Dhampur Sugar Mills Limited (DHAMPURSUG) Q4 FY23 Earnings Concall Transcript

Dhampur Sugar Mills Limited (NSE:DHAMPURSUG) Q4 FY23 Earnings Concall dated May. 08, 2023.

Corporate Participants:

Anant Pande — Chief Executive Officer

Susheel Mehrotra — Chief Financial Officer

Gaurav Goel — Managing Director

Analysts:

Nikhil Saboo — SKP Securities Ltd. — Analyst

Aman Sonthalia — AK Securities — Analyst

Sanjay Manyal — ICICI Direct — Analyst

Vinay Bhalotia — — Analyst

Udit Gupta — — Analyst

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

Gautam Dedhia — Nalanda Securities Private Limited — Analyst

Kruttika Mishra — Sharekhan by BNP Paribas — Analyst

Aashav Patel — Molecule Ventures LLP — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Dhampur Sugar Mills Limited Q4 FY’23 Earnings Conference Call hosted by SKP Securities Limited. [Operator Instructions]

I now hand the conference over to Mr. Nikhil Saboo from SKP Securities Limited. Thank you. Over to you.

Nikhil Saboo — SKP Securities Ltd. — Analyst

Good afternoon, ladies and gentlemen. It’s my pleasure to welcome you on behalf of Dhampur Sugar Mills Limited and SKP Securities to this financial result conference call. We have with us Mr. Gaurav Goel, Managing Director; and his colleagues, Mr. Anant Pande, CEO; Mr. Susheel Mehrotra, CFO; Mr. Vineet Gupta, VP Finance; and Mr. Akshat Kapoor, VP Operations. We will have the opening remarks from Mr. Goel, followed by Q&A session.

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

Anant Pande — Chief Executive Officer

Thank you, Nikhil. This is Anant Pande, the CEO. So good afternoon, everyone, and a very warm welcome to all of you at this Dhampur Sugar Mills Q4 FY’23 Earnings Conference Call. First of all, let me inform you that the company successfully completed expansion of its distillery capacity by 130 kiloliters per day on C heavy molasses at Dhampur unit. We had mentioned about this during our last conference — last quarter conference call, earnings call. The new capacity has been commissioned on 1st of February, 2023. With this expansion, the distillery capacity of the company stands at 350 KLPD on C heavy molasses. The 100 KLPD grain-based distillery is in the process of commissioning, which is expected to be on stream by the end of this month. Of the molasses expanded capacity, our company could achieve the full capacity, right from the time of commissioning as well.

Coming to the operating numbers of the company. The company crushed 18.85 lakh tons of cane in this quarter, which is higher by about 7.7% compared to the corresponding quarter last year. The gross recovery in this year was marginally lower, 12.38% versus 12.50% in the corresponding quarter last year. Sugar production during the quarter is 1.47 lakh tons, which is 83.5% of the production in the corresponding quarter last year. This is lower mainly due to the diversion of around 4.65 lakh tons of cane for production of ethanol through syrup.

Sugar sales during the quarter has been 0.96 lakh tons, which is higher by about 25%, corresponding to the — compared to the same quarter last year. Average sugar realization in this quarter has been INR34.67 per kg, vis-a-vis INR34.52 per kg in the corresponding quarter last year. Total ethanol production during the quarter is 347.18 lakh liters through syrup route, including about 90 lakh liters, additional production after commissioning of the new distillery, which was commissioned on the 5th of February. Last year corresponding quarter, the company had produced 212.93 lakh liters, out of which about 86.93 lakh liters was produced from the syrup.

Production and sales of ethyl acetate has been 108.18 lakh kgs and 107.40 lakh kgs. This was against 85.99 lakh kgs in the last, corresponding quarter last year. This was the production and the sales was 80.57 lakhs. There was an increase of about 20.5% in production and 25% in sales. Production and sales of potable spirits have been 3.96 lakh cases, and 4.13 lakh cases vis-a-vis 2.9 lakh cases and 3.13 lakh cases corresponding last year. Rajpura unit has completed its crushing season ’22-’23 with 137.75 [Phonetic] lakh quintal, which is higher by about six lakh quintal compared to the last year.

