A Sweet Saga
When the going is good, it is the wise who seek to secure their future in business. Balrampur Chini Mills Limited (BCML), one of India’s largest integrated sugar companies, always adopted the changing market scenario and invested in capacity expansion and value addition. Intensive research and innovations have begun to pay BCML rich dividends. The company is engaged in manufacturing of sugar, ethanol and power co-generation. It has grown steadily and presents a creditable report card.
BCML has an aggregate sugar crushing capacity of 80,000 tonnes per day, ethanol capacity of 1,050 KL/day and saleable co-generation capacity of 175.7 MW. “Our USP is to deeply engage with farmers and work with them for consistent quality and recovery,” says Vivek Saraogi, chairman and managing director. “Our focus is always on sustainable growth and make steady move to achieve that.” BCML, which had been exploring to enter a new business area, is now foraying into polilactic acid (a biodegradable, recyclable polyester) manufacturing as a business diversification.
Promoted by the Saraogi family, the journey of Balrampur began in 1975, with its Lucknow unit commenced with a cane crushing capacity of 800 tonnes per day. Later, when the family desired to exit the sugar business, K.N. Saraogi bought the entire stake from his uncles. In 1979 the company’s shares were listed on the Calcutta Stock Exchange. K.N Saraogi and his wife Meenakshi would stay at the plant in Balrampur in UP throughout the cane crushing season every year.
Determination pays off
But Saraogi, then chairman of the company, decided to move away from day-to-day plant operation and returned to their corporate office in Calcutta and managed the company’s finance. But his wife Meenakshi stayed put in Balrampur and managed the plant’s operation single-handedly. Initially nobody took her seriously. But with her determination, hands-on approach and business acumen, she had executed the job successfully and quietened the nay-sayers within the company.
In 1990, Meenakshi acquired a controlling stake in Babhnan Sugar Mill Limited (crushing capacity 1,000 tonnes of cane per day). The mill was expanded and modernised, resulting in an increased crushing capacity from 2,500 tonnes of cane per day in 1992-93 to 10,000 tonnes per day presently. Later Babhnan Sugar Mills Limited was merged with BCML.
In 1992, Meenakshi was awarded Padma Shri for her contribution to the Indian industry. Not only she had expanded operation but also increased the efficiency and conversion rate from cane to sugar with the help from her son Vivek who was managing the business from the corporate office in Kolkata. With her hard work, BCML became numero uno in the sugar industry.
In 1995, the company commissioned a distillery in Balrampur. The company claims to be one of the first sugar companies in the country to diversify from sugar to distillery and co-generation. Over the years, the company also acquired Tulsipur Sugar Company Limited in Eastern Uttar Pradesh, Dhampur Sugar Mills Limited; and set up several integrated greenfield projects including Haidergarh and Gularia.
Rise of GeNext
The company has grown wisely through acquisition and greenfield projects. It is now going from strength to strength under the leadership of Vivek Saraogi (57), chairman and managing director – a third generation member of the Saraogi family, who is a veteran in the sugar industry. He has contributed immensely with passion and a single-minded determination to be the best in the industry. His canny business sense has led BCML to be the second largest player in sugar crushing capacity in the country after Bajaj Hindusthan Sugar. And it is also the largest producer of ethanol. BCML clocked a consolidated revenue of Rs.4,665 crore in FY23 employing 6,270 people. Sugar constitutes close to 80 per cent of the company’s revenue.
BCML’s executive director, the 32-year-old Avantika Saraogi is now in the cusp of emerging from her father Vivek Saraogi’s shadow to one of its future growth leaders. Passionate about the family business Avantika is committed to promoting sustainability and reducing the environmental impact of sugarcane cultivation and improving the lives of the people in the rural community.
As part of its future growth plan, BCML’s new venture into polylactic acid (PLA) will facilitate the establishment of India’s first-ever industrial bio-plastic plant. The PLA venture is in tune with India’s sustainability goals.
Pramod Patwari, CFO, informs, “We will invest Rs.2,000 crore – funded through internal accruals and bank loans – with 40:60 ratio in phases over a period of around 2.5 years.” The state-of-the-art integrated greenfield PLA facility with a whopping capacity at global scale of 75,000 tpa will be located beside one of the existing sugar plants, wherein a significant proportion of the local infrastructure already exists.
The efficient usage of sugar as a raw material to produce PLA and bioplastics marks the onset of a significant shift from the current linear consumption-manufacturing paradigm to the one led by circular and regenerative principles. Additionally, most of India’s current SUP (Single Use Plastic) consumption and its respective applications can be replaced by PLA and PLA compounds. The company also believes the government’s continuous crackdown on the non-degradable plastics and its drive for eco-friendly variants will help.
“With this project, BCML aims to pioneer an industry-first approach in the country reducing carbon emissions by minimising reliance on fossil fuels in plastic production, showcasing innovation and environmental consciousness,” Saraogi points out.
