i think we should wait till Q3 result, because it can give us a broader view that their margins have been affected or not or the company is using some other strategy
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maize prices have increased to 25/kg and govt is not going to increase maize ethanol price.
margins are very very low.
- The long-awaited decision has finally been made: the government will release rice at Rs 22.5/kg, significantly benefiting grain-based ethanol distilleries.
- Producing 1 liter of ethanol requires approximately 2.3 kg of rice or 2.7 kg of maize. If BCL was using maize with a landed cost of Rs 25, this ~Rs 2 reduction will result in a cost saving of around Rs 5/liter.
- The alcohol yield of rice is higher than that of maize. While 1 MT of maize produces about 380 liters of ethanol, broken rice yields around 450 liters.
- The byproduct DDGS produced from rice fetches a higher price due to its higher protein content.
- This should also relieve some price pressure on maize, as distilleries now have an alternative raw material to process.
- Although maize is the preferred raw material in the long term for grain-based ethanol, the government needs to support the industry with FCI rice until Indian farmers can produce enough maize to meet all domestic needs, such as ethanol, starch, poultry feed, etc.
Source: Press Release: Press Information Bureau
Disc: Invested.
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Good move by the Govt to support the industry.
This price may stay intact for at least a year, hope there will be no surprise in the ethanol price revisions now.
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High raw material prices affected the company’s profitability in Q3. Despite this, BCL outperformed all other companies in terms of margin.
Similar to BCL’s management, the management of companies like Globus Spirits and Associated Alcohol have also indicated that margins are likely to improve in the future. This improvement is attributed to the availability of FCI rice, which is not only margin accretive for ethanol production but also reduces the demand pressure on maize. In fact, maize prices have already decreased from Rs 27-28/kg to Rs 25.5, and further reductions are expected once FCI rice is released to distilleries.
I am sharing my rough estimates for the next four years. These are based on the capex plans shared by the Management and the current prices of Ethanol, ENA, PML, DDGS, and Biodiesel. A lot can change in the future, so consider the numbers with that perspective. Please let me know if there are any mistakes in my assumptions or calculations.
Assumptions:
- Average revenue per liter of Ethanol/ENA/PML plus byproducts like DDGS considered at Rs 82. Has been around Rs 87 in recent quarters
- EBITDA/liter of Ethanol/ENA around Rs 9, for FCI rice @22.5 and maize @24. Mgmt. confirmed that FCI rice will be available for distilleries this sugar year atleast. FCI rice is most likely a short-term support measure till Maize production increases. Rs 1 change in maize price impacts EBITDA/liter by Rs 2.6. If Maize price > Rs 24 then BCL will need either FCI rice @ 22.5 or wet maize to sustain 11% EBITDA margins. Raw material availability is the key monitorable.
- If more FCI rice is used as raw material by BCL, revenue may be lower but margins will be better.
- Production of 1 ltr of Ethanol/ENA produces around 0.8 kg DDGS
- Price of 1 kg DDGS fluctuates around Rs 12-17. Protein % in Maize DDGS is lot lower so price is lower than rice DDGS
- Raw material for 50% of 75KLPD Biodiesel will be available inhouse without much cost.
- Processing cost for Biodiesel will be around Rs 15-16/lt, excluding raw material.
- For 50% of Biodiesel only processing cost is considered as raw material is available inhouse and for remaining 50% EBITDA margin of 10% is assumed, hence average EBITDA margin of 45%. We should get more clarity around Q2 results
- Per-litre Biodiesel and Biogas price of Rs 100 and Rs 85 respectively considered for calculations. No idea about Biogas prices and margins in over 2 yrs time. Assuming 10% EBITDA
- Distillery plants work for 330 days generally, 1 month/yr down for maintenance. 100% utilization = 330 days
- 150 KLPD Ethanol capacity to be come onstream around May 2026. 50% capacity utilization for 2026. According to Mgmt. it will likely be ready by Mar 2026.
- 250 KLPD Ethanol capacity and 20MTPD Biogas plant at Haryana to be come onstream around Apr 2027.
- Closure of Edible Oil business will result in (i) substantial reduction in working capital requirements, thus reducing financing costs and (ii) one-time non-cash adjustments which may impact P&L numbers this year. Have not accounted for these, more clarity will emerge in Q2 results.
- Over next 2 years company most likely will monetize land on which Edible Oil plant stands. Can be useful for funding Haryana set-up and/or reducing debt
- Construction of Biodiesel plant at Svaksha will only start once Biodiesel plant at Bhatinda is stable. So, unlikely to be commissioned before Sep 26.
- I am unable to estimate Dep and Finance charges 2-3 years down. I have tried to be conservative.
Disc: Invested. No recommendation.
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I’m among their maize suppliers. Avg maize for May-June has been 22.5
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Good to see real price updating.
Keep on posting the market prices if possible
Gulshan Poly announced results, it seems that Q1 was good for all players as there was slight dip in the RM prices. BCL also should post good numbers with incremental margins.
Q2 may not be as good as Q1 due to uptick in maize prices.
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A good 5 rupee drop compared to the Q3 average price of 27.50/kg. This drop should result in an additional margin of Rs.13/ltr of spirit in Q1. Their Q3 distillery EBITDA was Rs.42.77 cr. Assuming that around 4 cr ltrs of spirit would come from maize, and taking the maize price drop of a conservative 4 rupee a kilo, should result in additional margin of Rs.10/ltr of spirit, are we going to see the Q1 distillery EBITDA in the range of Rs.82-85 crores? Let us see. Tomorrow is the result.
