Balrampur Chini Mills: Navigating Sweet Challenges with Strategic Diversification

Balrampur Chini Mills Limited, a prominent integrated sugar company in India, has unveiled its financial results for the second quarter and half year ended September 30, 2025. The company reported a robust consolidated revenue from operations of INR 1670.76 crore for Q2 FY26, marking a significant improvement from the previous year. This healthy performance, achieved during a seasonally weak quarter, was primarily fueled by enhanced volumes and realizations across its core Sugar and Distillery divisions. The company's profitability also received a boost from the retrospective revision in power tariffs, effective April 1, 2024. Consolidated Profit Before Tax (PBT) for Q2 FY26 stood at INR 79.85 crore, with a PBT margin of 4.8%. Basic Earnings Per Share (EPS) for the quarter was INR 2.67.

The Sugar segment, a cornerstone of Balrampur Chini's operations, demonstrated strong growth. Revenue from this segment reached INR 1317.05 crore in Q2 FY26, contributing 76.02% to the total segment revenue. This was supported by a 14.97% increase in sugar sales volume and a 5.16% increase in realizations compared to Q2 FY25. The Distillery segment also showcased impressive performance, with revenue climbing to INR 405.01 crore, accounting for 23.38% of total segment revenue. This growth was driven by higher volumes and realizations. The nascent Polylactic Acid (PLA) segment, a new strategic venture, contributed INR 5.73 crore in revenue, while other segments added INR 4.59 crore.

Financial Highlights (Consolidated - Q2 FY26)

Strategic Diversification and Government Support

A key highlight of Balrampur Chini's strategic direction is its ambitious Poly Lactic Acid (PLA) project. This initiative marks the company's foray into eco-friendly alternatives to traditional plastics, aligning with global environmental goals and diversifying its product portfolio. The company is in the process of setting up India's first PLA plant with an 80,000 TPA capacity, with commissioning targeted for Q3 FY27. The project involves a gross capital expenditure of approximately INR 2850 crore, with a net capex of around INR 1750 crore after factoring in expected capital subsidies. At full operational capacity, the PLA project is projected to generate approximately INR 2000 crore in revenue. Construction activities are in full swing, and the company has already started developing the market by trading imported PLA, demonstrating proactive market engagement.

The PLA project is significantly bolstered by the Uttar Pradesh State Government's Bio Plastic Industrial Policy 2024. This policy offers substantial incentives for companies investing over INR 1,000 crore in bioplastic manufacturing, including a 50% capital subsidy over seven years, a 5% interest subvention for seven years, 100% net SGST reimbursement for ten years, exemption from electricity duty for ten years, and stamp duty exemption on land purchased after October 4, 2024. These incentives are crucial for the project's financial viability and reflect a strong governmental push towards sustainable manufacturing. The company has also secured committed contracts worth approximately INR 2218 crore for the PLA project, indicating strong initial market acceptance.

Operational Landscape and Policy Advocacy

India's sugar sector is anticipating a rebound, with net sugar production (post-ethanol diversion) projected to reach 31 MMT in the 2025-26 season, a 19% increase from the previous season. The closing stock of sugar as on September 30, 2026, is expected to be around 6 MMT. The government's decision to allow 1.5 MMT of sugar exports for the 2025-26 season is a positive step towards market stability. However, challenges persist, particularly with unrevised ethanol prices for Juice and B-heavy routes over the last two years, despite significant increases in sugarcane Fair and Remunerative Price (FRP) and operational costs. The U.P. Government's recent increase in the State Advised Price (SAP) of sugarcane by Rs. 30 per quintal to Rs. 400 per quintal further underscores the need for a timely upward revision in ethanol prices and Minimum Sale Price (MSP) of sugar to maintain the financial health of sugar mills.

Balrampur Chini Mills Limited is actively engaging with both the state and central governments to advocate for policy corrections, including revisions in ethanol prices, reduction in country liquor percentage, and other reliefs. The company is also making internal adjustments, such as optimizing its cane crush diversion strategy to maximize value extraction. For the ethanol year 2025-26, the company expects to produce around 28 crore liters of ethanol, including ENA, with a strategic mix from Juice, B-heavy, C-heavy, and maize routes. The company's long-term credit ratings of AA+ with a Stable outlook from CRISIL and India Ratings, along with A1+ for short-term, reflect its robust financial position and disciplined capital allocation.

Outlook: Sustained Growth Amidst Evolving Dynamics

Balrampur Chini Mills Limited's Q2 FY26 performance demonstrates strategic clarity and disciplined execution. The company is effectively navigating the seasonal nature of the sugar industry and the complexities of government policies, while proactively investing in future-oriented growth avenues like PLA. The management's commitment to sustainable value creation, operational excellence, and strategic diversification positions the company for sustained growth and enhanced shareholder value in the evolving market landscape.