I would like to now request our CFO, Susheel Mehrotra to take you through the financial performance of the company. Thank you very much.

Susheel Mehrotra — Chief Financial Officer

Thank you. Good afternoon, once again, and a very warm welcome to our earnings call for Q4 FY’23. Coming to the performance of the company, our Board of Directors approved the financial results for Q4 FY ’23 on 7th May, that’s yesterday. On standalone basis, income from operations during the quarter ended March 23 stands at INR756.9 crores, which is higher by 32% as compared to INR574.66 crores last year. PBT is at INR78.7 crores, which is higher by 50% [Phonetic] compared to last year. PAT is INR57.9 crores, higher by 76% and cash profit is INR81.7 crores higher by 45% as compared to last year same quarter. The inventory valuation rate is 32.9 per kg. The closing inventory as on 31st March ’23 is 1.2 lakh tons, as against 2.05 lakh tons moving inventory as on 31st March ’22. This is lower mainly due to dilution of 4.65 lakh tons of cane for production of ethanol through syrup.

Let me now take you through the business-wise performance. During the quarter, our revenue from sugar business is INR590.3 crores, higher by 45%, as compared to corresponding quarter last year. Revenue from power business is INR94.6 crores, almost at the same level as corresponding quarter last year. Revenue from ethanol business is INR192.7 crores, which is again higher by 68% as compared to corresponding quarter last year. Revenue from chemical business, INR85.9 crores, higher by about 9% as compared to last year same quarter. The higher profit during the quarter is attributable mainly to ethanol INR43 crores, vis-a-vis INR29.3 crores and chemicals INR6.9 crores versus INR0.1 crores last year. This is partly offset by our lower profit from the sugar business. This is again mainly because of dilution of syrup to ethanol production.

Coming to annual performance. Income from operations during the year ended March ’23 stands at INR2,840.8 crores, higher by 29%. PBT is at INR215.1 crores, higher by 5%. PAT is at INR150.3 crores, higher by 2% and cash profit is INR229.8 crores, higher by 3%. During the year, our revenue from sugar business is INR1,937.2 crore, higher by 33% as compared to same — as compared to last year. Revenue from power business is INR217.1 crores, marginally improved by 2% as compared to last year. Revenue from ethanol business is INR596.1 crores, higher by 40% as compared to last year and revenue from chemical business has seen in 2.4 crores, higher by 9%.

Now coming to the consolidated performance. Income from operations during the quarter stood at INR762.6 crores, EBITDA is INR107.9 crores, PBT is INR81.5 crores, PAT INR60.7 crores and cash profit is INR84.5 crores. Income from operations during full-year and in March ’23 stands at INR2,889.5 crores, higher by 33%, PBT is INR222.8 crores, PAT is at INR158 crores, and cash profit is INR237.5 crores. So these are our financial numbers on a broad level.

Thank you once again for joining us on this conference call. We’ll be happy to answer any questions that you may have. Thank you.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Aman Sonthalia [Phonetic] from AK Securities. Please go ahead.

Aman Sonthalia — AK Securities — Analyst

Good evening, sir.

Anant Pande — Chief Executive Officer

Good evening, Amanji.

Aman Sonthalia — AK Securities — Analyst

Sir, my question is just, last year the inventory cost was much lower than this year. Sir, what is the reason behind this higher inventory costs?

Anant Pande — Chief Executive Officer

So the only reason for that is in transfer pricing. So last year the transfer price that we have done, because the ARPU [Foreign Speech]. So we have only done sort of and the transfer pricing has been that 1,300 was have been 1,500 last year. So because of that we have seen the COP of sugar go up, but if we see the COP of our syrup ethanol, that is only at 8.8 [Phonetic]. So that is why we have seen that switch happening from one-side to the other side. So that is the only reason why the COP of sugar has gone up.

Aman Sonthalia — AK Securities — Analyst

Okay, sir. And sir, what is the bagasse base we have taken into account?

Anant Pande — Chief Executive Officer

INR100 per quintal.

Aman Sonthalia — AK Securities — Analyst

INR100 quintal?

Anant Pande — Chief Executive Officer

Ji.

