Dhampur Bio Organics Ltd (DBOL) Q3 FY23 Earnings Concall Transcript

Dhampur Bio Organics Ltd (NSE:DBOL) Q3 FY23 Earnings Concall dated Jan. 24, 2023.

Corporate Participants:

Nalin Kumar Gupta — Chief Financial Officer

Gautam Goel — Managing Director

Analysts:

Navin B. Agrawal — SKP Securities Limited — Analyst

Nitin Awasthi — InCred Equities — Analyst

Akshat Thakur — Pico Capital — Analyst

Aditya Shrimankar — Ishti Advisors — Analyst

Ambar Taneja — Geomatrix — Analyst

Kaustubh Pawaskar — Sharekhan Limited — Analyst

Nimish Sheth — Individual Investor — Analyst

Udit Gupta — Individual Investor — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Jaspreet Singh — VA Capital — Analyst

Presentation:

Operator

Good day, ladies and gentlemen. Welcome to the Dhampur Bio Organics Limited Q3 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Navin Agrawal, Head, Institutional Equities at SKP Securities Limited. Thank you, and over to you Mr. Agrawal.

Navin B. Agrawal — SKP Securities Limited — Analyst

Good afternoon, ladies and gentlemen. It’s a pleasure to welcome you on behalf of Dhampur Bio Organics Limited and SKP Securities to this financial results conference call.

We have with us Mr. Gautam Goel, Managing Director, and this colleagues, Mr. Sandeep Sharma, COO; Mr. Nalin Gupta, CFO; Mr. Mukul Sharma, COS; and Ms. Sonika Malhotra, Senior Manager, Accounts and Finance. We will have the opening remarks from Mr. Goel, followed by a Q&A session.

Thank you, and over to you, Mr. Goel.

Nalin Kumar Gupta — Chief Financial Officer

Yeah. Thank you, Navin.

I’ll be starting the first section of our con call today, and followed that, our MD, Mr. Gautam, will be taking over the proceedings of the call. Please.

Yeah. So thank you, Navin, thank you, everyone, and namaskar and a warm welcome to Q3 and nine months FY ’23 Dhampur Bio Organics Limited earning conference call today. The first section of our call will give a snapshot of key highlights of this quarter. Second section will contain a brief outline of our understanding of the macro environment, its possible impact on our business by our Managing Director, Mr. Gautam Goel. After which, we’ll be glad to answer any queries you may have.

Key highlights of this quarter, Q3 FY ’23, is that our revenue increased by 100% from INR347.6 crores to INR696.1 crore. PBT for Q3 FY ’23 stood at INR20.2 crores against INR24.6 crores in the same period last year. Profit-after-tax stood at INR14.9 crore against INR17.9 crores in the same period last year. You would witness the margin in this quarter are not commensurate with the increase in revenue. After out of total revenues sugar segments reported revenue of INR565.92 crores, which accounts for 69% of the total revenue as compared to 87% of the same revenue last year. And within this segment stood at INR24.59 crores in Q3 FY ’23 as compared to INR29.08 crores in Q3 FY ’22.

Our sugar average realization for Q3 FY ’23 stood at INR37.51 per kg against INR37.56 per kg in the corresponding period last year. Sugar sales in this quarter stood at 1.08 lakh tonnes against 0.69 lakh tons in the December quarter last year. During this quarter, we sold 0.5 lakh tonnes of sugar of last season, which were valued at INR35.2 per kg. Rest of the sugar sold in this quarter of 0.54 lakh tons includes exports of 0.11 lakh tonnes. Our inventory as on 31st December stood at 0.96 lakh tonnes of sugar, which has been valued at INR35.97 per kg. Our inventory as on 31st December stood at 1.49 lakh tonnes, which was valued at INR32.93 per kg.

In Q3 FY ’23, our revenue from distillery segment stood at INR250.25 crores as against INR49.85 crores in Q3 FY ’22. Ethanol revenue increased significantly as compared to December quarter last year on account of country liquor sale of rupees INR114 crores in this quarter coupled with increased quantity of ethanol sold in this quarter. EBIT in this quarter increased from INR6.88 crores last year to INR21.51 crores this year. We sold 25.63 lakh bulk liters of ethanol at an average realization of 58.8 bulk liter in this quarter, out of 162.43 lakh bulk liters of ethanol was derived out of syrup. We supplied 70.5 lakh liters of ethanol derived out of B-heavy molasses and 17.7 lakh bulk liters of ENA, which was derived out of C-Heavy. Lastly, in this quarter we had supplied 93.55 lakh liters of ethanol at an average realization of 48.9 per bulk liter, out of which 72.45 lakh bulk liter was derived out of B-heavy and 21.1 lakh bulk liter ENA was derived out of C-heavy molasses.

Substantial increase in revenue and biofuel segment from INR49.85 crores to INR250 crores is mainly on account of country liquor sales happened in this quarter, which was not there in last quarter and because of the higher ethanol sales in this quarter. We sold 483,393 cases of country liquor in this quarter at an average realization of INR248.22 per case. This is net of excise duty. Our margins in Q3 FY ’23 declined as compared to margin in Q3 FY ’22, mainly on account of lower sugar recovery, the results of which would be taken up by our MD, Mr. Gautam Goel, and also due to higher turnover of country liquor INR114 crore with mega margin of INR1.45 crores, as most of the revenue from country liquor comprises of state excise duty.

Profit before tax in Q3 FY ’23 stood at INR20.18 crores against PBT of INR24.61 crores for the corresponding period last year. Profit after tax in this quarter stood at INR14.97 crores against INR17.92 crores in the same quarter last year. We generated 10.53 crore units in Q3 FY ’23 against 9.73 crore units in the same period last year. We exported 4.96 crore units at an average realization of INR3.3 per unit in this quarter as compared to 4.08 crore units at an average realization of INR3.18 in the same period last year.

