basis, there was a considerable decline in both distillery and edible oil revenues together?

Kushal Mittal — Joint Managing Director

Basically, I think the decline is very minimal, and that’s a couple of reasons that I explained, there was a 10-day shutdown, which is a maintenance shutdown, which won’t — overall throughout the year, our capacity utilization will still be 100% and we won’t see any hindrance there. And also in this study there was another thing was, this quarter we saw DDGS prices being very low. So in that — in those days, the company tends to stock up on DDGS instead of selling it because the price is cyclical and we prefer to sell it once the price increases, which is it is starting to. So that was another factor. So basically, I wouldn’t really consider it because throughout the year we’ll will achieve 100% capacity utilization. But in the edible oil sector, there has been a lower demand in the market, in general, and that is not just with us. I think every company you look at in this sector, they will have the same story we expect the demand to increase.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Okay, has that picked up over the last month of this current Q2?

Kushal Mittal — Joint Managing Director

Slowly. Slowly.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Okay, thank you. I’ll get back to the queue.

Operator

Thank you. Next question comes from the line of Nitin Awasthi from InCred Equities. Please go ahead.

Nitin Awasthi — InCred Equities — Analyst

Hello sir, could you please specify the ENA rates during the quarter, I want the fee rate, ENA rate and DDGS rates and the broken rice rates?

Kushal Mittal — Joint Managing Director

ENA and DDGS rates during the quarter?

Nitin Awasthi — InCred Equities — Analyst

Yes.

Kushal Mittal — Joint Managing Director

So ENA rates during last quarter were around INR57 to INR58 and the broken rice rates were around INR18 to INR19 and DDGS, there is a little difference than what the market sells, so ours was around INR24. So in that scenario we decided not to sell anything.

Nitin Awasthi — InCred Equities — Analyst

Got it, sir. So one in the notes. One of the — in the presentation, one of the notes you mentioned was that you have sold ethanol to Reliance, so how is the pricing with Reliance when it comes to ethanol? How is that decided?

Kushal Mittal — Joint Managing Director

So the pricing with Reliance has been done which is the same as the OMCs and prices were at just two differences that we have done with them, so the OMCs have passed on a relief amount, which we have to bill them quarterly now, so that is a relief amount of INR2.337 per liter, but with Reliance, we bill them at the time of dispatch and the payment terms with OMC is a 21-day credit, with Reliance is 15-day credit. But otherwise, the rest of the commercials are the same.

Nitin Awasthi — InCred Equities — Analyst

Got it sir. Lastly what was the power issue in the Bengal plant because of which there is a delay?

Kushal Mittal — Joint Managing Director

It has been a power plant issue with the steam line designing, which we had some difficulties which is causing vibration in the turbine. So we are working on fixing it and we expect the production to commence in September.

Nitin Awasthi — InCred Equities — Analyst

Okay, sir. Thank you. That’s all from my side.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. [Operator Instructions]

Kushal Mittal — Joint Managing Director

Just to clarify on the last question Nitin Ji, the average rate of ENA for quarter one was exactly at INR58.8, so closer to INR59.

Operator

Thank you. [Operator Instructions] The next question comes from the line of Dheeraj Jain, an Individual Investor. Please go ahead. Mr. Jain, please go ahead with your question.

Dheeraj Jain — Individual Investor — Analyst

Yeah. Hi. Can you hear me?

Kushal Mittal — Joint Managing Director

Yes. Hello.

Dheeraj Jain — Individual Investor — Analyst

Yeah. So thank you for the opportunity. Did I hear it correctly that some approval is still pending from the Bengal government for the distillery?

Kushal Mittal — Joint Managing Director

I am sorry, I will clarify that, all licenses are in place, but in Bengal there is still an outdated system that once we receive the purchase orders from the OMCs, it is a small procedure, where the purchase orders are also forwarded to the state excise and that goes to a chain of command, where they sign it that you can dispatch this, dispatch this, so they give them a tanker wise purchase orders and the state government gives us its NOC tanker wise to dispatch it, which is regular in nature. But for the first time, we are learning the process also but once first NOC comes then it would all be regular there is no clearances pending in terms of licenses, whether that is environmental, fire, boiler, excise, all that is clear. It is just a small procedure that has to happen in the state of Bengal.

Dheeraj Jain — Individual Investor — Analyst

Okay, thanks for that. So if I understood correctly, you started the Bengal distillery at 50% capacity utilization and then after a few days you encountered some issues, right? And then because of that you had to kind of shutdown and then work on rectifying the issue, so right now, there is no production happening at that distillery? And then we intend to start only in September?

Kushal Mittal — Joint Managing Director

As we speak there is no production happening, we stopped the plant about a week ago and we are still working on the issue. Some issues are normal in the initial stage, but this has been an issue that is so long and we are working on resolving it as soon as possible. But at the same time, we have some stock available of ethanol, which we should start dispatching this week.

