Dhampur Sugar gains after board OKs expansion

Dhampur Sugar Mills rose 3.71% to Rs 170.50 after the company said its board approved expansion of distillery capacity at Asmoli unit in Uttar Pradesh from 150,000 liters per day (LPD) to 250,000 LPD.

In a BSE filing made during market hours today, the sugar maker said that the Asmoli unit is currently operating at 85% capacity.

The company said that the implementation of the expansion of distillery plant is expected to be completed within ten months, from the date of ordering of the main plant and equipment. Thus, the commercial production is targeted to commence in the distillery with expanded capacity from 1 November 2021. With the proposed expansion, the total capacity of the company will increase from 400,000 LPD to 500,000 LPD, it added.

The investment required for the capacity expansion is Rs 130 crore, of which Rs 32.50 crore will funded via internal accruals and the remaining Rs 97.50 crore will be funded via bank loans. The proposed capacity enhancement shall be eligible for 50% interest subvention from Government of India under their scheme for boosting ethanol production in the country, the company added.

With a view to augment ethanol production, Government of India has fixed better prices of ethanol produced from C & B heavy molasses, syrup and cane juice. Producing ethanol from B-heavy molasses /syrup/ cane juice, not only assures higher price of ethanol but also reduces sugar inventory through sugar sacrificed in B heavy/syrup/cane juice.

"The company is capable of producing required feedstock's like molasses (B heavy and C heavy) / syrup /cane juice for production of ethanol with expanded capacity, Dhampur Sugar Mills said in a statement while offering rationale for the capacity expansion.

Dhampur Sugar Mills is engaged mainly in the manufacturing and selling of sugar, chemicals, ethanol and co-generation and sale of power.

The company's consolidated net profit surged to Rs 28.16 crore in Q2 FY21 from Rs 2.90 crore in Q2 FY20. Net sales during the quarter jumped by 34.3% YoY to Rs 931.30 crore.

On a year-to-date (YTD) basis, the stock has declined by 26.83% while the benchmark S&P BSE Sensex has added12.71% during the same period.

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