BCL Industries Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Distillery revenue surged 55% YoY to ₹748 crores, driven by a 73% jump in ethanol volumes, while the edible oil exit advanced with the mill and solvent plant now shut.
• Distillery margins compressed on maize prices, but the company’s wet-maize procurement in Punjab gave it a competitive edge that peers could not replicate.
• A biodiesel plant and a biogas project are under construction, adding vertical integration that management expects will lift overall margins once commissioned.
• Management held its conservative ₹1,800 crore distillery revenue guidance despite an analyst’s math pointing to a possible ₹2,000 crores, citing potential maintenance shutdowns.
• What to watch next quarter: Whether maize prices correct post-Diwali as the delayed MP/Rajasthan harvest hits mandis, the pace of the edible oil refinery wind-down, and any order placement for the 150 KLPD Bhatinda expansion.

Distillery Performance & Margin Dynamics

• Ethanol volumes and realizations: Ethanol volumes reached 50,914 KL, a 73% YoY increase, with revenue from ethanol touching ₹362 crores, up 95% YoY. ENA realizations held at ₹71–₹72 across both Punjab and Kharagpur.
• Maize price pressure: The distillery EBITDA margin dipped primarily because of increased maize prices in the market. Current prices are higher than the previously mentioned ₹24–₹25 range, though management expects a correction once the delayed harvest from MP, Rajasthan and parts of Jharkhand arrives post-Diwali.
• Procurement advantage: The company procured wet maize in Punjab using its own dryers, a capability few competitors possess, which secured competitive rates. Management noted it was the only ethanol-based buyer for this wet maize in the market.
• Raw material discipline: The company does not stock raw material for more than 15–20 days, using forward contracts or trader procurement as needed, since stocking longer would add ₹3–₹3.5 in costs.
• Production flexibility: The Bathinda unit (400 KLPD) can produce up to 200 KLPD of ENA, and Kharagpur (300 KLPD) can produce up to 200 KLPD of ENA. The mix is decided month-to-month based on orders, with winter seeing greater ENA demand and summer more ethanol for beer consumption.
• Power cost advantage: Bathinda’s per-litre power cost is ₹3–₹4 versus the industry’s ₹6–₹7 because of paddy straw usage, and all power requirements will be in-house once the edible oil unit shuts this financial year.

Kushal Mittal: "We were the only ethanol-based buyer for this wet maize in the market, and we anticipated very competitive rates."

Edible Oil Exit & Asset Realization

• Phased shutdown progressing: The oil mill and solvent plant are already shut; the refinery continues to operate due to improved market demand from an unexpected 20%–25% government duty increase on imported oil and festive season demand.
• Exit timeline: Management hopes to fully exit the edible oil business by Q4 or maximum Q1 of the next financial year, with the refinery winding down slowly given the current favourable market.
• Profitability impact: Revenue will decrease materially, but overall profitability is not expected to decline significantly because edible oil is a low-margin business, and the biodiesel addition is expected to offset the loss.
• Policy inconsistency risk: Management remains committed to the exit despite the duty-driven improvement, citing past experience that there is no consistency in edible oil policy.
• Asset realization uncertain: Management does not expect any realization from selling edible oil brands due to market consolidation, and stated it is tough to comment on land value as the property has not been marketed yet. It also contradicted an analyst’s suggestion of a ₹400 crore real estate value, calling that figure very high and nowhere close to actual.
• Working capital benefit: Shutting down edible oil will reduce working capital requirements by around ₹3 crores, though working capital can increase depending on raw material inventory levels.

Kushal Mittal: "See, no, we're still looking to disinvest. Because one, the current improvement in business has been due to the change in duty structure... But we've seen in the past, as per our experience, there is no consistency in the policy."

Capacity Expansion & New Projects

• Svaksha Distillery at full utilization: The recently added 100 KLPD capacity at Svaksha Distillery has reached full utilization.
• 150 KLPD Bhatinda expansion: Orders are expected to be finalized in November, with commissioning 12 months from order placement. Management gave a conservative FY27–28 start date that may move earlier depending on order timing. ENA machinery already at the plant is being explored for redeployment here to avoid a unit shutdown given good ENA demand.
• Goyal Distillery acquisition: BCL acquired Goyal Distillery Private Limited in Fatehabad, Haryana, as a wholly-owned subsidiary, with land and permissions for a 250 KLPD grain-based ethanol unit. The license permits ethanol only; management noted obtaining an ENA license involves significant red tape. Funding options are still being explored.
• Total capacity trajectory: 850 KLPD by FY26, rising to approximately 1,100 KLPD by FY28 with the Goyal acquisition.
• Biodiesel plant under construction: A 75 KLPD biodiesel plant in Bathinda, using maize oil as the main raw material, is in full construction and expected to commission in April or May of the next calendar year. Permissions for a similar plant at Kharagpur are awaited.
• Biogas plant planned: A 20 metric tons per day biogas plant is planned on a newly acquired nine-acre plot near Fatehabad, processing approximately 250 metric tons of paddy straw daily. The company is exploring technology partners, noting the technology is new with some challenges and expected to mature.

Kushal Mittal: "See, to get an ENA license is very difficult. There is a lot of red tape. That's why you see most of the plants that have come up in the country right now are dedicated ethanol plants as getting clearances for them are relatively easier."

Biodiesel & Margin Outlook

• First-mover positioning: Management believes BCL will be the first ethanol player to produce biodiesel at this scale, citing no knowledge of any peers pursuing the same line. The 5% blending mandate is in place, but current blending rates are below 1%, last released at 0.3%, leaving a large addressable gap.
• Vertical integration logic: Biodiesel uses maize oil, a byproduct of ethanol production, as its main raw material. Management expects this complete vertical integration to improve overall margins and provide a valuation uplift.
• Standalone ethanol margins: Not expected to increase greatly from current levels; the margin improvement story rests on biodiesel addition rather than ethanol price recovery.
• Near-term margin outlook: Management does not expect margins to increase from the previous quarter and hopes to maintain the same level, with more clarity post-Diwali once the crop arrives. Even if maize prices decrease post-harvest, they are not expected to fall dramatically and should be similar to Q1 or Q2 levels.
• Finance cost tailwind: Finance costs decreased by ₹5–₹6 crores this quarter due to receipt of interest subvention funds, which typically arrive with a quarter or two of delay. Further decreases are possible if additional subvention funds are received, though timing is uncertain.

Kushal Mittal: "The addition of biodiesel will definitely help our margins, because that's complete vertical integration, and provide a great valuation, which will help increase the overall margins of the business."

Balance Sheet & Working Capital

• Working capital loan reduction: Working capital loans decreased by approximately ₹90 crores because no major harvest occurred this quarter except in Punjab, so the company was not sitting on a large raw material pile.
• Debt and inventory linkage: Working capital requirements can increase depending on material inventory levels, and the edible oil shutdown will reduce working capital needs by around ₹3 crores.
• Order book visibility: The initial order book from OMCs is approximately ₹1,300 crores, with OMCs typically increasing requirements through the year depending on blending percentages and demand, so this figure could rise.
• Stock recategorization underway: The company is working on applying to stock exchanges to recategorize from edible oil to distillery, though management described it as a slow process with no clear timeline.

Guidance & Commitments

Key Metrics