Dheeraj Jain — Individual Investor — Analyst

Okay. And by when do you envisage that we would be able to hit 100% capacity utilization for this plant?

Kushal Mittal — Joint Managing Director

We’re trying — we’re trying within the next days — within the next 10 days. But to be conservative, I will say the first week of September.

Dheeraj Jain — Individual Investor — Analyst

Okay, it would be 100% hopefully, right?

Kushal Mittal — Joint Managing Director

Because most of the plant was tested at — [Speech Overlap]

Dheeraj Jain — Individual Investor — Analyst

Okay. Okay. And like what is the status of the Bhatinda plant when do you intend to start I believe it is on track, right? The expansion —

Kushal Mittal — Joint Managing Director

The work is on track as we speak and we are hoping by December of this year.

Dheeraj Jain — Individual Investor — Analyst

Okay, thank you. Thanks for the opportunity and best of luck.

Operator

Thank you. Next question comes from the line of Abhishek Maheshwari from SkyRidge Wealth Management. Please go ahead.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Yeah, hi. Thank you again for the follow-up. just — my question was actually answered by the previous participant, but I have a follow-up on that, so when you bid for ethanol tenders, do you already have the economics of it in place or once you do get an order is when you place for the grain supply and everything, just want to understand what is the predictability in performance of the distilleries? Do we have that? Yeah, sorry.

Kushal Mittal — Joint Managing Director

It is a good question and to answer it, I would say, see first to understand that there is two ethanol that I can supply — two types of ethanol that I can supply as a grain-based supplier. One is ethanol that is derived from damaged food grains, so — for that, I have put in a yearly tender and there is no way right now that I can buy damaged rice in yearly contract that is done on, there are different contracts, some are seven days, some are months, some are 15 days, some are two days. So that is all calculated by us, we have a team that sits down and we forecast the price of grains throughout the year and that is how we do in a discussion on how much ethanol to supply under the damaged food grain seeds.

And same with the fuel. Fuel also is done, there are different contracts for different time periods, there is no — although, in Bengal, we have done a yearly contract for husk, but since there has been exponential increase in prices, which were not expected by anyone to be honest. We are seeing that the supplier also runs into troubles and he is asking for cost escalation which is justified. So we might have to revise that as well. But there is also another ethanol that is

The ethanol that is from surplus food grain, so that has a fixed grade, so that you buy a grain from FCI at INR20 a kg, you buy a rice from FCI INR20 a kg and there is a fixed amount for ethanol. The only big variable in that is the fuel price. But see that is the major difference and this year we have seen an unforeseen rise in the prices of food — damaged food grains and husk and other types of fuel as well.

So keeping that in mind, the government has given us a relief, which we will be able to bill them in every quarter. And also they have allowed us to, if we wish to change our supply from damaged food grains to surplus rice ethanol they allowed us to do so. For example, we have given more — we have shifted some of our damaged food grain quantity from to surplus in Bhatinda and 90% of our supply in Kharagpur will be again surplus food grains, against which we already have the necessary orders in place.

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Okay. Sir, and thank you very much for the detailed answer. And sir, one question regarding edible oil. So I can see that there has been a considerable price deterioration in edible oil, but are the volumes intact, you have said that the demand is a little less, but what can we do to keep the volumes intact at least and set our EPS based on margin improvement?

Kushal Mittal — Joint Managing Director

[Foreign Speech]

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

That I get it. That I get it. But regarding volumes, sir.

Kushal Mittal — Joint Managing Director

Volumes, see, yes, it is improving as we speak, but it is not what we saw in Q3 or Q4 of last year. We are frank about it. But as during monsoon that gets folder, the volume increases naturally and there is nothing I can do that is out of the way to increase my volume. This is the demand factor is there and that has been experienced by everyone not just me, so it is nothing that I am doing wrong [Foreign Speech].

Abhishek Maheshwari — SkyRidge Wealth Management — Analyst

Okay. Thank you, sir. Thank you very much for that.

Operator

Thank you. Next question comes from the line of Karthi Keyan from Suyash Advisors. Please go ahead.

Karthi Keyan — Suyash Advisors — Analyst

Yeah, hi, good afternoon. One on the your — new boiler that you’re proposing to set up at a cost of INR40 crores. Just wanted to understand, what is the supply arrangement you have in place for the rice straw? And in what form will it be consumed?

Kushal Mittal — Joint Managing Director

I’m sorry, your voice is echoing.

Karthi Keyan — Suyash Advisors — Analyst

I was asking you, what is the arrangement in place for paddy straw?

Kushal Mittal — Joint Managing Director

What is availability?

Karthi Keyan — Suyash Advisors — Analyst

Arrangement — arrangement in place for paddy straw?

