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Ladies and gentlemen, good day, and welcome to Q4 and FY '23 Earnings Conference Call of Triveni Engineering & Industries Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to [ Mr. Gavin Desa ] from CDR India. Thank you, and over to you.
Good day, everyone, and a warm welcome to all of you participating in Triveni Engineering & Industries Q4 and FY '23 Earnings Conference Call. We have with us today Mr. Tarun Sawhney Vice Chairman and Managing Director; Mr. Suresh Taneja, Group CFO; Mr. Sameer Sinha, CEO Sugar Business Group as well as other members of the senior management team.
Before we begin, I would like to mention that some statements made in today's discussions may be forward-looking in nature, and a statement to this effect has been included in the invite, which has been shared with everyone earlier. I would also like to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner.
We will commence the call with opening remarks from the management following an interactive Q&A session. May I now hand it over to Mr. Tarun Sawhney. Tarun, over to you.
Thank you, Gavin. Good afternoon, ladies and gentlemen, and welcome to the Q4 and fiscal '23 results earnings call for Triveni Engineering & Industries Limited. We are extremely pleased with the performance of the company for the year ended 31st March '23, where several milestones have been achieved. For example, the highest ever crush was in the Sugar Season 2022-'23, an increase of 11% year-on-year. On record gross and net turnover of INR 6,310 crores and 5,617 crores, respectively, with a strong performance across the board. Record alcohol production and sales following our capacity expansion to 660 KLPD and an aggregate engineering business revenue of over INR 500 crores and segment results of our engineering business of over INR 100 crores is another significant milestone. It's a matter of satisfaction to see that the diversification of our profitability; Alcohol and Engineering businesses contributed 51% of the total segment results in fiscal '23 against 39% in the previous fiscal year. It's a healthy trend, and it's indicative of lowering the dependence on the sugar business and more innovative management of the business is risks. Turning towards the Sugar and Alcohol business. We had our highest sugarcane crush at 9.3 million tonnes for sugar season '22-'23, an increase of 11%, as I mentioned over the previous season. This was due to monetization and debottlenecking activities that were taken up in the previous off season. Net recovery of 10.23% with 92% of sugarcane crush with B-heavy diversion in season '22-'23 versus 84% in the previous season. There were lower recoveries. It is important to note across the state of Uttar Pradesh for this year. Significantly enhanced refined sugar production was another important point from the previous -- from the year under review, increasing from approximately 40% in sugar season '21-'22, to 60% in sugar season '22-'23. Sugarcane exports contributed significantly to profitability. We achieved exports of 190,000 tonnes during fiscal '23 out of the total export quota of 200 -- just under 205,000 tonnes for the year under review. In quarter 4 of fiscal '23, just over 55,000 tonnes of physical sugar was exported. We had the highest ever alcohol production of 18.12 crore liters which is an increase of 68% over the previous year due to additional capacities and expansions and very much in line, in fact, a little bit more than what we had forecast in previous earnings conference calls, as declared earlier, that the figure at that point was 18 crore liters. We estimate that for the sugar season '22-'23, the nation will produce 32.8 million tonnes after a diversion of 4 million tonnes for ethanol, an 18% higher diversion with the previous sugar season.
Turning towards the Engineering Business highlights. As I mentioned, our combined business revenue of INR 500 crores plus, and the fiscal '23 revenues actually were INR 577 crores. So both water and the Power Transmission group growing by over 30% over the previous year.
The combined profit before interest and tax crossed the INR-100 crore mark at INR 101 crores. And the overall outstanding order book stood at over INR 1,650 crores for the combined Engineering Businesses. During the year, the company also divested its entire stake in an associated company, Triveni Turbine Limited, to enhance shareholder's value. Accordingly, it was followed up by distribution of INR 800 crores to the shareholders under the buyback scheme of the company, which was completed in March 2023, just a couple of months ago. The Board of Directors in the Board meeting held yesterday has recommended a final dividend of INR 3.25 per share, 325% for the fiscal year '22-'23. In addition, the other significant development is an additional incremental approvals of INR 85 crores of capital expenditure for the sugar business, which mainly includes the expansion in capacity of our unit at Sabitgarh by 2,000 TCD raising it from 7,000 to 9,000 TCD. And with the proposed expansion, the total crushing capacity of the company will be augmented to 63,000 TCD.
So looking at the financial highlights in brief. The notable changes for the quarter, of course, is a 50% -- 52.5% increase in revenues compared to the previous corresponding quarter and for the fiscal year under review a 34.4% increase to INR 6,310 crores of gross revenues. The EBITDA margin also improved quite significantly in the quarter from 16.6% in the previous quarter to 18%.
The PAT, of course, for the quarter under review also increased by 73% from 109% to 190% approximately. All the businesses have contributed to the growth. Boosted by higher sales, the sales volumes in the alcohol business were due to the new distillation capacities that were commissioned during the year and a large multi-feed distillery at Milak Narayanpur and a grain distillery at Muzaffarnagar complex. Profit before tax before exceptional items did decline marginally in fiscal '23 to INR 562.4 crores, and this is primarily because of an export subsidy that was recognized in fiscal '22 of about 57 crores.
The improved performance during FY '23 has been due to the substantial profitability of sugar exports, which I have previously discussed. We managed to price our sugar at extremely attractive rates in December, January and February and concluded at that time. Of course, prices went up quite substantially in February and later in March. But I think we're, overall, extremely happy with the realization and in comparing the realization that people have gotten across the country, I think we have did extremely well from that particular campaign. The total debt of the company on a stand-alone basis on the 31st of March '23 stood at INR 825 crores. This is a sharp reduction compared to the INR 1,504 crores on the 31st of March '22. The overall cost of funds for fiscal '23 was 5.1% versus 5% in the previous year. I'd now like to spend time on the individual businesses and discuss them in a little more detail. Turning to the Sugar Business, 6 of our 7 sugar units recorded their highest ever cane crush in sugar season '22-'23. We successfully produced and exported large quantities, well over 100,000 tonnes of X grade or rather EEC 2 grade sugar, which fetched excellent realizations as we were able to capture the widest margin for these products. Payable unit post conversion to a refinery has stabilized very quickly and produced excellent sugar during the previous sugar season in '22-'23.
