company has undertaken debt-funded expansion but profits have not increased much…
Q2 could be very negative due to high maize prices… better to wait and watch…
Disclosure - monitoring only.
Maize prices strong and expected to go higher in Sept and Oct - till new harvest starts.
While the Grain based Distilleries, Poultry and Strach industries have been complaining about high maize prices, there are also cases like these.
Regarding allowing FCI Rice and Maize Import, I agree it seems highly unlikely, specially seeing how tentative the Govt has been recently. They would not like to be labeled as ‘anti-farmer’ by allowing imports or preferring ‘fuel over food’ by allowing FCI rice for Ethanol, by the opposition, just before State elections.
Hopefully it is a short term (1-2 Quarters) issue.
1 Like
As govt allowed distilleries to produce ethanol from sugar crane juice and B heavy molasses, there is hope that they will up with some action for grain based distilleries also.
1 Like
For Grain based distilleries, they have allowed 23 lakh MT FCI Rice to be made available for Ethanol making. This should help some companies go for FCI rice, instead of Maize, thus helping ease some pressure on Maize. It has to be seen at what price is FCI rice will be available for Ethanol.
Next action is Ethanol price revision for upcoming Ethanol year- starting Dec. Most likely sugarcane-based Ethanol will see price hikes as it wasn’t increased last time, lets see if there is any increase for Ethanol made from Maize.
3 Likes
In the presentation of the company they’ve mentioned a few competitors, can folks help with the names of these bigger ones?
Any research report with distillery capacities of all players in the market?
2 Likes
Peer six could be Gulshan poly and globusspirit also comes in between, remaining all could be sugar based distilleries.
Any idea at what price is FCI giving rice to distilleries.
Maize price is very high and operating margins are negative for ethanol - BCL is headed for a very bad quarter! medium / long term still uncertain for ethanol - both grain and sugarcane.
1 Like
As mentioned earlier, assuming, even if FCI rice was a viable option, BCL management had no plans of using FCI rice. The only benefit BCL would have had with the availability of FCI rice is easing of pressure on Maize availability and its price as some players would have moved from maize to FCI rice. BUT even though the Govt has removed the embargo on FCI rice for Ethanol on paper, but practically speaking it is as good as not being available IMHO. Landed cost of FCI rice will be 30+/kg and Ethanol price produced from FCI rice is lower than that produced from maize, so I find it difficult to see who will opt for FCI rice, maybe only those which cannot process Maize at all.
There was no way Govt would have gone back to making FCI rice available for Ethanol at around Rs. 22 when States like Karnataka are procuring rice from FCI at around Rs. 28-30. That would have generated lot of heat for Central Govt.
Regarding Q2 results, I agree it doesn’t look pretty. I don’t know how much lower cost (~Rs 23) inventory they had available to be processed in this quarter. BCL is one of the most efficient players, so its results maybe among the least bad. Every Tom Dick Harry knows about the raw material prices plaguing Ethanol industry, I will be surprised if the ‘Market’ isn’t discounting the Q2 results.
I guess the more important aspect is the next years Ethanol price which will be published soon by Govt. If there is any negative surprise, that will move the stock price more substantially than 1-2 subdued quarters.
Disc: Invested. Frustrated. Possibly Biased.
2 Likes