Kushal Mittal — Joint Managing Director

Okay. For paddy straw, we have about 15 days in which I’ve to procure the entire paddy straw for the entire year, because when there is harvesting a farmer now has a choice between either burning it and causing pollution or hiring balers and making bales of it and selling it to people like us. So that is a 15-day period in which I have to procure for the entire year and I would need about — my forecast is that, I would need about 120,000 tons of paddy straw for the coming year out of which about 70,000 ton I have already done a contract with a supplier, who will supply me 70,000 ton and the rest we have a team in place, who will start procuring once the harvest season is there.

Karthi Keyan — Suyash Advisors — Analyst

And what capacity are these boilers, it would be 30 tons?

Kushal Mittal — Joint Managing Director

Mine is 60 ton boiler.

Karthi Keyan — Suyash Advisors — Analyst

60 ton boiler — if I may ask you what would be the per ton consumption? Okay, 60 ton boiler — 1.2 — 60 ton boiler.

Kushal Mittal — Joint Managing Director

The fuel consumption?

Karthi Keyan — Suyash Advisors — Analyst

Yes.

Kushal Mittal — Joint Managing Director

So fuel consumption for this could be around 350 tons per day.

Karthi Keyan — Suyash Advisors — Analyst

And this will be consumed in repeated format?

Kushal Mittal — Joint Managing Director

Yes, it will be in bales but the bales are of different sizes there are 25 kgs, 100, 200 kgs and these bales will be cut and then it will be fed into the boiler.

Karthi Keyan — Suyash Advisors — Analyst

Okay, directly it is dried and fed into the boiler?

Kushal Mittal — Joint Managing Director

Yes, directly into the boiler.

Karthi Keyan — Suyash Advisors — Analyst

Right, interesting. And second thing is on fuel security for your ethanol, so going ahead what should be the mix between broken grain and FTI or other sources for you as well grains to FTI for you?

Kushal Mittal — Joint Managing Director

See currently in Bhatinda, we are about 50/50 at surplus and damage and looking at the current market trend, I think, next year we will be aiming for about 80% from surplus food grain, because so much food grain has been exported out of India and lot of broken rice has been exported to China and Bangladesh. So there is a short supply in the market when it comes to damaged food grains and keeping that in mind, we will ship more of a quantity towards surplus rice.

Karthi Keyan — Suyash Advisors — Analyst

Right. Right, and you are not seeing any signs of stress in terms of pricing for the surplus grain part?

Kushal Mittal — Joint Managing Director

See, the grain prices are increasing as I speak and we are working on how to battle it, so I won’t say, it is a very easy situation but we are managing it well.

Karthi Keyan — Suyash Advisors — Analyst

Sure. Thank you so much for answering and best of luck.

Operator

Thank you. Next question comes from the line of Utkarsh Somaiya, an Individual Investor. Please go ahead.

Utkarsh Somaiya — Individual Investor — Analyst

Thanks for the opportunity. You had earlier guided for INR1,000 crore revenue for the current year for the edible oil segment? And — sorry for the distillery segment and INR1,500 crore of topline for the edible oil segment? Do you still maintain that margin?

Kushal Mittal — Joint Managing Director

See in my distillery segment, I think it might reduce a little, because Svaksha has been delayed by a couple of months due to the international issues, which we were not expecting since the plant has been designed in a way that we are not expecting these issues, but if Bhatinda unit is to start in December then I think, we should reach around INR800 crores, INR900 crores from distillery and we are aiming for that still. For edible oils, see that it just depends on how much further the prices were to decrease or where they will stabilize and that is tough for me to say at the moment, but around still we should aim for more than INR1,200 crores at least.

Utkarsh Somaiya — Individual Investor — Analyst

Okay. And your margins were around 4.3% last year — your PAT margins and you’ve seen that improve this year. So how will you think the year will end in terms of PAT margin?

Kushal Mittal — Joint Managing Director

That’s tough for me to say, because the markets in both edible oil and damaged food grain or fuel is extremely volatile, we have not seen anything like this in the past. So it is really tough for me to say, but what I can say right now is, as more and more edible oil seeds are available for us we expect good EBITDA margins from our edible oil sector.

Utkarsh Somaiya — Individual Investor — Analyst

So far Q1 has been pretty good. So don’t we expect similar better margins throughout the three quarters given that even power costs have come down?

Kushal Mittal — Joint Managing Director

I don’t know who are saying power costs are coming down, I have lot of contact, power costs are still increasing throughout the nation, but I think, we just try to sustain these margins.

Utkarsh Somaiya — Individual Investor — Analyst

Okay. And what is your current gross debt standard — net debt standard and what will it be at the end of the year?

Kushal Mittal — Joint Managing Director

Our debt situation, as of today is about INR180 crores in working capital in this year and now we have availed INR70 crores in Svaksha, which is both working capital and term loan and about INR60 crores in Bhatinda, so that’s about INR310 and we expect by the year end for this should be around INR350 crore.

Utkarsh Somaiya — Individual Investor — Analyst

Okay. And of this, how much is term loan of the INR350 crore?

