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.
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