We've also produced the highest ever quantity of pharmaceutical grade sugar from our factory at Sabitgarh, which was expected. Six of the company's units operated on the B-heavy molasses throughout sugar season '22-'23. And that leaves our unit in East Uttar Pradesh, which is quite far away, several hundred kilometers away near Ramkola. At Ramkola, where we did not produce C-heavy molasses -- though we produced C-heavy molasses, we did not produce B-heavy molasses. The sugar export prices were at a considerable premium as I mentioned. And the export sale of 73,000 tonnes during the quarter was sold at a revenue of INR 29.42 crores. Domestic sugar prices have remained broadly stagnant over the last few months. They have -- they went up a bit. They came down a bit and now have stabilized pretty much at the same level as they were just a couple of months ago. Sugar inventory on the 21st of March stood at 46.34 lakh quintals, which was valued at INR 33.7 per kilo. I would like to mention that the cogeneration operations of the business received sales of INR 63.8 crores, which was higher than the 62.4% in the previous fiscal year, an increase of about 2%. The current sugar prices that prevail just now, sales that happened yesterday and this morning are approximately INR 3,680 to INR 3,700 per quintal for refined sugar and INR 3,620 to INR 3,640 per quintal for sulphitation sugar. So we've seen some amount of price increase that has happened over the last few days, few weeks or 10 days or so. Going forward, I see some further improvement certainly as we come towards the holiday season, especially when we post monsoon, July, August, September. I would see prices increase slightly at that point in time. The performance of this sugar season was quite dramatic and remarkable. As I mentioned, we had our highest ever crush of 9.33 million tonnes of sugar cane at a net recovery of 10.23%. This recovery was lower, but state's recovery also was lower. The net recovery in the last season was 10.55%, but I think the more important numbers to look at is the gross recovery where you enter off the B-heavy molasses, et cetera, et cetera, and the previous season had a tiny little quantity of juice as well where we had experimented. The gross recovery for this season was 11.47% versus 11.7% for the previous year. So that's about 0.23% reduction year-on-year. And I think this is broadly in line with what was experienced or what we thought we would experience, but certainly better than other interstate of Uttar Pradesh. I'd like to look at the industry scenario as well. ISMA has revised its production estimate for sugar season '22-'23 to 32.8 million tonnes and this is -- it is lower than from 34 million tonnes. I think this is broadly speaking a very realistic estimate of production in the country. As of the 15th of May, the country's production stood at 32.1 million tonnes. There are still fewer sugar factories that are running in the state of Uttar Pradesh at this specific point of time. And there will be a small special season that will happen in South India, which will raise the total production to about 36.8 million tonnes.
In essence, the nation has a sufficient quantity of sugar to do 3 things: meet the domestic consumption requirements. 2, meet the requirements for the ethanol blending program. And 3, to feed the export market that we, as an industry, hasn't been stakingly developed over the last 2 years.
I would like to point out that going forward, I see and we will discuss the weather in the next few minutes. But regardless of that, we will be able to accomplish these 3 very important things. India plays a critical role in the global sugar trade. And any absence of course, would be detrimental to India's interest and also have a significant impact in terms of increasing global sugar prices. This is in Triveni's perspective. Looking at the balance sheet of the nation. With an opening balance on the first of October, about 5.5 million tonnes, this is our estimate. We estimate that the closing stock would also be just a shade above 5 million tonnes of sugar, a sufficient amount where I see the campaign for the next year, sugar season '23-'24, starting a little bit early. We also have later festivals, et cetera, which would allow for an easy start in North India, more specific. With an increased acreage and excellent rains in April and May '23, we are of the view that there are increasing chances of an El Nino impact and this has been expressed by various metrological agencies. I think what's also important to recognize is the changes in weather patterns. This April, we had unseasonably cool weather across North India. Last March, we had unseasonably hot weather for that entire duration that continued. And we've also had inclement rain times that we don't have it. This has an impact on sugarcane growth. This has an impact on recoveries. This has an impact on new forms of tests and disease that can potentially impact the sugarcane crop. And I think there has never been a more important time for us to be cognizant of all these weather events. It's not just El Nino, it's changes in weather, changes in overall temperature, increase in the average temperature, which is something that there is really no debate about and the impact that it has on sugarcane as perennial crop across the country and, of course, in the state of Uttar Pradesh.
As you know, For Triveni, the majority of our sugarcane areas are associated with our factories are located in river and well-connected canal systems and they're supplemental of course by tube wells, borewells and other irrigation records. And therefore, there is a significantly lower likelihood for our farmers to get impacted by inclement weather or any rain impact in that perspective.
Turning to the International scenario, according to the ISO, in view of the global supply and demand situation, the global sugar balance for '22-'23 is a substantially reduced surplus. It anticipates the global surplus of about 1 million tonnes, down from 4 million tonnes that is estimated in February. The changes are driven by increases in production in Brazil. However, the smaller increase in Thailand and lower estimates for India and Europe will be negative contributors to this.
For '22-'23, we must say that the balance situation is quite interesting. And I think the discussion should really move to a quarterly basis, where there are certainly coincident time, if we divide up, quarters into hemispheres. So we see pockets of deficit and strong deficit that emerge. And even going forward, I think it bodes very well for export of Indian sugar that can easily be absorbed by export market.
International sugar prices have rallied quite substantially in calendar '23. The New York #11 broke $0.27 per pound, which was a high, multi-decade high. Actually, this is the highest since April 2012.
