BCL Industries Ltd (BCLIND) Q4 FY23 Earnings Concall Transcript

BCL Industries Ltd (NSE:BCLIND) Q4 FY23 Earnings Concall dated May. 31, 2023

Corporate Participants:

Kushal Mittal — Joint Managing Director

Analysts:

Vikram Vilas Suryavanshi — PhillipCapital India Private Limited — Analyst

Mayur Liman — Profitmart Securities — Analyst

Nirav Seksaria — Living Root Capital — Analyst

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

Shlok Dave — CAO Capital — Analyst

Aditya Surana — Niveshaay — Analyst

Ankur Kumar — Alpha Capital — Analyst

Rahil Shah — Crown Capital — Analyst

Manan Shah — Moneybee Investment Advisors — Analyst

Narendra — RoboCapital — Analyst

Siddarth Malhotra — Private Investor — Analyst

Neeraj Jain — Private Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the BCL Industries Limited Fourth Quarter and FY ’23 Results Conference Call hosted by PhillipCapital India Private Limited.

This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.

[Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vikram Vilas Suryavanshi from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Vikram Vilas Suryavanshi — PhillipCapital India Private Limited — Analyst

Thanks, Rico. Good morning, and very warm welcome to everyone. Thank you for being on the call of BCL Industries Limited. We’re happy to have management of BCL with us here today for question-and-answer session with investment community. Management is represented by Mr. Kushal Mittal, Joint Managing Director.

Before we start with the question-and-answer session, we’ll have opening comments from the management. Over to you, Kushal.

Kushal Mittal — Joint Managing Director

Thanks for the introduction, and also thank you to PhillipCapital for hosting our earnings call. Good morning, everyone. We would like to extend a warm welcome to the earnings call for the fourth quarter and financial year ended 2023.

Let me start by giving you the key financial highlights for the fourth quarter. Total income for the quarter was around INR458 crores, including Svaksha, which is a decline of 10% on a year-on-year basis. EBITDA for the quarter was INR48 crores, which increased by 16% year-on-year basis. EBITDA margin stood at 10.47%. The net profit was around INR25 crores, which is an increase of 7.4% [Phonetic] year-on-year basis. PAT margin stood at 5.37%. It is important to note that the revenue contribution from Svaksha for the quarter was at INR74 crores and EBITDA was at INR9 crores, which is an improvement from the previous quarters.

For the financial year ended ’23, the total income stood at INR1,827 crores, which is a decline of 8.7% year-on-year. EBITDA stood at INR130 crores, a decline of 10.6% year-on-year and margins were at 7.13%. PAT was about INR64 crores while PAT margins were at 3.5%. For Svaksha Distillery, the total income for the financial year was at INR187 crores, with an EBITDA of INR11 crores.

Coming to the operational highlights. I would like to start with the Distillery segment. BCL distillery unit at Bhatinda continues to operate at 100% capacity utilization with good demand for both ENA and ethanol. And the company also hopes to commission the 200 KLPD expansion of ethanol by the end of June 2023. This should have a positive impact on the company’s financials moving forward.

To combat inflation in fuel prices, the company has commissioned its paddy straw based 11 megawatt power plant in Bhatinda in the second half of May 2023. The company expects this power plant to bring down the fuel costs for the Distillery segment significantly moving forward.

For ENA market, March and April month are considered to be lean months as a new excise policy is renewed during this period. This has led to a slightly lower demand for ENA in West Bengal, and the company expects its sales from West Bengal plant under its subsidiary Svaksha Distillery unit to be good moving forward.

The expansion plans for the additional 100 KLPD are ongoing. The company expects to commission this plant by December 2023 with a project cost of around INR90 crores.

There has been a significant increase in EBITDA margin for the [Technical Issues] ’22-’23 in the Distillery segment and this has happened due to very good demand for ENA and the company’s strong inventory management during a period of fuel price inflation.

In the Edible Oil segment, there was a dip in revenue for the quarter, which was due to the drop in global edible oil prices globally. Despite the dip in revenues, the company was able to get 4.5% in EBITDA margin from this sector due to strong inventory management. Global edible oil prices have decreased at about 30% to 40% when compared to the previous year, while the company’s revenue from edible oils have only decreased by 26.5%. This indicates that the company has not decreased its volume being processed from this sector. The edible oil prices continue to be in a decline as I speak and we are waiting to see how this market stabilizes.

Lastly, in the real estate segment, in its attempt to reduce the financial burden of the company, BCL has continued to utilize revenues from the real estate to liquidate its debts, which is visible in the year-on-year results.

With that said, I would now like to open the floor up for any questions.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] Our first question is from the line of Mayur Liman from Profitmart Securities. Please go ahead.

Mayur Liman — Profitmart Securities — Analyst

Thank you for the opportunity. I just want to ask, right now, how much of distillery do we have and how much capital utilization per distillery for the Q4 and the full year? If you provide the number distillery-wise, it would be very helpful, sir.