Our interest cost increased to INR4.87 crores as against INR2.9 crores in the same quarter last year. Higher interest is on account of higher utilization of working capital because of higher cane crushed in this quarter as compared to last year. And availment of fresh-term loan of INR129 crores for the capex undertaken by the company during this year. During this quarter under review, in terms of Ind AS 108, operating segment, sugar and biofuel and the split have been identified as operating segments pertaining to group’s operational and segmental information, including for the previous period having accordingly been compiled and restated and disclosed in the results.

We made a repayment of INR14.94 crores of long-term loans during this quarter. Our long-term loans stood at INR249.53 crores as on 31st December ’22. Working capital as on 31st December ’22 stood at INR307 crores vis-a-vis INR285 crores as on 31st December ’21. Long-term and short-term ratings of our company continues to be a sign that A+ with outlook stable by CARE. So these were the broad numbers.

I would request our Managing Director, Mr. Gautam Goel, to share his perspective on the industrial performance of the company in this quarter. Over to you, Gautam.

Gautam Goel — Managing Director

Thank you, Nalin, and thank you, Navin, and a very warm welcome to all of you.

As discussed, the root — the key root cause of the decline in margin in this quarter is the lower sugar recovery in two of our plants. The lower recovery in our region is mainly on account of weather and severe insect infestation like top borer. We are taking all — we are taking these issues very seriously and are taking all necessary steps for eradication of this disease and there like top borers. This continues to be a key focus area. And along with this, our cane development activities, we are looking to quickly and at the earliest possible, replace some of the existing 238 areas to newer high-sugared varieties. We, as management are viewing the cane development activities as the principal focus areas going forward.

As you all are aware, the Government of India released an export quota of 6 million tonnes under the MAEQ scheme. This was allocated for exports in the first phase. The company will be exporting — the company’s export quota amounted to 0.76 lakh tonnes. And we will be exporting 100% of this quota. The company has successfully commissioned 700 tonnes per day of pharma-grade sugar manufacturing facility in a small unit. We have exported 0.11 lakh tonnes of sugar in this quarter and the balance quota is expected to be exported in Q4 and maybe some spillover could be there in Q1 ’24.

Our distillery plant is running efficiently with syrup derived from — running efficiently with syrup derived ethanol being produced in the facility. Within five months of commencement, our CL businesses — the commencement of our CL business, we are part of the top 10 country liquor suppliers in the state. As mentioned earlier, Government of India permitted 6 million tonnes of export under the MAEQ scheme. Out of this 5.6 million tonnes of sugar is already contracted for export and balance is expected to be contracted within the time lines imposed in the policy. India contracted for approximately 2 million tonnes of raw sugar, ranging from 90 points premium to up 250 points premium. This year, we saw a record 8.8 million tonnes of contract for refined sugar. This shows the change in mindset of the men to invest in quality sugar production. Balance 3.2 million tonnes of sugar is expected to be — balance 3.2 million tonnes of exported sugar is expected to quality white sugar.

ESMA as per this last report, ESMA has projected at 36.5 million tonnes of sugar production. However, various state agencies are now forecasting this strength downwards on account of lower recoveries and yields in Maharashtra and Karnataka. As per some estimates, Maharashtra is expected to drop in the region of 1 million to 1.5 million tonnes and Karnataka by about 0.5 million tonnes. We expect UP to remain largely unchanged. After these recent trade estimates, the Indian production could fall by about 1.5 million to 2 million tonnes from the estimates of 36.5 million tonnes. Domestic sugar prices remain stable. Even though they are declined, they have declined a little bit at the start of the season. That we — on account of lower sugar production, we do expect the prices to remain stable in the months going forward.

On the global sugar front, 2022-23 global surplus of 4 million tonnes — ESMA projections of 4 million tonnes could drop on account of reduction in Indian crop. This surplus in production and Indian super production could make the sugar balance sheet a little tighter. We will base this estimates continue to remain at 590 million to 600 million tonnes as compared to 542 million tonnes. Sugar production in Brazil is expected to be in the region of 38 million to 38.5 million tonnes, up from 5 million tonnes from the previous years.

Ethanol directives today stood at 15.4 cents for hydrous and 16.9 cents for anhydrous in Brazil versus sugar prices of 19.7 cents, which would favor higher production of sugar, and Brazil is expected to max out its sugar production in this year. Thai Sugar production is up about 11% over last year. Sugar production as of January 11 was 2.5 million tonnes or 281.04 lakh tonnes above last year. The latest numbers as of January 15th were 3.35 million tonnes. The ’21-’22 Thai crop according to USDA was 94.17 million tonnes as compared to the latest estimate Thailand expects a crop of 105 million metric tons. This would be a 11.5% increase. So far, the sugar production is up about 11%. The current consensus for Thailand is about 11.74 million metric tons, which is about 15% above last year.

The Thai sugar would flow to Indonesia as they open up their import tender for 2023. Given the geographical proximity, this should undercut Brazilian sugar, while freight continues to fall, especially for containers. EU sugar production estimates continue to fall. The latest EC Commission estimates the EU sugar production has fallen to 15 million metric tons, a further decline of 500,000 tonnes from the last estimate. And down ethanol estimates. The ethanol requirement published by the OMCs for — the ethanol requirements published by the OMCs for supply of 2023 is basis 12% blending across the country. The industry has responded enthusiastically and is positive — and it is a positive sign for all of us. Based on the government’s own ethanol road map, in the coming days, we expect a further push on policy matters to make ethanol and even more attractive offering for sugar manufacturers and encourage OMCs to put in place and infrastructure capable of handling larger volumes.

