BCL Industries (NSE:BCLIND) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Bcl Industries Q2 and H1 FY 'twenty seven Earnings Conference Call hosted by Incred Equities. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinions and expectations of the company as of date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr.

0:45 Nitin Avasti from Incred Equities. Thank you, and over to you, Mr. Avasti. Thank you. I would like to thank the management of Bcl Industries Limited for giving us this opportunity to host their earnings call today. From BCL Industries management, we have mister Kushal Mehta, joint managing director, and mister Varang Gupta, CEO. Also from Go India Advisors, their IR, we have mister Adith. I would now like to invite Mr. Varun Gupta to initiate the proceedings with his opening remarks, post which we shall open the floor for a Q and A session. Thank you, and over to you, sir. Thank you, Nitin. Good afternoon, everyone. A warm welcome to BCL Industries Limited Q2 and H1 FY 'twenty seven Earnings Conference Call.

1:34 The results and investor presentation have been uploaded on the stock exchanges, and I hope you have had a chance to go through them. Let me begin with a brief overview of the industry and the opportunities ahead. India's ethanol program has laid the foundation for a robust biofuel economy. Beyond fuel blending, it's expanding applications across pharmaceuticals, industrial chemicals, sustainable aviation fuel, isobutanol and clean cooking fuels are opening up significant avenues for long term demand. The compressed biogas sector is also gaining momentum, supported by government's governance scheme and mandatory CVG blending targets of 3%, increasing up to 5% by FY 2029. BCL is strengthening its operational capabilities to capitalize on this emerging opportunity, further expanding its presence in the biofuel sector.

2:23 Moving on to the operational updates. I'm pleased to inform you that the temporary disruption at our 200 klpd ethanol unit in Varinda following the fire incident on June 19 has been fully resolved. After receiving all necessary statutory approvals, the unit resumed operations on August 28. With this, our entire installed distillery capacity of 900 klpd is now operational, comprising five fifty klpd at our Sanda Disturri in Punjab and three fifty klpd at Soksha Diskari in West Bengal. We have also filed the insurance claim for the fire incident and expect to receive the claim by the end of third quarter. On the ethanol allocation front, BCL has received an additional allocation of 4.37 crore liters from OMCs for quarter four of this year, comprising 2.35 crore liters for Sanddot and 2.02 crore liters for Swaksha.

3:15 With this, our total order book for ESY two hundred and two thousand five hundred twenty six has increased by 41% from one lakh to 1.5 lakh. Another key strength for BCL lies in the integration across our facilities at every stage of the value chain. At our distilleries, the same capacity can be utilized for either ethanol or E and A production, enabling us to switch between two seamlessly. This flexibility has reflected in quarter two FY twenty twenty seven with E and A volumes increasing up to 22.5 lakh liters sorry, 500 kl from 12,130 kl in quarter two of FY twenty twenty six, while ethanol volume stood at 39,500 kl during the quarter.

4:03 Moving on to our PML business, the growth momentum continues to remain strong. During second quarter of FY twenty twenty seven, we sold 6.42 lakh cases, representing a growth of 41.4% year on year. Coming to our Oil Refinery business. Following our exit from the Packaged Oil segment, our focus has shifted towards soft oil refining with an installed capacity of 400 tonnes per day each at Barhinda and Kharagpur. While we acknowledge the near term headwinds in the ethanol industry arising from oversupply, we remain cautiously optimistic about the emerging opportunities across the border across the broader biofuel sector, supported by our existing infrastructure and operational readiness. Moving to our financial performance for the quarter. Consolidated revenue from operations for second quarter of FY twenty twenty seven stood at INR695 crores, while revenue for first half FY twenty twenty seven stood at INR1319 crores.

4:58 EBITDA for the quarter stood at INR 66 crores with EBITDA margin holding steady at 9.5%. For first half of FY twenty twenty seven, EBITDA stood at INR 132 crores, up 5.9% year on year. With the margins improving by 191 basis points to 10%. PAT for the quarter stood at INR29 crores with a PAT margin of 4.2%. On a segmental basis, our distillery business reported an EBITDA margin of 11.9% in quarter two of FY twenty twenty seven compared to 11% in quarter two of FY twenty twenty six, marking an improvement of 90 basis points year on year. This improvement came despite higher maize prices during the quarter and reflects our enhanced operational efficiencies through shared infrastructure. In our Oil Refinery business, revenue for second quarter of FY twenty twenty seven stood at INR 188 crores with an EBITDA margin of 3.7%.

