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1
Bajaj Hindusthan Group
Corporate PresentationApril 2008
2
Presentation Outline
Global Industry Overview
Indian Industry Overview
Group Overview
3
Global Sugar Industry Overview
4
World Sugar
Produced in more than 120 countries
About 78% is produced from sugarcane
Beet sugar has gone down from 40% in 1990 to 22% in 2006-07
The cost of sugar from cane is less than the cost of sugar from beet
About 70% of production is consumed in the country of origin
The balance 30% is traded in world markets
In 2006-07, almost 41% of export market was controlled by Brazil, 9%
by EU, 8% by Australia & 4% each by Thailand & UAE
Source: CRISIL Research
5
World Sugar Production
• After increasing 7.2% in 2005-06, production up by 10.4% in 2006/07
This increase was primarily due to the following:
• Favourable climatic conditions across the world, with no adverse incidences
• With higher Sugar prices, prices of Cane also increased, incentivising Farmers to switch crops to Sugarcane – resulting into Bumper Cane crop & Sugar production
Source: F.O. Licht's International Sugar and Sweetener Report - World Sugar Balances - Report dated 27.3.08
MMT, Raw ValueCountry / Region 2007-08e 2006-07 2005-06 2004-05 2003-04
Brazil 34.23 32.64 32.64 27.73 26.14 India 28.50 30.77 20.94 13.80 14.74 EU 17.45 17.38 21.03 21.95 20.21 China 13.59 13.04 9.58 9.86 10.90 USA 7.66 7.66 6.71 7.15 7.85 Thailand 7.89 7.03 5.08 5.43 7.28 Mexico 5.58 5.54 5.50 6.00 5.36 Sub-Total Top 7 114.89 114.05 101.48 91.92 92.47 % of Total World 68.0% 68.3% 67.1% 65.1% 64.3%
Others 53.98 52.90 49.79 49.18 51.28 World Total 168.87 166.95 151.27 141.09 143.75 +/- YoY 1.2% 10.4% 7.2% -1.9% -4.4%
6
World Sugar Balance
Source: Company Estimate
MMT, Raw ValueSugar 2008-09e 2007-08e 2006-07 2005-06 2004-05 2003-04
Opening Stock 80.0 72.9 64.1 61.3 67.2 68.1 Production 160.0 168.9 166.9 151.3 141.1 143.8 Imports 52.0 51.1 51.8 54.1 51.0 49.2 Consumption 162.0 157.7 153.8 146.2 144.0 141.4 Exports 52.0 55.1 56.2 56.3 54.0 52.4 Closing Stock 78.0 80.0 72.9 64.1 61.3 67.2
Stocks as % of Consumption 48.2% 50.7% 47.4% 43.8% 42.6% 47.5%
Stocks as No. of Months 5.78 6.09 5.69 5.26 5.11 5.70
+ / - Production (%) -5.3% 1.2% 10.4% 7.2% -1.9% -4.4%+ / - Consumption (%) 2.7% 2.5% 5.2% 1.6% 1.8% 1.3%
7
Ethanol Production in Brazil
Source: Datagro
8
Sugarcane output breakdown in Brazil
Use of Sugarcane for Ethanol to grow from around 50% in 2006-07 to around 57% in 2008-09
Source: Datagro
9
International Retail Prices
Source: Illovo Sugar
Prices in India amongst lowest
in the world
10
Per Capita Sugar Consumption
Per Capita Sugar Consumption of Top 7 Consumers
8.618.6
38.147.8
57.643.8
31.4
-10.020.030.040.050.060.070.0
Brazil Mexico Russia EU USA India China
Kilo
gram
s
Source- World Sugar: FAPRI 2007 Agricultural Outlook Figures for 2006-07
Factors determining consumption:
Sugar prices versus alternate sweeteners
Per capita income Population growth The age profile Sugar availability Consumer preference Technological advances and Government policies
Huge Potential
11
Growth in consumption in Asia
Source: F.O. Licht, BHL
10
20
30
40
50
60
70
80
90
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
Asi
a's
Con
sum
ptio
n (M
MT)
Was 40% of total
World consumption
Currently, ~44%
of consumption
Going towards 47%
12
Indian Industry Overview
13
Planting of Sugarcane
Sugarcane Harvesting
Transporting Sugarcane to
PlantsCane Crushing & Juice Extraction
Evaporation - Converting Juice
into Syrup
Boiling of Syrup - Crystallization of
SugarCentrifugal
separation of Sugar Crystals
& MolassesDrying of
Sugar
Grading of Sugar
Packing of Sugar
Farms – Cultivation of Land for
Sugarcane Planting
Sugar Production Process
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Sugarcane – Varieties & Crop Cycle Early Maturing Variety – 10 to 11 month crop
General Variety – 11 to 12 month crop
Late Maturing Variety – 12 to 14 month crop
Planting can be done anytime in the year, except from May to September
In UP cane planting is done during 2 periods –
80% during 15th February to 30th April (Spring planting)
20% during 15th September to 20th October (Autumn planting)
Once planted, can produce crop for 3 to 6 years
First year crop is called “Plant Crop”, and thereafter
1st Ratoon, 2nd Ratoon, 3rd Ratoon and so on
15
Factors affecting Cane Cultivation
Soil – Sandy loam soil
Climate – Warm and humid
Temperatures – Between 20 to 40 degree centigrade
Rainfall – Between 700 mm to 1200 mm
Seed Selection – Quality and treatment of seeds
Mill Support –
Support / Subsidies for seed procurement and treatment, irrigation,
fertilizers, pesticides, harvesting, transportation, infrastructure
development (road, power), etc.