On May 9, 2023, the New York #11 closed at $25.7 cents per pound, although yesterday, there was a little bit of a sell-off because of higher numbers -- higher production numbers coming out of Brazil. But by and large, we are holding at much higher prices. And I think the fact that Brazil will have a record across all sugarcane and a record production of sugar is something the market has completely absorbed. And I think supply side shocks will leave this market higher. However, the correlation between international and domestic prices still eludes us, which, of course, is a domestic sugar producer we would be happy with, but that doesn't really exist in this particular point in time.
Turning towards the alcohol business. We achieved the highest-ever production of 18.2 crore liters. The additional capacities that were established, taking the overall capacity of the company [Technical Difficulty] at high levels of efficiency and production. We have, of course, improved our realization also quite substantially as the prices have been raised by the government of India, and you can see that in our results. And profitability margins have been impacted because of increased transfer price for B-heavy molasses and bagasse. It's very important for those bagasse fuels for the distilleries and that price has been increased as the transfer price will lead to market price. Ethanol constituted 92% and 93% of alcohol sales in Q4 and fiscal '23, respectively. The sale of alcohol from sugarcane constituted 63% and 75% of total sales. And what that means really is that in Q4, 33% of sales of alcohol was from grain. And for the fiscal year, 25% of alcohol was from grain. Going forward, I think we will look at about 33 -- 35% of grain as a stable level, provided all things are equal. But it is important to mention that Triveni was clearly the first to set up a large multi-feed distillery. It's absolutely critical, I think, in terms of our strategic positioning where our 2 new distilleries that will be coming up will also be multi-feed and it gives an enormous amount of flexibility and ability to be able to focus on the bottom line while making decisions on what feedstock to consume.
The industry scenario is also quite positive. All the 518 crore liters that was finalized by the OMCs against a requirement of 600 crore liters, the contract was of 514 crore liters against the above 244 crore liters have been lifted by May 7, '23, which equates to a blending percentage of 11.65%, which is not bad. Target is 12%. And I think we will be pretty close to that 12% level. The largest contributor for this, of course, has been ethanol supply from sugarcane industry. Turning to our Engineering Businesses, I would like to start with our Power Transmission Business and also water. For the Power Transmission Business, we had an increase in turnover and profitability by 22% at just under 20%, respectively. The profitability margins were sustained at 34-odd percent for the year, EBITDA margins being higher than -- actually higher than that.
For fiscal '23, the order booking grew at 5% and the order -- closing order book was about 17.7% higher than the previous year. The business has added 18 new customers in the OEM segment, which is contributing towards growth and will contribute even more towards growth as these customers buy more and more. As you know, we have a very high degree of market share and so as we add more customers and those customers buy more from us, it bodes very well and certainly on the product side, we are confident that we will see some step increases.
In addition to our increases from export revenues that we are witnessing, not just in Q4, but in order booking, the experience in Q4 and in the last portion of Q1 of this fiscal year. We had record profitability in the Power Transformation business of INR 76.44 crores, INR 76.5 crores, which improved by almost 20%.
Turning quickly to the water business...
I'm sorry to interrupt. This is the operator here. Sir, you are not sounding very clear now. It is sounding muffled.
Thank you for pointing that out. I hope this is better.
Turning quickly to the Water Business. The revenues have increased by 30%, driven by better execution. The orders that have been received in fiscal '23 stood at INR 192 crores, excluding OEM orders.
The business is actively targeting foreign projects. This is a change in the strategy of the company, and it's important to talk about and this is targeting -- the business is targeting projects where it possesses pre-qualifications and the funding is insured through multilateral and reputed agencies. The order booking on the 31st of March stood at just under INR 1,400 crores, which includes just over INR 900 crores of O&M contracts, which are over a longer period of time. I'd like to dwell just a little bit on the outlook of our various business segments. In the Sugar segment, we are focused -- very much focused on variety replacement and yield maximization programs. We are encouraging large increases in the introduction of implements and equipment to enhance focus on interfunctional operations and return management. There are innumerable digital initiatives that have been undertaken in the digital platform of Treveni Engineering will be one of the most significant differences that the organization possesses when compared to peers and will allow us continued differentiation and productivity gains with the direct beneficiaries being our farmers. There's aggressive surveillance as well on test and disease that has been carried out not just for this coming off season, but it has already started through the planting of the crops. Demonstration plots, we have over 1,800 demonstration plots , and these are showing our farmers what they can expect and how they can enhance their revenues. And with such a large scale of demonstration plots, we believe that we would have a significant impact to show and tell impact on our farming community. There's a huge improvement in other planting technologies as well. We also look forward to the government's help in terms of increasing the minimum sale price of sugar, which has not changed in several years. And I believe we are certainly due to a change in MSP of sugar and that support is quite important.
Turning to the Alcohol Business. In the Alcohol Business, the production and sales volumes have increased substantially following the increase in distillation capacities. During the current year, the revenues from distilleries have contributed 21% of our net turnover, and it will keep rising as we increase our distillation capacity from 660 KLPD to 110 KLPD. In the current ethanol tender for '22-'23, we have emerged as the second highest supplier in the nation. We have managed our ethanol sales spanning very well. And presently, we have low levels of inventory. The setup of the Milak Narayanpur distillery operate with B-heavy molasses syrup and syrup has been done very, very successfully. And it has had operating days of 325 in its first year, which is really quite a record. And we hope that with the 2 new distilleries, we'll be able to better that.
Turning quickly to the new distilleries. We expect the Rani Nangal distillery to be commissioned in Q4 of this fiscal year and the Sabitgarh distillery thereafter. We have decided to do this sequentially, and this also meets the strategic objectives of the business where we can see what's happening with the pricing points from the central government.
