Sugar division losing Rs 2/kg at current prices: Balrampur

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Balrampur Chini 's numbers were lower than expectation because of the Rs 92 crore it had booked as cane arrears write-off and that pegged the numbers quite a bit.

The company reported a net loss of Rs 64 crore in the October-December quarter of FY12 as against profit of Rs 23.4 crore in the corresponding quarter of last fiscal and loss of Rs 39.4 crore in the previous quarter.

Vivek Saraogi, managing director, Balrampur Chini says, at the current realisation, the sugar division costing is not yet positive. "Sugar division is making loss of Rs 2 per kilogram at the current prices."

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Any subsequent write offs do you see making for other arrears going forward?

A: No. It concludes all the past arrears because these two years were the only past years where there were judgements, there was stay in Supreme Court. This concludes the past.

Q: If you take this one off write-off out of the sugar division performance, did you breakeven on the last quarter's realisations?

A: To get into quarter costing is a very complicated issue. But without this Rs 92 crore, obviously we were Rs 27 crore plus.

Q: At the current realisation that you are getting on sugar, are you profitable in the sugar division?

A: No. At the current realisation, if you take the sugar division costing, we are not yet positive.

Q: What would be the typical loss run rate at the current prices?

A: About Rs 2 per kilogram and Rs 200 per bag.

Q: Could you give us an update on where things stand with any subsequent litigation that you are planning on the prices?

A: Firstly, the Supreme Court judgement, which has come out, the reference to larger bench has been made. That means there were two different judgements whether SAP can be fixed by the state government, that principle has been referred to the larger banks. We would also be looking at going in for a review of this particular judgement where these write-offs have come.

Subsequently, we a judgement for the current year, which is pending, in Lucknow High Court. The hearing is concluded. That is challenging the state advised price (SAP) for the current year of Rs 240. The hearing is concluded on that. The judgement can be out in a day or two.

Q: How critical would be the UP election results you think in determining your fortunes going forward into next year because generally investors seem to have a belief that between the BSP and the SP, one party is more favourable to your cause than the other, did you perceive it that way?

A: We only perceive that if the Central Government is able to take the reforms ahead that is more positive. So if the change in government leads to the Central Government being a part of it and taking things ahead yes, that I would personally also perceive as a lot positive.

Q: How critical would be the UP election results you think in determining your fortunes going forward into next year? Generally, investors seem to have a belief that between the BSP and the SP, one party is more favourable to your cause than the other. Do you perceive it that way?

A: We only perceive that if the Central Government is able to take the reforms ahead that is more positive. So, if the change in government leads to the Central Government being a part of it and taking things ahead, yes, that I would personally also perceive as a lot positive.

Q: What feedback are you hearing from Delhi about the expert committee which has been set up now to examine deregulation?

A: The new members added are the once who have always advocated decontrol, they put it in writing; the Commission for Agricultural Costs and Prices (CACP) Chairman Mr Ashok Gulati and Mr Nandkumar who was the former Food Secretary. If you see the additions, one does definitely look at it positively.

Q: Co-gen did quite well in the current quarter. Do you expect this kind of profitability to continue?

A: Yes, this is the best quarter for co-gen. So, we expect that it will definitely outdo what it did in the previous quarter. But distillery also performed pretty well this quarter.

Q: Could you give some more details of the distillery division?

A: I think it should perform better in this quarter also. To put it in perspective, if we see the crushing going on, the crushing and cane availability for East UP is better than last year, the recoveries are better. So, as we proceed, the co-gen division and distillery would not shut down in March, where maybe the sugar shuts down. But they would proceed well into April-May and June. So, you would not have two quarters of naked working, but you just have one quarter where working is not there of the power and distillery. So that should be a lot positive as we proceed ahead.

Q: What about global price of raw sugar? What kind of trends are you seeing there?

A: I am not an expert at that. But it seems that it is very flat. I don't see any great upside and nor great downside.