Next quarter too not very sugary: Dwarikesh Sugar Ind

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Next quarter too not very sugary: Dwarikesh Sugar Ind

Vijay Banka, chief executive officer of Dwarikesh Sugar Industries tells CNBC-TV18 that sales for the company are not likely to improve in the next quarter, though the current one has seen a fall by nearly Rs 10 crore.

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Vijay Banka, chief executive officer of Dwarikesh Sugar Industries tells CNBC-TV18 that sales for the company are not likely to improve in the next quarter, though the current one has seen a fall by nearly Rs 10 crore. "Typically, the July-September quarter is not a good one since there is no production, hence there will be no reflection of absorption of overheads in the coming quarter," he explains.

Below is the edited transcript. Also watch the accompanying video.

Q: We have seen a downfall in sales by almost Rs 10-11 crore, further leading to a loss between Rs 18 crore versus Rs 8 crore year-on-year. How is the situation panning out for the July-September quarter?

A: July-September accounts are under compilation so will not be able to comment on the same just now, but we don't expect any improvement in the performance in July-September. On the profit side, we have had some revenues on account of sale of our export entitlement, but July-September quarter is typically not a good quarter because there is no production so there is no absorption of overheads.

Q: Looking forward in the next SY12, if there is an increase in the SAP prices as has been proposed in Uttar Pradesh by about Rs 40 per quintal, what will be the impact on Dwarikesh Sugar per se on realization given high cost of cane and also subdued sugar prices?

A: We are aware that sugarcane prices have been increased by about Rs 35 per quintal in UP for the general variety, so assuming recovery of about 9-9.5% which is what is the average recovery in the state of UP, this translates into an increased cost of nearly Rs 400. Add to that interest cost which is also going to be higher for two reasons - one the interest rates have gone up and second, as the country is heading for a year of higher production, all of us will be carrying extra inventory resulting into more interest outflow on working capital as well. So we see an increase in cost of about Rs 400 per quintal as compared to last year Rs 400-450. We will have to wait and see how much the selling prices are going to go up. Recently the selling price was too little, but it is too premature, we cannot say how it will pan out in the future. We will have to wait and watch.

Q: The report I was reading suggest that the working capital of sugar mills could possibly erode in two months if they are forced to crush at the current SAP levels. Could you comment with specifics to Dwarikesh Sugar?

A: When we start our crushing season, in UP normally when the mill starts, the recoveries are very low. So what happens is theoretically, you don't have enough money in the working capital cycle to pay the sugarcane price. But as we advance further, the recoveries get better and working capital, unless the prices fall drastically, I don't see working capital erosion happening.

Q: What would be the debt on the books for Dwarikesh Sugar because you referred to high interest cost as well hurting you?

A: We have long-term debt of nearly Rs 350 crore. This is what is resulting in higher outflow on interest cost. We are making all attempts for cost rationalization and depending upon the improvement in sugar prices, we will be always watchful and we will want to clear our debt as fast as possible.