This article first appeared on GuruFocus .
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Revenue:Revenues improved across sugar and distillery segments, supported by higher sugar realizations and distillery volumes.
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Sugar Inventory:As of June 30, the company was carrying 45.67 lakh tonnes at an average carrying cost of INR37.19.
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Capital Expenditure:Approximately INR2,180 crores spent on the 80,000 PLA plant till end of July.
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Production:Crushing and production increased on improved cane availability.
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Release Date: August 12, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Sugar prices have firmed up due to tight inventory, providing relief to millers and offsetting higher cane costs.
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The company's sugar inventory of 45.67 lakh tonnes at an average carrying cost of INR37.19 provides a favorable base for profitability in upcoming quarters.
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The 80,000 PLA plant project is on track, with commissioning expected for lactic acid in October and PLA in December, and construction activities are in full flow.
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The company has made encouraging progress on PLA product development, customer trials, and market engagement, including successful trials for sustainable packaging in pan masala and gutkha.
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The company's integrated business model and focus on cane development and varietal balancing have led to improved crushing and production, with a positive outlook for the upcoming season.
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The company is well-equipped to handle a potential ban on B-heavy and juice-based ethanol diversion by switching to C-heavy and grain-based ethanol, ensuring distillery volumes remain viable.
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Management expects that higher sugar realizations will more than offset any potential negatives from cane price hikes or distillery restrictions, leading to a net positive impact.
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The company has a strong financial position and is focused on efficient capital deployment, supporting its growth initiatives.
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The company's distillery segment margins were resilient in Q1, supported by B-heavy and grain-based ethanol sales.
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The company's cane sowing season has been good, with yields expected to improve, and rainfall in its command area has been ideal for cane growth.
Negative Points
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The sugar season '25-'26 has turned out tighter than anticipated, with lower-than-expected production and a drawdown in inventory, leading to market volatility.
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There is uncertainty regarding government policy on ethanol diversion, with a likely ban on B-heavy and juice-based ethanol, which could impact distillery volumes and margins.
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The company faces potential increases in cane costs, which could pressure margins despite higher sugar prices.
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The PLA project is a new business venture, and management acknowledges uncertainty in production quality, timing, and quantity, with a conservative expectation of only 40% capacity utilization in the first year.
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The company is facing challenges in quantifying the potential market for PLA in pan masala and gutkha packaging due to a lack of reliable data.
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There is confusion and rumor-mongering in the market regarding sugar inventory numbers, which could lead to excessive speculation and price volatility.
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The company's first quarter is an off-season, with profitability influenced by carrying costs and inventory realization, leading to quarterly performance volatility.
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The company's distillery margins may come down if it has to switch from B-heavy to C-heavy or grain-based ethanol, as transfer pricing dynamics change.
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The company is awaiting clarity on government policies regarding broken rice availability and pricing for ethanol production, which could impact feedstock costs.
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The company's sugar inventory levels are expected to normalize only in about a year, meaning tight supply conditions could persist, affecting pricing stability.
Q & A Highlights
Q: What is the company's outlook on sugar prices, and how might government restrictions on ethanol diversion impact the upcoming season's profitability? A: Vivek Saraogi, Executive Chairman and MD, stated that the market has assumed a tighter inventory than reality, leading to a price spike. He believes it is reasonable to assume the government will restrict ethanol diversion to C-heavy molasses only, given the tight inventory. While this will reduce distillery volumes, the company is equipped to handle it. The loss from reduced distillery operations will be more than offset by higher sugar realizations and increased sugar sales volumes, making the net impact positive for the company.
Q: What is the current status of the 80,000-tonne PLA project, and what is the expected capacity utilization in the first year of operations? A: Vivek Saraogi confirmed that the project is on track, with lactic acid commissioning expected in October and PLA in December. Avantika Saraogi, Executive Director, provided guidance that the company expects to achieve around 40% average capacity utilization from January to March, with the target being higher but 40% being a safe, easily achievable expectation.
Q: How significant is the recent FSSAI notification regarding plastic bans in pan masala and gutkha packaging for the company's PLA business? A: Avantika Saraogi stated that this is a dynamic opportunity and the company is "in the thick of it." They have had successful technical trials, and results should unfold in the next two to three months. When asked if this single application could absorb the entire PLA capacity, she confirmed, "Largely, it could." Vivek Saraogi added that the opportunity is very large and could potentially spread to other snack packaging.
Q: Can the INR3,000-3,200 crore capex on the PLA project create a "parallel Balrampur" in the medium term? A: Avantika Saraogi answered definitively, "Yes." Vivek Saraogi added that based on all evidence gathered so far, there is no reason to believe this cannot become a reality, though it is their first attempt and requires patience. The company views this as a significant new growth lever.
Q: How is the cane crop quality in the company's command area given the concerns about below-normal rainfall in India? A: Vivek Saraogi stated that rainfall in Balrampur's area has been "absolutely ideal" for cane. He believes the El Nino concerns are a "bigger paper scare" than reality, noting that less rainfall in East UP can actually improve recovery. He remains positively inclined about the crop, with clarity expected by September.
Q: What is the company's view on the national sugar balance sheet for the current season, given the wide variation in estimates? A: Vivek Saraogi declined to give a specific number, citing confusion between ISMA, the government, and market players. However, he maintained that the market has priced in a scenario lower than reality. For example, if the market assumes a closing stock of 30 lakh tonnes, he believes it will be closer to 35 lakh tonnes, suggesting the price spike is overdone.
Q: What is the outlook for the distillery segment's margins, and how will the feedstock mix change if B-heavy and juice-based ethanol are restricted? A: Pramod Patwari, CFO, explained that Q1 margins were strong because operations were largely B-heavy and grain-based, with no juice-based ethanol sales. If restrictions come, the company will shift to C-heavy and grain. Vivek Saraogi clarified that while distillery margins may compress, the company will produce more sugar, selling it at higher prices, resulting in a net positive financial outcome.
Q: What is the company's expectation regarding a potential increase in the State Advised Price (SAP) for sugarcane? A: Vivek Saraogi stated that while a hike might not have happened if prices remained benign, it is now "in all probability" certain given the firm sugar prices and upcoming state elections. He has built this assumption into his calculations, along with the assumed ban on diversion, and still expects the company to come out as a net winner.
Q: How does the company view the international sugar demand-supply situation? A: Pramod Patwari noted that Brazil is expected to produce around 40 million tonnes, but ethanol is more profitable there, limiting sugar diversion. The EU is seeing contraction in production. Overall, there may be a global deficit of 1-2 million tonnes, but it is too early to give a definitive number.
Q: When will the tight sugar inventory situation normalize, and how long can higher sugar prices persist? A: Vivek Saraogi estimated normalization could take about one year. If diversion is restricted and production is around 31 million tonnes against consumption of 29 million, closing stocks could reach 3-3.5 million tonnes by October 2027. He sees sugar prices trending "north" of current levels in the coming years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