Kushal Mittal — Joint Managing Director

INR170 crore.

Utkarsh Somaiya — Individual Investor — Analyst

INR170 crore. Okay. So do we expect any of the working capital loan to reduce by the year end or thereafter. It will be — it will remain at this —

Kushal Mittal — Joint Managing Director

Not for this year. Not for this —

Utkarsh Somaiya — Individual Investor — Analyst

Okay. Thank you and best of luck.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. Next question comes from the line of Dipesh Sancheti from Manya Finance. Please go ahead.

Dipesh Sancheti — Manya Finance — Analyst

Hi, sir. Sorry I joined late, but so apologize if there’s any repeat questions.

Kushal Mittal — Joint Managing Director

That’s okay.

Dipesh Sancheti — Manya Finance — Analyst

Yeah. Firstly, is there is any increase in grain prices — broken grain prices?

Kushal Mittal — Joint Managing Director

Yes, yes, broken grain prices have increased and are increasing, they are in the increasing trend.

Dipesh Sancheti — Manya Finance — Analyst

How much by — if you can just quantify what percentage?

Kushal Mittal — Joint Managing Director

Yeah. I mean, at the start of last quarter, quarter one I was buying grain at INR17 to INR18 and today I am buying that grain from INR21 to INR22.

Dipesh Sancheti — Manya Finance — Analyst

Okay. Okay. So we plan to make the additional grain, which we get from that only we will be doing, right? As you mentioned in the previous question that 80% and 20%?

Kushal Mittal — Joint Managing Director

See that is for the new sugar. That was a new ethanol yield that I would be aiming for my — 80% of my ethanol to be supplied against the surplus food grain scheme. That is for the new sugar yield, but even we have our own rice mills, so we bought about 30,000 tons of paddy in a tender in the state of MP. And just going — so that we can keep supplying rice to our distilleries at a reasonable rate because paddy is old and not many millers will pick it up because the quality isn’t good but we as a distiller do not care about the quality of the rice as much. So we do things like that to mitigate the risk and for that reasons going off to last question I do not foresee my working capital coming down this year, because to participate in a tender like this I have to pay cash for 30,000 tons of

Paddy, which is a decent amount so over INR30 crores and but it helps our margins, so we have to participate in — no competitor of our does work like this. So we keep finding opportunities to help reduce our raw material cost but the rise in the raw material cost is an issue.

Dipesh Sancheti — Manya Finance — Analyst

Okay. And so regarding the paddy straw question, the total cost of purchasing is INR30 crores?

Kushal Mittal — Joint Managing Director

Total cost of —

Dipesh Sancheti — Manya Finance — Analyst

Purchasing the paddy stock from farmers for entire year would be INR30 crores that is what you saying sir?

Kushal Mittal — Joint Managing Director

I never said that. We —

Dipesh Sancheti — Manya Finance — Analyst

You just mentioned the INR30 crores figure that is why?

Kushal Mittal — Joint Managing Director

See I have said INR40 crores is the capex for the power plant and I think to give a fiscal value to the purchase of —

Dipesh Sancheti — Manya Finance — Analyst

According to you how much that be paddy if you are trying for the entire year?

Kushal Mittal — Joint Managing Director

For the entire year? I mean, I think, It should be around INR27 crores.

Dipesh Sancheti — Manya Finance — Analyst

INR27 crores and that will be accounted for this quarter or I mean, in this quarter itself, in the coming quarter, which means we will be buying right now?

Kushal Mittal — Joint Managing Director

This will be in the month of October-November.

Dipesh Sancheti — Manya Finance — Analyst

October, November, okay. Now has this Svaksha Distillery started or it is still under shutdown?

Kushal Mittal — Joint Managing Director

We were able to start the plant at 50% capacity utilization and we were able to produce ethanol and DDGS from it. But there has been some issues in the power plant, so we had to take a shutdown and we are working on resolving these issues and we are hoping and working towards coming into full capacity utilization by start of September.

Dipesh Sancheti — Manya Finance — Analyst

So as of today, it’s still under shutdown, because you mentioned the 15 to 20 days shutdown from 1 July, so we are in August, we are sitting in August. So that’s why I wanted to ask?

Kushal Mittal — Joint Managing Director

It has been shutdown now, that worked through most of July

Dipesh Sancheti — Manya Finance — Analyst

It worked through most of July. So early in August, we are having this shutdown for maintenance of this power plant?

Kushal Mittal — Joint Managing Director

I would not say maintenance there have been some other issues so we are working on that.

Dipesh Sancheti — Manya Finance — Analyst

Okay, you think this resolution will be found by September?

Kushal Mittal — Joint Managing Director

Yes, yes, the resolution has been found it is just implementing it on ground which is taking a bit of time.

Dipesh Sancheti — Manya Finance — Analyst

Great, great. Great, and will — now just a question, basically that, will the FCI allocation in future and also from our mills, will it be enough for our distillery, so all our distilleries in the expanded format to work?