Additionally, policy tweaks in the auto sector such as measures which encourage higher blending percentages and introduction of flex fuel engines that can run on 100% ethanol will incentivize ethanol production, which in turn will iron out some of the inconsistencies between expectations and ground realities. In order to accelerate the introduction of flex fuel vehicles, production-linked incentive scheme has been included in automobile and auto components of flex fuel engines. Various auto companies like TVS Motor and Bajaj Auto have already started producing flex fuel engines for the two and three-wheeler segments. The government has notified the standards for E85, E90 and E95 engines. Depending on the percentage of petrol as against the percentage of mix. Through alt energy is setting up countries first flex fuels phase in Karnataka’s districts. It will displace ethanol blends and CNG amongst other fuels. The plan is to set up initially 21 substations in the state, at least 250 across the countries within a five year.

E20 ethanol could be coming to a petrol up near you particularly in metropolitan areas sooner than expected. This is precisely why large manufacturers like Maruti Suzuki has said that all cars we sell will be E20 compliant —

Operator

I’m sorry to interrupt you, but we cannot hear you, sir. Hello?

Nalin Kumar Gupta — Chief Financial Officer

Hello? I think some signals are — signal issues there. We’ll wait for a moment, please.

Operator

Sure.

Nalin Kumar Gupta — Chief Financial Officer

Just a minute, please.

Navin B. Agrawal — SKP Securities Limited — Analyst

Thank you. Bear with us for a minute. We’re just checking the connectivity.

Nalin Kumar Gupta — Chief Financial Officer

Sorry, he got disconnected. Connecting again, please.

Operator

Sir, he is connecting from the Board Room only. He is reaching very soon.

Navin B. Agrawal — SKP Securities Limited — Analyst

Thank you. Mr. Goel, the line has got disconnected. Just bear with us for a minute, getting him back on the line and will continue. Thank you.

Nalin Kumar Gupta — Chief Financial Officer

Thank you. Navin, we can resume the line.

Navin B. Agrawal — SKP Securities Limited — Analyst

Friends, we have Mr. Goel back on the line. Mr. Goel, please go ahead.

Gautam Goel — Managing Director

Sorry for the interruption. As I was saying, the various state governments are also coming up with their ethanol policies to boost ethanol production. We encourage the efforts of blending of fuel. The government has introduced additional differential excise duty of INR2 per liter from 1s of November 2022 for unblended petrol in the retail sales. We believe this additional duty will push oil companies to procure more ethanol for mixing in petrol and the rate for logistics for transporting to deficient areas.

We would now thank you for very much for the brief overview. We would now like to invite questions and queries from the participants. Over to you, Nalin — over to you, Navin, sorry.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Aman Sonthalia from AK Securities. Please go ahead. Mr. Aman Sonthalia, your line is unmuted, please go ahead with your question. Mr. Aman Sonthalia, your line is unmuted. May we request you to please unmute yourself, if muted from the handset. As there is no response, we’ll move to the next question, which is from the line of Nitin Awasthi from InCred Equities. Please go ahead.

Nitin Awasthi — InCred Equities — Analyst

Hello sir, I had a couple of questions. Firstly sir, some clarifications on the company. I wanted to understand our ethanol capacity currency. How much is it and if you could differentiate between the routes?

Gautam Goel — Managing Director

Sorry, if you could — Nitin-ji, if you could please repeat the question. Ethanol, we missed you after ethanol capacities.

Nitin Awasthi — InCred Equities — Analyst

Yeah, the current ethanol capacity of the company on different routes.

Gautam Goel — Managing Director

Okay. So would you like to ask all your questions and we can answer them then or this is the only question that you had?

Nitin Awasthi — InCred Equities — Analyst

No. Yeah, we can have one by one because I think the questions vary on the — the subject is different of each and every questions. So I think we go question by question.

Gautam Goel — Managing Director

So we have currently our ethanol capacities as mandated as approved by the government. Our 250 kiloliters per day on C and 312.5 kiloliters per day on B molasses and syrup. We are currently only using syrup as raw material, and we expect in the off season to only use B-heavy molasses. So we expect our overall capacity to be 312.5 KLPD. Out of this new supply ethanol and some of the capacities to earmark to make levies to make ENA for our country liquor segment to fulfill our levy obligation.

Nitin Awasthi — InCred Equities — Analyst

Noted, sir. The second question would be on the liquor business. We have substantial amount of capacity there as I can see in the presentation. Why are we doing this? Because are we doing this business to fulfill our obligation to the state or there is in the certain exact policy, they will have to comply with [Indecipherable]? Or are we also looking at this, where it can profitably contribute to our bottom line?

Gautam Goel — Managing Director

Well, we obviously wanted to contribute to our bottom line, that’s there. But the principal objective here is to take care of the levy obligation. It’s obviously more — it’s more viable to supply country liquor directly as compared to selling the levy molasses. And we hope our margins will continue to remain stable in the country liquor business as we are able to establish ourselves more firmly.

Nitin Awasthi — InCred Equities — Analyst

But currently, like you said you’re meeting around 402% EBITDA right in that segment?

Gautam Goel — Managing Director

Basically as you understood, Nitin-ji, the biggest element of the top line in country liquor is the excise duty, 90% is excise duty, so out of the 10% of the real transfer of goods that real value of the goods, we are making about 10% of that is EBITDA. As we establish ourselves firmly for quantities and our markets so we hope this margin could increase — this margin could increase a little bit, but it obviously will not be commensurate towards top line because which is mainly on account of excise duty.

Nitin Awasthi — InCred Equities — Analyst

No, let’s leave the excise duty apart, right. If we remove the excise duty on the net realization, what would be your margins?

Gautam Goel — Managing Director

Nalin, do you want to answer that?

Nalin Kumar Gupta — Chief Financial Officer

Nitin-ji, as Gautam mentioned, like this is our loss curbing exercise on the ethanol front. Now margins out of — on the net realization are to the tune of 8% to 9%. This out of net realization we earned INR1.45 crores of margin in this quarter, so which is around 12%, more than 10%.