Aman Sonthalia — AK Securities — Analyst

And whether we have sold any bagasse in the market also?

Anant Pande — Chief Executive Officer

No, we have not sold anything in the market as of now. We have sufficient fuel stock as on-date. We will be seen that on August after we see exactly how much of fuel you all need. We do believe that we may have some surplus, but we don’t plan to sell any fuel as on-date during the end of August.

Aman Sonthalia — AK Securities — Analyst

And sir, what is the current steam congestion [Phonetic] on a unit base.

Anant Pande — Chief Executive Officer

So, Rajpura plant shut on the 10th of April, while Dhampur right now is running at about 32.5% to 33% is seen at Dhampur as on-date.

Aman Sonthalia — AK Securities — Analyst

33% steam conjunction is very, very low.

Anant Pande — Chief Executive Officer

Yeah, it is. I mean, as what we have spoken about this also earlier. And then we said that last year we worked lot on steam efficiency and that is what we’ve been able to achieve.

Aman Sonthalia — AK Securities — Analyst

Sir, what it was last year?

Anant Pande — Chief Executive Officer

Last year the average was about 40.

Aman Sonthalia — AK Securities — Analyst

Okay. So it’s a significant fall from 40 to 33, so great achievement, sir.

Anant Pande — Chief Executive Officer

Thank you, sir. Thank you.

Aman Sonthalia — AK Securities — Analyst

Sir, next year also most of the sugar companies are working with this Chandigarh-based company on this steam saving. So we are also going for further efficiency on this?

Anant Pande — Chief Executive Officer

So we will carry-on always, a monthly, or year-on year, we will try and bring our steam lower. But right now, we have already achieved what we had to. We are still working on now the mathematics as to how much of capex we will have to do to bring it down further, and whether it makes sense or not. So that work is still in progress. But yes, let’s put our unit, we are doing some work there to bring it down even more there. But Dhampur, we are not sure whether we will put any more capex on steam for the year ’23-‘ 24.

Aman Sonthalia — AK Securities — Analyst

Okay, sir. And sir, current grain prices, how is the margin, if we like this ethanol from grain.

Anant Pande — Chief Executive Officer

See, ethanol from grain, again, Amanji, will vary year-on year, but right now, the grain prices have again dropped. The price of DDGS seems to be stable. So as I’ve said, I mean as what was said by, I mean, in the month, our plant will start by end of May. So we do believe there is sufficient margin as on-date to make from date [Phonetic] as on — as of now, but again grain price rises and DDGS price fluctuate a lot, but still even after that there is sufficient margin, that we believe that we can have from there also.

Aman Sonthalia — AK Securities — Analyst

And sir, what is the current recovery, gross recovery compared to last season, sir?

Anant Pande — Chief Executive Officer

So we are almost at the same as what it was last year. We were actually, exactly the same till around, 2nd of May, but 2nd of May, we had very heavy rain that Dhampur due to which, for the last three days, four days, our [indecipherable] came has dropped. But we believe that now that the rain has stopped and weather has improved that we will come back into the same as last year in the next two days to three days.

Aman Sonthalia — AK Securities — Analyst

And, sir, one last question, sir, how this Bindal Agro plant will affect our dressing, next season, sir?

Anant Pande — Chief Executive Officer

Sir, for surely, some part of our cane will go to the Bindal Agro plant, which is coming up, but we have already made our own plants to try and ensure that we do not crush lower than what we will crush for the year ’22-’23.

Aman Sonthalia — AK Securities — Analyst

Yes, sir. And sir, if — happens, how it will impact western UP, sir, where our plants are located?

Anant Pande — Chief Executive Officer

Sir, that’s in UPC. There is no, the area where this new plant is coming up. It will impact the four, five of us who are there. But I think there is sufficient quantity and we will have to see as to how much of that first one gets stopped for [indecipherable] which happens as of now. [Speech Overlap] No, again, we need to talk about it as much as we like. I don’t see any real impact of that as on-date with every other area. But for surely, what we are — surely working on is our cane development where as of now old plants are only on 238 [Phonetic], and then seeking spread — western UP, east has changed, but west is still on 238 [Phonetic]. We have a plan in the next three years to at least have 50 per cent as varieties of cane, both our plants.