Kushal Mittal — Joint Managing Director

No. No, we have to buy — we still have to buy rice — broken rice and damaged food grains from the open market because surplus rice that we buy from FCI can only be used towards producing ethanol and we don’t wish to — we still wish to have 50% of our capacity dedicated towards ENA because it is the more profitable business at the moment. So we still need to procure the rice — broken rice from the open market and we do not see these prices cooling until the new crops, so until October, November we see prices of broken rice to be high. And then on surveying the crop, seeing what broken would be there, we will be able to make a better guess on what the prices will be next year.

Dipesh Sancheti — Manya Finance — Analyst

I was just coming to the ENA realization. Yeah, tell me. Sorry.

Kushal Mittal — Joint Managing Director

And also as we speak the government is considering the rise in food grain prices and I think, they are going to come with more export curbs, I think, today just they were talking about wheat and stuff like that will help in stabilizing food grain prices in the market.

Dipesh Sancheti — Manya Finance — Analyst

Right, because I just read in the news today and it was all over the news that since there is a low rainfall that there is chances of all the rice companies saying that the yield might be less?

Kushal Mittal — Joint Managing Director

See the rainfall in northern part has been good, in East India, yes, there has been some areas with low rainfall which could effect, the yield it is too early to say at the moment.

Dipesh Sancheti — Manya Finance — Analyst

No, but under no circumstances our distillery will be having any shortage of raw material, they should be working in 100% capacity without any surge?

Kushal Mittal — Joint Managing Director

We expect it to work 100% capacities. Yes.

Dipesh Sancheti — Manya Finance — Analyst

Okay, there would not be any dearth of raw materials?

Kushal Mittal — Joint Managing Director

No.

Dipesh Sancheti — Manya Finance — Analyst

Perfect. Now, ENA realization was better can you just quantify because since ethanol also the government was giving INR2 extra till September 2022I believe, and then with that the ENA realizations are still better than that?

Kushal Mittal — Joint Managing Director

Yes, so that is until the end of the sugar year that INR2.33 that they are giving is until the end of the sugar year and the new rate will be coming out after that, but still yes, ENA realizations are still better as currently in Punjab, the ENA rate is from INR60 to INR61 per liter.

Dipesh Sancheti — Manya Finance — Analyst

And in West Bengal?

Kushal Mittal — Joint Managing Director

In Bengal, it is still around INR59 to INR60.

Dipesh Sancheti — Manya Finance — Analyst

INR59 to INR60, okay. Great. Great. And okay, now you already said about the debt part I just wanted to know, what is the interest rate? I mean what is cost of [Technical Issues]

Kushal Mittal — Joint Managing Director

See our working capital, the interest rate is 7.35%, which is about INR180 crores out of the total I had mentioned. The INR120 crores of term loan in Bhatinda, the interest rate from bank is 8% but that is under the interest subvention scheme so the applicable interest rate to the company will be 4% and the INR70 crores loan which includes working capital and term loan at Svaksha Distillery, the interest rate is at 8%.

Dipesh Sancheti — Manya Finance — Analyst

8%. And this subvention of 4% is for how many years?

Kushal Mittal — Joint Managing Director

It is for six years.

Dipesh Sancheti — Manya Finance — Analyst

Six years, great. And if there is any other further since we will be having a boiler also for the paddy straw that INR40 crores also we will be taking under subvention?

Kushal Mittal — Joint Managing Director

No. That is included in the total project cost. So the — against the total project cost we will be taking a loan of INR120 crores, which is fully under the subvention scheme.

Dipesh Sancheti — Manya Finance — Analyst

Okay, okay, so there is no additional loan?

Kushal Mittal — Joint Managing Director

The subsides that I get is the INR40 crores, that I am spending on the boiler approximately the SGST portion of that capex will be refunded to me by the Punjab government.

Dipesh Sancheti — Manya Finance — Analyst

Okay, and that is 8%, sorry 9%?

Kushal Mittal — Joint Managing Director

9%. 9%.

Dipesh Sancheti — Manya Finance — Analyst

Okay, great. Okay, is there any MSP on — now coming just to the edible oil, is there any MSP on mustard seeds?

Kushal Mittal — Joint Managing Director

Yes, there is an MSP on mustard seeds.

Dipesh Sancheti — Manya Finance — Analyst

How much is that?

Kushal Mittal — Joint Managing Director

INR48 and currently the price of mustard seed in the market is around INR66.

Dipesh Sancheti — Manya Finance — Analyst

INR66, okay. So that is on — and what is the shelf life of these mustard seeds, I mean, I am just saying that if since you are getting from farmers, why do not we buy it for a longer period of time?

Kushal Mittal — Joint Managing Director

Yes, we currently are sitting on a good amount of mustard seed stocks and that is helping our EBITDA margins because we have more indigenous oil to process and the shelf life is good with three, four years.