Nitin Awasthi — InCred Equities — Analyst

More than 10%. Okay. So the current capacity that you have for country liquor, that is, if I’m not wrong, more than what’s required for meeting the state obligation.

Gautam Goel — Managing Director

Not really. The current capacity is only for meeting our own obligations. And we don’t have — after we don’t see ourselves going beyond that.

Nitin Awasthi — InCred Equities — Analyst

Okay, great, sir. That’s good. Thank you for clarifying that. Sir, the next thing I wanted to ask you about was the ethanol repricing. Do you think or anything is coming from the government side to encourage more blending because I believe the tender is already out for the next ethanol supplier and that’s already at 10-point-something, which is not being the capacity of that much magnitude, not available in India for 10 billion liters. So do you see them doing some repricing for ethanol?

Gautam Goel — Managing Director

To cure ethanol, there are various discussions which are going on. I think they could come out with some other various incentives that there is a talk of giving them some incentives to maximize ethanol, whether from sugar — whether from grain, whether this could result in repricing or whether it would be some sort of encouraging people to produce more. I’m not too sure. I mean, let’s say, I’m not really hopeful that there will be a new pricing coming out for the current year. But yes, there could be some sort of small incentives here or there, like we gave last year for some sort of — in Q2, Q3, they give a INR2 incentive for people who supply 100% quantities. Also government is definitely moving very fast sugar industry too is keeping pace, grain capacities are coming up. But to answer your question, I’m not too hopeful of a substantial or an increase in price at this moment.

Nitin Awasthi — InCred Equities — Analyst

Understood. Sir, last question from my side…

Operator

Mr. Awasthi, may we request you to please rejoin the queue. We have participants waiting for their turn?

Nitin Awasthi — InCred Equities — Analyst

Definitely. Okay.

Operator

Thank you. The next question is from the line of Akshat Thakur from Pico Capital. Please go-ahead.

Akshat Thakur — Pico Capital — Analyst

Very good evening to everyone. Thanks for the opportunity. My question is pertaining to the liquor business. So you mentioned that the sales amounted to around INR114 crores and average realization was INR248. So can I know the number of cases sold for this quarter?

Gautam Goel — Managing Director

Yes, so Akshat, we sold all 4.83 lakh cases this year — this quarter. And this INR248 realization per case is the net contribution net of excise per case.

Akshat Thakur — Pico Capital — Analyst

Okay, that makes sense. Okay, that will be all from my side. Thanks.

Operator

Thank you. The next question is from the line of Aditya Shrimankar from Ishti Advisors. Please go ahead.

Aditya Shrimankar — Ishti Advisors — Analyst

Yeah. Hi, my question was on the sugarcane use. It’s been low this season. So what is the reason for that and what are the steps being taken to improve and when can we expect any improvement?

Gautam Goel — Managing Director

Aditya, the reason for decrease in sugarcane is — this will be more a region-specific. I presume you’re talking about the state of Uttar Pradesh or are you talking about India as a whole?

Aditya Shrimankar — Ishti Advisors — Analyst

The industry has a whole.

Gautam Goel — Managing Director

The principal reduction in the yield, which will make a materialistic impact in the balance sheet for the country is in Karnataka and Maharashtra. Now, it’s a combination of agricultural factors, rainfall, also they had an extended season last year that could have caused the reduction in yield. Now in North India, we are finding that the reduction in the range of the tools are not uniform across the states. There is some part with a drop is a little bit more this is distributed on account of predominantly on account of weather. We are severely affected in two of our units on account of massive pest infestation, the top borer infestation.

Aditya Shrimankar — Ishti Advisors — Analyst

The what infestataion?

Gautam Goel — Managing Director

This is an insect that cause top borer, which is infesting — which has had a silver infestation in two of our units. So that is potentially — that has decreased the yields of our ratoon crop. But yes, we have made up some of the reduction in the decreased by higher drawl rates because of steady crushing and other farmers sort of outreach methods. So we don’t project — we don’t at least anticipate a greater and any substantial drop in our overall sugarcane production crushing this year. The recovery definitely has taken a beating the share for us.

Aditya Shrimankar — Ishti Advisors — Analyst

Okay. So how do we kind of combat this infestation? And has it been better in this current quarter?

Gautam Goel — Managing Director

So this infestation, it basically has to be combated at the right time. We have been working — from last year itself, we have been doing continuous effort which were spraying of pesticide using drones, using other tools. And this work continues to happen. We are quite hopeful to be able to keep it in control and possibly close to eradicate it in the current one or two years. Along with that, we are making very — lot of efforts to do a variety of replacement that is going on at full stream ahead. We are making a lot of time, effort, energy and resources are being put into replacement of varieties which will be more pest assistant. We hope to see that impact of that in the coming years.

Aditya Shrimankar — Ishti Advisors — Analyst

Okay. So the current profit before interest and tax margin is about 4%, which as you know, it’s 60% drop quarter-on-quarter. So is that — what can we expect going forward in terms of PBIT margins?

Gautam Goel — Managing Director

See, I won’t be able to give you specific numbers, but I can definitely tell you that this first quarter was — I mean the first Q3 was the lowest sugar recovery period. We are seeing an uptick in the sugar recovery, so this should definitely reduce the cost of production. As we also mentioned in our opening remarks, we hope to — we had 0.76 lakh tonnes of export quota for ourselves. We only exported about 0.01 lakh tonnes of exports — the sugar. So the balance sugar has to be exported in this quarter, maybe there’ll be some spillover into Q1 ’24. But I think we presume to export, so that will also have a positive impact on the overall realization.

Aditya Shrimankar — Ishti Advisors — Analyst

Okay. So can you see this moving back to closer to 9%, 10%?

