Dwarikesh Sugar Industries Limited (DWARKESH) Q4 FY23 Earnings Concall Transcript

Dwarikesh Sugar Industries Limited (NSE:DWARKESH) Q4 FY23 Earnings Concall dated Apr. 28, 2023.

Corporate Participants:

Tejas Sonawane — Investor Relations

Vijay Banka — Managing Director

B. J. Maheshwari — Managing Director and Company Secretary

Analysts:

Rajesh Majumdar — B&K Securities — Analyst

Nitin Awasthi — InCred Equities — Analyst

Nikhil Gada — Abakkus Asset Management — Analyst

Shailesh Kanani — Centrum Broking — Analyst

Prashant Biyani — Elara Capital — Analyst

Sanjay Manyal — ICICI Securities — Analyst

Riya Mehta — Aequitas Investments — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Dwarikesh Sugar Industries Q4 FY 2023 Results Conference Call, hosted by Dolat Capital. As a reminder, all participants’ lines will be in a listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] I now hand the conference over to Mr. Tejas Sonawane from Dolat Capital. Thank you and over to you sir.

Tejas Sonawane — Investor Relations

Thank you [Indecipherable]. On behalf of Dolat Capital I would like to thank the management of Dwarikesh Sugar Industries Limited for giving us the opportunity to host the Q4 FY23 Earnings Call. From the management team, we have with us today Mr. Vijay Banka, Managing Director; Mr. B. J. Maheshwari, Managing Director and Company Secretary cum Chief Compliance Officer; and Ms. Priyanka Morarka, President Corporate Affairs. Without further ado, I would like to hand over the call to the management for their opening remarks, post which we’ll open the forum for a Q and A session. Thank you and over to you sir.

Vijay Banka — Managing Director

Yeah, very good afternoon. I welcome you all to Q4 FY ’23 earning call conference. I’m very happy to be back among amidst you. We have announced our results yesterday. The results are already there in the public domain. I’ll quickly run through the results. In this particular quarter, we have a high turnover of about INR534 crores which is as compared to INR476 crores turnover that we clocked in the corresponding quarter last year. For the full-year, we have clocked a turnover of INR2117 crores vis a vis INR1,982 crores in the last financial year.

Our profit before tax is INR70 crores approximately as compared to INR86 crores in the corresponding quarter last year and on a full-year basis, we have clocked profit before tax of INR152.5 crores against INR218.67 crores. Profit-after-tax is INR46.75 crores vis a vis INR59.61 crores and for the full-year the profit-after-tax is INR104.81 crores vis a vis INR155 crores last year. So you will find the decline in the profits in the quarter as well as in the full financial year which is mainly attributable to a couple of factors deemed an immediate need. The first one is because in the last financial year, we had the benefit of selling sugar, which was renewed during season 2020-21, wherein the SAP was INR25 lesser so in a sense, we have had benefit of selling lower-cost sugar where the cost sold was lower.

Secondly, we had a dent in our recovery where our recoveries have been lesser, which is mainly because of the red rot in presentation [Phonetic], but as happened in the command area of our peripheral unit, which is in the Bareilly district and thirdly the sugar prices throughout the year, remained absolutely muted. They were range-bound between 3,400 and 3,5000. In a sense, there has been no commensurate and should increase in the selling price of Sugar as compared to the cost of sugar sold. ISMA has yesterday — sorry day before yesterday come out with latest estimate. They now estimate that the sugar production in the country is going to be approximately 32.8 million tons, which is after considering sacrifice of about 4 million tons.

So if we gross it up that means the total production in the country is going to be 36.8 million ton which is significantly lesser than what the gross level production we have had in the last crushing season which was almost 39 million ton. The main reason for the revision — downward revision in the estimated production and — estimated production is because Maharashtra and Karnataka that mills have concluded that crushing operation were closed in the month of March itself and there has been lesser production and lesser recovery across.

I’ll quickly to go through the numbers. Total income, as I mentioned is INR534 crores, EBITDA of about INR88 crores vis a vis INR103 crores in the corresponding quarter last year. On full-year basis our EBITDA is INR229 crores vis a vis INR294 crores. So these are the main numbers. We have already gone to the PBT and PAT number just when I started my conversation with you. So well some highlights, during this quarter, we sold 8.75 lakh quintals of sugar, which included export of about 6000 quintals of sugar as compared to 10.11 lakh quintal sugar that we sold in the corresponding last year so there has been reduction in the domestic market, there has been reduction of about two lakh quintals of sales in the domestic market which is obviously because of lower [technical issue] which again is attributable to lower carry forward stock that we have had. We are doing the full-year, we have sold 42 lakh quintals of sugar which includes export of about 10 lakh quintals which means in the domestic there is a 32 lakh quintals vis a vis 46 lakh quintals almost, which included 2.5 lakh quintals of sugar that we exported.

On 31st March, we were carrying a stock of 10.61 lakh quintals as compared to 19.63 lakh quintals. We have been able to moderate our stock by about 9 lakh quintals and as far as industrial alcohol is concerned, we sold 2,95,00,000 lakh liters this quarter as compared to 1.65 crores in the corresponding quarter last year. And on a full year basis we have sold 8.22 crores liters [Indecipherable] that we sold in the full-year last year. And nearly out of 8.42 crores nearly 4.6 crores is what we have — which was made from juice as the feedstock. So during the season 2022-23, we have been using cane juice at both our distillery to produce ethanol. B heavy molasses whatever we have generated that is being generated across all our three units, whatever B heavy molasses generated is stored and it will be used during the off-season for making to ethanol to the distillery.

I mean the B-heavy molasses that we have generated has also been given to levy obligation so that is being done and both our distilleries are now optically working at the rated capacity to begin with when we started our season for the first time we used juice as feedstock for making ethanol we had some teething problems, but we have overcome them all and now the production is we are optimally producing and we are getting the best efficiency parameters achieve also. And during the ongoing season so far until 31st March, we crushed 302.71 lakh quintals and 74.02 [Phonetic] lakh quintals of sugar. So till 31st March, we have used 60.69 lakh quintals of sugarcane. I mean, this quantity of sugarcane crushed, the juice was diverted for making ethanol.