Kushal Mittal — Joint Managing Director

In Bhatinda, we currently have 200 KLPD of ENA and ethanol and for the entire year — last year, the capacity utilization was at 100%. In Kharagpur, we have — in Bengal, we have 200 KLPD in ethanol and ENA again, and this plant was commissioned in July of 2022, but there were some problems that we ran into. So I think, since then, the capacity utilization has been at around 70% for that unit. But now, moving forward, we hope for that capacity utilization to be 100%. And in next month, we expect to commission another 200 KLPD of ethanol only at Bhatinda and once the plant is fully commissioned, we expect the capacity utilization to remain at 100% for that expansion as well. And another 100 KLPD of ethanol is to be added at Svaksha before the calendar year ends.

Mayur Liman — Profitmart Securities — Analyst

Okay. Sir, and my last question, how do you see the financial year 2024? What is your expectation from the next year and the outlook for the next year? If you provide the guidance on the segment-wise, it would be helpful for me.

Kushal Mittal — Joint Managing Director

For Edible Oil segment, we are hopeful of a stable year but I can’t speak with too much certainty in this sector as of now, because the market is at a free fall as we speak. And what we’re experiencing now wasn’t expected. So we hope to get about INR1,000 crores in revenue from this sector in the next financial year as well. But let’s see how and where the market stabilizes and when the market stabilizes, because that is not easy for me to predict, as I said right now. On the Distillery sector, we hope to and expect to get a revenue of around INR1,500 crores in the next financial year.

Mayur Liman — Profitmart Securities — Analyst

Okay, sir, thank you so much, sir.

Kushal Mittal — Joint Managing Director

Thank you.

Mayur Liman — Profitmart Securities — Analyst

That’s all from my side.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Nirav Seksaria from Living Root Capital. Please go ahead.

Nirav Seksaria — Living Root Capital — Analyst

Yeah, hi, sir. Sir, I wanted to ask — I had a similar question on the Distillery segment. So sir, going forward, how much is the margin that we expect out of — from the segment?

Kushal Mittal — Joint Managing Director

Yeah, I think, right now as we speak, margins from the Bhatinda unit, we expect them to be good moving forward, and a big reason for that is the paddy straw based boiler, that will significantly decrease our fuel costs. So we expect these margins to remain around 18%, if not more. For the West Bengal unit, due to some changes in the excise policies, there is a decrease in demand in Bengal for ENA as compared to the past. So we expect those EBITDA margins to be around 15%.

Nirav Seksaria — Living Root Capital — Analyst

Okay. And sir, one more question on the Distillery segment again. Sir, have we tied up with any major brands for bottling of Bhatinda facility?

Kushal Mittal — Joint Managing Director

No, we haven’t — we don’t have any bottling tie-ups with any major brands as of now. We just supply ENA to the brands and that includes the major brands of India but no bottling tie-ups.

Nirav Seksaria — Living Root Capital — Analyst

Sir, any plan of entering into the bottling for these brands?

Kushal Mittal — Joint Managing Director

For the Bengal unit, we are looking. And I think conversations are taking place, but none for Bhatinda. In Bhatinda, we’re bottling under our own brand: Punjab Made Liquor. And the sales are increasing monthly. So we hope to get over 1 million cases done in this year and I think if we can build on that, moving forward, then we won’t need a bottling tie-up in Bhatinda.

Nirav Seksaria — Living Root Capital — Analyst

Okay. And sir, just one more question. Sir, any [Technical Issues] level of operational blend — the level of operational blend we see from the Distillery segment going forward in the FY ’24 and FY ’25?

Kushal Mittal — Joint Managing Director

I’m sorry, I couldn’t understand the question.

Nirav Seksaria — Living Root Capital — Analyst

Sir, going forward, how much revenue can we expect out of — from the Distillery segment?

Kushal Mittal — Joint Managing Director

Yes, so this current financial year, we are aiming for the Distillery sector to give us around INR1,500 crores in revenue.

Nirav Seksaria — Living Root Capital — Analyst

Okay. Sure, sir. Thank you so much.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Balamuralikrishna Junalgadh [Phonetic] from Oman [Phonetic] Investment Advisors. Please go ahead.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

Hi, good morning. So I have a few questions. Regarding the Distillery segment, so earlier we used to achieve around 17,000 — till 20,000 kiloliters per quarter. So now even West Bengal I think it’s not up to 100% utilization. So in this quarter, we can expect around 35,000 [Phonetic] kiloliter on overall consol distillery, sir?

Kushal Mittal — Joint Managing Director

Bhatinda is continuing to be at 100% capacity utilization for the current quarter that we’re in right now. I think for the Bengal unit, we’d to be able to get 90% capacity utilization. As I mentioned in my speech, since excise policy is renewed every year in March end, so in March and April and even May, a lot of times, are considered to be very lean months in terms of ENA sales because even the bottling units has a — changing as per the excise policy and all that. So for this current quarter, we are expecting around 90% and hoping to get 100% moving forward.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

And just a follow-up on that one only. We have a good demand in Bhatinda for ENA, so if Bhatinda 200 KLPD is commissioned, then we can go for 100% ENA from the old 200 KLPD capacity? Or it can be…

Kushal Mittal — Joint Managing Director

That is the long-term plan. But before we do that, the current plant needs a revamp, some work needs to be done, which will take about a month. The order for that work has been placed and placed in advance, so that the towers — the distillation towers are ready in time. And we’ll be taking a shutdown in, I think, September or October to revamp the plants, so that the current 200 KLPD can only be used on ENA and the expansion on ethanol.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

Okay. And going forward, what will be the volumes of Distillery we expect in Q3 or Q4 after this Bhatinda also commissioned? So I’ve done some math, earlier we used to achieve around INR100 crores from Bhatinda 200 KLPD. So if I do some — yeah, per quarter.