Treading the green path
Avantika says, “I am thrilled to embark on this new journey, showcasing our commitment to environmentally conscious practices and responsible manufacturing. We see the utilisation of sugar as a raw material in PLA production as pivotal for a sustainable future. Through the PLA project, our goal is to not only drive financial growth but also redefine standards in India’s sustainable economic landscape.”
The Kolkata-headquartered BCML has 10 sugar factories across the cane rich belts of eastern and central UP having a total capacity of 80,000 tpd, besides there are 5 distilleries and 10 co-generation units. They are located in Balrampur, Bhabnan, Tulsipur, Akbarpur, Gularia, Maizapur, Mankapur, Rauzagaon, Haidergarh and Kumbhi. BCML has made judicious investment in cutting-edge technologies, which helped enhance operating efficiency and environment-friendly.
Ethanol, a green fuel produced by the company, which is blended with petrol for use in vehicles is supplied to oil marketing companies. All its ethanol producing units are running on zero liquid discharge technology. Molasses, a by-product, is used for producing ethanol and alcohol.
The company’s share in the overall sugar production in the country and in Uttar Pradesh stands at around 3 per cent and 9 per cent respectively. In ethanol (1,050 klpd) it accounts for 5 per cent of the country’s production and is around 20 per cent in UP. “The company was among the first in the sugar industry to moderate an excessive reliance on sugar and enhanced distillery and co-generation. Our business model is one of the best in the country,” claims Patwari.
BCML’s Gularia unit, 200 km from Lucknow, is a showpiece of sugar manufacturing complex commissioned in 2007. The facility spread across 160 acres on the national highway comprises a sugar unit, a power plant, a distillery and an agro division. It accounts for 10 per cent of the company’s cane crushing capacity with 8,000 tpd. The state-of-the-art unit is automated with distributed control systems along with Grooved Roller Pressure Feeder (GRPF) system which increases the cane crushing capacity. The plant achieves 100 per cent water recycling with zero ground water extraction and zero water and effluent discharges.
The company engages with more than 60,000 farmers, and around 97 per cent of the area is cultivated with high sugar yielding variety. The plant has been ranked among the top three units as measured by sugar recovery in Uttar Pradesh.
The ethanol plant at Gularia, the most modern with eco-mould technology, has a total manufacturing capacity of 200 klpd. It is getting molasses from its adjacent sugar plant and also from the company’s plant at Kumbhi. “We are selling our product to oil manufacturing companies like IOC, HPCL, BP and Reliance,” says Vinod Kumar Mishra, plant head.
BCML’s 320 klpd capacity at Maizapur distillery validates the vision and stability of the National Biofuel Policy of the government. The Maizapur plant was commissioned by BCML after acquisition, following which it largely focused on sugar manufacturing. Within three years of the announcement of the National Biofuel Policy in 2018 the company embarked on commissioning a new distillery at the location – in about four years from the policy announcement, the company made a decisive switch from complete manufacture of sugar to the manufacture of ethanol.
The distillery consumes all the cane syrup produced, the only Indian plant to do so. The distillery plant is multi-feed, again unique at BCML. The plant is equipped to operate throughout
the year.
Huge forex savings
India is the world’s fifth largest producer of ethanol after US, Brazil, EU, and China. It is largely used for blending with petrol. India has achieved the target of supplying petrol mixed with 10 per cent ethanol. The company is looking forward to the government’s target of 20 per cent ethanol blend with petrol by 2025 and 30 per cent by 2030. According to the petroleum ministry, the blending of ethanol into petrol resulted a foreign exchange savings of R24,300 crore in 2022-23.
Nikhil Saboo, Research Head, SKP Securities, who has been tracking BCML says, “The company enjoys a strong integrated business model, which over the years has helped in navigating the vagaries of sugar cycles, enabling robust and sustainable financial performance. The management’s continuous focus on maximising value from each tonne of cane crushed has created immense value for all stake holders.”
The company is moving up the value-chain with its foray into manufacturing of PLA, we believe the company’s new endeavour is in line with the government’s commitment for Net Zero by 2070 and with strong cash flow generation further de-risking the business from vagaries of the sugar cycle, thereby providing fresh impetus to drive long-term sustainable growth, the SKP report stated.
The government has recently announced to limit the sugar diversion towards ethanol to 1.7 mt, which is around 60 per cent lower than in the last season. The government’s move is not without reason. It fears sugar shortage in the country as production in Maharashtra and Karnataka declined due to the El Nino effect. The government wants to ensure adequate supply of sugar to prevent the price from going north, as it cannot afford the vagary of price rise in an election year, explains an expert in the sugar industry.