So if you see nearly 20% juice has been used for 20% cane crushed has been used — diverted for making ethanol. So this is in relation to what B heavy molasses we are generating. So in any sense we are taking we have started rising sugar production there also. So as per our question of the DD plant which is Bareilly industry that has been concluded and crushing in both the other units going on and we expect to crush till the 3rd week of May, and we should have similar crushing numbers around 380 lakh quintals for the full-season this time.

Our repayment track record is exemplary. We have — cleared payment dues up to 17th April including full and final payment for our DD cane unit. So we are paying ahead of schedule. This is another important things that I would like to highlight is the final reserves also captures the extra cost of INR8.95 crores that we incurred for investment retrospective revision of various payable to employees under the Wage Board but has been one-off feature for the year. And we have received quota of about 86,000 metric tons, out of which 50,000 metric tons we reported, rest we have swapped with domestic quota.

We started getting benefit of additional releases from April onwards and our loan profile is lean and trim. We have term loans of INR283.5 crores. All the loans are under — have been negotiated and are at subsidized rates because of the government subsidies involved. We have — our account has been long-term loans have been upgraded by ICRA. For upgrading is concerned, we are now rated double-A minus. We were stuck at B plus for five years almost. So our rating has [Indecipherable] so we upgraded not at double A minus. I would also like to talk about the sugar sector scenario. How it’s panning out across the globe. I’m sure you must have the sugar prices — international sugar prices are at their highest now.

The sugar prices have gone beyond [Indecipherable] and white sugar prices are also at all-time high. But the higher sugar prices internationally have [Indecipherable] in the domestic market because of better restriction on quota, restriction on exports. So, domestic prices were muted throughout the year, but from April onwards, the prices — there has been rebound in the domestic price. Last — in the month of April we have seen an average realization of INR3,600 — a little more than INR3,600 and we expect that cane should continue. We should have higher realization in the next six months at least.

To talk about the next crushing season it’s too early to talk about the next crushing season, but we do expect that crushing numbers may not be all that big because there is this lurky fear of El Nino factor impacting the second-half of 2023. So we will have to wait-and-watch. One question was to even [Indecipherable] clarity and so-far as UP is concerned, UP has been — production has been steady. UP should end-up with a production of 10.5 million tons for the ongoing season. So there has been lot of mills are being used in sugarcane mills to make ethanol, so we look-forward to the year 2023 and 2024 with a sense of optimism. Thank you very much. I would now invite questions from you. I would be very happy to answer them all.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] Our first question from the line of Rajesh Majumdar from B&K Securities, please go-ahead.

Rajesh Majumdar — B&K Securities — Analyst

Yeah, good afternoon, sir.

Vijay Banka — Managing Director

Very good afternoon, sir. How are you?

Rajesh Majumdar — B&K Securities — Analyst

All good, all good sir. So I had some questions, I’ll just ask you one-by-one. My first question was the total sugarcane crushing volume is higher than the 3,800 quintals is about the same as last year, right. So there is no growth in the cane volumes this year.

Vijay Banka — Managing Director

No, no, there has not been any growth. Sir, I tell you the exact numbers of our financial year. Last financial year 2021-22 we crushed 374 lakh quintals of sugarcane and this financial year, we crushed 382 lakh quintals of sugarcane. So there has been about 8 lakh quintals of increase in the sugarcane crushed. I’m talking about the financial year, not the season.

Rajesh Majumdar — B&K Securities — Analyst

Right, right. So what is the growth.

Vijay Banka — Managing Director

So 2.2% increase in the sugarcane crushed.

Rajesh Majumdar — B&K Securities — Analyst

And what is the following the recovery rate, the gross recovery rate Y-o-Y.

Vijay Banka — Managing Director

It’s 2.15%. Gross recovery rate is 11.83% vis a vis 12.09%, so which is about 26 bps reduction in the recovery.

Rajesh Majumdar — B&K Securities — Analyst

Okay, so my follow-up question is, we are looking at ISMA data things the UP, production will be an increase over last year. But from the data that you’re suggesting if the recovery is falling for everyone I mean, it’s much more in Maharashtra probably than in UP, but even in UP, the gross recovery is falling and there is more diversion, how will the production in UP overall increase or is there a difference in the areas.

Vijay Banka — Managing Director

No, no difference in the area we will have to look at UP, all the three regions on standalone basis. West UP, central UP, and Eastern UP. So there is some increase expected in some of the regions as a result of which the crushing numbers and therefore the production numbers should be little more than what it was for the last season. So it’s not uniform across all the three regions.

Rajesh Majumdar — B&K Securities — Analyst

So Eastern UP is where the increases I’m told, is that correct.

Vijay Banka — Managing Director

Yes, yes, yes, absolutely.

Rajesh Majumdar — B&K Securities — Analyst

Thank you so much sir. And my last question is that in the alcohol business what is the transfer pricing of molasses because we’ve seen a sharp jump-in the numbers, but the EBIT margins have fallen sharply.

Vijay Banka — Managing Director

See sir it is like this. I mean, as far as B heavy molasses is concerned, the transfer price that we assigned to B heavy molasses is based on the recent derived price essentially derived from the price we are getting for B heavy molasses okay but in this particular quarter or at least from the start of the season we have not been using B heavy molasses, whatever B heavy molasses is being manufactured is produced and stored volumes in the off season. As far as juice is concerned our valuation is about INR1,075 rupees [Indecipherable]. So essentially translates to a cost of around INR50 to INR50 a liter or so.

Rajesh Majumdar — B&K Securities — Analyst

INR50 a liter, okay. So, the margin would be much lower compared to B heavy.

Vijay Banka — Managing Director

Absolutely, absolutely. No doubt about it, but between the three let me — let me put it like this, the most profitable B heavy molasses, the second profitable is second in terms of ranking is juice, and third, would be sugar at given prices of sugar today.