Kushal Mittal — Joint Managing Director

In terms of revenue?

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

No, in Distillery only.

Kushal Mittal — Joint Managing Director

In terms of revenue?

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

Revenue, revenue, yes, yes.

Kushal Mittal — Joint Managing Director

Yes.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

So in going forward, if I do some math with the coming capacities, the revenue would be around INR1,200 crores, sir. Is it fair to assume the same figure?

Kushal Mittal — Joint Managing Director

Yes, INR1,200 crores before the Svaksha capacity kicks in. And post that, I think we can aim for INR1,500 crores once the 700 capacity is installed and commissioned. See, INR100 crores used to be a ballpark figure, yes, per quarter. But what we’ve seen in the past is that ENA prices have increased and so have ethanol and DDGS prices. So now we achieve about INR125 crores quarterly revenue from a 200 KLPD plant, average.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

Okay, and lastly on further expansion plans, you guys have told that you have plan to expand further to 500 KLPD or some green energy projects. Any update on that? Could you please share?

Kushal Mittal — Joint Managing Director

See, Bhatinda, we have moved file for 150 KLPD expansion, post 400. The environmental clearance file is ongoing and it’ll only move forward once the new plant has been commissioned. And see, firstly, we want to properly commission the 700 KLPD and be confident in its working and then look at expansion plans. Yes, we want to expand post the 700 KLPD, but I’ll be only able to speak with full certainty once this is commissioned.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

And lastly, if I can ask that whatever the power plant or boiler we have commissioned, out of which, how much we can save through fuel cost from Bhatinda?

Kushal Mittal — Joint Managing Director

See, out of my 400 KLPD commissioning that will be done, 60% of my fuel and my power and my steam can come from the new power plant. And this will give us significant savings. If I were to speak on per liter basis, then I’d say INR2 to INR3 a liter can be saved from this new power plant easily.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

Okay. That’s all. Thank you. Thanks a lot.

Operator

Thank you. Our next question is from the line of Shlok Dave [Phonetic] from CAO Capital. Please go ahead.

Shlok Dave — CAO Capital — Analyst

Thank you very much for giving me the opportunity. So just a clarification to the previous statement that you made: 60% of the power from the 11 megawatt new power plant. But is that for the expanded 400 KLPD or existing 200 KLPD?

Kushal Mittal — Joint Managing Director

See, that will be for the — 60% of my steam and power will be from the paddy straw boiler for 400 KLPD.

Shlok Dave — CAO Capital — Analyst

For 400 KLPD, okay.

Kushal Mittal — Joint Managing Director

Yes. So that will be for 240 of my — so I’ll require about 100 tonnes of steam and this should give me 60 tonnes, so about 240 KL would be from the new power plant.

Shlok Dave — CAO Capital — Analyst

You will require 100 tonnes of steam for 400 KLPD.

Kushal Mittal — Joint Managing Director

Yes, yes.

Shlok Dave — CAO Capital — Analyst

Okay, okay. Okay, great, great. And sir, just a clarification on some of the calculations. So what is a good assumption to take for effective number of days? If you’re operating at 100% utilization, this 200 KLPD or 400 KLPD, that needs to be multiplied by 365 because I know for a fact that there are routine maintenance shutdowns that every company has to take? So…

Kushal Mittal — Joint Managing Director

330 would be a good ballpark figure.

Shlok Dave — CAO Capital — Analyst

And that is every year, right? It’s not like every other year you will do maintenance. You will do maintenance shutdowns every year.

Kushal Mittal — Joint Managing Director

Maintenance shutdowns are quarterly, so to speak, because the plant does require cleaning every — once a quarter. So on an average, you can do 330.

Shlok Dave — CAO Capital — Analyst

Right. So again, if I get my volume at — if I understand the things correctly, you will have probably close to three-fourths of the year for the new 200 KLPD Bhatinda plant. Is that a reasonable assumption?

Kushal Mittal — Joint Managing Director

[Speech Overlap] By June end, we expect to have that plant commissioned, yes. But as I mentioned, we will be taking the shutdown in our current 200 KLPD plant in this year as well for a month, at least, to have that plant revamped. So once you calculate it, you also have to include that in your calculations.

Shlok Dave — CAO Capital — Analyst

Right, right, right. No, that’s okay. That’s again transient thing, temporary thing that doesn’t really — so what made me curious is how do you reach your INR1,500 crore number? Did you mean exit run rate Q4 INR1,500 crore annualized? Is that what you meant by INR1,500 crores coming from Distillery?