Gautam Goel — Managing Director

This won’t be prudent for me, Aditya, to give you any projections going forward. I will suggest you can do your own working and calculation. We are definitely more hopeful than — we are definitely hopeful for a better quarter going forward.

Aditya Shrimankar — Ishti Advisors — Analyst

Okay, that’s it from my side. Thank you.

Operator

Thank you. The next question is from the line of Ambar Taneja from Geomatrix. Please go ahead.

Ambar Taneja — Geomatrix — Analyst

Yes, hi. I had a slightly longer-term question. It seems to me that the state government has taken some quite unfriendly steps in the last six months or so. First, there was turn off for the wages that you guys had to pay in the last quarter. Then, last quarter we understood that the amount of assets that have to be given to country liquor went from 18% to 20%. And then right now in the DCM Shriram call, we were made aware of another tax that the government has put on sales lease of molasses. So firstly. I wanted to confirm that is this tax a new thing, INR20 per quintal so basically charge on captive consumption of molasses?

Gautam Goel — Managing Director

Yeah. So this is a regulatory fee, which now state government has imposed on the supply of molasses even this is applicable to captive consumption also. And this is not for imposing, this is running for last one year.

Ambar Taneja — Geomatrix — Analyst

Is this a new tax?

Gautam Goel — Managing Director

This tax got imposed some time last year. Yes, this is under litigation — this tax is under litigation. And then going forward, we do hope that we will see some relief. But you are right that some of the measures have not been the most sort of friendly towards the sugar industry. I mean I can’t — you can’t argue with that. But again, there have been some measures which have been really proactive and friendly to the industry. There has been some measures, which, as an industry, we are not happy with them. But we are based out of UP, and we have to learn how to navigate all these positives and we have to take advantage of the positives and navigate the negatives.

Ambar Taneja — Geomatrix — Analyst

So actually that’s — I mean, I’m not arguing with that. My question is, so is the now is the sharing is still at 20% for country liquor permanently up from 18% to 20%?

Gautam Goel — Managing Director

So this is a little bit more complex. What we could do is we can share with you on email separately if you give your email ID. There is a difference even though they are same 20%, but the way to calculate that 20% has been amended. So for people like us who are diverting B-heavy and syrup, yeah, it could potentially see a reduction in our overall levy obligation because the calculation has been rationalized.

Ambar Taneja — Geomatrix — Analyst

And then last question is very strong rumors of extremely strong political pressure from MLAs and MPs for an increase in cane price this year. I mean it was widely assumed that next year, of course, we’ll see rupee rising. But I’ve been hearing a lot of talk about this year also. Now I know you can’t say much on the record, but what is your personal feelings about all this? This is get away with no rise this year or do we see a small rise, what’s your personal call?

Gautam Goel — Managing Director

Personal, I can’t tell you what my call would be, Ambar, but my hope is that we don’t have a price. But we too are hearing the rumors and to — I mean we have to just wait-and-watch, no comments on that feeling. I can just tell you our hope.

Ambar Taneja — Geomatrix — Analyst

Okay, all right, fair enough. I think you guys are going through a tough time. I wish you much luck coming out of it.

Gautam Goel — Managing Director

Thanks very much.

Nalin Kumar Gupta — Chief Financial Officer

Thank you, Ambar.

Ambar Taneja — Geomatrix — Analyst

Okay.

Operator

Thank you. The next question is from the line of Kaustubh Pawaskar from Sharekhan Limited. Please go ahead.

Kaustubh Pawaskar — Sharekhan Limited — Analyst

Yeah. Good evening, sir. Thanks for giving me the opportunity. Sir, my question is again and this sugar production for us, so you just mentioned that the yields, the recovery rate is lower. So earlier the expectation was there would be some kind of a mid-single-digit kind of an increase in production for the current sugar season. So considering the lower recoveries news, should we expect the production to be lower again for this season or you still hold on to your earlier commentary of around mid-single-digit kind of production increase for the current sugar season?

Gautam Goel — Managing Director

Kaustubh, sorry, if you can just — are you talking about the industry or about ourselves?

Kaustubh Pawaskar — Sharekhan Limited — Analyst

For us.

Gautam Goel — Managing Director

So yes, we do hope we will be able to make good some of the reduction and recovery in the first part of the season. We do expect to have a higher crush rate, but please keep in mind we are diverting substantially more sugar into — I mean cane into ethanol. We will be diverting considerably higher quantity from last year. Last year, we diverted about to 2 lakh tonnes of cane equivalent into ethanol. This quantity will be substantially increased. So sugar equivalent, we should be — we could be marginally higher, but overall sugar production will definitely should be lower on account of higher diversion of ethanol or cane into ethanol.

Got your point. Thanks.

Operator

Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go-ahead. Mr. Saket Kapoor, please go ahead with your question, your line is unmuted. Mr. Saket Kapoor, may we request you to unmute yourself, if muted from your handset. As there’s no response, we’ll move to the next question, which is from the line of Nimish Sheth, an Individual Investor. Please go ahead.

Nimish Sheth — Individual Investor — Analyst

Yeah. Hi, good evening, Gautam and rest of the team. First of all, your results are timely. So that’s really appreciated. I think that’s — I think something that you should continue doing as you have in the past. You mentioned — the sugar inventory is at 36. I think you mentioned why the cost is high and I think you indicated going forward, there is a chance that it may come down a little. I think I get the reasons around poor recovery in the cane. So what is the outlook for production this year for the company? Are we going to have a higher production, flat production year-on year? What is the outlook?

Gautam Goel — Managing Director

Yeah. Hi Nimish, thank you for your compliment and thank you for your good wishes. So as I was mentioning earlier, Nimish, we do expect to crush higher cane than last year. But we also expect to be diverting substantially higher portion of cane into ethanol manufacturing. So I mean, in today’s scenario, when you talk about production, is it a — we will — when we look at production, it’s a combination of sugar and ethanol. We do hope to produce more of this combination. So sugar production would definitely be lower.