India is the largest consumer of sugar in the world and second largest producer after Brazil. India produces 32-33 million tonnes of sugar. However, the per capita consumption in India is about 20 kg per annum as against the world average which is more than 40 kg. Sugar is the second largest agro-based industry, next only to cotton in the country. The annual turnover of the sugar industry is approximately R1.5 lakh crore.
The sugar industry significantly contributes to the socio-economic development of the nation. It caters to 12 per cent of the rural population, both direct and indirect. The industry is regulated across the value chain starting from sugarcane cultivation to sugar sales. Even its by-products are subject to government regulations. Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu and Gujarat contribute more than 85 per cent of the total sugar production in India. However, political agendas have repeatedly affected the sector.
“Earlier the government was taking care of farmers only while announcing the cane price. Post 2015 things have changed. The government has taken a holistic view of the entire ecosystem of the industry with new policy,” explains Patwari. The ethanol policy has changed the entire fabric of the sugar industry. It was a cash flow initiative. Introduction of the minimum selling price in 2018 is benefitting the industry, he adds.
Some positive measures
“Indian sugar industry has been, till recently, known for its cyclical nature and volatility. With an intention to change the fortunes and keeping farmers’ interest in mind, the Union government announced a slew of positive measures in 2018-19, which have started reaping benefits,” Saboo describes.
BCML is deeply involved with cane development, not only to make operations easier but also to improve efficiency of the entire process. The company embarked on an initiative to broad-base its cane varietal mix away from C0238 variety. This popular variety with high yield has become the favourite of both the industry and farmers. But now it is hugely infested by the ‘Red Rot,’ a killer disease in sugarcane. “We are trying to educate farmers that no cane variety in its command area accounts for more than a quarter of its standing cane mix. We are insisting them not to depend on one but use 2-3 varieties in their land to mitigate the risk of pest,” says Avantika. She, along with her team, is managing the cane development programme for farmers in all the company’s plants. The company intends to incentivise the use of mechanisation with the objective to enhance farm productivity.
BCML’s advanced tissue culture laboratory is located at its Haidergarh Sugar Mill in UP. It is one of the best labs in the industry or among research institutions in terms of efficiency, adherence to protocols, reducing contamination to almost nil under the guidance of Dr. Pratap Singh, the chief scientist. “This lab was established with the objective of providing healthy and disease-free seeds and promising varieties of sugarcane to the growers,” Avantika explains.
Digital drive
The Balram app, developed by BCML for sugarcane farmers in Uttar Pradesh, signifies the company’s commitment to agricultural digitalisation. This app not only provides crucial information to farmers, including real-time updates on cane supply tickets and full payment history, but also offers useful insights through the fertilizer calculator, to help farmers precisely determine the required fertilizer quantity for optimal soil fertility. Additionally, it shares vital information on crop diseases and their prevention, enhancing agricultural awareness and productivity.
“Balrampur is a well-managed company under the leadership of Vivek Saraogi and his professional team. Their numbers speak for themselves. The company is a benchmark for the sugar industry,” says Vijay Banka, managing director of Mumbai-based Dwarikesh Sugar Industries.
BCML has reported an annual revenue of R4,665.86 crore in March 2023 as against R4,846.03 crore in March 2022. It clocked a profit of R275.53 crore in 2023 as against R5.14.66 crore in March 2022. The company’s revenues plunged by 3.7 per cent on account of lower sugar volumes based on a monthly release mechanism that was partly offset by higher distillery volumes and higher realisation in both segments.
For the 9 months ended December 2023, the company achieved a revenue of Rs,4,159.48 crore as against Rs.3,174.30 crore during the corresponding previous period. The net profit till December 2023 is Rs,331.08 crore as against Rs,297.20 crore for the 9 months ended in March 2022. “This quarter has showcased the benefits of our sustained engagement with the farming community. Our cane development initiatives are on track and we expect to crush 10 per cent more canes this season. Sugar recovery is also expected to be higher than last season,” informs Saraogi.
With focus on sustainable growth and value-driven initiatives, the management remains confident in its ability to navigate challenges. The company plans to seize opportunities to create long-term value for all stakeholders through a prudent balance between capital allocation plans, borrowings and reward to shareholders. Patwari says the company is always open for good acquisition.
BCML’s market cap stands at Rs,7,635 crore with its share price touching R378.90. The promoters hold 42.90 per cent of the company. While foreign holding is 14.76 per cent, domestic mutual funds have 18.93, qualified institutional buyers hold 1.79 per cent, residential individuals hold 17.50 per cent and the rest 4.12 per cent is with others. “We believe the recent correction in stock price on account of government restriction on sugar diversion for ethanol production was temporary and offers an opportunity for investors having a medium to long-term view,” says Saboo.
The Saraogis have crafted the business carefully that resulted in BCML’s success. It is now interesting to see how the new generation handles the new avenues efficiently with top-down focus and take the business to next level.
SAJAL BOSE
sajal.bose@businessindiagroup.com