Aman Sonthalia — AK Securities — Analyst

Sir, we say, thanks and great set of [indecipherable], congratulations for that. Thank you, sir.

Anant Pande — Chief Executive Officer

Thank you so much, sir. Thank you for all your help.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Sanjay Manyal from ICICI Direct. Please go ahead.

Sanjay Manyal — ICICI Direct — Analyst

Hi, sir. Just a few questions on the sugarcane crushing, but currently this year, we had 29 lakh tons kind of crushing. So would it be safe to assume approximately 2%, 3% things will happen next year, financial year.

Anant Pande — Chief Executive Officer

Very, very early days, but yes, is the plan. This year we will crush, you are right, close to about 30, 39. Next year, the plan is for surely to make it up higher, but again, I think that in your July call, I’ll be able to answer that better one to see the final planting numbers and also the monsoons. So in July, I’ll be able to exactly answer, but yes, we do expect and hope that we will crush higher than what we did for the year ’22-’23.

Sanjay Manyal — ICICI Direct — Analyst

Okay. And given the prices have moved up to INR3 in last one month, your current sugarcane juice diversion is approximately 24%, 25%. Does it make sense to sort of bring it down to maybe 20% [Phonetic] or below given the prices, sugar prices have made up a bit, I mean, might probably an overall scheme of things, you know will be profitable to sort of sell more?

Anant Pande — Chief Executive Officer

See, as of date, that will always, where if you all always know that during the summer months sugar prices go up syrup or B heavy. How much we make is basically to balance out the feedstock that I need to run my chemical or my ethanol plant for the whole year. So that is how we balance our [indecipherable]. As of now also with the present price actually have sugar, we still don’t see there is any sort of loss to do sort of output of the same.

Sanjay Manyal — ICICI Direct — Analyst

But proportionately you believe it should remain 25-75 rather than [indecipherable].

Anant Pande — Chief Executive Officer

Roughly yes.

Sanjay Manyal — ICICI Direct — Analyst

Okay. And if you can just give a guidance for the full-year volume for the ethanol for ’24 and ’25?

Anant Pande — Chief Executive Officer

Should be a well opportunity [Speech Overlap] So basically, we all do — we all expect to produce over 12 crore liters next year ethanol. Overall, we will do 15-plus, but that we will need E&A to also take care of him, ethanol, so for OMC over 12 grower contract is what we believe that we will do for the year ’23-’24.

Sanjay Manyal — ICICI Direct — Analyst

Sir, just last one, our overhead spend this year was somewhere around 190 [Phonetic], what I believe a lot of dips would be because of the freight. Now given the fact that anyway would be carrying lower inventory export possibility, probably the next year would be very limited. So will that overhead spends come down given the birth rate [indecipherable].

Anant Pande — Chief Executive Officer

See, again, I think that the export front, again, very, very early days to speak about. But I still believe exports will happen. How much they will happen is anyone’s guess right now. Last year we did 11 million tons. This year, we’ve done six, next year also seeing the cane crop as of now exports will happen. So the freight cost definitely moves. See, New York is [indecipherable] high almost right now. So it makes canes for India to export, if we have a surplus next year.

Sanjay Manyal — ICICI Direct — Analyst

Yeah. I mean, from the [indecipherable] perspective, I’m saying it’s probably, and would it — wouldn’t it make sense to sort of sell the quota and sort of start continue to sell in the domestic market and probably save on the freight cost.

Anant Pande — Chief Executive Officer

Absolutely. So, see these options are always open. We will be starting all these options vis-a-vis, what is the price that we can have in New York, vis-a-vis, what is the price that we get it is still our quota. So all options open for us as of now to be in a sweet spot.

Sanjay Manyal — ICICI Direct — Analyst

And in last bit, if you can just tell me what is your guidance for the debt level, overall debt level for ’24?

Anant Pande — Chief Executive Officer

So we do not have major capex plans for the year ’23-’24. Capex plans are limited, because we believe that we have sufficient capacity as on date. Our total debt —

Sanjay Manyal — ICICI Direct — Analyst

Will be 230 next year?