Nimish Sheth — Individual Investor — Analyst

Okay. One question on Dhampur International. It has recorded a revenue of INR54 crores for the quarter. Is it for the quarter?

Nalin Kumar Gupta — Chief Financial Officer

Yes, this is for the quarter on account of sugar. This is for this quarter.

Nimish Sheth — Individual Investor — Analyst

Is where you’re means you’re exporting it through this subsidiary? How is it working? What is the reason for this sport in revenue at Dhampur International?

Nalin Kumar Gupta — Chief Financial Officer

So DIPL has been the subsidiary overseas sales of the company for last 10 years.

Gautam Goel — Managing Director

So Nimish, if I can just — as we just mentioned, we are — we commissioned a pharma-grade unit of 700 tonnes per day. And we’re looking to support our entire obligation in the form of refined sugar. So DIPL is vehicle, we are using to export because this allows us — gives us the opportunity to hedge our sugar in the international market. Yes, bulk of our sugar, which will be exported will be…

Nimish Sheth — Individual Investor — Analyst

Pharma-grade sugar is going to get exported basically?

Gautam Goel — Managing Director

A lot of our pharma-grade sugar will get — as per we should be able to produce more than our overall export obligation catering to some of the domestic institutional buyers. But let’s say, majority of it will be exported this year.

Nimish Sheth — Individual Investor — Analyst

Okay. And Dhampur International is more or like the commission agent, the profits will sit in the Indian subsidiary or will sit at in Dhampur International?

Nalin Kumar Gupta — Chief Financial Officer

So major profit will come in the parent company in India. So it’s 100% subsidiary of Dhampur, ultimately it will get consolidated with the parent company in India.

Nimish Sheth — Individual Investor — Analyst

Noted. Okay. I have one housekeeping question. If you see the last page of your results, in the segment results from sugar, for example, you have this line which has less unallocable expenses and there is a spike year-on year from 8.4 crores to 21 crores. So what is the result — what is the reason for the spike in unallocable expenses?

Nalin Kumar Gupta — Chief Financial Officer

So Nimish, as you are aware that the cost the expenses which cannot be overloaded on the manufacturing of sugar, so this is the balance amounted, this balance, the reason increase of this amount from last year to this year on account of the head counts and the salary increase and the inclusion of the director salaries.

Nimish Sheth — Individual Investor — Analyst

Okay, got it.

Nalin Kumar Gupta — Chief Financial Officer

Yes, so post the merger, lot of expenses, which were — yes, so this is sort of like — director remuneration is now part of DBOL which was not there earlier in these things already.

Nimish Sheth — Individual Investor — Analyst

Got it, okay.

Nalin Kumar Gupta — Chief Financial Officer

And commission also, so and actual expenses are now being allocated directly.

Nimish Sheth — Individual Investor — Analyst

Okay. Two last questions, one is on dividend. Usually, I think Dhampur used to give dividend in the third quarter. Is that a change now and you’ll be giving it annually once annual results are out? Is that what they’re going to do now?

Gautam Goel — Managing Director

I think we are still debating, let the season progress. We obviously were not very excited about the Q3 performance. But we do see something — we do see the situation improving and the Board is discussing this. So I will not be able to give you any concrete answer to your question at this point in this.

Nimish Sheth — Individual Investor — Analyst

Okay, sure. And the last question on capex. We were expecting you to give us some sense on the way forward if any decisions are being made for expansion in ethanol or any capacity. Is that something that’s going to be delayed because of cane related issues or they were not connected?

Gautam Goel — Managing Director

Sorry. Nimish, definitely there is a connection, but yes on cane related issues, we are bullish on account of increase in area. We don’t believe we should be able to get this pest matters in control. We have been taking a lot of action on this from last year. We are seeing some positive results. We are continuing to explore increasing — I think the big question here will be increasing our ethanol capacity, because our capacity is not really so much. We have adequate capacities that could be debottlenecking going forward. We are considering this, we are actively debating it internally. What would be the most opportune time to look at increase in ethanol capacities and also when we look at other related products down the line. Hopefully, we will be discussing this internally along with our Board and then coming out with our concrete plans going forward.

Nimish Sheth — Individual Investor — Analyst

Perfect. Thank you. Wishing you all the best. I know it’s a tough year, but wish you all the best. I think you guys will bounce out of it. Thank you.

Nalin Kumar Gupta — Chief Financial Officer

Thanks, bye.

Operator

Thank you. [Operator Instructions] The next question is from the line of Udit Gupta, an Individual Investor. Please go ahead.

Udit Gupta — Individual Investor — Analyst

Good afternoon, sir. Hello?

Gautam Goel — Managing Director

Yeah, hi.

Udit Gupta — Individual Investor — Analyst

Hello, yeah. Sir, my question is like to give us so it’s like 312,500 KLPD in terms of B-heavy, sir, what in terms of liters, how much have we expect to produce?

Gautam Goel — Managing Director

So it is 312,500 liters per day capacity.

Udit Gupta — Individual Investor — Analyst

Yes. And how many days of production is expected in the year?

Gautam Goel — Managing Director

We have permission to produce for up to 350 days, and we are working hard and trying to ensure we max out the production. Barring any unforeseen circumstances, we hope to produce for 350 days.

Udit Gupta — Individual Investor — Analyst

So can we expect like 10 crore liters of ethanol, just like a ballpark figure?

Gautam Goel — Managing Director

Fingers crossed, we hope to do better than that, but fingers crossed.

Udit Gupta — Individual Investor — Analyst

And sir, this does not include levy molasses or a country liquor?

Gautam Goel — Managing Director

No, this would be the overall alcohol production. And whatever is our levy obligation, we will have to produce equivalent ENA, which we will divert for country liquor manufacturing.