Looking quickly at the Power Transmission Business, the outlook looks extremely positive. We're seeing growth from our OEM segment from steam turbines, compressors, gas turbines and pump segments. The domestic oil and gas sector is doubling its refining capacity by 2030. And therefore, we will be a direct beneficiary in terms of the gearbox requirements for all the aforementioned products.
Infrastructure growth for steel sector, cement sector and waste heat recovery, again, hold very well, not just domestically, but also internationally for our products. And we are also looking at market share gains in export markets as we focus on export revenues from our factory in Mysore.
Within the defense segment, the business expects increased order bookings from key segments during this fiscal year with many RFPs coming up to conclusion in the next couple of months. The setting up of a dedicated multi-nodal facility for our defense products in Mysore is underway, and we anticipate that factory being commissioned during the course of this fiscal year. The land acquisition is now complete. And the preliminary work at site is already underway.
Turning quickly to the Water Business. After achieving success in Maldives and Bagadesh, the Water Business is trying to expand its activities overseas. Domestic market opportunities are also increasing in the Recycle & Reuse spaces, and we are targeting these 2 segments quite aggressively. Besides this, the company is also exploring PPP opportunities for sewage treatment plant on a PPP format. The outlook is positive for EPC and HAM projects, and this is driven primarily by large investments by the government, both at state and the central level.
The market is witnessing increasingly more and more projects under the PPP HAM model and the company, of course, would seek to benefit from these changes in this direction. Thank you very much, ladies and gentlemen. I would now like to open up the floor for questions.
Thank you very much. Ladies and gentlemen, we'll now begin the question-and-answer session.
[Operator Instructions] We have our first question from the line of Sanjay Manyal from ICICI Securities.
Just a few questions. I believe your FY '23 sugarcane crushing should be closer to 96 lakh tonnes. If you can just confirm that number and give us what would be the divergence towards the B-heavy and the sugarcane juice respectively?
You are asking about the next year, the forecast?
I'm asking about FY '23 financial year.
The total price is 95.5 lakh tonnes, as you said. And the total sugar diversion between the season has been 11.57 lakh quintals. And we have not processed any juice for ethanol?
Okay. So 95.5 lakh tonnes. And if you can just repeat, I'm sorry, I just...
Sugar diversion has been 11.57 lakh quintals to ethanol.
Okay. But can you give what would we B-heavy and what would C-heavy if there's no significant juice in percentage terms?
Sir, I'm sorry, can you use your handset mode, please?
Sugar season, we have already generated...
Sir, can you give...
We'll just recalculate that. But for the sugar season, we have already given it that 92% of our crush has been towards B-heavy versus 84% in the previous year. So it will be very close to about 90% or it will be largely -- yes, 92% itself, it will be 92% itself. The next question, please.
We have our next question from the line of Rajesh Majumdar from B&K Securities.
I had a question on why you have not produced any alcohol from juice. That was the first question because the crushing fuel is now over. So it's unlikely that there'll be any juice now in the financial year '24. So that was my first question.
So in fact, in the previous season, I stand corrected, in sugar season '21-'22, we did produce a little bit because our distillery at distillery at Milak Narayanpur did consume some juice to make ethanol. And some of that has come into this fiscal year, but that was the previous season. For this season, we have not consumed any juice for ethanol at all. And the reason for that is simple, why we used it in the previous season was really to test the economics. And the economics are completely unfavorable.
To give you an example, what we're seeing is, on the B-heavy molasses, we're seeing margins of about INR 14 per liter. We're seeing PBT margins on grain. This is the FCI rice that we purchased a majority of that of INR 9 per liter. However, on juice, after sacrificing sugar, the PBT margin is INR 3 at a sugar price of INR 35 per kilo. And today's sugar price INR 36 means, actually the PBT margin would be even lower.
And therefore, we are not under any compulsion to process juice because we have multi-feed distilleries. So we're able to actually use grain and secure higher returns on these assets than being forced to using juice. That's a clear strategic move by the company, as I have mentioned on previous calls.
Just a related question on this. What is that the margins are basically because of the transfer price. So whether the profits are coming in the sugar division or the alcohol division, should we really bothered about that? Because when you say market [ 35 or 36 ], the profits are going somewhere, right, instead of [ 25 or 26 ] instead of sugar -- instead of alcohol going into the sugar division.
And secondly, sir, if you don't use juice during the season,are you confident of getting adequate grain during the next 6 months or so to be able to fulfill your requirements?
So a very simple answer to your question. The first point is that if you're transfer price goes up, it will impact everything. It will impact B-heavy molasses. It will impact juice. It will impact C-molasses in case you consume that. So that is a standard. And pretty much everybody the transfer prices are around about the same kind of range when I compare to peers. But today, I'm here to only discuss Triveni's results, frankly speaking.
So I don't see that your argument about transfer prices being one that is -- that will really move the needle very, very much. The profitability on juice versus B-heavy molasses is what it is. It can change a little bit by some small increases in transfer price. But in transfer price, I think the market price, it doesn't move the needle very significantly. And the difference is quite acute, frankly speaking. It is substantially acute. To answer your second question in terms of grain, we functioned through Q2 and Q3 of the fiscal year under review with large quantities of grain being purchased. The distilleries are in strategic locations where they are close to FCI depots. So we are actually able to secure large quantums and have no fear of securing quantums of grain. And of course, we can always supplement it by damaged food grain as well.
And so what would be your inventory of B-heavy molasses as of 31st March? And what is the valuation on that? Is it possible to share that figure?
I'm afraid I don't have that number on me. You can take it offline.
And my last question, sir, is that the OMCs have only lifted 44 crore liters out on the contracted quantity, whereas more than 60% of the ethanol here is already over. So is that any cause for concern? Or it just -- I mean, how should we read this?