Anant Pande — Chief Executive Officer

Will be — it should be — it will be lower than what it is for the year ’22-’23. We will be keeping more debt, more debt we will take.

Sanjay Manyal — ICICI Direct — Analyst

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

Anant Pande — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Vinay Bhalotia [Phonetic], an investor. Please go ahead.

Vinay Bhalotia — — Analyst

Good evening, sir. Many congratulations on the fantastic results. I just have one small doubt on your segment wise revenue and profits compared to ’21-’22 versus ’22-’23. Last year we posted a revenue from ethanol INR596 crores [Phonetic] and had a profit out of it was INR131 crores. This year we see a fantastic 40% growth in revenue, but the profit remains same. So is there any particular reason for the same?

Gaurav Goel — Managing Director

So the only reason, as I said earlier, is transfer price. So last year in the year FY ’21-’22, our transfer price from six months for B Heavy was INR800 and then for the balance six months was INR1,025, while this year our transfer pricing of B Heavy has gone up to INR1,100. That is one of the reasons. And the other one is we have diverted — last year we only ran syrup for about 25 days for the year FY ’21-’22, while for the year of FY ’22-’23 we have run it for almost close to 180 days. So that is the main difference that you have seen that the profit margin has come down. It is only due to transfer price.

Vinay Bhalotia — — Analyst

Okay, got it. Thank you so much.

Operator

Thank you. Our next question comes from the line of Udit Gupta [Phonetic], an investor. Please go ahead.

Udit Gupta — — Analyst

Good afternoon, sir. Sir, my question is what are the future expansion plans in sugar or in ethanol or what are we thinking of in any of those things?

Gaurav Goel — Managing Director

So as of now, as I said that our capacities are pretty — we have got sufficient in Dhampur, Rajpura, so we really do not need to do any capex as of now. The only effort and the only focus that Dhampur has, as of now, has to become — how to become more efficient. What we spoke about earlier last year, we worked on steam. This year also we will be doing on steam. How to make our breakdowns lower, and in Rajpura especially how to make our cane growth higher. So I don’t see any need for us to do any major expansion for the year ’23-’24. We have sufficient capacity on all the fronts.

Udit Gupta — — Analyst

Sir, are we thinking of a sugar refinery or grain-based distillery or nothing of the sort?

Gaurav Goel — Managing Director

No, so grain is already there. So grain-based, as I said, we have already done our 100 KL of grain-based which will come on stream by end of May 2023 itself. So within three weeks our 100 KL grain will be back — it will be on stream.

Udit Gupta — — Analyst

Okay. And sir, you were just talking about the finances of the grain-based. Could you please repeat it once more? Like what are the economies…

Gaurav Goel — Managing Director

Yeah. So financials on grain-bases as on date seem to be good. I don’t see any challenge on that front, but again as I said, as soon as our plant starts July, I will be able to give you exact numbers of our COP, everything else. But as on date, what we have worked on paper, grain-based makes sense for us as we have our own fuel. We don’t have to buy coal or anything else because the biggest cost for a grain-based plant — a standalone grain based plant is the fuel cost.

Udit Gupta — — Analyst

And sir, are we looking at it as an optionality or are we thinking of running it, sir, from day one?

Gaurav Goel — Managing Director

Both, both. So we have both the options and that is why we put up the plant. We will run it — at least we have the option. So in case we believe that we can make more money out of grain and save on the B Heavy or syrup for the next year, we will see like that. But for us, you are right, grain is an option. It is not…

Anant Pande — Chief Executive Officer

So Uditji, we are doing our feedstock planning also in such a way that we have that flexibility. So we have done the B Heavy plans — stock plans in such a way that if the grain, for some reason, doesn’t become very viable, we can switch over to B Heavy. We have done that contingency planning. So we are going to be carrying some stocks of B Heavy.

Udit Gupta — — Analyst

So basically, sir, in July you’ll be able to give us a better picture about how it’s going.

Anant Pande — Chief Executive Officer

Absolutely.

Udit Gupta — — Analyst

And sir, about that the Bindal plant which is just coming, which you just spoke about, sir. Can you expand it a little more? Like, are we expecting a hit on our crushing or there is enough for everyone or something like that.