Dipesh Sancheti — Manya Finance — Analyst

Three, four years. So I mean, we will be able to maintain these margins for another two, three quarters easily?

Kushal Mittal — Joint Managing Director

We are trying, yes.

Dipesh Sancheti — Manya Finance — Analyst

Nice.

Kushal Mittal — Joint Managing Director

See, but also we procured the mustard seed at a given rate and if the prices of oil were to deteriorate too much then it is not good as to sustain these margins but I do not see them deteriorating too much. So we are trying to sustain these margins.

Dipesh Sancheti — Manya Finance — Analyst

I know, the government has been after palm oil, so does that — will that affect our oil prices also, from last quarter has that decreased or it is the same?

Kushal Mittal — Joint Managing Director

It has decreased the prices of oil in the market and it might decrease a little further also.

Dipesh Sancheti — Manya Finance — Analyst

Okay, but you still expect to maintain reasonable margins?

Kushal Mittal — Joint Managing Director

Yes. Yes. Because we don’t indulge in too much forward buying in futures in the imported oils, we buy, process, and sell. We don’t want to keep that risk in our hands.

Dipesh Sancheti — Manya Finance — Analyst

Right. And in this quarter, has there been any inventory loss or gain in the edible oil?

Kushal Mittal — Joint Managing Director

Yes, there has been an inventory loss in the edible oil.

Dipesh Sancheti — Manya Finance — Analyst

Can you quantify it how much?

Kushal Mittal — Joint Managing Director

I am not sure of the exact amount in front of me.

Dipesh Sancheti — Manya Finance — Analyst

Okay, no problem.

Kushal Mittal — Joint Managing Director

I can get back to you.

Dipesh Sancheti — Manya Finance — Analyst

No problem. And how much was the real estate revenues — how much real estate revenues are you expecting till FY’25, I mean, how much more can we juice out from our real estate business?

Kushal Mittal — Joint Managing Director

See I think it should be around INR15 crores maximum not more.

Dipesh Sancheti — Manya Finance — Analyst

One five?

Kushal Mittal — Joint Managing Director

One five, yes.

Dipesh Sancheti — Manya Finance — Analyst

INR15 crores, okay, fine. Now the ENA resolution, okay. Now asset side I just saw some that the capital work was referring to the Svaksha and Bhatinda expansion on the asset side of the balance sheet, there were capital work in progress and there was real estate, there was increase in FY’22 in the balance sheet?

Kushal Mittal — Joint Managing Director

We bought some 6 acres of land in one of the colonies, which was under dispute with the Electricity Board, the dispute has now been resolved, and the land is ours and a bit of working capital was there.

Dipesh Sancheti — Manya Finance — Analyst

Okay, so this is in Bhatinda itself, right?

Kushal Mittal — Joint Managing Director

Bhatinda, yes, in the current establishment just joining it, this has been in dispute since the colony was built.

Dipesh Sancheti — Manya Finance — Analyst

So great, I mean, where we have additional 6 acres for further expansion. Great.

Kushal Mittal — Joint Managing Director

Yes. Yes.

Dipesh Sancheti — Manya Finance — Analyst

Okay. And now this is my last question about trade receivables in FY’23, do you think — what is the nature of bad debtors? I mean, it was about —

Kushal Mittal — Joint Managing Director

Bad debt in our industry is very minimal. In distillery, we do not have any bad debt, very minimal like INR50,000 to INR1 lakhs against country liquor maybe in an entire year and even in edible oil someone had asked me what move are you doing to progressively market in the edible oil sector, I currently do not sell much edible oil for credit. It is only done to one or two, three people who have been dealing with us for the past 10, 20 years. Otherwise, if someone comes looking for credit, we do not serve them. So that is why even in this bad debt is very minimal.

Dipesh Sancheti — Manya Finance — Analyst

That is great. So are we trying to — are we planning to get into B2C through Amazon, through Flipkart are we planning to do something like that?

Kushal Mittal — Joint Managing Director

Our brand presence has increased and we have had a new team and are planning on increasing this even further. And even in the distillery segment, I am very pleased to say that there has been a new excise policy that has come into play under the new government and it has opened up the market for everyone and we too are now aggressively marketing our country liquor product and it is doing very well for the past 1.5 months, so that has given us lot of courage and encouragement and now we are also re-launching IMFL brand Vodka Summerchef in the market, which did very well previously, but due to the excise policy, we have to shut it down, discontinue it, we are now bringing it back. So even in the sweet segment, at the Bhatinda unit, we are increasing our consumer focus.

Dipesh Sancheti — Manya Finance — Analyst

What brand if I may ask?

Kushal Mittal — Joint Managing Director

See we have country liquor brand, which is Asli Santra, Ranjha Saunfi, we are launching a new country liquor Vodka brand and we have our IMFL Vodka brand called Summerchef, which was doing very well in the years 2011 to 2014-’15 but after that it was discontinued due to the excise policies in the state, but now we are re-launching the product.