Udit Gupta — Individual Investor — Analyst

Okay, sir. So this includes the ENA as well as the economic part.

Gautam Goel — Managing Director

This is a government-mandated capacity that we can produce.

Udit Gupta — Individual Investor — Analyst

Okay. And sir, the ENA part would be about 18% to 20%, what did you say?

Gautam Goel — Managing Director

Roughly about 20%. So roughly about — this will be roughly about roughly — 11% roughly.

Udit Gupta — Individual Investor — Analyst

Roughly at 11% of this.

Gautam Goel — Managing Director

Yeah.

Udit Gupta — Individual Investor — Analyst

Thank you so much sir. Thank you.

Gautam Goel — Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, this will be the last question, which is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.

Saket Kapoor — Kapoor & Company — Analyst

Yeah, thank you. Namaskar, sir, and thank you for the opportunity. Am I audible, sir? Hello?

Gautam Goel — Managing Director

Yes. Namaskar, Saket.

Saket Kapoor — Kapoor & Company — Analyst

Sir, firstly, as this is our first call, if I’m not wrong, we would like to understand the differentiating factor for our company. What are the steps currently that the management or what we are doing deposits, the results would appear going ahead, especially for the improvement in margin?

Gautam Goel — Managing Director

Saket, sorry, this is not our first quarter call, this is our third quarter. [Foreign Speech] the question is as our name indicated, we are working very hard to look at optimizing our capacity utilization and value addition, using all our — with all the opportunities as cane producers. For example, we looked at commissioning a pharma unit this year, specifically earmarked for export and for domestic institutional customers, which will give us a higher sugar realization. We are maximizing our ethanol then country liquor came into place that we’ve worked hard to, in a very short span, we are at least able to supply the — our entire levy obligation directly rather than selling molasses.

Currently, as we discuss, our big focus will be on account of improving our sugar recoveries through cane development efforts, which will further improve our margins. We worked hard on improving our steam efficiencies, which has resulted in higher bagasse savings over last year, which are resulting in a higher revenue from bagasse. So we continue to look at all the opportunities available to us, whether it is value addition, whether it is expansion, whether it is in addition of new capacities of ethanol and things like that. And going forward, we do believe we will be improving both our margins and our overall a steady growth company.

Saket Kapoor — Kapoor & Company — Analyst

So when we look at the margin profile, what should we expect going ahead? And there is also the seasonality factor that plays on a quarterly basis. I think the Q4 would be traditionally better than what Q3, I think, correct me there, if I’m wrong. So if you could give us that — yes.

Gautam Goel — Managing Director

So Q4 definitely, on account of cost of production, the recoveries are always better, so that improves. We have steadier — we have a longer season. I mean that’s a three-month or sugar season as compared to two months of the new season. So what is in our control. I mean, really, one is the sugar prices, there is an element of the macro view. Recovery, we have to work hard towards improving our cane development activities. And the right product mix, maximizing ethanol, running the plant efficiently, in today’s scenario, that would be probably something that we — which is directly in our control, which we are continuing to do. And we hope our margin will further improve, because we have a substantial portion of sugar, which we will be exporting in this quarter, which will have a — which has a higher realization as compared to the domestic production.

Saket Kapoor — Kapoor & Company — Analyst

Okay. What is the exported quantity, that’s said, we have contracted?

Gautam Goel — Managing Director

Our export orders and our export quota was 0.76 lakh tonnes. We exported about 0.01 lakh tonnes in this quarter. So the balance sugar should be exported in the next quarter. Bulk of it maybe, most of it, there could be marginal quantities spilled over, but we are working hard to export most of it in this coming quarter.

Saket Kapoor — Kapoor & Company — Analyst

So 0.06 lakh would be done — 0.06 lakhs tonnes should be done for the next quarter?

Gautam Goel — Managing Director

0.06.

Nalin Kumar Gupta — Chief Financial Officer

0.65 for the next quarter and it spillover over into Q1.

Saket Kapoor — Kapoor & Company — Analyst

Okay. So when we look at this other expenses line items, how should one read the INR79 crore whether it’s commensurate with the revenue or there is some one-off item that has impacted for this quarter?

Nalin Kumar Gupta — Chief Financial Officer

So for this going forward, you may like to — you may have these kind of expenditure, because these expenses are more or less seasonal nature expenses. And this, as compared to last year, the figure is coming because of post-demerger because of the head office actual expenses are mainly thus every part and other fixed expenses, which are lying in the books of Dhampur Bio Organics Limited.

Gautam Goel — Managing Director

As you are aware, Saket, we had a demerger and the results of which now — so now the demerger has been completed, this is the — we’re not adding the third month of the demerger — third quarter — 3rd May ’22, the demerger got completed. So lot of the expenses, which were allocated over five units and then the overall the SML balance sheet will allow some of them will become — there won’t be a direct reduction, there will be some fixed cost increase in the DBOL books, which are coming into this nature.

Saket Kapoor — Kapoor & Company — Analyst

Okay, so this will be — this line item will be — whether it’s INR79 crores, INR80 crores on a consistent basis? I just wanted to understand the nature of these other expenses reoccurring again.

Nalin Kumar Gupta — Chief Financial Officer

So nine months expenses, if you see, more or less — more or less, if you see the nine-month expenses are…

Saket Kapoor — Kapoor & Company — Analyst

INR150 crore.

Nalin Kumar Gupta — Chief Financial Officer

INR150 crores. Not INR150 crores. So nine months, if you see only the INR37 crores of expenses analytical expenses, right.

Saket Kapoor — Kapoor & Company — Analyst

So I’m getting to line item H.

Nalin Kumar Gupta — Chief Financial Officer

H?

Saket Kapoor — Kapoor & Company — Analyst

Yeah. If you take the line item H for the quarter it is INR79 crores. And if you take the nine months, it is 14,999.