Yes. So that number has gone up as of the 22nd to about 254 crore liters. But that apart, we believe that they would be in a position to be very close to the numbers of 525 crore liters, which they are targeting to achieve. Having said that, what is a little matter of concern is the fact that the grain ethanol lifting has been much lower. And if you look at that percent rate versus the contracted quantum, that is much lower. So from the sugar contracted numbers, we are very hopeful that we'll be able to achieve the numbers.
So will that conflict with our strategy of using more grain? Or will that be a problem for us?
No, I have commented for the nation as a whole. It is not a comment for Triveni as a whole. Our contracts are secure. Our relationship with the OMCs are secure. These lower dispatches could be due to operational banking, all sorts of different issues, capacities, et cetera, for stand-alone grain-based distilleries. This is not a comment on Treveni. We're confident of meeting our projected dispatched numbers.
And sir, if I could sneak in a last question. You mentioned in your report that you expect the SAP prices to go up ahead of elections. Is that correct?
Well, I would -- I think conventional wisdom shows that when we come towards elections, our cane prices do go up, there is talk that the FRP will increase. And I think if the FRP increases for a couple of years, there may be an increase in SAP. The reason for us mentioning it is that we are cognizant that this may be an eventuality. And therefore, we have to plan for it. So we have to look at how do we protect our margins in an environment, but there may be a possibility of an increase in our largest cost, which is the cost of cane.
We have our next question from the line of Anupam Goswami from [ Sur life]
Sir, just wanted to get an update on the new harvest and recovery going there given the climate and.
You're unclear. Can you speak up a little bit, please?
Mr. Goswami, please use your handset mode.
Just wanted to get an update on the harvest and the recovery from the upcoming season, given the climate and the percentage of grade of sugarcane that we are using.
So in terms of the planting, our planting area is up by 5.5% in the planting, which has just been concluded over there and which will be used for the upcoming season. In terms of cane development, Mr. Tarun Sawhney has already mentioned about the various initiatives being taken up and we'll be very proactively looking at the disease portion of pest and the diseases.
And therefore, we are very confident that -- all things being equal, we would -- should have a higher recovery and definitely the increase in the crushing that we are anticipating.
And as you mentioned your strategy on like having less on use ethanol. And if the industry goes that way, do we see, again, more of a sugar surplus and subdued prices going forward?
I'm sorry, I'm pleased to ask your question again. It was unclear.
Mr. Goswami. please use your handset mode you're not sounding very clear.
I just wanted to get an update on the industry how the industry is fanning out on juice ethanol as we have not so much of a increasing our juice ethanol, how the industry because that would affect our sugar surplus in the industry as well as the prices going forward.
Yes, you're right that everything is sort of interrelated. But it's not as truly interrelated as you may be suggesting prices are determined between demand and supply. We have a quota-based system.
We have managed price increases over many, many years, having excess huge expenses in production in the nation. So I don't agree with your comment that prices decline for any reason because there's more sugar that gets produced at all. In fact, it's quite to the contrary. And the experience shows that it is very, very much to the contrary. And therefore, I do not agree with your statement at all.
With respect to your comment about juice, I think it's an individual corporate's preference. It's a strategic decision that has taken remaining at a different -- have taken a decision of expanding capacity and having multi-feed opportunities available to us, which we will then reconsider based on the relative pricing of each or its raw material, it is used. And so we will have the ultimate amount of flexibility in making those decisions. That is the tuition that we have taken. I can't really comment on any other corporate.
Sir, last one, do we see any risk in rainfall hence recovery on this?
Yes, we've already addressed the risks of weather. In fact, the last 2 questions have talked about weather as well. And that is a very [indiscernible] risk in today's environment. And it's not just about the potential El Nino in the summer.
It's about weather for the next 12 months because we do have rainfall that happens at times. We have dry hot and cold spells that are happening, et cetera. So there's a lot more to consider rather than just the monsoon to the monsoon is the most important one, but there's a lot more to consider.
We have a next question from the line of Shailesh Kanani from Centrum Broking.
Is my voice audible? Sir.
Yes, it is.
Yes. Sir, just a bookkeeping question. Sir, if you can share fourth quarter details of sugarcane crush and recovery levels for the quarter. Thank you.
We're going to have to just take it out. We have to just bear with us. We've got our annual numbers and sugar nature, we see the numbers with us.
Could I procced to the next question.
Yes, proceed to the next question.
Yes. So and also I wanted to know from our export quota, my calculation is showing some 15,000 tonnes is yet to be booked, which is going to be booked in the first quarter. Is that right? -- or.
That is correct. -- it's already finished in the month in.
Yes. So come the first quarter FY '24, right?
Correct. That will come into the quarterly results of this quarter.
Sir, 1 question on capital expenditure. Sir, just to get a complete summary of it, the status, what we have done in FY '23 division-wise, like roughly in Sugar division, we have done a CapEx of around INR 300 crores, [indiscernible] 460 crores and PTB 180 crores. That is the road map of our CapEx, right? And so can you just give a breakup of what has been done in FY '23 segment-wise and what we are planning to incur in FY '24?
Okay. Broadly speaking, I will share the numbers with you. So for the Sugar business group, you work the numbers absolutely right. So the Sugar business group, the total CapEx of -- that has been approved by the Board over the last quarter results meeting has been INR 305 crores in 3 tranches of 130 that was incurred last year, 90 that was approved at the last board meeting -- or the one before the board meeting yesterday and INR 85 crores of new CAPEX that has been approved at this Board meeting. Now all this, the INR 130 crores was incurred last year.
And all INR 375 crores from the last 2 board meetings of CapEx, the majority of this will happen this year and about 20% to 35% would happen in the next year. For the Power Transmission business, we're looking at INR 50 crores last year, which was incurred in INR 100 crores -- sorry, INR 100 crores, which will be incurred this year. For the ALCO business, alcohol business, setting up 2 distilleries added an expense of INR 460 crores, the majority of which will be incurred in this year.