5:50 Other income for the quarter also includes onetime gain of INR 2 crores from the sale of assets from our former oil and vanaspati unit at Batenda. As we move forward, we will remain focused on strengthening our core businesses while leveraging our procurement expertise to create sustainable long term value for our shareholders. With that, we would now like to open the floor for questions. Thank you. Thank you. We will now begin the question and answer session. The first question comes from the line of Puneet Seagal with PinPoint X Capital. Congratulations for a good set of results.

6:51 Sir, firstly, I wanted to understand about the ethanol tender for the New Year. The government has been plenty of changes where I think the sugarcane cane juice and other things have been disqualified. So the pressure on grains will be more, and there has been some great revisions. So firstly, I would like to know like what is our expectation for allocations for the new year? And what are the kind of margins we'll be able to make on this? Yes. Good afternoon. So the the new tender is out and the government did make a lot of changes to it. And, again, they made more changes to it by another call agenda. So, firstly, when speaking allocation wise, I think allocation should be somewhat similar to what they were last year with with this new tender.

7:47 And with the raw material prices going up significantly, I think there will be pressure on the margins for the year because now majority of the burden has come on grain distilleries. And accordingly, there'll be increased demand for maize in the market. So I think margins will come under pressure, but thanks to our company's flexibility, especially when it comes to industrial alcohol and DNA, we're able to pass on, you know, the costs at least in the DNA and industrial alcohol business. I suppose the rates for ENA as well as DDGS have also increased. Right?

8:37 Yeah. ENA prices have increased. This is the peak demand season anyways for the next two, three months at least. And DDG prices are also increased slightly, but not as much. Okay. And, sir, you referred to the where they made some changes again, I think, on the grain of of the rice and the damaged food grain. So... But they did not consider any price increase. I mean, there could be a... Do you think, in your opinion, is the risk of a shortfall of the blending target because of the policies they have made this year? No. I don't think the blending target is at risk per se because there is overcapacity in the industry, and I think they will get the ethanol they require.

9:26 But, yes, I think with the raw material prices being where they are, it is now survival of the fittest. Okay. Okay. And with the new maize harvest and also, do you think the rates would go down with the raw material or it would get balanced by the demand? It's tough to say markets are closed for Diwali. Post Diwali, I think we'll know better. Got it. Sir, with respect to the segment, what are our plans? I think the new scheme is pretty attractive, and a lot of people are talking of expansion. So I I suppose in our presentation also, we mentioned. Yeah. So setting up a Yeah. You know, our facility, we're planning on setting a 20 ton per day plant. We're in talks with the CGDs for LOI for long term offtake agreements.

10:20 Meanwhile, we're also getting the necessary permissions, one or two which are left. And post, we'll be floating our tender for the plant and machinery, and from there on, we'll kick forward the project. So what is the revenue and EBITDA potential from this project, sir, and how long will it take for it to come online? See, the revenue... If we if we operate the plant EBG plant with the 90% to 95% of capacity, we're expecting revenue to the tune of INR70 crores and EBITDA margins are pretty healthy and we expect it to be should be around forty five percent Forty to 45%. And this plant we are doing on stand alone, we are not having any tie up with any of the OMC's because, I mean, we see a lot of other companies in the segment, like, they keep getting these MOUs or they... I mean, I know Gail and IGL and Petronet. They're signing up with other companies for, you know, 10 plans, five plans, something like that.

11:27 Yeah. But couple of more companies have come out with some EOIs. We're working on it, but too early to comment. Okay. Because I think we have the balance sheet strength and, you know, capabilities to do something big in this segment, looking at how it's opening up towards... Just wanted to get your thought process on that. You know, I think it's a it's a good upcoming sector, but I I do think that is just like every other business, this will have its challenges as well. I think we want to kick... Take off with one and then plan a few more. So with respect to biodiesel, I think the OMCs have come up with the latest tender for three months at, I think, INR95 per liter, if I'm not wrong.

12:19 So is that viable for us? And I mean, what are our plans in that segment? Yes. For biodiesel at $95 also, I don't think it's that viable for us. Prices of pretty much all byproducts in the oil market are quite high. So we're not looking to participate as of now. Okay. Okay, sir. All right, sir. Thank you and best of luck from my Thank you. Next question comes from the line of Imran with Longbow India. Please go ahead. Hi. Thanks for the opportunity.

13:07 Kushal, you mentioned you expect the margins to be subdued for the coming time or maybe till about '27. There is a new element which has come to equation is that now FCI will procure rights with only up to 10% broken, you know, broken rights. Used to be earlier about 25%. And you think that's not enough to to mitigate this kind of problem in the margins? No. That's not enough in my opinion because this project, like, is... Which is called improved rice.