Nalin Kumar Gupta — Chief Financial Officer

So this other expenses mainly on account of variable costs part of that is variable cost and this is in line with the increase in turnover. If you see the turnover has almost doubled, the increase in other expenses in line with the increase in turnover. Some of that expenses part of our fixed expenses that will not increase. But where expenses will increase in line with our turnover.

Saket Kapoor — Kapoor & Company — Analyst

So we should then get the margins, my understanding was this line item will have a larger impact on the margin profile. So that’s what — yeah.

Nalin Kumar Gupta — Chief Financial Officer

These expenses really increase in commensurate in line with the turnover increase.

Gautam Goel — Managing Director

As we produce more, as we sell more, whatever are the variable expenditures will definitely go up. The selling expenses are variable, all variable consumers will end packing expenses are part of this other expenses.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir. And the last point is, sir, how is the mix going to change mainly between this biofuels and the sugar profile for becoming in coming years or whether it is true shorter-duration to commit what the mix is likely to be?

Gautam Goel — Managing Director

Saket, if you recollect, I mean, last year, our distillery — capacity of our distillery commissioned in the month of January, and so we had some part of a season where we could not utilize the early part of a season, we did not have the advantage of this enhanced capacity. And there were some teething trouble for which we have to take a shutdown of our distillery in the month of July for about a month. This year, our distillery has been running efficiently. I mean, post the shutdown, our distillery has been running with the desired and optimum parameters. And we hope to maximize our ethanol production. Therefore, we will be diverting more cane either in the form of syrup or in the form of B-heavy as compared to last year. As I mentioned earlier, we will be crushing more cane, but our overall sugar production will go down on account of more diversion into ethanol and also because of reduction in recovery over the last year.

Saket Kapoor — Kapoor & Company — Analyst

Thank you sir. And hope to connect again. And all the best.

Gautam Goel — Managing Director

Thank you very much.

Operator

Thank you. Ladies and gentlemen, we will be taking the one final question, which is from the line of Jaspreet Singh from VA Capital. Please go ahead.

Jaspreet Singh — VA Capital — Analyst

Good evening, everybody.

Nalin Kumar Gupta — Chief Financial Officer

Good evening.

Gautam Goel — Managing Director

Good evening, Jaspreet.

Jaspreet Singh — VA Capital — Analyst

Yeah. Sir, you mentioned that your cane area has gone up, and apparently the crushing will go up this year. And along with that the gross recoveries have fallen down. So first question is that at C molasses basis, do you expect that used to be at the same level as last year or a bit lower or higher?

Gautam Goel — Managing Director

Juice should be similar to last year. The amount of potential sugar and TRS in the juice have come down.

Jaspreet Singh — VA Capital — Analyst

It will be more or less the same?

Gautam Goel — Managing Director

Yes. The juice will be the same. The CRS and sugar, that is lower than last year.

Jaspreet Singh — VA Capital — Analyst

So what does it mean?

Gautam Goel — Managing Director

[Foreign Speech] sugar and reducing sugar, which can be rather so across our ethanol, that is down from last year on account and so that is the — in fact that has adverse effect for us.

Jaspreet Singh — VA Capital — Analyst

Okay, that will be lower. And in the beginning of the call, I think you mentioned that this pest infestation which has happened, it will take one or two year to overcome. So do you expect this thing to continue for next season also?

Gautam Goel — Managing Director

So we are very hopeful to have got — as I mentioned that we are very hopeful we would be able to — we were working very hard and we are very hopeful, we should be able to eradicate it or be close to eradicating it in this coming season itself. And we’re also working very hard to introduce new varieties and front-ending all those efforts. So we are hopeful we will have a better situation next year as compared to this year.

Jaspreet Singh — VA Capital — Analyst

Okay. And may I know what is the dominant variety right now which you are using, 238?

Gautam Goel — Managing Director

Our initiative — pretty dominant variety is 238. And the newer variety is in question and the work — in which work is going on very seriously is 118 and 15023.

Jaspreet Singh — VA Capital — Analyst

Okay. So the dominant these two varieties will become dominant in the next season, is it?

Gautam Goel — Managing Director

Not next season, but we hope to have self-sufficient in the next two years, we do hope to have sizable quantities available of one of these varieties, which will make a materialistic impact on the cane crushed. Next year, the quantities will be more — will be earmarked mostly for seed for the following year.

Jaspreet Singh — VA Capital — Analyst

Okay. And as you mentioned that the area under sugarcane has gone up, how much has it gone up?

Gautam Goel — Managing Director

Well, there are two things. Yeah, it has gone up by about — for the overall group, it has gone up maybe about 5%, what we see is 5%, but we have worked hard to increase our drawl diversion that used to happen to other khandsari pharma outreach, our steady crushing has an overall increased our drawl, which we think that will have a positive impact overall in our cane availability.

Jaspreet Singh — VA Capital — Analyst

Okay. Thank you. Thank you very much.

Operator

Thank you.

Navin B. Agrawal — SKP Securities Limited — Analyst

Thank you very much, friends. That was the last question in queue. In case there are any further follow-up questions or any unanswered questions, my email ID is there on the invite, request you to send your queries and we take them up with the management.

I’d now like to hand over the conference to Mr. Goel for his closing remarks. Thank you, and over to you, Gautam.

Gautam Goel — Managing Director

Thank you, Navin. I think we will let Nalin do the honor.

Nalin Kumar Gupta — Chief Financial Officer

Yeah. Thank you, Gautam, and thank you, Navin.

And on behalf of Dhampur Bio Organics Limited, we would like to thank you all of you taking time out for this conference call. And if you have any queries, further questions, please feel free to contact us either by way of mail or telephonically. You can also visit our website, dhampur.com, and post your queries you have. We’ll get back to you as soon as possible for us. And thank you very much once again, and have a wonderful day.

Thank you.

Operator

[Operator Closing Remarks]