unit economics has just turned worst.
bulk business
revenue per litre of bulk alcohol ~64 + animal feed and other by products ~12 = 75-76
RM cost = 2.2 kg of broken rice (26*2.2 = ~ 57)
Gross margins = (75-57)/75 = ~24% (this use to be (58+10)-(20*2.2=44)/(58+10) =~35%) when broken rice prices where 20/kg and bulk alcohol was 56-58/ kg just 6 months back.
Power cost of around 9-10 rupees a litre which was as high as 12-13 rupees per litre 6 months back.
net net the impact per litre is 6-8 rupees. which means EBITDA margins down by about 700-900 bps going forward from a sustainable margins of 13-15% purely on the bulk alcohol.
Consumer business (business – govt – consumer)
very similar impact of about 6-8 rupees a litre but because there was no price increase (at least till March-2024) margins could be hit by 500-700 bps since realisation is better in consumer business (or one can call it B-G-C business).
I don’t see EBITDA margins of more than 8-9% for the next two quarter unless the broken rice prices fall which has not happened yet.
Key variables in order of priority.
Broken rice – a ~3 rupee/kg drop would mean ~500 bps margin expansion.
Consumer business price hikes – a 10% price hike would mean ~300 bps margin expansion
further price hikes on ethanol – a ~3 rupee/kg increase would mean ~300-400 bps margin expansion.
disclosure : reduces it to just as a tracking position.
All figures are indicative as management doesn’t provide any info.
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