BCL Industries Ltd Management Discussions

Economic Environment

Global Economic Overview1

Despite geopolitical tensions and shifting trade and monetary policies, the global economy exhibited a resilient performance in CY 2024, recording 3.3% growth. Headline inflation declined from 6.6% in CY 2023 to 5.7% in CY 2024, driven by declining energy prices and tight monetary policies implemented by most nations. Disinflation trends were bolstered by Advanced economies as they made strides towards reaching their inflation goals, while a number of emerging markets experienced high inflation resulting from currency weakness and supply-chain issues.

The US economy grew by 2.8%, supported by strong domestic demand and a firm labour market. Large European economies like Germany contracted, mirroring turbulent economic conditions. Emerging Markets and Developing Economies (EMDEs) experienced steady growth, with Chinas fiscal stimulus providing 5% growth and India recording 6.5%. The Middle East and Central Asian economies experienced subdued growth, primarily due to OPEC production cuts.

Outlook

The global economic perspective reflects cautious optimism. Amid a backdrop of easing inflationary pressure, the global economy continues to grapple with rising geo-economic uncertainties. The global economy is projected to grow at 2.8% in CY2025 and 3% in CY2026.

Recent implementation of US tariffs on sectors such as steel and aluminium are likely to drive oil prices up and fuel inflationary pressures. These tariffs have led to downward adjustments to projections for world trade volume in 2025 and 2026 and can potentially drive up inflation in the US with anticipated spillover effects across Europe and emerging markets.

Germany has implemented large stimulus programs to offset faltering demand, representing a sharp policy change to restore growth. Growth in the Middle East and North Africa (MENA) is expected to pick up, despite persistent risks. Emerging markets are, however, set to sustain their growth trajectories, with their manufacturing growth expected to outpace that of advanced economies.

Indian Economic Overview

In FY 2024-25, the economy of India recorded a growth of 6.5% despite strong macroeconomic turbulence. While aggregate growth slowed slightly compared to last year, consumption remained buoyant, led by ascending rural demand. The average headline CPI inflation remained at 4.7%, which was within Reserve Bank of Indias acceptable range and allowed for the subsequent 50 basis-point cut in repo rate to 6%.

Investment activity gained momentum in FY 2024-25, supported by a pick-up in manufacturing and orders for exports. The governments increased infrastructure expenditure and schemes like the Production Linked Incentive Scheme 2.0 were major drivers of industrial activity and the inflow of foreign direct investments. Steep imports of capital goods further indicated companies investment in capacity augmentation.

Outlook

Despite the threats posed by persistent global headwinds on Indian industries and trade, the overall prospect for growth remains optimistic. This outlook is supported by elevated consumer demand, private investment and favourable policies.

As inflationary pressures ease, consumption is expected to rebound. RBIs hawkish policies combined with the additional income tax benefit for salaried individuals will further catalyse spending. Sustained public capital spending and additional reforms are expected to lure FDI and support domestic production. Expedited urbanisation is expected to continue to fuel consumption, supporting Indias ambitions for achieving a developed-nation status by 2047.

Indias Ethanol Industry

Indias ethanol sector has witnessed remarkable growth over the past decade, emerging as a vital contributor to the countrys bioenergy strategy. The ethanol blending programme has recorded notable progress, with blending percentages rising from a mere 1.53% in 2014 to an impressive 15% in 2024.2 This substantial elevation has positioned India as the worlds third-largest producer and consumer of ethanol. This highlights the effectiveness of targeted policy interventions and industry commitment.

Currently, the market size of Indian ethanol has reached $3 billion in 2024.3 The growth in the market is bolstered by higher ethanol blending orders, heightened sugarcane production, expanding biofuel infrastructure and augmented industrial utilisation beyond the transportation sector. Following the achievement of 15% ethanol blending in petrol in 2024, India revised its goal to 20% blending by 2025 or 990 million annually.4 5 The nation is projected to reach 18.4% in Ethanol Supply Year (ESY) 2024-25 with current volume of blended ethanol being 391 crore litres (November 2024-March 2025).6

The ethanol blending scheme has yielded huge economic and environmental dividends over the last decade. These encompass foreign exchange saving of 1,06,072 crore, saving of 544 lakh metric tons of CO2 emissions and replacement of 181 lakh metric tons of crude oil. Further, Oil Marketing Companies (OMCs) have paid 1,45,930 crore to distillers and 87,558 crore to farmers, with a positive economic effect across the value chain.7 From the environmental perspective, Indias ethanol blending programme has resulted in a reduction of 7.9 million tonnes of CO2 emissions in 2020-21.8

Moving ahead, the market is envisioned to grow at a Compound Annual Growth Rate (CAGR) of 14.4%, reaching $10.07 billion by 2033.9 This headroom in capacity presents significant growth prospects for investors and industry players. The optimistic growth expectation can be attributed to the augmented utilisation of ethanol as an acceptable alternative to traditional fuels as a result of government requirements and ecological concerns.

