Dhampur Bio Organics Limited, a company that recently demerged from Dhampur Sugar Mills Ltd and got listed in September 2022, has quickly emerged as a prominent player in the integrated sugarcane processing industry. The company’s diverse product profile includes sugar, biofuels, renewable energy, domestic spirits, ENA (Extra Neutral Alcohol), bagasse, and organic fertilizer.
Operating three plants in Uttar Pradesh (Asmoli, Mansurpur, Meerganj), Dhampur Bio Organics boasts an impressive manufacturing capacity, with sugarcane crushing at approximately 22,000 tonnes per day, a sugar refinery with a capacity of around 2,000 TPD, and the production of biofuels and spirits using BH Molasses reaching 312,500 LPD. The company is also actively involved in renewable energy production, with an impressive capacity of 95.5 MW.
In terms of production, the company crushed 39.77 lakh tons of sugarcane in FY22, marking a notable increase from 38.01 lakh tons in FY21. The company’s shift towards ethanol production is evident, with 1.95 lakh tons of syrup-derived ethanol and 0.52 lakh tons of B-Heavy derived ethanol. Dhampur Bio Organics has also seen significant growth in the contribution of its biofuel and spirits segment, which increased from 10% in Q1FY22 to 21% in Q1FY23.
The revenue breakdown indicates that in FY22, the company generated revenue primarily from its distillery and power division, accounting for approximately 23% of the total revenue, while the sugar division contributed 77%.
The demerger from Dhampur Sugar Mills Ltd took place through a Scheme of Arrangement approved by the DSML board in June 2021. The scheme became effective in May 2022, with shareholders receiving 1 share of DBOL for every share held in DSML, without any cash consideration.
One notable aspect is the company’s long-term power purchase agreements (~20 years) with Uttar Pradesh Power Corporation Ltd, ensuring power sustainability for all its plants. In FY22, around 54% of the power generated was used internally, and the rest was sold to DISCOMS.
Research and development efforts are dedicated to optimizing raw materials, reducing consumption, and developing new products. Dhampur Bio Organics has established a tissue culture lab to ensure a steady supply of high-quality cane seed material and has even experimented with drones for efficient nutrient and pesticide application on sugarcane crops.
Key Factors for Dhampur Bio Organics Ltd’s Success:
1. Diversified Product Portfolio: Dhampur Bio Organics offers a wide range of products, including sugar, biofuels, renewable energy, domestic spirits, ENA, bagasse, and organic fertilizer, allowing the company to tap into multiple markets and revenue streams.
2. Impressive Manufacturing Capacity: The company operates three plants in Uttar Pradesh with significant production capabilities, particularly in sugarcane crushing, sugar refining, biofuels, and renewable energy production.
3. Ethanol Production Focus: The company has strategically shifted towards ethanol production, as evident from diverting sugarcane towards ethanol and increasing its distillery plant’s capacity. This move aligns with the growing demand for clean energy sources.
4. Revenue Diversification: Dhampur Bio Organics has successfully diversified its revenue sources, with a substantial portion coming from its distillery and power division, in addition to traditional sugar production.
5. Demerger Strategy: The demerger from Dhampur Sugar Mills Ltd allowed the company to focus on its specific industry niche and enabled shareholders to benefit from the new business direction without the involvement of cash transactions.
6. Long-Term Power Purchase Agreements: The company’s long-term agreements with Uttar Pradesh Power Corporation Ltd ensure a stable and sustainable power supply, reducing dependence on external power sources.
7. Research and Development Efforts: Dhampur Bio Organics invests in research and development to optimize raw materials, develop new products, and improve agricultural practices through the innovative use of technology like drones.
8. Capex Initiatives: The company’s capital expenditure is directed towards improving sugar quality for export, reducing losses, and enhancing environmental management capacities. These investments are expected to boost efficiency and competitiveness.
9. Market Growth: The company’s shift towards ethanol production and renewable energy aligns with the global trend of transitioning to cleaner and sustainable energy sources, which presents substantial growth opportunities.
10. Commitment to Sustainability: The company’s focus on renewable energy, organic fertilizers, and eco-friendly agricultural practices reflects its commitment to sustainability, which can attract environmentally conscious consumers and investors.
These key factors collectively position Dhampur Bio Organics Ltd as a company with significant potential for success in the sugarcane processing and related industries.
The company’s commitment to growth and innovation is evident through its capex initiatives, aimed at manufacturing pharma-grade sugar for export and the premium domestic institutional sector, reducing losses and steam consumption, and enhancing environmental management capacities. These efforts position Dhampur Bio Organics Ltd as an unparalleled dark horse in the sugarcane processing industry, poised for remarkable success in the future.