Gaurav Goel — Managing Director

No, see, for surely as on date, our cane area will be cut. We will believe it will be about 25 lakh to 30 lakh quintals of cane of ours might be cut for that plant, but we have already made a Plan B where we will be able to make up the 25 lakh to 30 lakh from other areas that we have not focused on as of now. So that’s why I said Dhampur, we are going to crush 260 lakh quintals in the year ’22-’23, and next year also even after the Bindal plant is there, we all will try and ensure that we do not crush lower than what we have done this year.

Udit Gupta — — Analyst

Thank you so much, sir. Thank you, sir.

Gaurav Goel — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Sunil from Nirmal Bang Securities Private Limited. Please go ahead.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

Yeah. Thank you very much, sir, and congratulations on good numbers. Sir, can you give a bit clarification that the cane area for the next year has higher in the next year or it’s more of a similar?

Gaurav Goel — Managing Director

See, the cane area for Dhampur is almost going to be the same, Rajpura for surely we are hoping it to be slightly higher than what it was. Again, planting is still on as we speak, even though a major part of the planting is over, but because of the rains that we had last week, planting got a bit slowed down, but planting has again started. And seeing the planting and what rainfall we get, July I’ll be able to give you all a far, far better idea about the total cane area that we expect for the year ’23-’24.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

And for overall UP, what is the outlook?

Gaurav Goel — Managing Director

It looks to be the same as of now. It is very hard — again, early days. We have not got numbers as of now. As I said planting is still on all over UP. So extremely hard to say, as of now, that what will be the overall number. Do not have an exact idea as to how much planting is happening in east and in central UP. But whatsoever I’ve heard, planting seems to be healthy, so I don’t expect the cane crop to be lower in UP for the year ’23-’24 as of now.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

And sir, about the export, how much exports volume is there in this quarter number?

Gaurav Goel — Managing Director

No, we don’t have any export for Q4. So in the 31st March, we had no export. We already did our exports in Q3 and then we sold our quota also in Q3 itself. So our Q4 has no exports.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

Okay. So pure domestic sales realizations are there.

Gaurav Goel — Managing Director

Yes.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

Okay. So we will be building up from here in the next quarter then. Sir, last question…

Gaurav Goel — Managing Director

Sorry, can you repeat the question?

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

Yeah, realization is expected to be higher in the next quarter then.

Gaurav Goel — Managing Director

Yes, for surely, prices have improved from April onwards.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

Sir, last question relating to this grain-based, I think it’s a multipurpose, like you can use both grain or whatever the B Heavy.

Gaurav Goel — Managing Director

So grain, what we have put up, the 100 KL plant is, as I said, is an option that we have whether I want to use B Heavy, whether I want to use syrup, whether I want to use grain, that is the option that now we all have got. So this is a great option to have because I can always plan vis-a-vis sugar price and how much India is going to make. So grain is going to be a great option that we will have from the end of May itself.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

And sir, you talk about captive fuel, that is bagasse you will be using in that.

Gaurav Goel — Managing Director

Yes, yes, that’s right.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

Whatever bagasse you now are selling in the market will be consumed internally and that can give you additional earnings on that basis.

Gaurav Goel — Managing Director

So we are not — as I said, we are not planning to sell any bagasse as on date, even though we may have some surplus. But that call Dhampur will take only at the end of August.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

But by the time your this grain-based plant will start, so that will need…

Gaurav Goel — Managing Director

[Foreign Speech] both for B Heavy and for grain-based. We don’t need to buy any fuel from anywhere. So we have saved sufficient fuel to run on B Heavy, grain, any other — so we have no issue at all on the fuel side.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

So if we talk in such a way that like if you sell the bagasse in the market and if you consume it yourself, then how much more realization you can get in bagasse?

Gaurav Goel — Managing Director

Bagasse, as of now, we believe that if we — see, again, if I sell my fuel and if I don’t have fuel, then my plant will stop, whether I run grain or I run B Heavy, so it don’t really matter. So it makes more sense for us to utilize our plant than to close the plant. So you will always get a better margin as on date, what is the present price of fuel that we can sell, it makes better to do it for captive than to sell to a third-party.