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Bad set. Softened raw material prices not reflected in numbers.
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Avg Realization of the Ethanol in the Q1 is around 65-66 INR/Ltr. BCL would have switched to Rice as Raw material somewhere in the quarter middle, which lead to no bump in the revenue and margins.
From next quarter we may see some drop in revenue on QoQ due to exit of edible oil biz.
Q3 may add some revenue due to 75KLPD bio diesel plant commission.
Q4 may also see some slight improvement in revenue due to 150 KLPD Batinda plant commissioning.
Need some update on when 250 KLPD of Goyal distillery will get on stream?
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Market was expecting margin expansion following the decline in maize prices. The disappointment was evident in price action post Q1 result declaration.
On the concall, management attributed the flat margins to three key factors:
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Forward contracts in maize procurement: To ensure continuous availability and hedge against volatility, the company enters into forward contracts. Some high-priced contracts were still being serviced. The change in maize prices are averaged out over quarters. (Effectively, BCL gains when maize prices rise but lags when they fall.)
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FCI Rice: In Q1, 30-35% of production consisted of FCI and DFG rice operation which is low margin compared to maize.
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Volatile DDGS prices: During Q1 prices have fallen to around 12 (But now in August they are trading in 14-15 range).
Despite the absence of margin expansion in Q1, BCL continues to demonstrate superior operational efficiency versus peers like Globus and Gulshan. Below is a comparison of distillery operations:
| Q1FY26 | Globus | Gulshan | BCL |
|---|---|---|---|
| Distillery revenue (Rs. Cr.) | 426.00 | 403.00 | 526.00 |
| Spirit sold (Crores of Ltrs) | 5.35 | 6.00 | 6.34 |
| EBITDA (Rs. Cr.) | 22.20 | 33.00 | 52.84 |
| EBITDA margin (%) | 5.21 | 8.19 | 10.05 |
| EBITDA per Ltr. (Rs.) | 4.15 | 5.50 | 8.33 |
| Revenue per Ltr, (Rs.) | 79.63 | 67.17 | 82.97 |
Margins to sustain:
Feed stock environment continues to improve substantially with FCI rice availability to ethanol industry in abundance and improving maize acreage coupled with high yields. Presently the raw material is in surplus situation putting together all 3 sources- FCI rice, market rice and maize. So expect very limited volatility in raw material prices for the next 1-2 years. This should support stable to improving margins.
BCL Outlook:
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Distillery expansion: Capacity to rise from 700 KLPD to 1100 KLPD; 150 KLPD to be commissioned by year-end.
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Bio-Diesel: 75 KLPD Bathinda plant to commence in this quarter. Kharagpur unit secured consent for another 75 KLPD plant.
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Bio-CNG: A 20 MTPD Bio-CNG plant is in evaluation.
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IMFL foray: Plans to enter IMFL segment in 2026 with one or two product launches.
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Margin profile: Margins set to improve considerably as the closure of low margin oil business is complete, and a maize oil (extracted from in-house maize DDGS) extraction unit commissioned in Bathinda recently, fetching ~Rs.90/kg.
Valuation:
TTM EPS: Rs.3.49
FY26E EPS: Rs.4 to 5
CMP: Rs.41
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Looks like maize oil is turning into a big kicker for BCL.
Assuming 20 crore litres of ethanol coming from maize, then:
- DDGS recovery works out to ~11 crore kg (since 1 litre ethanol needs 2.6 kg maize, and DDGS recovery being ~21-22%).
- From that DDGS, about 55-88 lac kg of oil can be extracted (5-8% yield).
The company is selling corn oil at Rs.90-95/kg (as mentioned on the concall). That’s a revenue potential of ~Rs.80 crore without much of a cost. The cost is only the DDGS weight loss and negligible extraction overheads. Considering the DDGS revenue loss of ~Rs.10 crore (taken at Rs.14/kg), the ~Rs.70 crore net revenue increase pretty much flows down to EBITDA, which is a considerable addition to the present 200cr+ EBITDA. And this working is for the current 700 KLPD. Needless to say, this number can only go up as the capacities increase.
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Why is the Cash flow conversion so poor for BCL industries as compared to Globus spirits. BCL has less than 20% EBIDTA to cash flow conversion (5 year basis) while Globus has 62% ? Any Idea ?
The company might have entered into forward contracts
Advance to suppliers 122 Cr (FY25) Vs 47.5 Cr (FY24)
Can it choke the margins going ahead? As Maize prices are falling in spot market which can prove out to be disadvantageous for BCL?
That’s primarily because of edible oil business of BCL which is working-capital heavy. Cash flow conversion should improve substantially as they exit this low margin business.
Yes, they do enter into forward contracts. I wrote this on 17 Aug- “Forward contracts in maize procurement: To ensure continuous availability and hedge against volatility, the company enters into forward contracts. Some high-priced contracts were still being serviced. The change in maize prices are averaged out over quarters. (Effectively, BCL gains when maize prices rise but lags when they fall.)”
In the last call they indicated that some improvement in the margins would be possible due to lower maize prices in Q2 as compared to Q1.
Revenue will fall QoQ & YoY due to loss of edible oil revenue but Ebitda may not see much impact on absolute number wise.
In Q2 there was some 10% hike in the maize prices and after that there is some 12-13% steep correction. Interesting to see how BCL would take these price fluctuations with the forward fixed price contracts.
Maize seems to be dropping , how is the trend expected to be . Also what is the reason for the drop .