Rajesh Majumdar — B&K Securities — Analyst

Okay, so the entire alcohol sold in the fourth quarter from juice. Is that what you’re telling me.

Vijay Banka — Managing Director

Absolutely.

Rajesh Majumdar — B&K Securities — Analyst

So going-forward we will see more BAV [Phonetic] in better margins. Is that a correct assumption.

Vijay Banka — Managing Director

Correct, correct. Absolutely.

Rajesh Majumdar — B&K Securities — Analyst

Thank you so much sir, I’m done. I’ll get back in the queue.

Vijay Banka — Managing Director

Thank you so much sir. Thank you so much.

Operator

Thank you. We take the next question from the line of Nitin Awasthi from InCred Equities. Please go-ahead.

Nitin Awasthi — InCred Equities — Analyst

Hello sir, how are you?

Vijay Banka — Managing Director

Very good sir, how about you. Longtime.

Nitin Awasthi — InCred Equities — Analyst

Longtime sir. So a few questions from my side. Firstly, what is the carrying of stock value per kg.

Vijay Banka — Managing Director

It is INR3,172. We are carrying about how much did I say about 10 lakh quintals of Sugar as on the 31st March. 10.11 and it is valued at if you see per ton valuation, it is INR31,723 rupees.

Nitin Awasthi — InCred Equities — Analyst

Okay, and the sales recovered last year.

Vijay Banka — Managing Director

Sorry.

Nitin Awasthi — InCred Equities — Analyst

The same figure as on last year.

Vijay Banka — Managing Director

Friend, I don’t remember the figure what it was, but I can get back to you quickly on that, that is absolutely no problem.

Nitin Awasthi — InCred Equities — Analyst

Okay, was is substantially lower.

Vijay Banka — Managing Director

No, it wouldn’t be substantially lower. It was definitely lower, but not so much lower because — yes, it would be lower because the recoveries have fallen in this particular financial year. So, it would definitely be lower.

Nitin Awasthi — InCred Equities — Analyst

Okay, got it, sir. As per your presentation the sugar you have sold during the quarter you have got a realization of approximately INR74 [Phonetic] a kg. Is that correct?

Vijay Banka — Managing Director

Yeah, yeah, absolutely. Absolutely sugar prices are very muted, very muted throughout the quarter.

Nitin Awasthi — InCred Equities — Analyst

Understood, sir. And you said in [Indecipherable] now my question here is we saw government intervening in April the government of India leasing additional sugar into the market. Your comment on that move of the government, do you think the government is on its toes or it is not wanting to sugar prices to go up or was it a planned release that was going to happen because of the summer heat.

Vijay Banka — Managing Director

It’s a combination of all the fact that you have spoken about, number-one it’s a hot month, so you know I think they had to increase the releases because the prices were going up, so additional releases pumping into the market. It does have a dampening effect on the sentiment. But nonetheless, one should look at both the macro picture that we can see hereafter. You know we estimate the production of 32.8 million tons, opening stock of 7 million tons this summer. Opening stock number has been recalibrated by the government. So, seven-plus 32.8 is 39.8 million tons of export, 27.5 million tons of consumption. So we are looking at a number of only 6 million ton and all factories are in favor of price rise. Number-one, the international prices seem to be very good and there is little uncertainty over the prospects of sugarcane and sugar production next year — next season as well. And see I have also told this in my earlier conferences that I don’t think price up to INR40 should be of any discomfort to the government.

I mean, we have seen in 2016-17 when the prices have gone up to INR38, and yet there was no government intervention. Measures like pumping in some additional revenues into the market, they are always in the government hand but the macro picture states that yes, there is scope for price, rise.

Nitin Awasthi — InCred Equities — Analyst

Understood sir. Sir like you mentioned about the international prices being high there has been a revision or you know there was not some clarity from how much Brazil would actually produce and how much it would put out in the market. Do you have any clarity on that front, how much could be the production in Brazil and how much — what effect that would have on the international prices.

Vijay Banka — Managing Director

See, if we talk about season 2022-23, okay the downward revision on the world production estimated come mainly from the Asian countries with India which has contributed largely for the [Indecipherable] see when the season began it was estimated that in 2022-23, globally there will be 4 million tons of surplus, assuming 37 million tons of production in Brazil [Phonetic] but there has been reduction in the production estimates from Asian countries, which has brought about this lowering of the production numbers and we see 2022-23 being virtually balanced. Now the talk is that the next season Brazil may have seen some increased production, but it’s difficult to [Indecipherable] at this point in time, because it will all depend on the tax — how does Brazil tax gasoline whether it makes sense for the Brazilians to move a little more towards ethanol.

So there are a host of factors which will be — which will play a critical role next season.

Nitin Awasthi — InCred Equities — Analyst

Understood sir, understood. Sir, last question from my side as per the presentation, we have seen a very low margins compared to last year in the ethanol segment and you are mentioning that this is because last year you had ethanol, which was made from molasses, whereas this year, you had ethanol made from juice. Now given that a lot of capacity of juices come up and government did warrant at some point in time that is used to become [Indecipherable] and companies have also set-up substantial capacity including [technical issue]. Do you see any price increase, any scope of price increase in the juice route.

Vijay Banka — Managing Director

Yes, yes, yes. See, there is no denying the fact that the given price of ethanol the margin — it’s profitable, but the margins will come under pressure, number-one. Number two the margins appear to be lower also because the recoveries have been lower so eventually what is the formidable content in the molasses for the juice, which is what matters. So the lesser content of sugar, formidable content in the sugar. Obviously, the ethanol recoveries also are going to be lower. Number three, yes, we have represented to the government in various forums that if you want bigger sacrifice of sugar production to happen in favor of ethanol now this is the area which needs to be focused upon. Ethanol price of using sugarcane juice, as the feedstock that needs to be increased and we strongly believe that our request should be considered by the government favorably.

Nitin Awasthi — InCred Equities — Analyst

Understood, sir. Thank you so much for answering the questions.

Vijay Banka — Managing Director

Thank you sir. Thank you.