2https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2050907 3https://www.imarcgroup.com/india-ethanol-market 4Press Note Details: Press Information Bureau 520% ethanol blending goal means more sugarcane utilisation 6https://iced.niti.gov.in/energy/fuel-sources/others/bio-energy/bio-fuel 7https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=153363&ModuleId=3 8https://beeindia.gov.in/sites/default/files/Telangana_SEEAP_Report.pdf 9https://www.imarcgroup.com/india-ethanol-market

Feedstock

The industry has successfully diversified its feedstock sources. It has gradually shifted its reliance away from sugarcane and embraced alternatives such as, maize, broken rice and farm residues. The rise in utilisation of maize in ethanol production is particularly notable. Maize utilisation recorded a rise from 0% in 2021-22 to 36% in the 2023-24 Ethanol Supply Year (ESY). This reflects the success of focused incentives aimed at feedstock diversification.10 The diversification strategy is crucial to the maintenance of supply security and reduction of dependence on one particular source.

Maize plantation is witnessing growing interest, with crop acreage growing by nearly 7% in FY25 over the previous year and reaching an unprecedented 84.30 lakh hectares. Maize production grew by 12% during the same period, reaching 42.28 million tonnes. These trends highlight the growing availability of feedstock which provide further growth avenues for the industry.11

Indias Bioenergy Industry

India has taken a revolutionary path in the bioenergy industry, reflecting remarkable success in reducing import dependence, conserving foreign exchange and embracing a circular economy. The governments multi-pronged strategy has made the nation a global champion in the production and utilisation of biofuels, with ethanol blending proving to be successful endeavour. With a projected agro biomass power potential exceeding 35 GW by 2030, bioenergy is anticipated to significantly augment Indias energy landscape, thereby playing an important role in the nations energy security and sustainability.12

Indian Biodiesel and Biofuel Industry

While the ethanol industry has made impressive strides, Indias biodiesel and wider biofuel industries are presenting notable opportunities with immense potential for expansion and diversification of Indias energy portfolio. Currently, an approximated 98% of fuel consumed in road transportation is of fossil origin, with just 2% emanating from biofuels such as ethanol. This gap is presenting a huge opportunity for growth.13

During the period of April to November 2024, oil marketing companies procured 366.8 million litres of biodiesel for the biodiesel blending programme, compared to the procurement of 292.5 million litres from April to November 2023.14

10https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2050907 11https://upag.gov.in/ 12https://www.worldbioenergy.org/uploads/White%20Paper%20-%20India.pdf 13https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=153363&ModuleId=3

14https://www.spglobal.com/commodity-insights/en/news-research/latest-news/refined-products/011325-india-ethanol-blending-crosses-18-as-plans-beyond-e20-take-off-energy-secretary

The growth of the biofuel and biodiesel industries will help to meet a variety of national priorities, ranging from improving energy security to curbing foreign currency outflow, reducing pollution, creating jobs, facilitating the ‘Make in India campaign, assisting the Swachh Bharat Mission and assisting double incomes for farmers. In addition, the biofuel industry helps to create wealth out of waste, further emphasising its value to Indias economy and sustainability agenda.

Government Initiatives

The Government of India has introduced an extensive array of strategic measures to promote the bioenergy industry. The government is focused on establishing an environment conducive to sustainable development and innovation. Such measures include improved policy frameworks, fiscal support, technological developments and foreign collaborations.

Policy Frameworks and Targets

The National Policy on Biofuels (2018) and later amendments have endowed a structured approach to biofuel development in India. The policy established blending goals for ethanol (20% by 2030) and biodiesel (5% by 2030). However, expedited progress enabled the preponement of the ethanol blending target to 2025.15 Further, the policy defines roles of 11 ministries to provide coordinated government support, constituting an integrated approach to bioenergy development.

Financial Support and Incentives

The government has rolled out a series of financial incentives to support the production of ethanol. These include particular support levels for various feedstocks including 9.72 per litre for maize-based ethanol, 8.46 per litre for ethanol produced from damaged rice and 6.87 per litre for ethanol produced from C-heavy molasses.16 These specific incentives have been able to stimulate diversification of feedstocks, as reflected in the considerable augmentation of maize based production.