Anant Pande — Chief Executive Officer

See whether we run grain or we run B Heavy, the steam consumption or the fuel consumption would still be there. So we have done our fuel planning in such a way that either option we use, our fuel will be sufficient for the entire year running.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

So you don’t have to buy it from outside.

Anant Pande — Chief Executive Officer

No, no.

Sunil Jain — Nirmal Bang Securities Pvt. Ltd. — Analyst

Okay, great. Thank you very much.

Gaurav Goel — Managing Director

Thank you.

Operator

Thank you. Our next question comes from the line of Gautam Dedhia [Phonetic] from Nalanda Securities Private Limited. Please go ahead.

Gautam Dedhia — Nalanda Securities Private Limited — Analyst

Hello, can you hear me?

Gaurav Goel — Managing Director

Yes, yes, I can. Thank you.

Gautam Dedhia — Nalanda Securities Private Limited — Analyst

Yeah. Just want to know what are the current spot prices of sugar and what was your March exit price ex-mill.

Gaurav Goel — Managing Director

So the current price of sugar is about INR35.82 [Phonetic] to INR36.00 [Phonetic], and our average for March was INR34.6 [Phonetic].

Gautam Dedhia — Nalanda Securities Private Limited — Analyst

And do you expect it to go up more in May with some more demand?

Gaurav Goel — Managing Director

No, I expect prices to be pretty stable from here, INR0.50 paisa, plus/minus, that will always happen. But if you are asking if I expect the prices to go up to INR38, INR39, I don’t.

Gautam Dedhia — Nalanda Securities Private Limited — Analyst

And these are raw sugar prices, right?

Gaurav Goel — Managing Director

White.

Gautam Dedhia — Nalanda Securities Private Limited — Analyst

Okay, thank you.

Operator

Thank you. Our next question comes. From the line of Aashav Patel [Phonetic] from — I’m sorry, Mr. Patel has dropped his line or has left the queue. We move on to the next question. It’s from Udit Gupta, an investor. Please go ahead.

Udit Gupta — — Analyst

Sir, thanks for taking my question again. Sir, the bagasse prices, have they come down because of the recent fall in the coal prices or something like that?

Gaurav Goel — Managing Director

No. Bagasse prices, as far as what we know, are still in the range of about INR300 to INR350 per quintal is the price of that even as on date. So we have not seen any prices drop, even though we are not either a buyer or a seller of that. But still, this is a price range that we all have heard of.

Udit Gupta — — Analyst

Okay. And sir, for the sugar prices that you just spoke of, sir, the domestic quota which has been increased for the month of May and there was an increased quota for April, sir, has that had any impact? Has the price fallen in the last 15, 20 days or something in the sort?

Gaurav Goel — Managing Director

No, the prices have stayed stable.

Udit Gupta — — Analyst

So we are not seeing any such impact of this increased domestic quota.

Gaurav Goel — Managing Director

No.

Udit Gupta — — Analyst

Okay. Thank you, sir. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Kruttika Mishra from Sharekhan by BNP Paribas. Please go ahead.

Kruttika Mishra — Sharekhan by BNP Paribas — Analyst

Sir, just a couple of questions on the margin front. So for the current quarter, our gross margins are down by around 500 basis points. So if you can just help out what is the reason for the same?

Gaurav Goel — Managing Director

So it is only on transfer pricing what I spoke about. The transfer pricing of syrup and of B Heavy that we did vis-a-vis last year is one reason why you have seen the margins drop. The other reason is if you see overall, our country — our CL sales have gone up, so that is why the revenue side is up, but the margins on that have stayed the same. So because of these two, we have seen the margins drop, but overall the margins have dropped only because of transfer pricing, not because our COP going up.

Kruttika Mishra — Sharekhan by BNP Paribas — Analyst

Okay, alright. For the full year also that would be because our reduction from operating margin is also around 300 basis points for the full year, so for that also it will be the same or there are any other…?

Gaurav Goel — Managing Director

No, same.