Operator

Thank you. We will take the next question from the line of Nikhil Gada from Abakkus Asset Management. Please go ahead.

Nikhil Gada — Abakkus Asset Management — Analyst

Yeah, hi, thanks for the opportunity.

Vijay Banka — Managing Director

Good afternoon, sir. How are you doing?

Nikhil Gada — Abakkus Asset Management — Analyst

Good sir, how are you?

Vijay Banka — Managing Director

First class, sir. Tell me.

Nikhil Gada — Abakkus Asset Management — Analyst

Yeah. Sir, I had a couple of questions. Firstly, could you help us with the current year FY ’23, how much of crushing was done through the B heavy and how much was done through the juice route?

Vijay Banka — Managing Director

See, the entire, in this season — okay, let’s talk about —

Nikhil Gada — Abakkus Asset Management — Analyst

Sir, I’m talking about fiscal year.

Vijay Banka — Managing Director

Yeah, FY, we crushed 382 lakh quintals of sugarcane, okay. And we started making use of juice only from the current season onwards and I had given that number 60.69 lakh quintals of sugarcane juice — sugar was diverted for conversion to ethanol, via the juice route, okay. So 382 minus 60, which is about 322 lakh quintals was what was crushed and on the entire 322 lakh quintals, we have generated B heavy —

Nikhil Gada — Abakkus Asset Management — Analyst

Round about 16% yeah, 15.5%, 16%.

Vijay Banka — Managing Director

Yes, yes. And so insofar as fiscal is concerned, yes, this is the number, but if you talk about the season per se, up to 31st of December, we have done 20% on juice and the rest of by generating B heavy molasses.

Nikhil Gada — Abakkus Asset Management — Analyst

And by 31st of March, sir then for the season?

Vijay Banka — Managing Director

Yeah, I’m talking about 31st of March — up to 31st March, in this particular season, we crushed 302 lakh quintals and we have diverted 60.69 lakh quintals of sugarcane for making ethanol. So which means roughly 20%, but on the entire season, it may not be 20%, it will be lesser because our DD plant has closed crushing operations on the 14th of April, where we were generating — we were — where we were using juice for making ethanol. So whereas in the DN plant, we are still continuing till the end of the season, we will be generating — we will be using juice for making ethanol in the distillery there. But in the other two plants, I mean, in the third plant, we are generating only B heavy molasses.

Nikhil Gada — Abakkus Asset Management — Analyst

Understood.

Vijay Banka — Managing Director

So this number of 20% would come down, it would be somewhere around 18% or so — 18% or 19%.

Nikhil Gada — Abakkus Asset Management — Analyst

Understood, sir. Sir, just an extension to this question, so for FY ’24, because now that the overall inventory that we have of sugar has seen a sizable reduction. How do you think this number will vary for us by FY ’24? Assuming that government has not changed the rate for juice.

Vijay Banka — Managing Director

No, you see the government — let me tell you, we are optimistic, we are hopeful that government will change the rate for the sugarcane juice. But while if your question is what if the sugar prices go very high and the ethanol prices remain the same, the juice to ethanol prices remain the same, what will be our strategy. Now insofar as season ’22-’23 is concerned, it’s all over, I mean, whatever, because if at all there is going to be any increase in the juice to ethanol price, it will be only from the next year onwards, from November onwards, okay. So whatever has been done in this season has been done and over.

Now, okay, assuming the same scenario next year, that sugar prices, let’s say, assume are more than 3,700 or 3,800 or so, whereas ethanol prices remain the same. But we would like to take a very holistic picture. We would like to go — we would like to take a very macro stance on this in the sense that we would still continue with juice because if all of us think alike and stop making, stop using juice for generating — for making ethanol, I think there is — we will have end up with surplus sugar production in the country and then that will trigger a downfall in the sugar prices.

Nikhil Gada — Abakkus Asset Management — Analyst

Understood. So basically this 18%, 20% crushing through juice would — is something which we should [Indecipherable].

Vijay Banka — Managing Director

Absolutely, absolutely.

Nikhil Gada — Abakkus Asset Management — Analyst

Understood. And sir my next question is in terms of the availability of B heavy molasses, if I compare from ’23 to ’24 perspective, can you help us with what kind of increase we have seen in the molasses availability and what kind of — we are valuing that molasses at?

Vijay Banka — Managing Director

See — sorry, your question is, how do we foresee for ’23-’24, is it?

Nikhil Gada — Abakkus Asset Management — Analyst

No, sir currently. Sorry, my question was from versus ’22 to ’23, how has inventory changed?

Vijay Banka — Managing Director

Okay. So molasses inventory has obviously gone up because we are generating molasses across the three units last year, the impact, in the last crushing season, we were — we had only that much molasses generation of B heavy which was required for our one distillery and for the start-up of the second distillery. But now we are generating B heavy molasses, so obviously the top — I’ll just tell you, one moment, give me a moment how much molecules we were carrying, just a second. So we were carrying, one moment I’ll tell you. We had — we had lot of molasses stock, but when — nearly, we were carrying a stock of nearly 7 lakh quintals of B heavy molasses and the number was significantly lesser than last — on the same day last quarter.

Now going forward, our strategy will be the same, but what we do expect some changes is that as compared to 380 lakhs quintals of sugar that we have crushed in the last fiscal, in the coming fiscal, we should be crushing more, I mean, not in ’23-’24, but definitely at ’24-’25, we should be targeting a crush of about 400 lakh to 425 lakh quintals. So when we do that, our B heavy molasses generation will also be higher and we will be — instead of 323, 325 [Phonetic] days of distillery operation, we should be running the distilleries for 350 days at least.

Nikhil Gada — Abakkus Asset Management — Analyst

Understood, sir. The reason to ask that number, because. I wanted to understand the change in inventory, just because of the molasses, from ’22 to ’23. Because that would be significant if I’m not wrong.

Vijay Banka — Managing Director

I often don’t have the number of molasses stock for ’21-’22, but I can get back to you on that separately.