A scheme of interest subvention has been implemented to provide interest subsidies in order to expand the ethanol production capacity. In addition, the Goods and Services Tax (GST) had been decreased to 5% on ethanol under the Ethanol Blended Petrol (EBP) Programme in 2021 to make it financially more appealing for the manufacturers and consumers.17

Pradhan Mantri JI-VAN Yojana

The Pradhan Mantri JI-VAN Yojana is playing a crucial role in the emergence of a sustainable ethanol production ecosystem by providing monetary assistance to high-level biofuel projects. In August 2024, the Union Cabinet amended the scheme, extending its implementation period by five years to 2028-29. The scheme was further widened to encompass advanced biofuels from various feedstocks, such as lignocellulosic, industrial residues, synthesis gas and algae.

15https://www.fipi.org.in/event-detail.php?eventId=223

16https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2050907 17https://www.pib.gov.in/PressReleasePage.aspx?PRID=1782275

The government has also restored the release of Food Corporation of India (FCI) rice to ethanol distilleries and permitted their purchase up to 23 lakh tonnes through e-auctions in August-October 2024.18

Regulatory Reforms

To ensure the smooth development of the bioenergy industry, the government has made amendments to the Industries (Development & Regulation) Act, allowing the unhampered flow of ethanol within states and encouraging smoother blending operations. Public Sector Oil Marketing Companies (OMCs) are eagerly floating Expressions of Interest for the purchase of ethanol to ensure sustained demand and development of the market.

The establishment of a positive procurement price for ethanol through the EBP Programme has provided producers with financial stability. Further, this has reduced the outstanding arrears to farmers of sugarcane. This has resulted in the reduction of dependence on crude oil imports and has bolstered foreign exchange savings while being beneficial to the environment.

International Cooperation

India initiated the Global Biofuels Alliance (GBA) in September 2023 under its G20 presidency, establishing a knowledge-sharing platform to enhance technology and policy development to potentially triple its biofuel production in the next four years.19 Currently, the GBA has 29 member nations and 14 international organisations working to drive global biofuel uptake through technology transfer.20

The GBA targets three main areas—market discovery and exploration of high-potential markets for biofuels production, expediting technology implementation to commercialise next-generation biofuels and building consensus on performance-based sustainability metrics and frameworks. Through this global effort, India aims to scale its biofuel success globally and further consolidate its leadership in sustainable energy development.

Challenges

Despite remarkable progress, the ethanol sector faces several challenges. A primary concern is the fixed ethanol procurement price. The fixed price often fails to align with the rising feedstock costs. Over the past year, prices of broken rice and maize have witnessed substantial increase, placing significant pressure on distillery margins. In addition, declining prices of byproducts like Dried Distillers Grains with Soluble (DDGS) have impacted the profitability of distilleries.

One of the major challenges in the production of biodiesel is the diversion of Used Cooking Oil (UCO) into the food stream by different small restaurants, hawkers and traders. This necessitates the establishment of stringent norms to avoid diversion of UCO into food streams and to help the creation of proper collection channels to increase its availability for fuel production. The industry also needs to research alternative feedstocks like vegetable oils produced on marginal land to establish a sustainable and diversified supply chain.

Additionally, the industry is facing issues regarding vehicle compatibility. Despite the availability of E20 fuel across 15,600 retail outlets in India and E100 fuel at more than 400 retail outlets, massive adoption of these fuels necessitates the production of compatible vehicles.21 Industry players are introducing new E20-compatible cars as well as retrofit kits for existing cars, paving the way towards higher ethanol blending targets.

Company Overview

BCL Industries Limited, established in 1976, is a leading Indian agro-processing and manufacturing company with vertically integrated operations in edible oils, rice milling, grain-based distilleries and real estate. Driven by a commitment towards technology and innovation and guided by principles of integrity and transparency, it delivers high-quality products and services that adapt to evolving customer needs. BCL Industries operates across Punjab and West Bengal.

Performance Highlights

Commemorating its 50 years of existence, the company reached full capacity utilisation of its 700 KLPD distillery in FY 24-25. As the Company undertakes its planned exit from edible oil, its oil mill, solvent extraction and rice mill units have been shut down. The refinery remained operational to liquidate existing stock of edible oil.

The Company has partially converted its raw material procurement to surplus rice, for which reduced input costs are anticipated from the new surplus rice and maize crops. A 60-tonne-per-hour paddy-straw boiler is being commissioned to reduce fuel expenses and enhance operational effectiveness. The Bathinda maize oil extraction plant has undergone trials and is set to be commissioned. The Svaksha maize oil extraction plant is in the process of development, with commissioning scheduled for FY26.