Kruttika Mishra — Sharekhan by BNP Paribas — Analyst

Okay. So mainly because of the transfer pricing that the margins have taken a hit.

Gaurav Goel — Managing Director

Yes.

Kruttika Mishra — Sharekhan by BNP Paribas — Analyst

And for the coming year, I know it’s too early, but for the coming year since the margins have gone down to around 10.6% or 11%, so for the coming year, how do you see? Do we expect an improvement or how would…?

Anant Pande — Chief Executive Officer

See, next year we expect because of our new distillery has been commissioned, so we will have the benefit of operating it for the full year. So margins will definitely improve. And the country liquor, which is a drag on the margins, will remain more or less in the same range. So that will also contribute to the higher margins in the next year.

Kruttika Mishra — Sharekhan by BNP Paribas — Analyst

Okay, sir. Thank you so much. That’s it from my side.

Gaurav Goel — Managing Director

Thank you.

Operator

Thank you. Our next question comes from the line of Aman Sonthalia from AK Securities. Please go ahead.

Aman Sonthalia — AK Securities — Analyst

Sir, there is talk of increasing MSP. So what are the possibilities, sir?

Gaurav Goel — Managing Director

I don’t see it happening. I really don’t see it happening, my friend. We’ve been talking about it now for the last I think about three years. But there have been talks, there have been some press notes which are out, but I think it’s a long shot as of now if we believe that MSP is going to be increased. So my personal view– I can be fully wrong on it. I don’t think it will.

Aman Sonthalia — AK Securities — Analyst

And sir, what are the chances of price increase in this SAP increase in the coming seasons, sir?

Gaurav Goel — Managing Director

Amanji, I don’t want to — I hope not, but again, early days. 2024 we’ll have the general elections also. So I’m not — I don’t have a view on that as of now.

Aman Sonthalia — AK Securities — Analyst

Okay, sir. Thanks a lot.

Operator

Thank you. Our next question comes from the line of Aashav Patel from Molecule Ventures. Please go ahead.

Aashav Patel — Molecule Ventures LLP — Analyst

Sir, to summarize the call so far, as you have explained, within the segment, the sugar segment has seen a larger input cost, and we don’t really expect the prices to move or firm up from here given the political scenario. Can we expect — and the entire growth and profitability improvement would largely come from the ethanol segment? Is that correct understanding? The sugar segment is not expected in terms of profitability to reach to the previous, say, a year back level.

Gaurav Goel — Managing Director

See again, out here the profitability because of transfer pricing has got moved. So earlier the profit that would have — you would have seen on the sugar side, now you will see it on all sides. So that is the only shift that you will see happening from the year 2021 — from the year ’21-’22, then to ’22-’23 and changing even more in the year ’23-’24.

Aashav Patel — Molecule Ventures LLP — Analyst

Okay, got it. Got it. And sir, can you please explain how you have mentioned that one of the key reason for increase in the inventory cost was higher syrup usage. So can you please explain. I am little new to that concept. Why it increases our inventory cost?

Gaurav Goel — Managing Director

So basically, what happens is, is that when you — whatever is your transfer price, so when you do COP of sugar, if you transfer syrup, so sugar, the cane cost and their manufacturing cost stays the same, and the transfer pricing has a huge impact on the COP. So in case the transfer price is higher, so if I want to transfer price the syrup at a higher price, my COP that I have as of 31st March would be lower, or the other way around. So that is how it will just change.

Aashav Patel — Molecule Ventures LLP — Analyst

Sure. Got it, sir. And sir, you have mentioned that CMP around — ex-mill CMP is around INR36 right now. What would be our COP for sugar right now?

Gaurav Goel — Managing Director

INR32.8.

Aashav Patel — Molecule Ventures LLP — Analyst

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

Gaurav Goel — Managing Director

Thank you.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing remarks.

Nikhil Saboo — SKP Securities Ltd. — Analyst

On behalf of Dhampur Sugar Mills Limited, we would like to once again thank you all for taking your time out for this conference call. If you have any further questions, please feel free to contact us either by phone or by email. You can also visit our website www.dhampursugar.com and post any queries you have, and we will get back to you as soon as possible. Thank you.

Operator

[Operator Closing Remarks]