Dipesh Sancheti — Manya Finance — Analyst

Great. That is great. And it was mentioned that we have won an order from Reliance also for the distillery, so this is the first time we have won an order from Reliance?

Kushal Mittal — Joint Managing Director

Yes, actually it is the first time we spoke to Reliance. They had been interested in procuring ethanol from Bhatinda also but since most of our quantity was already diverted towards ENA and towards the ethanol tender to the UMC. We won’t be able to cater to the demand, but in Kharagpur, they reached out to us again because they have a huge, huge requirement of ethanol for blending purposes and we have now saved some quantity for them and this will be a start of a good relationship.

Dipesh Sancheti — Manya Finance — Analyst

Okay, just a general question that most of the companies whether it is Global Spirits, whether it is EID Parry, I mean, everybody has reported lesser numbers for their distilleries from the last quarter including BCL, is there any particular reason because of raw material or because the realizations were already high because of the additional INR2.33 which was given by the government?

Kushal Mittal — Joint Managing Director

This INR2.33 has come into play because I have to bill them quarterly and are yet to bill them since the relief was forwarded to me, so that has not been reflected in my numbers yet or any of the other company numbers. And also we are experts in the food grain division, we have been in the market for 30 years primarily in food grain because we started off as an oil mill and a rice miller, which are competitive. Then we have very good gist of the market when it comes to procuring food grains and that has helped us to procure at lower rates in my competition, but sometimes we reported lower margins [Foreign Speech] I used to say every business is run differently and are still safe today, but we — I think, personally saying, we have an advantage when it comes to procuring food grains.

Dipesh Sancheti — Manya Finance — Analyst

No. No, you have reported better margins, I can really compliment that to you and you have really been very nice to shareholders by giving us dividend and not to taking — deciding not to take dividend, I think that has to be really appreciated by all small investors like us. Thank you so much.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] Next question comes from the line of Dheeraj Jain, an Individual Investor. Please go ahead.

Dheeraj Jain — Individual Investor — Analyst

My question is related to the 6-acre land that you have got now finally after resolution of the dispute so what are your plans for that, are you planning to expand in the real estate sector because earlier you had mentioned that you do not have any plans to venture into real estate?

Kushal Mittal — Joint Managing Director

I just said old dispute settled and basic work will be done, there will be plotting only, we would not be building any group housing over there, basic amenities will be given like road, electricity, sewage and stuff and the basic plotting will be done, so not much investment is involved.

Dheeraj Jain — Individual Investor — Analyst

Okay, fine. Thank you for that update. Thank you.

Operator

Thank you. [Operator Instructions] Next question comes from the line of Dipesh Sancheti from Manya Finance. Please go ahead.

Dipesh Sancheti — Manya Finance — Analyst

Again, this is just a request that if we can have a con call aftermarket hours, I think, we will get more participation from a lot more investors and because this is actually the time of market so lot of investors do not come for con calls, just a request, if it can happen because it is a lovely company and I want more — I mean, it would be lovely if more investors would know about this company.

Kushal Mittal — Joint Managing Director

I think, that is a good idea, we do not have any issues with it. Next time we keep it in mind, I will discuss with our IR team.

Dipesh Sancheti — Manya Finance — Analyst

Yes. After 3:30 if it is done or around 4 o’clock, I think it will be great.

Kushal Mittal — Joint Managing Director

No problem we will try. We will do it next time.

Dipesh Sancheti — Manya Finance — Analyst

Thank you so much. Thank you.

Operator

Thank you. [Operator Instructions] Next question comes from the line of Prashant Sharma. Please go ahead.

Prashant Sharma — Quantum Securities Private Limited — Analyst

Yeah. Sir, I just want to know your plans to expand — I mean, say, ramp up the production in the West Bengal plant, once it starts in September when can we expect it is running at 100% capacity?

Kushal Mittal — Joint Managing Director

See, I think, once we start in September, we expect it to work at 100% because a lot of the trials were done while it was working at 50% and lots of false over from — once we start, we would be aiming for 100%.

Prashant Sharma — Quantum Securities Private Limited — Analyst

Okay. Okay. What is your capex plan for FY’23 and FY’24?

Kushal Mittal — Joint Managing Director

So FY’23 our capex plan is to finish our Bhatinda expansion of 200 KLPD ethanol, which has a project cost about INR180 crores and ’23-’24, actually, once the Svaksha 200 KL is stabilized and we are confident with it, we would like to start the work towards adding another 100 KL over there, it is, we have done lot of the home work there, whether that is in clearances. So we expect to start that to work by December. So that would be around INR45 crores to INR50 crores in that expansion.

Prashant Sharma — Quantum Securities Private Limited — Analyst

Okay. Sir, this is just a general question, recently there has been a rumor that says the government file, I mean, government inventory of rice is going down. So they might prohibit conversion of rice into ethanol, my understanding till now is that the broken rice that we take is not for human consumption. So can you please throw some light on this?