Sir, can I squeeze in 1 more question?
Yes. Let me just answer your first question. You had asked about the quarter 4 numbers for [indiscernible]. The crush is 4.63 million tonnes versus 4.11 million tonnes in the previous corresponding quarter and the regrow recovery is 11.59 for Q4 fiscal '23.
Just one more question, sir. So going ahead, what would is going to be our strategy with respect to crushing on the ethanol production side as we are increasing our capacity on the ethanol side, and we have taken a stand not to produce on juice with given rates. So are we going to see more and more ethanol getting produced from [indiscernible] grain as a feedstock?
Absolutely, you are very right in that comment. The 2 new distilleries that are coming up are multi-feed facilities, and we see them operating on grain. In fact, actually, there will be more B-heavy molasses because we crush gains anticipate.
We just spoke about the cane area going up, et cetera. There was a question previously talked about that. That directly means that there will be more sugar produce, there'll be mobile assets produced which be consumed by the distilleries. However, there will be a considerable portion of capacity that will be diverted towards grain. And as I had mentioned, in Q4, 35% was or 33% in Q4 of outcome produced works from grain. I see on next year, maybe on a medium-term basis, it will be about 33% to 35%.
We have our next question from the line of Nitin Awasthi from InCred Equities.
Sir, I would like to understand on our grain ethanol production, how much of it was done from the open market damage [indiscernible] how much was it done from the SBI route? .
6% of the grain that we procured was split grain and the balance, 94% was from SBI, which is some.
Okay. Got it, sir. So our thought process would obviously be to get the maximum profitability. So we will only ship to grow our damage food grains when the prices are favorable. So I want to understand the trend. So by this mix, I'm understanding that the last quarter, it was not favorable to buy damaged food grains. Has it become more favorable right now?
Yes, the prices have come down. And again, with the summer rise happening, the prices will again come down from September, October. But in between, let's say, the June, July, et cetera, will again be higher pricing. So there is a seasonal variation in the prices that we see.
I think there will be buying opportunities, greater buying opportunities this year versus last year for split-grade damage would pay.
And once we buy damage footprints, we have some of our plants which are capable of producing ENA and they have got licenses for producing ENA will we go ahead with producing ENA from grain?
Yes, we have got the license to produce ENA from crane at our Muzaffarnagar facility, and we'll do that depending on the attractiveness of the opportunity.
Yes. Last question. The UP government's excise policy was out and they are foreseen or at least want to move from molasses-based country liquor to grain-based country liquor, is it -- will the molasses-based country liquor reduce in which in turn will lead to more molasses-based to be left over with the companies and not to be surrendered to the government? Or do you think the consumption of liquor is growing so much that this molasses will continue to go and then there will be grain-based country liquor also coming in.
So the grain-based IMIL country liquor is only for 1 segment, 42.8% segment. The other 2 segments of 26% and 25% remain as molasses-based E&A. The overall liquor market in Uttar Pardesh with the massive cleanup that has happened in the has become -- is growing at a frenetic pace. So I don't see -- I actually see the molasses that is right now being taken towards IMIL, called reservable assets, all of that continuing at that level, unless the state government decides that we will move to a better quality product because grain-based DNA is a better quality product.
And also that better quality product through country liquor consumers even in the 36% and 25%. Our hope, of course, is that they do move back. It means it will free up [indiscernible] for us to make ethanol.
Understood, sir. And a very small question that would follow would be if that is the case or even if the case is as of today, in which 1 segment is being moved to a grain-based ENA, aren't grain based ENA prices rising rapidly in Uttar Pardesh?
Well, they haven't been rising rapidly. They have been largely stagnant at about INR 63 to INR 64 ex factory inclusive of all taxes, and we supply on GST.
We have our next question from the line of Resham Jain from DSP Asset Managers.
So just on this topic of ethanol through setup, which you have not adopted or not started this time and rather you produce through heavy. So obviously, at the industry level that must -- there must be a discussion on this side because next year, a lot of other distilleries would also like to do it if the equation remains similar to this year, which means that the overall availability of ethanol may not be may not increase.
So what kind of industry discussions are happening on this front with government? Any color?
So you've asked a very interesting question, actually. The government in its determination and deliberations is aggressively pushing grain-based distilleries. In fact, there was recently an enormous seminar where they were looking at other food crops and the propagation of base on a very large scale as a fuel crop, frankly, as an imaging crop.
The sugar industry will always be the bedrock, whether the government voices it or not, it will always be the bedrock. 60% of minimum was what was envisaged in the master plan on 20 several years ago. I don't see that number changing very much. today, there's a very small quantity as my colleague said that it's going from grain, not smaller quantity than what was in past. But with the push by the central government and more distilleries coming up, we will certainly see that. We will see more ethanol being produced from grain sources.
I see the discussion today in terms of quantity. So I think until we reach 20. This is my personal view and not the government. My personal view is that we have to get sufficient capacity set up across the country. The ethanol manufacturing capacity in the country is right now significantly lower than 20% level. We need to be able to build that, whether that happens to the ethanol for the sugar and ethanol route or to the grain ethanol route.
Those are very discrete discussions and being very based on what the price is offered by the government and the direction of price. But I think the government from its perspective, needs these capacities to come up, and that's what we're going to see up to '25, '26. We're going to see a large number of distilleries come up. At present, the greatest majority of distilleries are grain-based plants. You can see that with the loan applications that are lying in front of DFPD But it's a complex scenario that will be -- that will change based on pricing. And in fact, the only determinant that will that will move the barometer between grain and molasses [indiscernible] 2 is going to be pricing.