16
Crop Dynamics for Farmer
Source: Company Estimate
Crop Yield SP Total Cultivation Net Earnings(Qtl./Acre) (Rs./Qtl.) Earnings Cost Earnings as a %
(Rs./Acre) (Rs./Acre) (Rs./Acre) of Cost
Sugarcane 250 110 27,500 17,215 10,285 60%
Wheat 20 1,000 20,000 7,029 12,971 185%Paddy 20 800 16,000 8,500 7,500 88%1 Wheat+1 Paddy 36,000 15,529 20,471 132%
Note: 1 Wheat & 1 Paddy crop can be done in a yearWheat : Nov - AprPaddy : July - Sep
17
Sugar Cane Material Balance
Typical Sugar Cane Material Balance
Recoverable Sugar, 11%
Sugar Losses, 2%Molasses, 5%Press Mud, 4%
Bagasse, 33%
Water, 45%
18
Typical Sugar Cycle
19
India’s Sugar Demand-Supply Equation
Source : BHL. F10 demand based on Tuteja Committee Report (Dec 04), headed by Shri S.K. Tuteja, the then Secretary, Department of Food and Public Distribution, Govt. of India
MMTParticulars FY01 FY02 FY03 FY04 FY05 FY06 FY07e FY08f FY09f FY10fOpening Stock 9.3 10.6 11.2 12.4 8.2 4.6 3.7 7.7 7.7 5.2 Production 18.5 18.5 20.1 13.5 12.7 19.3 28.0 26.0 21.0 24.0 Demand - Total 17.2 17.9 19.0 18.1 18.5 20.1 24.0 26.0 23.5 24.0 - Domestic 16.2 16.8 17.5 17.9 18.5 19.0 22.5 23.0 23.5 24.0 - Exports 1.0 1.1 1.5 0.2 - 1.1 1.5 3.0 - - Imports - - - 0.4 2.1 - - - - - Closing Stock 10.6 11.2 12.4 8.2 4.6 3.7 7.7 7.7 5.2 5.2 Closing Stock (Months) 7.4 7.5 7.8 5.4 3.0 2.2 3.9 3.6 2.7 2.6 Stock-to-use Ratio 61.6% 62.6% 65.3% 45.3% 24.9% 18.4% 32.1% 29.6% 22.1% 21.7%
20
Potential Demand for Sugar Year
Demand based on historical growth rate
of 4%
Demand based on growth rate of 2%
(Million MT) (Million MT)1 2009-10 24.0 24.02 2010-11 25.0 24.53 2011-12 26.0 25.04 2012-13 27.0 25.55 2013-14 28.1 26.06 2014-15 29.2 26.57 2015-16 30.4 27.08 2016-17 31.6 27.69 2017-18 32.8 28.110 2018-19 34.2 28.711 2019-20 35.5 29.312 2020-21 36.9 29.813 2021-22 38.4 30.414 2022-23 40.0 31.015 2023-24 41.6 31.7
Source : BHL. F10 demand based on Tuteja Committee Report (Dec 04), headed by Shri S.K. Tuteja, the then Secretary, Department of Food and Public Distribution, Govt. of India
21
Alcohol Demand – Supply ProjectionsMln. Ltrs.
