The target of 660 klpd is expected to be achieved by the first quarter of the next financial year, according to Tarun Sawhney, managing director of Triveni Engineering & Industries.
The company estimates that revenue from its distillery business will increase to about Rs 1,500 crore annually once this capacity is achieved. In FY21, the revenue from the distillery business was Rs 544 crore, with a profit of Rs 101 crore, as per the company’s annual report.
“The actual return on capital employed for this new capex is going to be very, very high because the enhanced revenue for such a small amount of capital is quite large,” Sawhney told ET.
The government’s ethanol blending programme involves mixing ethanol with petrol to reduce pollution and the import of crude oil. This will also create an additional revenue stream for farmers and the sugar industry, as cane syrup is primarily used to produce ethanol.
In June this year, the Centre had advanced the target of achieving E20, or blending 20% ethanol in petrol, by five years to 2025. At present, the national average for ethanol blending is 8-9%.
Over 90% of Triveni’s revenue comes from its sugar and alcohol business. It has grown at a compounded annual growth rate (CAGR) of 13% over the past four years.
Sawhney attributes this to increased production of sugar–from 600,000 tonnes to almost a million tonnes a year over this period. This was done by increasing the capacity across its seven sugar mills in Uttar Pradesh and by helping farmers who supply to its mills to increase their yield.
“Over the last five years, I can certainly say this about our farmers–their take home income has grown by 3x. And it is because of the increase in yield, because sugarcane is paid for by weight,” Sawhney said.
However, Sawhney said that over the coming years, the growth in revenue will be aided more by its engineering businesses, which include manufacturing power transmission systems and water purification plants.
“The engineering businesses are going to be growing at a faster pace compared to sugar. And the reason is simple. Our increases in production are going to be limited,” he said.
Sanjay Manyal of ICICI Securities wrote in August that Triveni was one of the most efficient sugar companies in India, having the third-largest sugarcane crushing capacity.
“TEL would be a beneficiary of higher global sugar prices, given it is holding large sugar inventories and is capable of exporting white sugar (fetches better realisations). With the negligible impact of lower sugarcane yields, recovery rates, higher export potentials (and) sustainable distillery operations, we believe the company would witness stronger operating profit growth,” Manyal wrote.
On Tuesday, shares of Triveni Engineering & Industries closed 1.77% higher on the BSE at Rs 174.9.