Financial Overview

Key Financial Ratios (Standalone)

Ratio	2024-25	2023-24	% Change
Debtors Turnover Ratio	0.54	1.74	68.96
Inventory Turnover Ratio	5.73	5.33	-7.50
Interest Coverage Ratio	8.77	2.26	-288.05
Current Ratio	2.26	2.26
Debt Equity Ratio	0.23	0.23
Operating Profit Margin (%)	5.07	4.33	17.09
Net Profit Margin (%)	2.68	4.33	38.10
EPS (Diluted) ( )	2.46	2.80	12.14
Return on Investment (%)	9.17	11.46	19.98

 

	Standalone		Consolidated
Particulars	FY 2024-25	FY 2023-24	FY 2024-25	FY 2023-24
Revenue from Operations	206,545.47	169,725.74	290,959.67	220,062.01
Other Income	870.82	811.33	905.31	789.28
Total Income	207,416.29	170,537.07	291,864.98	220,851.29
Profit before Depreciation, Finance Cost and Tax	13,617.19	13,576.07	21,364.34	19,873.27
Less: Depreciation	2,978.42	2,390.26	4,609.51	3,598.26
Less: Finance Cost	1,194.30	1,280.04	3,095.58	3,306.54
Profit before Tax	9,444.47	9,905.77	13,659.25	12,968.47
(Less): Current Tax	-2,130.00	-2,000.00	-2,468.38	-2,000.00
Add/(Less): Deferred Tax	-164.40	-432.50	- 907.56	-1,246.40
Less: Prior period items	-1.59	-130.33	-1.59	-130.33
Profit for the year	7,151.66	7,342.94	10,284.90	9,591.74
Other Comprehensive Income/(Loss)	70.23	247.91	74.67	256.05
Total Comprehensive Income	7,221.89	7,590.85	10,359.57	9,847.79
Earnings Per Share Basic	2.46	2.89	3.26	3.54
Earnings Per Share Diluted	2.46	2.80	3.26	3.43

Business Outlook

Moving forward, BCL is well positioned to grow its core ethanol and biofuel business through strategic acquisitions and investments in green energy. The recent acquisition of Goyal Distillery and the current 150 KiloLitres Per Day (KLPD) distillery project in Bathinda will collectively increase grain-based ethanol capacity. Both plants are expected to become operational within a year.

To enhance cost effectiveness and contribute to environmental objectives, the Company plans to add a paddy-straw boiler and commission a 20 ton-per-day bio-CNG plant. These initiatives will reduce fuel costs, address stubble burning in North India and generate additional revenues from farm residues. Vertical integration will be further bolstered by the forthcoming 75 KLPD biodiesel plant at Bathinda and another 75 KLPD one at Kharagpur, adding flexibility to the Companys renewable portfolio.

The planned withdrawal from the edible-oil business, to be finalised by FY 2025-26, will release working capital, de-leverage and discard marginally-profitable operations. Proceeds from the phased divesting of real-estate assets will also be utilised to further deleverage.

Approval for utilising FCI rice at 22.50 per kilogram for ethanol production and expected softening in raw-material costs will enhance supply-chain efficiency and margins. In the meantime, consistent demand in the PML segment will remain crucial to near-term revenues.

Overall, these strategies are expected to abet BCLs mission of sustainable margins and long-term creation of shareholder value.

Human Resource

BCL considers its people as its greatest asset and is dedicated to their development and well-being. By creating a nurturing and collaborative environment, the Company encourages and develops talent. The Company ensures a vibrant, plural business environment that stimulates innovation, collaboration and open communication, providing its workforce with challenging and rewarding career opportunities. BCL also focuses on its nation-building role, providing the employees with a sense of purpose and opportunity to contribute meaningfully.

As of 31 March 2025, BCL had 815 employees in its payroll. Additional appointments were made during the review period and the workforce was provided with annual increment. Industrial relations remained strong with no interferences in the production activities.

To guarantee the overall well-being of its employees, BCL has in place a variety of initiatives that span training and development, healthcare and safety, communications and diversity and inclusion. The Companys HR policy manual integrates codes of practice across a variety of human-resource issues. Acknowledging that HR needs to evolve with evolving business demands, BCL remains committed to the sustained development and improvement of policies and practices in response to emerging issues and opportunities.

Objectives

1. Recruit and retain qualified employees using proactive recruitment and talent development programmes.

2. Invest in employee development by providing training programmes, coaching, mentoring and formal career-development plans.