Alcohol Production / Demand - All India Basis
PARTICULARS Year 07-08 Year 08-09 Year 09-10ALCOHOL PRODUCTION 2,400 2,100 2,350 DemandPOTABLE 1,000 1,080 1,170 INDUSTRIAL 1,100 1,160 1,220 BLENDING WITH PETROL AT 5% LEVEL 500 560 600 Total Demand 2,600 2,800 2,990 Surplus / (Deficit) (200) (700) (640)
NOTE :1. The above information is as per the industry sources.
4. Blending percentage has been taken at the rate of 5 % level. Demand for ethanol will increase, if blending percentage is increased to 10%.
2. The dip in alcohol production is on account of reduction in cane production which means reduced availability of molasses. 3. Import of alcohol will take place to meet the demand of industrial sector, if International prices are at reasonable level. Else there will be a redn. in demand of Alcohol for Industrial use / Ethanol for blending.
22
Import Dynamics of Sugar
No threat of imports - Current duty 60%
Base Price (US$ fob) 320 340 360 320 340 360 Freight * 45 45 45 45 45 45 C&F Price 365 385 405 365 385 405 Import Duty (%) - - - 10% 10% 10%Cost with duty 365 385 405 402 424 446 Port & incidentals 10 10 10 10 10 10 Inland Transportation 33 33 33 33 33 33 Importer Margin (8%) 30 32 33 33 35 36 Landed Cost (US$) 438 459 481 477 501 524 Rs. / US$ 40 40 40 40 40 40 Landed Cost (Rs.) 17,500 18,364 19,228 19,077 20,027 20,978 * Import from SE Asia Columns in blue indicate current FOB price
Import Dynamics - Per MT Sugar0% Duty 10% Duty
23
Sugar : Largely price-inelastic
Commodities Assumptions
Primary Articles (98 Items) Per Capita Income 797 US $ / AnnumFood Articles 15.40 Per Capita Income (@ Rs.40 / $) 31,880 Rs. / AnnumNon Food Articles 6.14 Per Capita Income 2,657 Rs. / MonthMinerals 0.48 22.02 No. of Members in a Family 5
Family Income 13,283 Rs. / MonthFuel, Power, Light & Lubricants (10 Items)Coal & Mining 1.75 Per Capita Consumption of Sugar 18.60 Kg. / AnnumMineral Oils 6.99 Per Capita Consumption of Sugar 1.55 Kg. / MonthElectricity 5.49 14.23 Family's Sugar Requirement 7.75 Kg. / Month
Manufactured Products Retail Sugar Price 18.00 Rs. / Kg.Sugar 3.62Other Food Products 7.92 Family's Total Exp. (80% of Income) 10,627 Rs. / MonthBeverages, Tobacco & Tobacco Products 1.34 Family's Expense on Sugar 140 Rs. / MonthTextiles 9.80 Which is 1.3% % of Family's Total Exp.Wood & Wood Products 0.17Paper & Paper Products 2.04 If Sugar Prices Increase by (Rs./Kg.) 0.50 1.00 1.50 2.00Leather & Leather Products 1.02Rubber & Plastic Products 2.39 Impact on Family's Exp. BudgetChemicals & Chemical Products 11.93 Rs. Per Month 3.88 7.75 11.63 15.50Non Metallic Mineral Products 2.52 Monthly Exp. Up by (%) 0.04 0.07 0.11 0.16Basic Metal, Alloy & Products 8.34Machinery & Machine Tools 8.36 Impact on Wholesale Price IndexTransport Equipments & Parts 4.30 63.75 Sugar Price Increased by (%) 2.78 5.56 8.33 11.11
Weightage of Sugar in WPI (%) 3.62 3.62 3.62 3.62Total 100.00 WPI Up by (Points) 0.10 0.20 0.30 0.40
Wholesale Price Index - Commodities Basket
Weightage
Impact of Sugar Price Increase
24
Sugar Industry Risks Environmental Risks
Climatic conditions such as monsoons, droughts etc.
Substitution Risks
Crop switching due to non-receipt of timely payment
Crop switching due to better realisations for alternate crops
Diversion of cane to Gur/Khandsari manufacturers
Regulatory Risks
Fixation of arbitrary cane prices
Control of end product prices by the Government
Direct imports of sugar by the Government and subsidised sales to check
domestic prices
25
Recent Developments
26
What went wrong?