Nikhil Gada — Abakkus Asset Management — Analyst

Sure, no problem sir. Sure. Thank you for answering all my questions. I’ll come back in the queue. Thanks.

Vijay Banka — Managing Director

Thank you.

Operator

Thank you. We take the next question from the line of Shailesh Kanani from Centrum Broking. Please go ahead.

Vijay Banka — Managing Director

Good afternoon, sir.

Shailesh Kanani — Centrum Broking — Analyst

Good afternoon, sir.

Vijay Banka — Managing Director

How are you doing?

Shailesh Kanani — Centrum Broking — Analyst

Thanks for the opportunity. Thank you sir. I’m doing fine. Sir, one thing on sugar volumes front, how — we have done around 0.42 million tons in FY ’23. How would you see numbers for FY ’24 and ’25 and where do we see growth on the volume front for sugar division?

Vijay Banka — Managing Director

Sir ’23, ’24, because let’s talk about [Technical Issues] hello?

Shailesh Kanani — Centrum Broking — Analyst

Yeah, yeah — yes, sir.

Vijay Banka — Managing Director

Yeah, let’s talk about the fiscal there may not be any significant increase in the number — crushing numbers and therefore, since we are diverting more juice for ethanol, the production number, obviously, the sales and production number will come down. And but ’24-’25, when fiscal ’24-’25 where we’ll have the benefit of larger crushing in the season ’23-’24 also and ’24-’25 also, we should see increased production numbers as well as increased sugar sale number also.

But if you look at, for example, I’ll tell you in this particular season, in this particular season, we have up to 31st March, okay. We have produced only 24.02 lakh quintals of sugar.

Shailesh Kanani — Centrum Broking — Analyst

Okay.

Vijay Banka — Managing Director

We crushed 302 lakhs quintals of sugar, we have produced only 24.02 lakh quintals of sugar. So, obviously, this number — progressively there is reduction in the production — sugar production number and hence, their sugar sales number as well.

Shailesh Kanani — Centrum Broking — Analyst

And sir would it — our ’25 estimate would be depending upon good monsoon or better reuse and recovery because, western UP, we are seeing this red rot diseases, and eastern UP had seen effect on that for nearly two years in their yields and recovery. So are we expecting better yields and recovery going ahead?

Vijay Banka — Managing Director

See, my optimism come from the fact that in our Bareilly unit where we have seen the crushing of only 110 lakh quintals in this season and the season has completed already. Here, we had been — as far as supplies are concerned, we had more than 96% of that variety for two, three years, a substantial part of which was red rot impacted, okay. So obviously farmers have also supporting, as far as is concerned that dent in the recovery that we have seen is also predominantly because of this reason, okay. Now, we will see this 90% number we expect and we worked on that and we — on the basis of the data that is already available with us, we see this number coming down from 96% to about 66% to 70% maximum. So we will have new varieties in place. And additionally, we are also — we have intensified our efforts to protect this variety. So wherever is there, we are, we have — we are applying some new fungicides.

And the benefit theme palpable and we do expect that both in terms of yield and both — and also in terms of recovery, we should — we there wouldn’t be any kind of disappointment.

Shailesh Kanani — Centrum Broking — Analyst

And sir, what is the timeframe when you said this 96% will come down to around 66% that effective improvement, that is for next year, you are saying?

Vijay Banka — Managing Director

Next season supplies I’m talking about, next season supply.

Shailesh Kanani — Centrum Broking — Analyst

So not for the current season starting from October for the next year you’re saying?

Vijay Banka — Managing Director

Yeah, I’m talking about October to —

Shailesh Kanani — Centrum Broking — Analyst

October to, okay, okay. So that —

Vijay Banka — Managing Director

I’m talking about October —

Shailesh Kanani — Centrum Broking — Analyst

So that would be a decent improvement, yeah, yeah.

Vijay Banka — Managing Director

96% to about 70% — 66% to 70% on one hand and secondly, our efforts are on to protect this two, three, eight variety in whichever or whatever manner possible.

Shailesh Kanani — Centrum Broking — Analyst

Fair enough. Sir, my second point — second question was with respect to margins when you said the profitability in B heavy molasses is weight, can you give us some ballpark number, what kind of EBIT margins we are talking about here for B heavy versus juice?

Vijay Banka — Managing Director

See, I would say, collectively for the distillery, we should have an EBIT margin of around 18% to 20%. This is around, I mean, here we have had a margin of about 12%, so there the margin is at least 23%, 24%.

Shailesh Kanani — Centrum Broking — Analyst

So that should be on an ideal year when we have around good recovery levels. That is what you’re saying 18% to 20%.

Vijay Banka — Managing Director

Yes, 18% to 20%, yes. When we have recovered the lost ground, then we should have 18% to 20% margin of deployment.

Shailesh Kanani — Centrum Broking — Analyst

And if — then there is a combination between juice and B heavy, right, so it is 18% to 20%.

Vijay Banka — Managing Director

Yeah, nearly 6 crores of juice and 5 crores of — yeah, 6-plus crores of juice and 4-plus crores of B heavy.

Shailesh Kanani — Centrum Broking — Analyst

So is it fair to assume that this quarter EBIT margins of around 10% for the distillery division is primarily due to lower recoveries as in juice per say, right?

Vijay Banka — Managing Director

Absolutely, absolutely. See, it’s absolutely that, because of that.

Shailesh Kanani — Centrum Broking — Analyst

Okay, fair enough. Okay. I think that was the last question from my side. Thanks a lot, sir.

Vijay Banka — Managing Director

Thank you so much sir. Thank you so much.

Operator

Thank you. We take a next question from the line of Prashant Biyani from Elara Capital. Please go ahead.

Prashant Biyani — Elara Capital — Analyst

Yeah, thanks for the opportunity.

Vijay Banka — Managing Director

Good afternoon, sir and how are you?

Prashant Biyani — Elara Capital — Analyst

I am good sir, how are you doing?

Vijay Banka — Managing Director

First class, sir. Tell me, sir.

