Balrampur Chini Mills Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Seasonally weak quarter, but pricing and power tailwinds helped: Improved sugar realizations and an upward revision in power tariffs supported profitability in what is normally a soft quarter.
• The INR 30 SAP hike is the central tension: The steep cane cost increase, roughly INR 10 above expectations, makes domestic sugar realization improvement critical to sustain margins.
• PLA is moving from concept to construction: The project is advancing on schedule, market development has begun via imported PLA trading, and management expresses high confidence in demand, though confirmed offtake visibility is still building.
• Ethanol policy remains a bet, not a given: Management is hopeful on price revisions and a larger sugar-sector allocation, but no concrete government communication was confirmed.
• What to watch next quarter: Clarity on the UP Government relief package, the actual crushing and recovery numbers as the season ramps up, and any progress on ethanol pricing or PLA offtake agreements.

Sugar: Surplus, SAP Shock & the Export Valve

• Surplus concentrated in two states: The entire production increase is from Maharashtra and Karnataka, leaving them saddled with stocks and creating the political push for exports. Reduced diversion from sugarcane feedstock is expected to add to the surplus.
• SAP hike stings: The INR 30 per quintal rise to INR 400 for early maturing variety is steep, with INR 20 being the broad market expectation. Management cautioned against extrapolating another gigantic rise next year, suggesting the informal feeling is this INR 30 was meant for two years.
• Cost of production may partially offset: Better cane availability is expected to reduce fixed overhead cost incidence per unit, and better recovery is also anticipated, though the final cost depends on transfer prices still being evaluated. Last year's sugar cost was INR 35.5/kg.
• Export rationale is domestic price defense: Management argues exports improve 94% of domestic life by tightening the balance, with interest savings for Maharashtra and Karnataka as an added driver. The 15 lakh tonne export quota represents only ~6% of the estimated 2.8 crore tonne production.
• Crushing outlook positive: Balrampur is hoping for a 7%-8% increase in cane crushing, which would improve fixed cost absorption, along with better recovery subject to weather. East UP had not yet begun crushing at the time of the call.

Saraogi: "to improve 94% of your life, if one has to do a little bit on the 6%, go do it. That theory plus the saving on account of interest. These two factors being the underlying emotions, I think exports would happen."

Ethanol: Hope, Underutilization & Allocation Tussle

• Grain-based capacity is running below potential: Maize capacity has been underutilized because mills did not get full orders; Balrampur received only 60% of its maize bid (3 crore litres vs a 5 crore litre bid). Mills that did not get orders likely did not bid for Q3/Q4, and a second tender may come.
• Sugar-sector allocation is the structural fix: Management argues that if diversion to ethanol were higher, exports would not be needed and there would be no surplus. It is hopeful of getting a much larger portion of ethanol allocation going forward, suggesting 45%-50% should be allotted to the sugar sector in the interim.
• Price revision hopes are alive but unconfirmed: Management remains "very hopeful" of a rise in ethanol price and that MSP dialogue may yield results, but did not confirm any specific communication from the government on evaluating an increase.
• Margin hierarchy within grain-based: Rice, which forms 40% of the allocation, will have lower margins than maize; maize margin per litre will be higher than grain-based alternatives.
• Effective utilization capped at 80%: It is not possible to operate ethanol capacities at 100% due to normal upkeep, repairs, and maintenance; 80% effective utilization is the planning assumption.

Saraogi: "if diversion was higher, probably you would not have needed exports. If you did not need exports, you are not sort of uneasy as to what will happen to the surplus. There would be no surplus."

PLA: The Long Bet Is Taking Shape

• Construction on track, commercial production by October: Construction activities are advancing well, and the company expects commercial production to commence in October, with 2-4 months thereafter to reach 100% capacity and world-class quality.
• Market development has begun: Balrampur has started trading imported PLA to seed the market. Management states "everybody wants to do it, but they are saying, where is your production?" indicating latent demand awaiting domestic supply.
• Customer trials underway, but no confirmed offtake yet: The company is in trial stages with many customers; some have given a "yes" and want to do trials, which are also required at the customer end for large-quantity visibility. Management is "very confident" but did not confirm firm orders.
• Policy support being pursued: Management is hopeful on Minimum Import Price (MIP), Quality Control Order (QCO), or anti-dumping measures for PLA, and is dialoguing with government bodies on a comprehensive policy to create a level playing field.
• Profitability timeline is a personal view, not guidance: Management does not expect a loss in the first year, but EBIT-level breakeven (EBITDA covering ~INR 150 crore depreciation) is tough to estimate now. A personal view offered: "from March 2027 onwards, I think we should fly."

Saraogi: "everybody wants to do it, but they are saying, where is your production?"

Policy & Political Economy

• UP Government relief package in dialogue: Balrampur is hoping for a package including an increase in country liquor price of ethanol, reduction in country liquor percentage, transport out-center cane rebate, and other reliefs. Management has dialogued with the Chief Minister of UP on ground realities.
• UPML deregulation a downstream hope: Management is hopeful that down the line, something may move in the direction of deregulating UP Made Liquor, with a large portion of what was alluded to potentially moving that way.
• Cane payment structure is upfront: In UP, cane dues are paid entirely upfront in a single installment, not staggered.
• Clarity expected in the near term: Management expects the next one to three months to provide significantly more clarity on the UP Government stance, Central Government policy, and the company's own crushing and recovery expectations.

Saraogi: "we are feeling that the worst may be behind us with this INR 30 per quintal announcement. However, a little more evidence to everything I have mentioned may be sort of available in a month"

Guidance & Commitments

Key Metrics