3. Establish a compliant and safe workplace through policies on employment law, health and safety and data protection, which are upheld through regular audits.

HR Initiatives to Meet Objectives

€ Biannual and quarterly performance appraisals that guide career development and facilitate internal promotions.

€ Regular training sessions aimed at providing employees with competencies for their immediate work and future roles.

€ Periodic auditing processes to identify and rectify variances from set norms, ensuring effective and compliant operations.

Management Outlook

The leadership of the Company ensures that the objectives of all departments are set in accordance with the corporate vision, mission and risk appetite. This integrated approach encourages strategic decision-making and enhances the overall resilience of the organisation.

Risk Mitigation Process

The Companys risk mitigation process includes:

Risk Identification

€ Department heads along with their teams identify material risks.

€ Risks are recorded with staff input, suggested mitigation concepts and suggestions.

€ Department heads and the management consider collectively rank reported risks.

Risk Analysis

€ Every risk is reviewed for origin, possible impact and probability.

€ Present procedures and controls are assessed in relation to their effectiveness.

€ The probable severity and frequency of risks are assessed in light of existing safeguards.

Risk Assessment

€ Predefined categories (High, Medium, Low) are applied based on operational criteria.

€ Risks are ranked according to their severity and probability and a prioritised action list is produced.

€ Risks deemed low-priority typically need minimal further action while those considered high-priority are escalated to detailed response planning.

Risk Response

€ Potential options for treatment, which include avoidance, reduction, transfer or acceptance, are recognised and evaluated.

€ Comprehensive action plans, which include responsibilities and timelines, bridge the gaps between existing controls and desired outcomes.

€ Critical risks are noted down in a Risk Assessment and Control Matrix for sustained monitoring.

Governance and Oversight

The Board of Directors has appointed a Risk Management Committee (RMC) to manage policy development, implementation and review. The RMCs main responsibilities are:

Policy Development

€ Develop an overarching Risk Management Policy that encompasses financial, operational, ESG, cybersecurity and other emerging risks.

€ Enforce strong internal controls and a business continuity plan for operational resilience.

Implementation and Monitoring

€ Maintain systems and procedures that are appropriate for monitoring and evaluating risks.

€ Regularly update the risk policy and review the effectiveness of risk controls.

Board Reporting

€ Establish procedures for reporting risk exposures, mitigation methods and suggested actions to the Board.

€ Ensure open communication about the RMCs results and recommendations.

Continuous Improvement

€ Update and refresh the risk policy at least biennially to maintain alignment with evolving challenges, threats and industry shifts.

€ Coordinate with other Board-level committees to prevent overlaps and ensure efficient governance.

Regulatory Compliance

€ Ensure compliance with the Companies Act 2013 and SEBI (LODR) Regulations, 2015.

€ Keep track of cybersecurity threats and channel their prevention under the Risk Management Policy.

Risk Categories and Mitigation Measures

In order to meet varied challenges, the Company utilises a customised approach for every broad risk category:

Market Risk

€ Diversify product lines and customer base.

€ Establish long-term client relations and monitor market trends and price variations.

Operational Risk

€ Manage equipment through a systematic maintenance and repair programme.

€ Secure alternate suppliers and put in place contingency plans to reduce production interruptions.

Financial Risk

€ Hedge foreign exchange exposures and diversify funding sources to cope with interest rate fluctuations.

€ Monitor customer credit profiles and impose controls to limit credit risk.

Compliance Risk

€ Develop and implement policies on the environment, health and safety and labour legislation.

€ Regularly undertake audits and undertake staff training to confirm regulatory compliance.

Reputation Risk

€ Encourage transparency and ethical behaviour throughout all levels.

€ Invest in responsible practices that demonstrate the Companys values and build stakeholder confidence.

Internal Control Systems and their adequacy

BCL protects its assets and the integrity of its financial disclosures through a sound system of internal controls that is designed for its size and operations. This system provides assurance that each transaction is authorised, recorded and reported. To ensure that it remains effective, management reviews periodically and engages external chartered accounting firms to conduct independent audits. Internal audit groups check out vital areas of operation-paying particular attention to compliance with policy, the robustness of information systems and authorisation processes for safeguarding assets. Internal and statutory audit reports are laid before the Audit Committee, which reviews the results and whether the controls in place are sufficient. The multiple layering, based on continuous communication between auditors and the Committee, ensures sustained improvement in BCLs internal control environment.

Cautionary Statement

This document contains statements about expected future events and are forward looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the Managements Discussion and Analysis of BCL Industries Limiteds Annual Report, 2024-25.