Prashant Biyani — Elara Capital — Analyst

Sir for the current crushing season, till when do you think and the crushing continue?

Vijay Banka — Managing Director

One unit is already concluded on the 14th of May, the other two units they will continue their crushing operations till the third week, maybe around the 20th of May or so is the indicative date that we have got then they will close the crushing operation.

Prashant Biyani — Elara Capital — Analyst

Okay. And sir, what would be our closing ethanol inventory at the end of FY ’23?

Vijay Banka — Managing Director

Not much really going hand to mouth, selling it immediately, less than INR5 lakhs.

Prashant Biyani — Elara Capital — Analyst

Okay. And sir could you —

Vijay Banka — Managing Director

If you want the exact number, I’ll tell you one moment.

Prashant Biyani — Elara Capital — Analyst

Yeah.

Vijay Banka — Managing Director

So we will have something in the process also, if you add all together, it will be about 10 lakh units.

Prashant Biyani — Elara Capital — Analyst

Okay. And sir, could you repeat the number for molasses inventory, please?

Vijay Banka — Managing Director

I told it’s about 7 lakh quintals.

Prashant Biyani — Elara Capital — Analyst

7 lakh quintals. Okay. And sir for next year, how much crushing would we be targeting? If some color can be shared on that.

Vijay Banka — Managing Director

Fiscal?

Prashant Biyani — Elara Capital — Analyst

Yes.

Vijay Banka — Managing Director

Fiscal should be around the same, but season should be more. So ’23-’24 should be the same, because, you see the — we concluded our crushing operations around the same time as we have been in ’21-’22 season also, we concluded our crushing operations in the — sometime in the third week of May. So we will have a similar date this time around. So April onwards, the crushing numbers will be more or less the same and from the start of the season to March 31st, you get the same number of days to same amount of crushing, but yes, there is one difference this year we have — we will have increased crushing capacity at our DN plant, so which is about 500 metric tons to 600 metric tons. So we should have some improvement in the crushing numbers.

Prashant Biyani — Elara Capital — Analyst

Sir 400 can we reach by next year?

Vijay Banka — Managing Director

Yes, that fiscal.

Prashant Biyani — Elara Capital — Analyst

Yeah, even in sugar season wise?

Vijay Banka — Managing Director

Sugar season, yes, 400 plus only.

Prashant Biyani — Elara Capital — Analyst

Okay. And sir, if we are targeting around 11 crore liters of ethanol, then, sir just for the sake of discussion moving aside, the government control on sugar export, but would we be in a position to export sugar, won’t be — this be a position of stock-out next year?

Vijay Banka — Managing Director

Even that to be a very happy position to be in.

Prashant Biyani — Elara Capital — Analyst

Yeah, that’s true.

Vijay Banka — Managing Director

We will have to wait and see how much government decides. Now, for example, when put out for the current season was around of 60 lakh tons. Initially, we had contracted to sell about 50,000 metric tons, which we did, we produced raw sugar and we exported. But for the balance quantity, we formed it in favor of domestic quota, so we will wait and see which is more profitable, what is the — I mean does one get any kind of a premium in scoping the quota. So those are the factors which we will be and we will accordingly take the call.

Prashant Biyani — Elara Capital — Analyst

But sir government typically will want companies to keep minimum quantity of sugar. So, I mean, what will typically happen if some companies don’t have any sugar left, maybe you know or if there is only one month of —

Vijay Banka — Managing Director

It’s not like that you see they will decide on a countrywide basis now for example, if next year, we assume after diversion, the production is going to be, let’s say — let me be very pessimistic in the sense that we paid after diversion for ethanol, the production is only 31 million tons. Yes, you have about 3.5 million tons of surplus sugar in the country, so we will always moving for exports. And as such given small surplus coming from India, international prices should be good. And whatever we export, we should be able to make good money out of it.

Prashant Biyani — Elara Capital — Analyst

And, sir, on this juice-based ethanol, over and above the transfer price of INR50 rupees per liter, how much could be the conversion cost?

Vijay Banka — Managing Director

No, you see it’s about INR7, INR8 the conversion cost.

Prashant Biyani — Elara Capital — Analyst

So net-net, the costing should be around 57, 58 for this?

Vijay Banka — Managing Director

That is 55 optimally — 55 is what we should be targeting.

Prashant Biyani — Elara Capital — Analyst

Okay. And next year, we should target around 11 crore liters of ethanol.

Vijay Banka — Managing Director

Absolutely, yes.

Prashant Biyani — Elara Capital — Analyst

And sir, what would be the plans on capacity expansion and how much do we plan to invest?

Vijay Banka — Managing Director

No, we have already done — we are doing small capexes, which will result in increase in our crushing capacity at our Dwarikesh Nagar unit, that is where we see the crushing operations going on to the end of May, so we will be crushing that at a faster pace. And presently, you see, we see more scope in increasing a crush cane availability. And our target is that, for example, the BD unit, Dham unit at Bareilly district, it closed crushing operations on the 14th of April. Here is where we are targeting additional cane mobilization of additional cane and here is where we think we can get more cane and we can run this unit from the present middle of April till at least the end of April or the first or the second week of May. So we have capacity available at our Dwarikesh Dham unit. All we need to do is mobilize more cane for our — that particular unit.

Prashant Biyani — Elara Capital — Analyst

And sir, how much are we investing for expanding the crushing capacity at DN?

Vijay Banka — Managing Director

Not much about INR25 crores, INR30 crores, that’s it, not much.

Prashant Biyani — Elara Capital — Analyst

Okay. And sir, what would be the maintenance capex?

Vijay Banka — Managing Director

I mean, every year, it’s about the same actually, we end up incurring about INR20 crores, INR25 crores of maintenance capex, so you don’t need to really call it maintenance capex, it’s mostly for enhancement or recognition piece — debottlenecking operations wherever required. The general maintenance is, of course, so it’s a combination of both, the regular maintenance, the preventive maintenance plus efficiency enhancement, altogether about INR29 crores, INR30 crores or so.

