DCM Shriram Q2FY22: Ethanol biz helps mitigate low sugar volumes; caustic soda demand high

DCM Shriram reported a decent set of second-quarter earnings. The Chlorovinyl and fertiliser segment did well. However, there was some weakness that came across in the sugar and bio seed business. To discuss the numbers and the outlook going forward, CNBC-TV18 spoke with the company's joint managing director Ajit Shriram.

The revenues for the sugar business were down around 30 percent and margins too contracted, Shriram said as far as the sugar business is concerned, the domestic releases and the export releases are given by the government. In this particular timeframe, the monthly releases given by the government were lower than what we were given last year.  The export quota given this quarter was also lower compared to last year. This is primarily based on the stocks that the company holds.

However, the ethanol business that the government is very strongly advocating and pushing has helped us mitigate the low volumes of sugar. The ethanol has actually helped us increase our volumes by about 38 percent compared to last year, he said.

“Coming into the new season, we are looking at a healthy season going forward. As far as the consumption is concerned we are looking at a main 26 million tonnes, rough exports of 5-6 million tonnes and most importantly, the diversion of heavy molasses into ethanol of roughly 3-3.5 million tonnes compared to 2 million tonnes last year. So that should be good progress as far as the sugar balance sheet is concerned on all India, level,” said Shriram.

On caustic soda business and prices, he said with the decreasing of the pandemic and decreasing of the infection rates, there has been an increased demand on pan India and realisations have been going up and so has our capacity utilization. There also has been a constant endeavour to try and export caustic soda and that has increased this year compared to the previous year.

“We do see a cost-push as far as coal is concerned and salt is concerned and we try to mitigate this by trying to get lower-cost carbon into the system, and by increasing our biomass consumption. However, on the whole, the margins are better, better compared to the past,” he stated.

The environment is volatile and there has been some shutdown of caustic soda plants in the US, which has helped the national prices, the freight prices have been high. The general environment has been pretty volatile but we do see a positive movement going forward, he said.