Kushal Mittal — Joint Managing Director

INR1,500 crores, I’m hoping that it will get at least a quarter of 500 [Phonetic] KLPD expansion in Svaksha also. So that’s why…

Shlok Dave — CAO Capital — Analyst

No. That part I understand, sir. What I don’t understand is this INR1,500 crore is an actual guidance for the entire year or is it an exit number for Q4 next year? Exit run rate number. Like divided by 4, so you get INR375 crores, so will Q4 of next year, only that part will show INR375 crores or you will actually do INR1,500 crores throughout the year? Because then my math doesn’t quite add up. I don’t reach INR1,500 crores, given the one month shutdown, given only three quarters probably of the expansion at Bhatinda and then better utilization in West Bengal [Technical Issues] KLPD expansion coming for only one quarter.

Kushal Mittal — Joint Managing Director

[Speech Overlap] INR1,500 crores, I think we might be — I think that would be a better way to put it was that, in quarter four, we expect about INR375 crores to INR400 crores from the Distillery segment and I think with this one month shutdown, we might — because it’s not — I can’t predict exactly what the number would be because you know there will be an ethanol price increase, which is expected.

Shlok Dave — CAO Capital — Analyst

I understand, sir. I understand.

Kushal Mittal — Joint Managing Director

Along with that, ENA prices are also to increase. So could set the INR1,500 crores figure. That’s the target, depending on how much the prices of ethanol and ENA increase and rest of DDGS increases, because if you track the company, we used to get about INR100 crores from 200 KLPD in terms of revenue. And this year we did INR130 crores.

Shlok Dave — CAO Capital — Analyst

INR125 crores. Yeah, INR125 crores, INR130 crores, yeah, correct.

Kushal Mittal — Joint Managing Director

Yeah, INR125 crores to INR130 crores for the quarter. So that all depends. Yes, I’d say — I think you raised a [Technical Issues]. And I think it would be safer to say INR1,250 crores to INR1,500 crores, anything in that range.

Shlok Dave — CAO Capital — Analyst

Yeah, better have toned down expectations for the market, because INR1,500 crores [Foreign Speech] then there is always a — sir, I would like to understand your edible oil business slightly in a better way. This is something that I don’t understand about the company. So as you said, the market is in freefall as of now, right? So when your margins get compressed, are we talking about a completely commoditized product, where bulk of the compression in margin actually is because of inventory losses? And the spreads, they’re basically maintained and once the fall in the underlying commodity stops, the margins immediately rebound or is it something else which is that the spread itself is getting compressed? Because I don’t have enough data to actually understand what exactly is the ramification of this fall in the underlying commodity on your revenues and on your margins, so can you explain that bit in more clarity? What generally happens? How does this commodity behave?

Kushal Mittal — Joint Managing Director

Yes. See, there’s two types of edible oil businesses that we’re involved in. One, which is our specialty and the sort of business that we want to be involved in moving forward is the indigenous edible oil, so that is your cotton seed, mustard, rice bran. That was always our company’s specialty. And once the global edible oil prices starts to fall, these oils don’t give us as much losses in terms of inventory losses because, first, the holding period is much shorter when compared to imported oil. And secondly, we have seen that the prices of indigenous oil tend to be more stable, as opposed to imported oil. There has been — imported oil market has been extremely volatile for the past nine months. And a lot of times, a lot of these contracts are forwards — forward contracts, forward shipments that we book in advance. And that is your CPO, crude palm oil, and your soya bean oil. So once these prices starts to fall, then there is an inventory loss that needs to be booked. The spread doesn’t change, we still work on some margin as opposed to, but the problem is then we’ll have to consider the current buying price of the raw material.

Shlok Dave — CAO Capital — Analyst

Can you provide some understanding as to what this spread is — this constant spread? So there are two components, right? One is the inventory expansion and compression, the expansion and compression in the spread because of inventory losses and gains. The second one is that fixed amount, right, that fixed spread which doesn’t change that much.

Kushal Mittal — Joint Managing Director

That too depends on what edible oil am I using because, see, we have a fully integrated unit that includes the oil mills, solvents, refinery, [Indecipherable] manufacturing unit and also rice mill. So when I’m processing, for example, a mustard crop, then my entire plant is getting utilized. My oil mill is crushing the mustard seed, my solvent is extracting the oil from the cake, and further my refinery is being used for that mustard oil as well. So that is the crop — that is the oil that has value addition on each and every step. For example, even rice bran, we consider it to be good alternate because my solvent is being used for the rice bran, and the cake usually sells at a very good price. So these tend to have a higher margin as opposed to imported oil where I’m importing the oil just refining it and [Technical Issues].

Operator

Ladies and gentlemen, please stay connected. The line for the management has dropped. We’ll reconnect them quickly. Ladies and gentlemen, the line for the management has reconnected. Sir, you can go ahead.

Kushal Mittal — Joint Managing Director

Yes, sorry. So, as I was saying, there is no set formula to give you what is commodity-wise my margin but as opposed to the same quarter of last year where we did 4.56% this quarter and 2.97% last quarter, so once we have more indigenous oils to process, we expect better margins. And overall, I don’t expect the margins to — I think what we did this quarter, [Foreign Speech].

Shlok Dave — CAO Capital — Analyst

In any one year when the prices are steady, everything is like normal, right, [Foreign Speech], but in any one particular year when everything is stable and steady, how much ROE can this business generate?