Prashant Biyani — Elara Capital — Analyst

Okay, thank you sir. That’s it from my side.

Vijay Banka — Managing Director

Thank you, sir.

Operator

Thank you. We take the next question from the line of Rajesh Majumdar from B&K Securities. Please go ahead.

Rajesh Majumdar — B&K Securities — Analyst

Sir, just a follow-up question, do you see the fall in the crop as a threat for the blending program because the government has already cut down the blending volumes from 4.5 million tons to 4 million tons, then going forward, if there is an El Nino impact this year as well, is there a serious threat of the blending program and subsequent alcohol volumes for our company’s thereof?

Vijay Banka — Managing Director

Sir, it’s a cash ’22 [Phonetic] situation. I wouldn’t like to be in the government shoot to visualize and this kind of situation. But well, see, in worse situation also, the production wouldn’t fall substantially maybe a 1 million or 2 million tons of production fall can be expected, not much if the El Nino does impact. In fact, there’s another meteorological department has predicted normal monsoons, that assuming the worst, there could be a reduction of about 1 million or 2 million tons. So this ethanol blending program is irreversible I don’t think and once in five years, we’ve kind of swing downwards, swings are expected and to be factored for.

Rajesh Majumdar — B&K Securities — Analyst

Okay.

Vijay Banka — Managing Director

Yeah.

Operator

Thank you. We take a next question from the line of Sanjay Manyal from ICICI Direct. Please go ahead.

Sanjay Manyal — ICICI Securities — Analyst

Hi, sir.

Vijay Banka — Managing Director

Hi, sir, good afternoon.

Sanjay Manyal — ICICI Securities — Analyst

Good afternoon, sir. Just one thing, your current inventory somewhere around the 1,06,000 and I believe from 1st April till the end of season, you at best will produce somewhere around 60,000 tons to 70,000 odd tons I believe. And so given the fact that your inventory will be 1,80,000 tons, is this at best you will exhaust your inventory by August or maybe mid of September. So in the peak, in a time when probably country-level sugar inventory would be the lowest or the prices will be the best to you might be sort of exhausted the inventory. Am I right in my assessment over there?

Vijay Banka — Managing Director

Sir, no, I’ll tell you, you’ll be — there is a drive in our production and there is a drive in our inventory turn, obviously [Indecipherable] are going to be picked by the government. And you see the price rise, the benefit of increased prices available mostly till the month of September, there is a over and crushing operation starting for the next year. So already we’ve seen in the past from October onwards, the prices are always little depressed and they start getting better, only after the month of March. So I don’t think we will be in a situation where we will review the fact that we don’t have stock and the prices are very good. I don’t see such a situation arising.

Sanjay Manyal — ICICI Securities — Analyst

Okay. Great sir. Sir just one more thing on the — on the gross recovery front. So what would it be the — like how much it is down from the peak level?

Vijay Banka — Managing Director

So from the last fiscal to this fiscal, the recovery is down by 26 basis points. So we are actually working very hard on this. We are trying to be that — we recover the lost ground and we make up — the balance is one thing which we are working upon. And so I think in the next crushing season, we should see some rebound.

Sanjay Manyal — ICICI Securities — Analyst

Sir this the 26 basis points is this year, but I think we lost somewhere around 15 basis points, 20 basis points last year as well.

Vijay Banka — Managing Director

So if you compare it with the previous financial year, the decline is almost 40 basis points, yes.

Sanjay Manyal — ICICI Securities — Analyst

40 basis points. Okay, understood.

Vijay Banka — Managing Director

So we will not be happy with recovering only 26 basis points, we will be working towards recovering the — to get back to our days of glory, when we clocked out this recovery.

Sanjay Manyal — ICICI Securities — Analyst

Sir, but with the change in the variety, do you think that those newer variety can match to the recovery of sales [Indecipherable]?

Vijay Banka — Managing Director

Yes, absolutely, sir. The results are fantastic. The varieties are as good as 238 or maybe better than 238, but we are also simultaneously I explained the one of the participants that we are also working towards protecting this 238 variety. I mean, it’s just not, but we have given it up that okay this varieties, red rot impacted nothing can be done. So the 66% to 70% will continue to be that variety and had been with red rot impacted. We are trying to educate the farmers, we are trying to tell them to apply fertilizers in the right doses. We are trying to guide them, educate them on [Indecipherable] management, we have taken various steps to see that we recover our lost, I mean, we recover our recovery.

Sanjay Manyal — ICICI Securities — Analyst

Right, sir. Thank you, sir.

Vijay Banka — Managing Director

Thank you, sir. Thank you.

Operator

Thank you. We take our next question from the line of Ria from Aequitas Investments. Please go ahead.

Riya Mehta — Aequitas Investments — Analyst

Hello, thank you for taking my question.

Vijay Banka — Managing Director

Hi, ma’am how are you?

Riya Mehta — Aequitas Investments — Analyst

My first question will be in regards to ethanol, so what would be the breakeven price that we decide for sugar versus juice?

Vijay Banka — Managing Director

[Indecipherable] ma’am. At the given price anything above 7,700 is reasonable to —

Riya Mehta — Aequitas Investments — Analyst

Sorry, your voice is breaking.

Vijay Banka — Managing Director

Hello.

Operator

Mr. Banka, sir I’m sorry to interrupt, this is the operator. Sir, your audio is not coming very clear.

Vijay Banka — Managing Director

Yeah, yeah, can you hear me now?

Operator

Yes, yes, please go ahead.

Vijay Banka — Managing Director

Yeah. So what I was saying was 37 is the threshold price, sugar price at the given ethanol price from juice to ethanol and anything about that, sugar is profitable below that juice to ethanol less profitable.

Riya Mehta — Aequitas Investments — Analyst

Okay. And in terms of government increasing the release quota, I think for May also just 24 lakhs tons, so do we expect that the consumption to be higher than 27 million tons, which is estimated in the sugar balance sheet — domestic balance sheet?