13:53 It's mostly happening in a few states like Punjab, Haryana, and not planned India as of now. So even if that is to increase the broken rice supply in the market, I think it will help for sure, but not to the extent that we wish it would. Right. Got it. Got it. And since, you know, this part of the business or actually this area is... The more we think about it, the more, you know, time we spend on it, it it seems that, you know, there is no pricing power. The government will continue to, you know, give pain to, so to say, distilleries and, you know, other associated parties. What are your thoughts on, you know, growing the other parts of the business like consumer business where you sell liquor?

14:45 I think you're doing it in Punjab. Are you also planning to do it in West Bengal and and therefore diversify? You're very right. We knew the risks, you know, with the ethanol business and not not solely dependent on just ethanol. You know, EMA gives us very good flexibility. We're growing our country like a business in Punjab at a very good pace, which is evident in our sales numbers. We found good demand for industrial alcohol and also for for EMA. So there we have that flexibility and accordingly, we're looking forward to now CBG and setting up a more plant in Batinda to help launch our IMSI business as well in the coming year.

15:33 And for now, but no plans as of now to start bottling in the state of West Bengal. I think we'll kick off the consumer business from Punjab and see the growth from there. Right. And any idea if you could give what is the market size? How much initially you are you are targeting? Any exercise done so far or or that's not done yet? For for IMFL? Yes. IIM FL, IIM IL both in in Punjab. No. IIM IL, so we're already present. As of today, now we're the second largest in Punjab. Exact market share numbers, wouldn't have updated, so I don't want to put anything here. Right. But for IMFL, we're discussing still internally, and I I wouldn't have the exact numbers for you right now. You got it. Got it. And and lastly, you know, I think the... We have achieved a decent scale in terms of the overall business. We have removed the the the business that we didn't like. Right? So so there is...

16:43 My my my point here is, you know, you are making enough cash flows now. Right? And if you... If I assume that you don't go for expansion in ethanol or any related items, then you would get a lot of cash. I mean, you will generate a lot of cash, right, over over the, let's say, period of three, four years... Next three, four years. So what are the plans to... You know, how you want to use that cash? You want to put it in IMFL brands or you want to give more dividends? What are your thoughts on, you know, cash planning for the future three, four, five years? Yeah. See, if you've been following our company, you would know that we like to invest as soon as possible.

17:30 So keeping that in mind, we're coming up with the CPG project. And at the same time, see, we understand that, maybe the ethanol business is going through a tough phase, but this is a business that will continue to, grow. And I I... Unfortunately, in the past few months, we saw very bad publicity on social media, and I think that's died down. So this is not a sector that's going anywhere. It's... It'll continue to grow. But understanding the risk for gold history, which was initially only an ethanol cleared file, we've already moved the file there to get the environmental clearance for the ENA and ethanol plant. So if we have the flexibility there, then we'd go ahead with that plant as well. And beyond that, as you rightly mentioned, we'll need cash for our IMFL business. So to be completely frank and honest with you, I don't think we'll become a higher paying dividend company in the coming years. Instead, we'll be investing this cash flow.

18:31 Got it. Thank you so much. Thanks. Thank you. Next question comes from the line of Dipesh J. Sanjeeti with Mania Finance. Please go ahead. Hello, Vishal J. I'd make a couple of questions was regarding hello, am I audible? Yes, yes. Good afternoon. Pipesh, you are audible. Yes. Now since the ethanol has been restricted from sugar companies, do you see any traction coming in terms of volume more volumes and more demand from the OMCs? No. I...

19:17 For now, I don't see that happening because newer plans were set up, and the OMCs have made a couple of changes in their procurement policy. So I think allocations are around... Expectation are about the same as last year. So we'll have to continue to rely on ENA. Okay. And so I was asking this because then what is the viability? Because since we have lower power cost and because of that, we we we have that 4 rupees margin. But what is the viability for ethanol with maize as well as with f... FCI FCI rice? Because maize prices have also seen uptake.

20:03 It has almost gone to about $20.24, 25. And the... Also, FCI rice as per our last con call, it it doesn't have that kind of great margins because of the lower prices. What is your take on it? See, as I mentioned earlier in the call call, it's it's survival of the fittest. Whoever can be efficient, have backward forward integration, control their procurement costs, I think they'll be able to do well. But but I think I'll... The basic idea that you correct me, prices are now hovering around $29.30 rupees. And their market is closed for Diwali, but someone was estimating to... For it to go even higher, but I don't think that will last.

