As an investor in BCL, it has been a roller coaster ride this year. Below is a summary for anyone who wants to come upto speed with BCL:
Good
Company’s transition from Edible Oil to pure-play Green Energy continues with good momentum. Here is a summary of the declared plans for the next 2 years.
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As per current disclosures, in around 2 yrs time, company will have 1100 KLPD Ethanol-ENA (current 700 KLPD), 150 KLPD Bio-diesel, 20 MTPD Bio-gas, plus country made liquor business
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Edible oil business will be shut down in the next couple of quarters, required machinery will be moved to where the Distillery is located and land on which Edible Oil business is, will be sold. Proceeds (40+ crs) from that will help in bringing down debt or help in capex. Shuttering of Edible Oil business will also help in substantial reduction of working capital in addition to the proceeds from land sale.
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75 KLPD Bio-diesel plant under construction in Bhatinda along with power plant, planned completion by 1st quarter next FY
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150 KLPD of Ethanol plan under construction in Bhatinda, planned completion by 3rd quarter next FY
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Another 75 KLPD Bio-diesel plant construction will start at the W.Bengal subsidiary once the first Bio-diesel plant stabilizes
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Edible oil business has low single digit margins, while the Green energy business will have mid teens margins. Should help the company command better multiples than what it did in the past
Not so good
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SEBI notice – no idea yet what it is about. Will try to get some info from IR.
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Margin pressure (discussed above) – I believe it is a short-term phenomenon. Once new maize harvest comes, maize price should cool down. This year more area is under maize cultivation. Rice is rotting in FCI godowns but govt still not releasing it at subsidized rates like they did in past, for Ethanol is disappointing. Allowing companies to participate in e-auctions won’t help much due to high auction price
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Promoter selling – for me promoter selling 1.6% when they hold ~60% stake is no biggie. Promoters sell for various reasons, buy only for one. When asked the reason for selling during the Arihant Rising stars conference, Mr. Kushal Mittal mentioned that his parents are over 60 yrs now and they needed money for personal/social obligations. He said that promoters have always put in money in the business when required, so recent sales shouldn’t raise too much concerns (not his exact words, but that’s what he implied)
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Low cash flows – according to Management it is primarily due to Edible oil business constraints e.g. The flip-flopping govt policies related to custom duties, made it very difficult to plan inventory, often resulting in substantial inventory losses. Now, with EO business shuttering over next few quarters and major Distillery capex starting to generate returns at higher margins, cash flow should improve substantially.
Disclosure: Invested. No recommendation.
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