Kushal Mittal — Joint Managing Director

Firstly, I have not heard of this rumor, I don’t know they are still supplying us under the scheme and surplus rice is supplied to us by the government and for that we have a separate policy and then there is broken rice that we find in the market for ENA production or damaged food grain ethanol production and these are two different type of rice, the damaged food grain we buy from the market is primarily food that’s not — primary rice that is not consumed by humans, either rejection, broken, damaged, has foreign material whatnot, and the rice we procure from the government under the surplus rice scheme that is PDSI that is very good quality rice. So yes, there are different — they are different raw materials.

Prashant Sharma — Quantum Securities Private Limited — Analyst

Okay. Thank you. That is all from my side.

Operator

Thank you. Next question comes from the line of Dipesh Sancheti from Manya Finance. Please go ahead.

Dipesh Sancheti — Manya Finance — Analyst

Sir, just one question you mentioned that a lot of broken rice has already going to China [Technical Issues] any particular reason since broken rice is not for human consumption — are they using it like soya meal?

Kushal Mittal — Joint Managing Director

What I understand it has gone for poultry industry to China.

Dipesh Sancheti — Manya Finance — Analyst

Okay. Okay.

Kushal Mittal — Joint Managing Director

For poultry industry, they have imported a lot.

Dipesh Sancheti — Manya Finance — Analyst

Okay. Thank you.

Operator

Thank you. [Operator Instructions] Next question comes from the line of Dheeraj Jain, an Individual Investor. Please go ahead.

Dheeraj Jain — Individual Investor — Analyst

Yeah, thank you for the opportunity again. Sir, if the rumor about the rice as the government not releasing the surplus rice for ethanol production tends out to be true I hope that it is not because that it is happens, would you be able to access broken rice is there enough broken rice, would you have access to that, if not then what would be the impact on the business if surplus rice is indeed not available?

Kushal Mittal — Joint Managing Director

See I firstly, I don’t know, I hardly doubt whether this rumor is true to begin with that. And secondly, yeah, of course, you can procure something but our prices of damaged food grain was increasing further. So if you want to procure then do it rates are going to increase which will impact the margins. But the OMCs are also understanding that there has been an increase in prices and raw material prices. So we expect a further revision of price, further upward revision of price in the next ethanol year as well.

Dheeraj Jain — Individual Investor — Analyst

Okay. There is no dearth of broken rice is that fair understanding, if surplus rice is not available then I understand that the rates of the surplus rice would increase but what about the quantity is there enough quantity of broken rice available?

Kushal Mittal — Joint Managing Director

It is tough to say at the moment because lot of supply comes from surplus now, so it is tough to say, but I think, yes, rates were increased, but I think there is enough availability and there is new crop coming in as well.

Dipesh Sancheti — Manya Finance — Analyst

Okay. Thank you for that update. That is it from my end. Thank you.

Operator

Thank you. Next question comes from the line of Manish Aggarwal from Edison Energy Limited. Please go ahead.

Manish Aggarwal — Edison Energy Limited — Analyst

Hello, sir, thank you so much for the opportunity. I just have one simple question I just came across an article in Business Standard, where it states that the cost of manufacturing a second-generation plant is almost six times that of first-generation. So how far do you agree with this?

Kushal Mittal — Joint Managing Director

I think, firstly that article second generation say, there has been a plant that has commissioned and I still don’t see them producing. It is very tough thing to produce ethanol from second-generation and no private player can venture into that industry because firstly the capex for which is almost seven to eight times as much and then further cost per liter that is done by the government for a green initiative, yes, that article is accurate if someone is able to produce 2G ethanol.

Manish Aggarwal — Edison Energy Limited — Analyst

Sir, what — could you please just help me with what is the difference between first generation and second generation, like as far as my knowledge is the second generation is basically the grain based, yeah?

Kushal Mittal — Joint Managing Director

Second generation is what they are doing is, for example, they are trying to extract ethanol from paddy straw, extracting ethanol from cellulose, so that is second generation. What we are doing or what molasses-based companies are doing is first generation.

Manish Aggarwal — Edison Energy Limited — Analyst

Okay, our grain-based ethanol plant is basically comes under the category of first generation and not second generation?

Kushal Mittal — Joint Managing Director

Yes.

Manish Aggarwal — Edison Energy Limited — Analyst

Okay. Thank you so much. That is all. Okay. Thank you so much.

Operator

Thank you. As there are no further questions we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. Kushal Mittal for closing comments.

Kushal Mittal — Joint Managing Director

Yes, I would like to thank you all for joining and asking very good questions about the company. We at BCL are trying our best to deliver the best results despite the market trends in edible oils and grains and we hope meeting your expectations in the future as well. Thank you so much.

Operator

[Operator Closing Remarks]