20:52 So margins will be stressed. And I think since we have done so much in terms of backward power integration and power cost, I think we'll we'll continue to differentiate ourselves from the rest. Right. But at these prices of maize, is there any viability of producing ethanol apps... I mean, at all? Because ethanol prices from maize also has reduced to 68. It's it's it's definitely hampered, but I I think there's there's still viability. So we'll continue to do that. Right. Right. And a different question on the property prices in Punjab has suddenly gone up. And so what is our land bank right now? And are we planning to monetize on any of our land banks?

21:51 I don't know. Property prices in here are quite... They're not rising as much. I don't know where in... Where else in Punjab they're rising. But... Yeah. So our land bank is not much left, to be honest. Our partner stock is pretty much finished. When it comes to plots, demand is low, I think, but we still have around 10 crores odd value left in stock, not more. And then we have the oil mill land, which was vacated. So that we'll look to hopefully monetize it on in the next year or so. And how is the E and A demand shaping up in Alcoa industry?

22:39 And what is the current E and A realization compared to 58 rupees in Q1? No. E and A demand is good. And because sugar companies are also not diverting much towards E and A, and this is a time when there's good demand in the year. So currently, prices are around 68 to 70 rupees. 68 to 70 rupees. Oh, that's really nice. So how much of our current capacity can we, I mean, do completely e and a? Because I'm sure that there is some amount of capacity where we have, I mean, we have to do ethanol. Hello? So at both our facilities, 200 kLPD up to 200 kLPD is flexible in up to.

23:36 Okay. But there is there are two... There is one facility where we have to complete... It is completely dedicated to ethanol because we have taken the loan also at subsidized prices. Right? So is that still there, or can we convert it to ENA? No. Whatever is dedicated for ethanol, which is three fifty k l p d in Bacinda and 150 k l p d in Kharagpur remains for ethanol. Okay. And just my last question. With diesel demand all over the world, are we planning or are we looking at exporting our biodiesel at better prices in maybe Europe or something? Have we thought about it? No.

24:23 No. I think biodiesel prices, even in Europe, there's not that great demand. So our refinery is being utilized. So we haven't really worked too much on it, to be honest. Because we're getting good margins in our refinery, so we want to keep that going. Thank you. Mr. Sanjay, please reach in queue for more questions. And please stick yourself to three questions per person. The next question comes from the line of Abhishek Kumar Lekha with Nest Wealth LLP. Hi, sir. Thank you for the opportunity. I have two, three questions. One is like major expansion projects are nearing completion. How do you see the capital allocation strategy over the next few years? Is it would be more debt reduction or kind of additional acquisitions or more greenfield capacity?

25:21 How it is? As I as I just mentioned in the previous questions, debt reduction will happen as per the repayment schedule. We're in... We are decreasing our working capital utilization in the past couple of years, and that will continue to decrease with more cash being generated. But besides that, the company will look to invest into CPG, into malt, and as I already mentioned, Coel Industries Limited, which was initially only an ethanol plant, we've already moved our application to get the flexibility between ENA and ethanol. And if that pipe is clear, then we continue to set that plant up as well. So that... Those are our investment plans for now.

26:08 Right. And one one, like, BCL is expanding the country liquor business in Punjab and also in the North area. So as management now prepare for the MSL journey, what are the biggest learnings that we have from Punjab alcohol market and which which which will help take the brand penetration when we are penetrating to other markets in India? And across The biggest the biggest learning of naturally is to be price competitive Mhmm. And have a very good product with good packaging. Even in even in country liquor now, you need good packaging. You know, your corrugated box should be good, your caps, your bottles, and, of course, the product has to be good at a very price competitive point. Our market is very price conscious and you have to keep that in mind.

26:57 Okay. Okay. And then anything that probably is helping the the Punjab experience when we are penetrating Ariana and UP, which which is able... We are able to take the market share faster. Hello? No. Naturally, you know, the distribution networking. Uh-huh. Actually, the distribution networking and everything will help. Okay. Okay. Yes. Thank you. Doctor. Kumar Saik. Thank you. Next question comes from the line of Nitin Avasti with Incred Equities. Please go ahead.

