BCL Industries – Ethanol Pick (Capacity 3.5x in Next 2 Yrs)

BCL Ind Quarterly Investor call notes:

1. Recent increase in price by Govt for Ethanol produced from maize to add to the margins from this (Q4) quarter
2. Svaksha Distillery capacity expansion to 300 KLPD likely to be over this quarter
3. Expect the approvals for 150 KLPD expansion in Bhatinda distillery to come in next few months. It will take around 12 months for the plant to be ready from the approval date. This will take total Distillery capacity (Bhatinda + Svaksha) to 850 KLPD
4. Applied for permission to set-up 100 KLPD Biodiesel plant in Bhatinda. Expect the approvals to come in around 3 months time (approx). It will take around 12 months for the plant to be ready from the approval date.
5. Around 40% of the raw-material required to produce Biodiesel is already available in-house.
6. Biodiesel price is around Rs 82/litre. It is more margin accretive than Ethanol, specially because of the inhouse availability of around 40% of raw material.
7. They will be shutting down the Edible oil factory which is within Bhatinda city limits by year (calendar) end. Management waiting to see Govt policy on Edible oil before they decide what part of Edible oil business to retain. They will move the related machinery to the existing distillery plant. This will save overhead costs as existing utilities will be shared.
8. Strong demand for their Country Liquor. Awaiting Punjab govt excise policy to decide on <forgot, will update once they publish the transcript>
9. Company has competitive advantage over other Ethanol producers because it is already maize ready while many others are struggling since govt stopped selling FCI rice for ethanol.
10. Even after considering the planned capacity expansion by other players, Management thinks that it will be a tall task to produce enough Ethanol to meet Govts 20% blending target within the deadline. Hence they see no danger with regards to lack of demand for Ethanol. This is specially considering that Govt is encouraging Ethanol produced by maize over Rice and Sugarcane.

Todays call was short one as the Management had to cut short the call due to disturbances at their end.

I like that

1. BCL is diversifying in a related area (biodiesel) which is futuristic (green economy) where their decades of experience in raw material sourcing and contacts will come in handy as much of the raw material is common between biodiesel and their existing products. Also their products Ethanol and Biodiesel have the tailwinds interms of regulatory support, which will be in-place for years to come because of Indias pledge at COP26 to reduce carbon emission
2. BCL has the next generation of Management in place. Mr. Kushal Mittal seems well spoken and he knows the business well. Also, he refrains from tall claims and clearly articulates the uncertainities in the business on investor calls.
3. Over the years their Investor communications have become very professional. Look at the latest quarterly presentation, it will help you understand their business and future plans very well.

Disc: Invested.