Raw sugar price to stabilise at 18-20 cents/lb: Balrampur

Vivek Saraogi, managing director, Balrampur Chini told CNBC-TV18 that a slight firming up of domestic sugar prices has been seen. "I don't expect it to go up on a runaway level but it is a little better."

Country's second largest sugar maker's Q4 net profit was up 15% at Rs 130 crore versus Rs 112.8 crore, year-on-year (YoY). Its net sales were up 23.50% at Rs 578 crore versus Rs 468 crore, YoY. Meanwhile, he doesn't expect global raw sugar prices to go below 18-18.50 per 1 pound (lb) nor he sees them inching above 20-25 per 1 pound (lb). Below is the edited transcript of Saraogi's interview with CNBC-TV18. Also watch the accompanying video. Q: Give us a word on the realizations which seem to have seen a mild dip quarter-on-quarter (QoQ), what is it that you expect to see from realizations even in the first two quarters of FY13? A: We expect that there is a bit of firming up in prices. I don’t expect it to go up on a runaway level but it is a little better. Q: What is the outlook for the next season because indications seem to be that next year supply is going to be pretty high and that might rein in any possibilities of sugar price increases, do you agree with that assessment that you may continue to linger with oversupply in the next season too? A: If we have to see next season, let us see this season to begin with. Whatever surplus we have in this season, the production being 26 million, very clearly will be exported beyond consumption. So next season also if we see the planting data, Maharashtra, Karnataka have reported a lower than last year planting of 6-7%. Uttar Pradesh (UP) has reported a 7-8% higher planting.  Maharashtra, Karnataka contribute about 130 lakh tonne out of the total 260, UP contributes 70. So all in all we don’t see a production level, which is higher than this year in the coming season. Just another 2.5 million if is exported next year, you are not adding to inventory. Q: Will the performance of the sugar division be better in FY13 you think because despite a good performance in Q4, you still ended FY12 with a loss from the sugar division? A: I would like to clarify that we ended with a loss because we provided that 92 crore in the sugar division in the P&L account. So that is why it has seen a loss on the pre-interest, pre-expenditure level. As we move ahead, I am a little more positive on the sugar side, based on the data because there is going to be no addition to inventory and also based on some expected policy measures. Q: What policy measures specifically, are things moving with the UP government for sugar companies or are you expecting to hear more on the Rangarajan committee report? A: On the sugar side, i.e. the finished product, the finished product is handled by government of India. There we are expecting from the Rangarajan Committee, I think the report is due June end first week July. Ethanol is overdue and after this petrol price rise, ethanol is a screaming saving on cash flow for the oil companies. Rangarajan committee should be dealing with levy, sugar price, cane price linkage etc. Q: What do you expect the cogen division to do this year because this quarter does not seem to have been a very good one for Cogen? A: Cogen has done very well. in the coming year with our production level, last year we have saved bagasse. If you see the full yearly segmental report, Cogen has done 42 crore that is the pre-interest level. I expect that they should move up substantially. Q: And distillery? A: That should do way better too. These two will perform much better because we have already crushed, we have our bagasse, we have our molasses, we have our distillation capacity in place, so it is planned. We will begin crushing next year November 15, so all these are known, so these two divisions would do very well. Q: Generally though would you say it is a subdued price environment for sugar even globally raws are trading below 20 cents, are you not expecting too much traction in terms of prices? A: Even in India, UP mills are selling like ours we are selling at about Rs 29.60 and global prices being just below 20 cents. From these levels, there is not much room to go down. I am not seeing global price to move from 20-25, I am not seeing that go below 18-18.50 also. So with the currency, there will be some movement of sugar outside. We already moved more than around 2 million, so the rest would also happen but not in the speed at which it had happened. Q: You had interest cost of about 41 crore, do you expect that to come down significantly this year FY13? A: I think interest cost will come down a little not significantly. We are borrowing at about 10.25 so there hasn’t been any sharp dip in rates maybe 25-50 bps from the peak. So I don’t see a sharp reduction, mild.