Massive Over-production of Sugar – In India and Globally
Estimate of 22MT in FY 06-07 wrong, actual production was over 28 MT
High sugar prices led to high cane prices
Expansion of crushing capacities led farmers to grow more cane
High cane prices led to massive crop switching from all other crops to sugarcane
High oil prices made people believe more ethanol will be made and less sugar
Conclusion – global surplus in sugar led to depressed sugar prices
27
Recent Positive Developments
1. Allahabad High Court Final Order:
Quashes SAP (State Government) price for 2006-07 & 2007-08 of Rs.125/qtl
Form Committee of Experts to re-fix cane price for 06-07 based on transparent
norms, criteria’s and formula. Until then price will be SMP.
For all future years (07-08 onwards) – incorporate transparent norms, criteria’s
and formula into rules of the act, which shall determine cane price, otherwise
follow SMP
28
Supreme Court Interim Order:
Interim relief to the Sugar Mills by reducing 2006-07 Cane price from Rs.125 /
Qtl. to Rs. 118 / Qtl – potential saving of around Rs.100 Cr.
Adjustment of excess payment allowed from amount payable to farmers
No coercive action against mills
Allahabad High Court order holds good in all other aspects
Recent Positive Developments - Continued
29
2004 UP Government Sugar Promotion Policy
Stayed by Lucknow High Court on basis of Promissory Stopple
Group continuing to avail benefits
4. Ethanol Blending Program – All India
5% blending mandatory from October 2007 at Rs. 21.50/litre for 2 yrs
10% blending to be made mandatory from October 2008
Group production of 11 crore litres out of production of 15 crore litres booked
Recent Positive Developments - Continued
30
Supreme Court Judgment on Molasses Sales – Companies having
sufficient captive consumption not required to compulsorily sell 20% of molasses
production to liquor manufacturers – positive impact of around Rs.15 – 20
Crore
Sugar Levy Price – Being revised upwards with retrospective effect. Potential
upside thereon
Due Recognition by BSE – BHL included in BSE “A” Group w.e.f. 3rd March
2008
Recent Positive Developments - Continued
31
1. Sugar production in SS 2007-08 to be around 26 Million Tons, lower than the earlier
estimate of 31-32 Million Tons
2. Major reasons being:
25-30% Lower Sugarcane prices
Higher prices for other crops – Wheat (Rs. 1,000/MT)
Massive Crop switching from Sugarcane to Wheat, Mustard
Drop in Sugarcane yield
Drop in Area under sugarcane cultivation
3. Around 3 Million Tons of Raw Sugar likely to be exported in SS 2007-08
4. Sugar Inventories likely to be at lower levels
5. Sugar prices already firming up
Going Forward
32
Group Overview
33
# 1 in India
# 1 in Asia
Amongst the top 5 in the World
Bajaj Hindusthan Group
34
Group Overview India’s largest Sugar & Ethanol manufacturer
Estd. in 1931 – weaving a success story since last 76 years
Key products – Sugar, Ethanol & Industrial Alcohol
Group has 14 Sugar manufacturing plants – all in UP, the largest Sugar
manufacturing state in India
6 Mfg. plants have Distilleries & 9 have Surplus Power Co-generation
Strong track record of profitability – have declared dividend in 73 out of BHL’s
76 years of existence
Strong relationships with farmers based on track record of regular payments
Entered into more profitable business of making MDF from bagasse
35
Well Integrated, diversified Business House
210
No further expansion in Sugar or Distillery businesses
BHLSugar – 96,000 TCDDistillery – 640 KLPD
Surplus Co-gen – 90 MW
BHSIL
Sugar – 40,000 TCDDistillery – 160 KLPD
Surplus Co-gen – 15 MW
BEPL
PB – 50,000 m3 p.a.MDF – 160,000 m3 p.a.
• Integrated operations enable the group to tide over business cycles
36
Success factors in the Indian Sugar Industry – How is BH Group placed?
BHL & BHSIL score high on all the above factors – in terms of Raw Material availability, Economies of scale (lowest cost producer), Sugar deficient markets & excellent relationship with farmers.
