See great potential in distillery business: Triveni Engg

Tarun Sawhney, Vice Chairman & MD, Triveni Engineering & Industries is confident that their distillery business has tremendous promise and will deliver higher profits in the coming 12 months.

Commenting on the dismal performance of their sugar business in July-September quarter, Sawhney says they have been suffering losses for the last 12 months and going forward the future of the business totally depends on sugarcane prices in Uttar Pradesh (UP). However, he does not see a decline in sugar prices in the next quarter and therefore does not see any need to make inventory write-downs. He further added that they have requested the government to adopt Rangarajan Committe formula as the sugar industry is going through pain and need support of the state government. Below is the verbatim transcript of his interview on CNBC-TV18 Q: You have seen net loss of Rs 48 crore, sugar quite clearly is still a bit of a problem zone for you. Do you think this kind of numbers will continue for next three-four quarters as well? A: Yes we have had an unprecedented loss for the fourth quarter and for the last 12 months as well of about Rs 87 crore. This includes a write-down of inventories of just over Rs 60 crore. Looking forward, the scenario is totally based on what the sugarcane price in UP will be. As you know we have made many representations to the state government at various levels to look at rationalisation of the following year’s price. We have also made representations to the central government to stop imports, to increase duties etc which will give some weightage to sugar prices and allow them to rise slightly. Q: In the next quarter will you have to write-down more inventories? A: We have written down inventories to market price. Our estimation is that we will not see a decline in sugar prices over the next quarter and therefore we will not need to make any inventory write-down. Q: Distilleries profit has nearly doubled, it has come in at Rs 8 crore. Going forward what could we expect in that? A: I think the distillery business has tremendous promise. As you know the recent tender announced by the oil marketing companies (OMCs) has been subscribed well. We estimate higher ethanol price. So looking forward I see that this business will deliver higher profits especially for the next 12 months. Q: If things stand as they are on the sugar price front - what will be the extent of sugar loss in the coming quarter? A: It is totally dependent on the cane prices. Although for this current quarter we will be selling sugar that was made in the last year, so at this point we have written down our inventories to cost. Therefore if prices stay at the same level, we should be fairly comfortable but one has to bear into account that we have written down inventories very substantially to be in line with market prices. Going forward of course everything is dependent on the cane price announced by the UP state government. Q: Since this is an election year do you expect any kind of respite in terms of cane pricing? A: Our message to the state government has been very clear that the industry is in a very painful situation, we need support of the state government and we need rationalisation of prices. We have requested that the Rangarajan Committee formula be adopted by the state. Now, if the state wants to give any kind of benefit to the farmers or to pay a higher price, we will not oppose if the state pays it from its own pockets. However, the industry is unable to pay any thing more. With current sugar prices we are unable to pay anything more than Rs 225 per quintal which is a stark difference to the Rs 280 cane price that we paid for in the last year.