So my second question is beyond '24 -- '24, I think will have a very large technology capacity we have debottlenecking our sugar capacity as well. Is there more to do with the existing capacity in terms of ethanol or sugar debottlenecking? Or we need to look beyond what we have currently for the next leg of growth and CapEx?.
So you've asked a fantastic question. I mean, yes, of course, to grow more will require more CapEx. There's no doubt about that. But with these aggressive sugarcane development, programs that we have underway, which takes a period of time because the growth in the first and second year is limited.
The growth in the third year is more palpable, harder and more recognizable, but the growth in year 4 and 5 is astounding. That's with the real benefit fix. And we have just started these aggressive programs, which means that the quantum of can that we are envisaging for the future way, which means -- if we want to more loan to that game, we will have to enhance our capacities and it will not just be about being bottlenecking because we are already operating at 180 days, around about 180 days plus.
We can extend it to maybe 200 days, but you really don't want to send it to 200 days. You want to curtail your season at 190, 195 days to be able to take advantage of the weather conditions. So the moment you cross 190, 195 days, you will be able to excessively hot weather, which is in opportune as you see recovery declines. So therefore, you will have to enhance capacities. And that will happen with some CapEx going forward.
So -- and of course, the more you crush, the more molasses you have, potentially the more juice you have, and therefore, that fits directly into your distilleries as well.
Okay. Just a related question. This new -- you mentioned about 1,800 demonstration plots. So any color if you can give what is the average, let's say, yield which a farmer is getting on an average and versus what you are showcasing to them, how much difference is happening because of that? So let's say, 5 years out, if more and more farmers adopt these new practices -- what kind of improvement 1 can see?
It's an excellent question. At this particular point in time, we're seeing up to 40% higher yields. We are hoping to increase our yield in our old demonstration plot so that the difference goes up to 50% in terms of all the other plots versus the 1,800 that we have and that we hope to prove out in this planting season. The reference launch that we have for this season should have an increase of 50% on average when compared to the area that we buy cane from. So that's a pretty significant increase.
And we think the cascading effect, the show and tell impact that we will have will be quite significant. Will ever be able to achieve this 50% increase? I doubt that very much. But even if it has a partial improvement, I think that has an enormous impact on cane availability.
We have a next question from the line of Ambar Taneja from Geometric.
I had a slightly different question. It seems to me that basically the contractor business on the sugar side, is regulated from what you can buy, how much you have to pay. Even on the ethanol side, your buyers are mostly OMCs, which are government controlled, et cetera. So -- it seems on the sugar side, one of the ways to kind of get out of this whole control thing is to sell sugar, which is not regulated in price or not subject to a commodity kind of scenario.
So I think you've been making some efforts on pharma sugar refined sugar, et cetera. Could you talk a little bit about that to get alpha on the sugar side -- and also your nonsugar businesses, which are, of course, completely deregulated have reached a fairly sizable revenue number. Any plans to not demerge today, but in a year or 2 to unlock value? Because I feel the company is doing really well, great corporate decisions are being taken, but the value in the market is quite low. Any comments?
Sure. Let me start off with your first question about getting alpha. You're right. from a strategic perspective, a lot of the work has happened at both ends, maintaining costs and reducing cost of production and also enhancing our sales price.
When we look at sales price, we have moved from 40% refined sugar with 2.5% from suitable grade sugar to 60% refined sugar with 5% pharmaceutical-grade sugar.
The CapEx that we have in place right now will further enhance it to 70%, 75% refined sugar with more pharmaceutical grade sugar also in play. The only difference I would like to say is 2 things. The first thing is that all of this is still subject to the controls and regulations that are in place, the monthly release mechanisms by the DFPD. But that's not a bad thing.
It's -- I would like to sort of state it. In fact, absolutely fine. And what has been shown, frankly speaking, is even in an industry that has controls the ability to be able to generate revenue to improve alpha, et cetera, is not something that is in but it's encouraged that those discussions are happening very actively. The government encourages people to find new and innovative ways of improving that alpha, as you very rightly put it.
I would also take examples of other industries where there are enormous controls, for example, petrochemicals and oil and gas, huge amounts of control, where they actually generate fantastic margins and are able to operate within that system of control. So I think the controls will make that much of a difference any longer frankly speaking. In fact, if anything, they're very productive and the same start the interest they ensure that you have continued periods of profitability.
And frankly speaking, the ominous sugar cycle that used to exist, which is been very clearly and definitively broken in the last 7 to 8 years, at least. That is one of the reasons for that, of course, is the foresight of the central government. So that's a very, very big positive. And in answer to your first question.
In answer to your second question about engineering businesses. Very quickly, there is no plans on demerging the companies. However, we I would like to state that we have actually achieved many significant milestones in both the business in terms of revenues and profitability. And we are really -- we have invested in the future. So we have created that capacity to be able to grow quite substantially.
Now it's about us developing those new partners, developing those new opportunities. All that process has already happened in fiscal '23. So in fiscal '24, the expectation really has to be how much can you grow? And how quickly can you grow? And how quickly can you get these new expansions that you've invested in complete, et cetera [indiscernible] -- its going to take this year to get all of that done. But we will be stronger for it.
We're seeing increases in order bookings that are coming from newer geographies, et cetera, which very, very promising in both the power transmission and in the water business when we're looking at international customers. Understood.
We have our next question from the line of Aman Sonthalia from AK Securities.
Sir, what was -- what is the average gross recovery for the season?
The recovery for the gross recovery for the season is 11.47%.
And sir, we have taken the valuation at INR 33.75 . So for that valuation, what was the price of molasses and this bagasse we are taking?
I say we don't really declare the [indiscernibe] price that we keep up our gas at.
Okay. And sir, nowadays every company is working on steam savings -- so what is the steam consumption of our company? And what work is going on to further save the steam?