Kushal Mittal — Joint Managing Director

See, this business — we expect this business to give us around 3.5% to 4% of EBITDA margin in a stable year and…

Shlok Dave — CAO Capital — Analyst

At what turnover?

Kushal Mittal — Joint Managing Director

At a turnover — see, that is also not a very hard question to answer because the prices have fallen by about 40%, 45% now. So we expect to stay at INR1,000 crores of turnover [Speech Overlap].

Shlok Dave — CAO Capital — Analyst

Okay. One final question which is coming back to the distillery business. What kind of price escalations are you expecting? What is the industry expecting? Because the last round which happened, everyone was left — like, it was good, but not that great. Everyone wanted a bit more. So what are the [Speech Overlap] what is your sense?

Kushal Mittal — Joint Managing Director

We as a company are expecting that the maize prices of ethanol will be significantly increased because the government needs to move in that direction now because the buyer has…

Shlok Dave — CAO Capital — Analyst

Sorry, which prices? Which prices? I missed.

Kushal Mittal — Joint Managing Director

The price for ethanol made from maize — corn.

Shlok Dave — CAO Capital — Analyst

Maize prices. Okay, okay.

Kushal Mittal — Joint Managing Director

Yes, because the government can’t simply rely on FCI rice as being the raw material for the grain-based ethanol industry. See, what we’ve seen this year and there was a conference held in New Delhi in which all of this was discussed. What we’ve seen this year that for the government to promote an Atmanirbhar Bharat and support its agriculture sector, they need to ensure that a farmer is not selling his crop below MSP or below a price where the farmer has to book a loss. Last year, we saw this with mustard and maize and every crop that the farmer grew, we made a very — that crop, we gave them a very good return and that will only help the agriculture sector and that will only help India in crop diversification, which is the — which is a very urgent need as of now. What we’ve seen this year is that maize is selling below MSP and even mustard is selling below MSP and this was — this is in the government’s notice and they don’t want this to happen.

See, for a farmer who grew maize this year and they didn’t get the remuneration for it, they’ll go back to paddy next year and they’ll expect the government to buy it at MSP and the government does not want that burden on themselves. So what — as per our reading of the market and the policy, we expect that the government will increase the maize price of ethanol. So that maize that is currently surplus in the market will be bought by distilleries, converted into ethanol and sold to the OMCs. And…

Shlok Dave — CAO Capital — Analyst

[Foreign Speech], maize?

Kushal Mittal — Joint Managing Director

I’m sorry?

Shlok Dave — CAO Capital — Analyst

You guys can use maize, right?

Kushal Mittal — Joint Managing Director

Yes, we can use maize and we prefer to use maize, it is a more sustainable method for the industry as maize is not as water guzzling as paddy. These grain-based — if you look at the grain-based ethanol market globally, it’s all dependent on maize. India is an outlier, which makes it from rice. So we expect those prices to increase significantly. Let’s see what the government does but I think we should expect those. For the prices from surplus side, I think they — we don’t expect much increase from them.

Shlok Dave — CAO Capital — Analyst

Got it, got it. Has West Bengal finally stabilized after the excise policy changes?

Kushal Mittal — Joint Managing Director

Yes, Bengal has stabilized. The production — the factory is working with very good parameters. It’s just that there were some policy changes in the alcohol market, which has led to a significant decrease in sale of alcohol in Bengal. So that had [Indecipherable] a little bit, but we hope that will stabilize in the future too.

Shlok Dave — CAO Capital — Analyst

And Q1 will be back to trend levels for West Bengal — trend growth levels?

Kushal Mittal — Joint Managing Director

Q1, I think we…

Shlok Dave — CAO Capital — Analyst

For the industry, for the industry. You guys — I understand what you guys are going through. But for the industry, liquor sales and alcohol sales in West Bengal, will they mean revert to…

Kushal Mittal — Joint Managing Director

It will take some time to pick up because the government has done two things. One, they have increased the prices of country liquor, which has led to the decrease in sales. And secondly, what they have done is for the distillery industry, which is a bit of a negative is what they’ve done is, they have imposed an export fee for us to export ENA out of the state, but they’ve waived the import fee. And historically speaking, Bengal used to be a state which used to have a very high import fee. So they’ve done the opposite now. These are policy changes. They keep changing. I think at one point of time, having a unit in Bengal was more profitable than having a unit in Punjab, and now this has changed and it could change in the future also. So they’re policy changes that keep changing. So all we can do is give our representation and try to nudge the government in the right direction.

Shlok Dave — CAO Capital — Analyst

Understood, sir. Thank you very much for giving me the opportunity and answering all the questions in great detail. All the best, sir. Thank you.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Aditya Surana [Phonetic] from Niveshaay. Please go ahead.

Aditya Surana — Niveshaay — Analyst

Sir, good morning. Sir, can you please tell me the order book currently? And how much time it will take to complete the order book?

Kushal Mittal — Joint Managing Director

The order book of what?

Aditya Surana — Niveshaay — Analyst

For ethanol.

