Simbhaoli Sugar aims to up power generation capacity to 115mwh

Uttar Pradesh-based Simbhaoli Sugars' board has approved a business restructuring plan under which it will spin off its alcohol and power businesses to subsidiary companies.

Speaking to CNBC-TV18, CEO GSC Rao said the move is intended at expanding the businesses. "The aim is to expand power generation capacity to 115 MWh (mega watt hour) in three-years," he said. 

Recently, an Empowered Group of Ministers (EGoM) had allowed sugar export of 5 lakh tonne. Rao expects improvement in the sugar business post the export allowance. "We have already exported 40,000 tonne under the Advance Licence Scheme (ALS)."

Below is a verbatim transcript of the interview. Also watch the video.

Q: Just walk us through the restructuring first and what kind of impact this has on the listed Simbhaoli in terms of your revenue line?

A: We have planned to restructure the company. We have the sugar, power and the alcohol businesses. The alcohol portion has two portions: one is the ethanol production, another is the potable segment. We want to demerge the potable alcohol into a separate company wherein we can catch up with the 10-12% growth happening in the drinking alcohol sector, that is, in the Indian made foreign liquor (IMFL). We want to demerge that and then grow that as an independent one.

Apart from that we have 64MWh power generation in the company today, with the three sugar units. This we want to expand it to 115 MWh power by demerging the sugar, power part of it into that. As a result of this, there will be improvement into the revenues to the company and there will be financial restructuring and we will be de-risking ourselves into cyclicality of the sugar industry.

Q: What is the eventual plan of this hiving off? Do you think you would be looking to perhaps list this new entity at some point in time? Also you explained that there would be an increase in revenues, so any kind of numbers that you can throw at us?

A: When we demerge it and the company starts growing it in their own way, there is a sunrise sector for the potable drinking alcohol. Right now, we have right Rs 3,162 billion turnover from the industry. We expect it to at least grow by three times.

The power generation will definitely give nearly 3-4 times revenue of what we are getting