I think that's an excellent question that you've asked in the CapEx is that we have that have been approved by the Board in the last -- in yesterday's board meeting and the one before that, a lot to do wind steam economies, et cetera. So as you know, we have 3 factories that were set up in 1934. And then 4 factories that was set up and 2006 , '7.
So the steam economies of the 4 versus the 3 are quite dramatically different. Plus must also remember that when you move towards refined sugar, it does take 1%, 1.5% extra stream, maybe 2% steam as well. But there are all efforts in terms of asset steam reduction by automation and also by process improvements that are in place across all 7 of the factories. And so we do expect the amount of the gas savings to improve quite considerably.
I'm not in a position to assign a number to it at this call today. However, I would like to share with you in abstract terms that, that is something that is definitely something that we are working on. And we've already seen from last year's CapEx, some improvements. This year, we expect a very substantial improvement in terms of our steam economies and commensurate basin.
And sir, one question. The companies are -- a number of companies are making profit by selling Potash by selling CO2 and also getting revenue from selling this REC. So what -- how much profit we are generating from on this side?
I don't think we've given a number for this, but we are selling we are doing all of the above as well. They merged into our financials. I don't have the numbers as separate to share with you. But you should know that we are engaged in all 3 activities.
We have our next question from the line of Sanjay Manyal from ICICI Securities.
Sorry, my line really was dropped, so I couldn't really complete my question. So my basic question was, what kind of quantities we are looking in terms of ethanol production in FY '24 and '25. And the composition of that in terms of B-Heavy and C-Heavy. I know that you have mentioned 35% is the grain. But other than that, how much would be the B-heavy and C-Heavy.
The other portion , C-Heavy we don't use. It will be -- all B-heavy. And in terms of total production, we're looking at well higher than 21 crore liters for fiscal '24. And -- and then, of course, based on the actual commissioning of the 2 new distilleries, the region will be somewhere between 28 to 32 crore liters for the following year.
Okay. Understood that. And sir, given the fact that you will see a significant increase in the ethanol volumes in the next 2 years, so generally, our overhead expense -- is it because of the conversion cost overhead spend will also significantly increase the next 2 years?
No, I don't think so. I think we will have -- we will benefit from efficiencies. So 1 of the 2 plants, for example, is an expansion at our Sabitgarh facility which is going from 225 KLPD to 450 KLPD.
So that will benefit the operating costs over there will be shared over a larger production facility, et cetera. And plus, we, ourselves, as we're operating more and more distilleries our able to improve our conversion costs, especially at the operating level. And those benefits would certainly decrease into the business.
And 1 just bookkeeping, what would be our income tax rate for '24 and '25.
It is 25.17% under the new tax regime.
And if I could just ask 1 last one. You have mentioned that India level sugar inventories would be closer to 5 million tonnes, whereas I think earlier government has, I think, restated the opening stock at [ 7 ] and probably it could go down to 1 million.
So there is a huge difference between what government has been mentioning. And we don't really know what exactly would be the inventory level. What is your outlook on the sugar prices in the next 3, 4 months, given that the actual inventory could be much lower than what government is stating. And do you see any possibility of -- I suppose if there is a drastic reduction in inventory level import probably in October, November.
Absolutely out of the question. We have more than enough sugar for the country this year. We have more than enough sugar for consumption next year. In fact, we have enough sugar cane to meet the ethanol blending program requirements, which will be raised next year. and we have enough for the exports. So there's no fear of that at all. However, I do see a little bit of tightening, but we'll see some increases in trigger prices from where they are today. The fact that the matter is at the closing balance is a book number. There is also a pipeline stock. And that pipeline stock, we anticipate least 1 million tonnes at the end of September 2023. So that also must to be factored in as available sugar for consumption. So we have enough -- in answer to your question simply, I will tip, but we do see some positive 1 in terms of pricing.
We have our next question from the line of Shailesh Kanani from Centrum Broking.
Just one question. How are you placed in terms of expanding our external facility since have we selected the vendor for the new facility that we are going to setup. And is the time line sale, we are expected to complete the expansion plans by fourth quarter FY '24.
Excellent question. For our Ravi Nagar distillery, we certainly expect to have that plant commissioned Q4. The vendors have been selected. The land has been acquired, everything -- I mean, the process is under way. The execution is underway, as I mentioned earlier, we're doing it in a sequential manner. So it will happen straight after running anger, and this is for strategic reasons and looking very much at what is going to happen if anything, in terms of pricing, et cetera, et cetera.
We expect that facility, as I mentioned, sequentially, to come up straight after Ravi Nagar that may very well keeping to the next quarter -- the first quarter of the next fiscal year. It may not be by the end of Q4. But all of that is up for grabs.
We could accelerate that project as well and try and have it concluded in Q4. But we have that nimbleness and flexibility of when we're going to be operating. And at that plant, frankly speaking, will be operating on grain. So there isn't that extreme urgency that it has to be as early as possible during the sugar season. at least to start off with, and it will have the flexibility to be able to consume molasses or any other sugarcane by product.
Thank you. As there are no further questions, I now hand the conference over to management for closing comments. Over to you, sir.
Thank you very much. Ladies and gentlemen, thank you for joining us for the FY '23 results for Triveni Engineering and Industries Limited . So pleasure talking to you. We've had a historic year for us, all businesses firing on all [indiscernible]. The expectation is that this will continue for fiscal '24 as well.
I think what is critical over the next few months is the monsoon and the impact of that. By the time we have our next call, perhaps we will not have the full impact of monsoons, but we will certainly with a greater degree of certainty what we're seeing in terms of production, what we're seeing in terms of yields follow sugar cane across the nation.
And in that particular point in time, we will see the changes in terms of order booking as well for the engineering business. I hope to come back to you with like this time with positive news across all the businesses, and I look forward to speaking to you in a few months. Thank you very much, and have a good afternoon.
Thank you. On behalf of Triveni Engineering & Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.