Kushal Mittal — Joint Managing Director

Order book of ethanol, I think we have till November end to complete the contract. And I think for the Bhatinda unit, it’s set around INR4.5 crores, for the year, to INR5 crores [Phonetic] and for the Bengal, it’s around, I think, INR3.25 crores, and we expect to commission — to complete the entire quantity. And as we speak, we might even put more quantity. So the order book can increase because there has been a new cycle that was just introduced this year. We’ll still look at it and put in more quantity.

Aditya Surana — Niveshaay — Analyst

Okay. Sir, can you explain the cost structure of ethanol in liter terms, like raw material costs, if you’re near towards INR42 and fuel cost is INR58, can you explain me the whole cost structure?

Kushal Mittal — Joint Managing Director

See, for a tonne price, we expect — the industry standard is 450 liters of ethanol, that could change depending on how efficiently you’re working a plant or how efficiently you’re not working a plant. And then about — depending on your raw material, about 18% recovery is DDGS, which is currently selling at INR27 a kg I would say. And then there are your fuel costs, which are about INR12 a liter and then there are other costs, your salary, maintenance, finance cost. So I think you can do the calculation from there.

Aditya Surana — Niveshaay — Analyst

Okay. Sir, can you tell me the EBITDA margin going forward?

Kushal Mittal — Joint Managing Director

I had mentioned this earlier. I think for the Bhatinda unit, we could expect around 16% to 18% in EBITDA. These are all, I think, quite conservative numbers that I’m giving, and for the Kharagpur, around 15%.

Aditya Surana — Niveshaay — Analyst

Okay. So how much revenue can be generated from a 100 KLPD plant in a year?

Kushal Mittal — Joint Managing Director

A 100 KLPD plant should give you around, I’d say, INR270 crores of revenue.

Aditya Surana — Niveshaay — Analyst

Can you explain me the calculation like 100 KLPD plant, it would be converted into — by multiplying by 1000? I mean, it could be showed at INR60 near about. So can you explain me the calculation?

Kushal Mittal — Joint Managing Director

Yeah, 100 KLPD plant should give you about INR3.3 crores in spirit. If you multiply that by INR58, that is INR191 crores or INR192 crores and the rest is in DDGS sales. DDGS, CO2 and then there are other sales — [Indecipherable] sales also that you can include. So all those that included.

Aditya Surana — Niveshaay — Analyst

Okay. Thank you, that’s all. Thanks you.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Ankur Kumar from Alpha Capital. Please go ahead.

Ankur Kumar — Alpha Capital — Analyst

Hello, sir. Congrats for a good set of numbers, and thank you for taking my question. Sir, on the edible oil side, you are saying that things are looking tough. So do you expect current margins of 3%, 3.5% to stay or you think it can go even lower from here?

Kushal Mittal — Joint Managing Director

See, margins — the processing margins, we expect them to be stable. We don’t expect much of a decrease in them. But the only thing is the inventory — the loss on the inventory is what we’re worried about as we speak. So we don’t expect the market to remain the way it is right now. But let’s see what happens.

Ankur Kumar — Alpha Capital — Analyst

But like for our segment-wise reporting, do we carry high-cost inventory which can give us losses or how should we look from BCL…

Kushal Mittal — Joint Managing Director

See, there are some forward contracts that we have to do on imported oils. So that is usually — as I was explaining, indigenous oil is not much of a problem because they’re not as volatile as imported oil, firstly. And secondly, the holding period for them is much shorter. We can buy mustard seed from the market, process it and sell it, whereas imported oil, the holding period is much longer and there are future contracts also that we need to fulfill. So that is a bit of a worry.

Ankur Kumar — Alpha Capital — Analyst

Got it, sir. And sir, on the distillery side, you are saying INR1,500 crores revenue for this year. So like over INR350 crores per quarter and currently we are at INR200 crores — around INR200 crores.

Kushal Mittal — Joint Managing Director

So I have been corrected, I’d say around — I’ll make the change of about INR1,200 crores to — around INR1,200 crores. It can go up above that also, depending on the escalation in ethanol and ENA prices.

Ankur Kumar — Alpha Capital — Analyst

And so basically, like, the jump will come in from second half or how should we expect the revenue jump from this segment?

Kushal Mittal — Joint Managing Director

See, revenue jump in quarter two, I think there should be another expansion of Bhatinda that will add to the revenue. And we expect the Svaksha unit to also operate at 100% capacity utilization, which you know, in the past, it hasn’t. So that will add to the revenue as well. So I think INR1,200 crores is a very conservative figure in terms of revenue.

Ankur Kumar — Alpha Capital — Analyst

So basically, Q1 will improve marginally and then Q3 — Q2, Q3 will…

Kushal Mittal — Joint Managing Director

Q2 will — yes, you’ll start to see much of the impact.

Ankur Kumar — Alpha Capital — Analyst

Sure, sir. Thank you and all the best.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Rahil Shah [Phonetic] from Crown Capital. Please go ahead.

Rahil Shah — Crown Capital — Analyst

Hello, sir. Good morning. You mentioned things have been stabilizing in West Bengal after the policy changes, and then you mentioned that Svaksha Distillery will be good, moving forward. So by when do you expect this?