Vijay Banka — Managing Director

I think we should have a production of — consumption of about 27.5 million tons. Typically April, May, June, these are very hot months, so I don’t see the — it will have any kind of pressure on the sugar selling prices. Temporarily, yes, on a sustained basis, no.

Riya Mehta — Aequitas Investments — Analyst

Okay. And in terms of smaller mills and is it a possibility that sugar is exported to illegal mills for an organized mills —

Vijay Banka — Managing Director

No, I’m not aware of any such thing ma’am, I’m not aware. So something I’m not aware I would not be able to comment.

Riya Mehta — Aequitas Investments — Analyst

Okay. And in terms of number of days for crushing, this sugar season is higher as compared to last sugar season, if I’m not wrong.

Vijay Banka — Managing Director

No, it’s going to be more or less the same because we’re going to crush the same quantity and there has been no increase or decrease in the — there’s been no increase actually in the crushing rate. So we will have similar number of working days.

Riya Mehta — Aequitas Investments — Analyst

Okay. And in terms of the monsoon which — the timely monsoon which happened lately and what is that and in which parts of UP, do we see this impact being more prevalent?

Vijay Banka — Managing Director

It’s impacted the entire UP, actually the October rates have not been good for the sugarcane crop, which is why we have seen some drop in the yield as well as the recovery. So unfortunately anything — any rains after the month of maybe towards the end of September or in the month of October is not good. What is really good is June, July, August rains that are sugar profit.

Riya Mehta — Aequitas Investments — Analyst

Right. And currently you think even in the month of February, March, there was a short span of rains, so orders —

Vijay Banka — Managing Director

Yeah, that’s good. That is good, that is encouraging actually. The right amount of [Indecipherable] generally good.

Riya Mehta — Aequitas Investments — Analyst

And in terms of ethanol. So juice based since you explained that you know the total cost for us on an overall basis, the procurement though transfer price plus conversion cost is around 57, what would be the same for B-heavy molasses.

Vijay Banka — Managing Director

Basically less than INR50 now. I mean, the cost — total cost would be less than INR50, INR48 to INR50. So again, it all depends on the kind of fermentable sugar that is contained in the molasses but it will be definitely less than INR50.

Riya Mehta — Aequitas Investments — Analyst

Okay, and based on the current prices. Based on the basically Q4, what was the proportion of B heavy and what was the proportion of juice based.

Vijay Banka — Managing Director

Everything was juice. Everything was juice to ethanol. See like I explained, the model that we follow is we do juice to ethanol during season and during off season we do ethanol from [Indecipherable].

Riya Mehta — Aequitas Investments — Analyst

Okay, okay. Right. And crushing numbers for next year would be more or less same, right.

Vijay Banka — Managing Director

Yeah, yeah, more or less same.

Riya Mehta — Aequitas Investments — Analyst

This is financial year or.

Vijay Banka — Managing Director

I’m talking about financial year season number should be much better. Because you know part of the season is going to fall into — it’s going to spillover over to the next financial year, so there we expect some improvement in the numbers, but fiscal year yes more or less the same numbers.

Riya Mehta — Aequitas Investments — Analyst

And going-forward, since you mentioned that the 238 cane variety would be almost around 60% or do we see this red rot could extend over the next one or 1.5 year.

Vijay Banka — Managing Director

It is already there, red rut menance is already there, so it’s I mean, it’s become a — it has assumed the form of an epidemic. So it’s there all over and more prominently in the East and the Central UP. So we are not seeing the impact of Red Rot in our command areas of [Indecipherable]unit, but it is very much there in the DD units so we see it across all the supplies, so we’ve been educating the farmers to approve the [Indecipherable] wherever there is red rot affected cane grown. We are trying to educate them further [Indecipherable] management, we are trying to make them use the right — there are some new fungicides, which have come into the market. So we are helping them apply all that and we are trying to protect variety 238 also as far as possible but replacement plan is definitely on.

Riya Mehta — Aequitas Investments — Analyst

Okay and in terms of recovery next year do you expect it to improve more than [techinical issue]

Vijay Banka — Managing Director

No, no, not 50 basis-points. There will be definitely improvement but we will have to wait and see that. We are targeting significant improvement in the recovery, but we will have to wait and see. I cannot immediately comment on [technical issue] improvements do we get.

Riya Mehta — Aequitas Investments — Analyst

Right. And in terms of international markets, what is the current situation in Brazil, Thailand, Pakistan.

Vijay Banka — Managing Director

International market is very good, the prices are beyond 26 or 27 [Phonetic] pound.

Riya Mehta — Aequitas Investments — Analyst

Production, sorry.

Vijay Banka — Managing Director

So. Well 22-23 seasons virtually balanced season, there is no surplus and no deficit. 24-25 — sorry, 23 24 is expected to be a surplus season, but not a substantial surplus. If at all there is surplus it will be around 2 million tonnes of surplus. Now this surplus can swing — these numbers can swing either way. So it will all depend on how much Brazil will produce and India, these are the two key geographies, which produce sugar so eventual number will — it’s very difficult to talk about it right now. But as of now the exports, the trade houses, etc., they predict an estimate. I mean their forecast and estimate of production surplus of about 2 million tons.

Operator

Thank you sir. Ladies and gentlemen we have reached the end-of-the question-and-answer session and I would now like to hand the conference over to Mr. Vijay Banka for closing comments. Over to you sir.

Vijay Banka — Managing Director

Thank you very much friends, thank you for participating in this earning calls conference. The question that you asked encourages us to improve our performances. We challenge ourselves to see that there is improvement, so that we get — not that we have spoken on the back-foot, but yes we can — we can talk more about improved recoveries, etc., in the future earning calls, but I thank you very much for the trust and confidence that you have reposed in our company. We look-forward to engaging with you in the times to come. I would request my colleague, Mr. Maheshwari, to say a few words.

B. J. Maheshwari — Managing Director and Company Secretary

I thank all the participants for joining the earnings call and then involved in active participation in the call. We look-forward to meeting again in the next earning call. Thank you.

Vijay Banka — Managing Director

Thank you so much.

Operator

[Operator Closing Remarks]