27:46 Hello, sir. Two questions. On the being issued alcohol market, India predominantly relies on import. However, we have seen the trend, and this is backed by data as of now. Specifically, for the month of July and August, we have seen about a 99% drop year on year for the imports of denatured alcohol. And the rate through will be Indian companies who are... Who have the license to manufacture that product taking on this market. Of course, proximity to users of said commodity would also play an important role. Given that there's such a big drop in import of this commodity in India, are we have we marked the third capacity because we have a lot of users of denatured alcohol around our units. So we would be very cost competitive apart from product and logistics also.

28:51 Wanted some thought process there because that would be a major market which opens up for BCL as a company? Yes. Naturally, last year, I think a good capacity of ours was being utilized for the nature of spirit, especially for API companies present in Punjab. So from our Bachenda unit, there's not that many consumers in and around West Bengal for this. But we have not earmarked a set quantity for it because this too, we sell on a month to month basis. So right now, if there is such high volatility in grain prices domestically, we cannot do any forward contracts for this and bear that risk.

29:45 So so accordingly, there is good demand as we speak. So I think even in this month, we'd be selling about 15 land liters for denatured spirit. And depending on the movement and the raw material prices locally and the Chicago price for ethanol, will continue to do bookings for this. But we're not looking to get into any forward contracts right now. Okay. That's from... You're not looking to get into the forward contracts because the volatility in the green price is not a demand issue. I just want to clarify whether it's a raw material issue or a demand or the end product issue. Yes. This is because we don't want to bear the risk on terms of raw material.

30:34 Understood. So there is no problem. The demand has actually opened up in the market for this product. Yes. Okay. Understood, sir. So secondly, the additional contract for four karat plus liters that we had received for the last technology, There had there had been some notifications because of which that that said order would be extended into the month of November. So have we already delivered, say, 4.4 plus caroliters last ethanol season? Or are we going to deliver it in November? No, we're to deliver that in November. Understood. So because it also merges with the lean season for ethanol for grain producers, but they should change that factor. That's what I was trying to understand.

31:24 Precisely. Understood. Understood. Thank you, sir. Thank you. Thank you. Next question comes from the line of, an individual investor. Please go ahead. Good afternoon, mister Mitchell. Thank you for the opportunity. Firstly, could you help us quantify the peak revenue potential from the existing capacities? At a 100% utilization of 900 k l p d plan, what kind of annual revenues should investor broadly factor in? Can we expect revenues to surpass $808.50 crores at 100% utilizations? But the reason I'm asking, in q two, BCL's total volume combined was around 62,000 k l. So representing an average operational rate of six seventy four k l p d. So the reason is this was heavily restricted by the Bhandha fire disruption.

32:25 So have I done my math correctly? Are you looking at stand alone numbers or consolidated numbers? Are you including such necessary? Yes. And when you talk about the numbers you are looking at, I think that also includes the oil trading, the major extraction and refinery, and the real estate. Am I correct? Yeah. Yeah. Yeah. I... I'm correct. Correct. Yeah. So for that reason, you know, it's difficult to because that calculation will work when you only isolate a discovery number. Right? So I... Would you want me to speak with just the discovery numbers or or pan comp... The entire company? Entire company. So you have done around 700 crores this quarter. So on... Based on that specific base, what revenues can we expect going forward in every quarter?

33:23 Just a sec. See, it all changes with the prices of oil and prices, but I think peak revenue for our company, with this added capacity, will be 2,900 crores, not more. 2,900 crores. Okay, sir. So we will go at a run rate of No. That is the peak. That is the peak. I'm not... That's not a forecast. Okay. Yeah. Got it. And secondly, your presentation mentions the insurance claim is filed and likely to be settled in q three FY twenty seven.

34:09 So could you share the approximate figure you anticipate to receive? It's too early. I I wouldn't want to share anything in publicly right now. Okay. Fair enough. So on the IMSL business, when do you plan to start the business end of FY '27 or the FY '28? When exactly? No. In 2829. 2829. So... Okay. And one last question regarding the Goel Distillery. When do you anticipate receiving the final approvals, and can we expect the EMA also to to simultaneously be received with... Along with the... Yeah. We just applied last month for it. And now with the ENA being added, it's a it's a long long process with public hearing requirement.

35:09 So as of today, I think at least nine to ten months will be required in obtaining an environmental clearance. And CVG? CVG will be quicker. CVG is mostly done by state. So we have a couple of cadences left. We'll work on them. So in the next three months, I think those those should be completed. And Malt? Malt, we haven't moved any application yet in Punjab. Elections are due. So post elections will move. Perfect. Perfect. Thank you so much. Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of question and answer session.

35:58 On behalf of Bcl Industries, that concludes this conference. Thank you for joining us. You may now disconnect your lines.