Kushal Mittal — Joint Managing Director

No. I think from — I think our quarter one results will be better than the previous. And then moving forward, it will be better.

Rahil Shah — Crown Capital — Analyst

Okay, okay. And you’ve given your views on individual segment-wise margins. So on a consol level like how do you see this? So I think we’re currently at around 7%, so flat — it’s been flat year-on-year. Do you see improvement by the year end?

Kushal Mittal — Joint Managing Director

Consolidated margin?

Rahil Shah — Crown Capital — Analyst

Yes. Yes.

Kushal Mittal — Joint Managing Director

I think as the revenue share from our Distillery sector increases, so will our margins — consolidated margins.

Rahil Shah — Crown Capital — Analyst

Okay, but like these are sustainable numbers otherwise?

Kushal Mittal — Joint Managing Director

See, if I were to look at my EBITDA margins for last financial year, it was at 6.61% as opposed to 7.22% this year. And with an increase in Distillery revenues, I think this can go up to 8%, 8.5%.

Rahil Shah — Crown Capital — Analyst

Right. Okay. All right. Thank you, all the best.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Balamuralikrishna Junalgadh from Oman Investment Advisors. Please go ahead.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

Thanks for the opportunity again. So regarding this oil segment, so do you expect any inventory losses like in Q3 when [Phonetic] we had posted some inventory losses? Do you expect the same thing in this quarter?

Kushal Mittal — Joint Managing Director

I can’t comment on that right now. I think I’ve already spoken enough about the market. And I can’t predict where this market will be one month or 15 days down the line, to be honest. As of now, it’s very volatile, so I really can’t make a comment on this right now.

Balamuralikrishna Junalgadh — Oman Investment Advisors — Analyst

Okay, thank you.

Operator

Thank you. Our next question is from the line of Manan Shah from Moneybee Investment Advisors. Please go ahead.

Manan Shah — Moneybee Investment Advisors — Analyst

Yeah, hi, congratulations on a good set of numbers and a wonderful gesture from the promoters on foregoing their share of the dividends. My question was on the Svaksha. So wanted to — what feedstock are we using as fuel for the Svaksha Distillery?

Kushal Mittal — Joint Managing Director

See, now for ENA, most of my feedstock is maize. So ENA primarily, I would say, maize. For ethanol, it’s FCI rice.

Manan Shah — Moneybee Investment Advisors — Analyst

Okay. So my understanding is that if we use maize, the yield that we get as against rice is lower.

Kushal Mittal — Joint Managing Director

See, the alcohol yield for maize is lower as opposed to rice. But the DDGS yield is higher in maize as opposed to rice. So our calculations are based on what the DDGS prices are and what ENA prices are and what maize and rice prices are. That’s when we decide — after looking at everything, that’s when we decide what raw material to use. So maize currently is cheaper in Bengal. As Bihar is surplus in maize this year, so we decided to use maize as a feed for the ENA.

Manan Shah — Moneybee Investment Advisors — Analyst

So on an absolute basis, the revenue that we will generate by using maize against rice, will there be any significant difference or we don’t expect any significant difference, either on the upside on the downside?

Kushal Mittal — Joint Managing Director

Maize as of now is more profitable than using rice [Indecipherable] right from the market. So looking at that, we’ve shifted to maize and I have given — I expect the EBITDA margins to be around 15%, and that being — that is looking at the maize prices currently.

Manan Shah — Moneybee Investment Advisors — Analyst

Okay, understood. And what are we using for power and fuel as a feedstock over there?

Kushal Mittal — Joint Managing Director

Mostly husk, some of coal.

Manan Shah — Moneybee Investment Advisors — Analyst

Okay. So if at all, coal prices trend downwards, then we can expect further improvement over there?

Kushal Mittal — Joint Managing Director

Yes, the coal prices have been softening. And we are looking at our future contracts for coal. So yes, I think that should help a little.

Manan Shah — Moneybee Investment Advisors — Analyst

And if rice straw also available over there and is it possible that we can…

Kushal Mittal — Joint Managing Director

Rice straw won’t be possible in Bengal, firstly, because in Bengal, people use this rice straw for other uses. Their cattle — it’s used as cattle feed also or it’s used at many other — there is not a problem of rice straw being burned by the farmers, it’s being used by them. And secondly, to install a rice straw-based power plant is a huge colossal task, it requires a lot of space and I reiterate this again, we’re the only alcohol company in the country that will now be using rice straw as a fuel and it was a colossal task to collect this rice straw, store this rice straw. I’ll give you an example. For next year, I need 120,000 tonnes of rice straw for the entire year as my fuel. And I have a 15 day period to collect this during the harvest period. Either the farmer will burn this or either I’ll collect it from him. And I need about 120 acres of land to store this for the entire year.

So this requires a lot of preparation beforehand to plan and collect this rice straw and store it. But this is a strategy that will pay us dividends moving forward because fuel has been a problem in the past and we don’t expect this to go away very soon and we have a very good alternate fuel now as a source. And even the capex on a power plant that will run on paddy straw is almost double as opposed to a coal-fired or a husk-fired power plant. So a lot of hard work has been put into this. And in Bengal, unfortunately, it’s not possible, because there is not a problem of surplus rice straw.

Manan Shah — Moneybee Investment Advisors — Analyst

Understood. Fair point, fair point. Thank you. I’ll get back in the queue.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Narendra [Phonetic] from RoboCapital. Please go ahead.

Narendra — RoboCapital — Analyst

Hello, am I audible?

Kushal Mittal — Joint Managing Director

Yes.

Narendra — RoboCapital — Analyst

Yeah. So you talked about the edible oil and two capacities added in the indigenous and imported. So is there a definitive split between the two right now that you’re seeing?

Kushal Mittal — Joint Managing Director

See, the changes, it varies depending on the demand. So right now, as we speak, I think most of the plant is running on imported oil. This changes, if mustard prices are to increase and farmers starts selling the mustard again, then we’ll start running on mustard again. The problem is that the prices of mustard have fallen down so much that the farmer is not interested in selling. So there’s not much availability of the raw material.

Narendra — RoboCapital — Analyst

Okay, so there is not much that you can do about it, right?

Kushal Mittal — Joint Managing Director

Yes.

Narendra — RoboCapital — Analyst

All right. Thank you so much.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Siddarth Malhotra [Phonetic], who is an Individual Investor. Please go ahead.

Siddarth Malhotra — Private Investor — Analyst

Yeah, hi. Most of my — in fact, almost all my questions are answered but I would like to use this opportunity to just make a housekeeping point here. The moderator just mentioned requesting participants to ask maybe one or maximum two questions, but about 20 minutes back, there was a particular participant who took away 25 minutes of the con-call. That is downright ridiculous because this con-call is not a tutorial, it’s supposed to be answering questions from investors. So that’s the point for the moderator to keep in mind. That’s my only point. Thanks very much. Otherwise, most questions are answered.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Neeraj Jain [Phonetic], who is an Individual Investor. Please go ahead.

Neeraj Jain — Private Investor — Analyst

Yeah, thanks for the opportunity. So my question is regarding the commissioning of the Bhatinda plant. So if I remember correctly, when we had the last investor call sometime in February, the management had mentioned that we hope to commission it by end of that quarter. So I would assume they meant end of March. Now, we are hoping for the commissioning to happen by June end. So any specific issue we are facing with the commissioning like we faced with Svaksha or can you please help, sir?

Kushal Mittal — Joint Managing Director

No, no, no, there is no particular issue like Svaksha. Svaksha was, I think, one-off issue where a column that was delivered was faulty and it didn’t perform as per its requirement. In Bhatinda, I think a big problem that is — that I think everyone is facing is that a lot of these machinery suppliers are quite booked and they’ve been delaying a lot of things from their end, a lot of [Indecipherable] items do get delayed sometimes. And keeping that in mind, that’s why we decided to commission the power plant before the distillery and — but this time, we hope and we expect that the deadline won’t change.

Neeraj Jain — Private Investor — Analyst

Okay. And my last question related to Svaksha is that, you mentioned for this quarter the capacity utilization would be around 90%. So can we expect a revenue of around INR110 crore from Svaksha for this quarter? Or is that an over-estimation? Thank you.

Operator

Ladies and gentlemen, the line for the management has dropped. Mr. Jain, please stay in the queue, I will reconnect the management quickly, thank you. The line for the management is reconnected. Mr. Jain, you can go ahead with your question.

Kushal Mittal — Joint Managing Director

Sorry, you were asking about Svaksha?

Neeraj Jain — Private Investor — Analyst

Yes, so as you had mentioned that for this quarter, the capacity utilization would be around 90%. So I was just asking about the revenue estimate for this quarter for Svaksha. Will it be like around INR110 crores, because you mentioned that 200 KLPD plant, generally the revenue would be around INR125 crore per quarter. So is INR110 crores a fair estimate?

Kushal Mittal — Joint Managing Director

Yeah, I’d say around INR100 crores to INR110 crores, you can probably consider that much for the quarter.

Neeraj Jain — Private Investor — Analyst

Okay, and can I ask one more question, please? That would be my last question.

Kushal Mittal — Joint Managing Director

Yes.

Neeraj Jain — Private Investor — Analyst

Yeah, so for your allotment — the placement that you had done, so I understand that as of now, 25% of the amount has been paid in by all the investors. So any timeline when the rest of the 75% would be coming in, in the company? Because I understand you would be using it to reduce your working capital, right?

Kushal Mittal — Joint Managing Director

Yes.

Neeraj Jain — Private Investor — Analyst

The loan that you have [Speech Overlap] working capital.

Kushal Mittal — Joint Managing Director

No such timeline as of now. I think we have 18 months from the receipt of 25%. So no specific timeline.

Neeraj Jain — Private Investor — Analyst

Okay, thanks a lot.

Kushal Mittal — Joint Managing Director

Thank you.

Operator

Thank you. That was the last question of our question-and-answer session. I would now hand the conference over to the management for closing comments.

Kushal Mittal — Joint Managing Director

Yes. I would like to thank everyone for tuning in on the call and asking very insightful questions and we hope to deliver on everyone’s expectations moving forward. And thanks again.

Operator

[Operator Closing Remarks]