Size Size helps garner larger proportion of available raw material Reduces per unit cost
3
Location2
Proximity to sugarcane critical (Uttar Pradesh & Maharashtra) Uttar Pradesh most favorably positioned
• Dominant producer accounting for more than 30% of total sugarcane production in India
• Proximity to sugar deficient markets resulting in higher price realizations
• Well irrigated, reducing dependence on rainfall Maharashtra heavily dependent on rainfall
Efficiency4
Profitability is a function of efficiency which hinges on sugar recovery, throughput and control over production costs
Relationship with Farmers5
Prompt payment to farmer imperative to ensure sufficient sugarcane supply
******
*** ********* *********
*** *** *** *********
******
*** ***
***
Major Sugar Producing States
* Cane Growing Areas in UPSugar Deficient StatesSugar Balanced States
Raw Material Security1
UP
Maharashtra
37
Manufacturing Facilities• Gangnauli (Distt.Saharanpur)
• Thanabhawan and Budhana (Distt. Muzaffarnagar)
• Bilai (Distt Bijnor)
• Kinauni (Distt Meerut)
• Barkhera (Distt. Pilibhit)
• Gola, Palia and Khambarkhera (Distt.Lakhimpur)
• Maqsudpur (Distt. Shahjahanpur)
• Kunderki (Distt. Gonda)
• Rudauli (Distt.Basti)
• Pratappur (Distt. Deoria)
• Utraula (Distt.Balrampur)
Cane growing Areas
BHSIL Presence(4 loc)
BHL Presence (10 loc)
38
Group Capacity Expansion & ProductionYear Sugar Distillery Exportable Sugar Alcohol
Cap. Cap. Power Prod. Prod.TCD KL/Day MW MMT Lac Ltrs.
FY 03 17,000 85 - 0.4 199
FY 04 24,000 145 - 0.3 245
FY 05 31,000 160 - 0.4 283
FY 06 56,200 320 - 0.8 648
FY 07 95,000 800 - 1.4 894
FY 08 Est. 136,000 800 105 1.3 1,500
39
BHL Financials – ProfitabilityRs. Crores
Financial Year : Oct – Sep
30
60
103
353
F 08 Qtr.1
-5.8%51 191 140 61 PAT
3.6% 102 278 183 91 EBIT
31.0% 248 350 218 111 EBITDA
50.1% 1,744 1,487 855 515 Revenue
CAGR F04-F07
F 07F 06F 05F04Description
40
BHL Financials – Key Ratios
Financial Year : Oct – Sep
4%14%23%44%ROE
2%10%16%20%ROCE
83302455Inventory (Days)
2.42.51.92.1Current Ratio
2.01.10.82.3Debt / Equity
3%13%16%12%PAT / Revenue
14%24%25%21%EBITDA / Revenue
F 07F 06F 05F04Description
41
BHL – Sustained Sugar Profitability
1,363
1,668
1,416
1,1801,3311,2951,2921,257
1,761
1,020
1,2901,146
1,037
860
1,033977956
900
357 336 318 298 320 379522 471
343
200
400
600
800
1,000
1,200
1,400
1,600
1,800
FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007
(Rs.
/Bag
)
Avg. Selling Price Avg. Cane Cost Margin
BHL’s economies of scale and operational efficiency ensure sustained profitability at all points in the cycle
42
BHSIL
43
1. BHSIL among India’s top 5 Sugar manufacturers
2. Capacities in place:
Sugar : 40,000 TCD (4 Units, all in Eastern UP)
Distillery : 160 KLPD
Co-Gen : 15 MW Exportable surplus
6. Ideally positioned to service sugar deficient North Eastern / Eastern markets, where
Sugar realisations are marginally higher
7. Synergies with parent which has mills in Western & Central UP
8. Close proximity to Kolkata provides opportunity to export sugar, if reqd.
9. Support from multilateral agencies like IFC through subscription to FCCBs indicates
confidence in business model and the company management
Company Overview
44
Capacity Expansion
210
SS 2007SS 2007Cap expanded Cap expanded to 6000 TCDto 6000 TCD
SS 2006SS 20061 Mill, 3200 1 Mill, 3200
TCDTCD
SS 2008SS 2008- 3 new Sugar mills with
34,000 TCD Capacity taking total capacity to 40,000 TCD
- New Distillery of 160 KLPD
- Exportable Co-gen 15 MW
45
BEPL
46
Particle Board (PB) second generation substitute of plywood made from small pieces of wood chips and other agro waste cellulosic
materials, bonded with resin under pressure
Medium Density Fibre Board (MDF) third generation substitute of plywood made by defribrizing wood and other agro waste cellulosic materials, bonded
with resin under pressure
Both PB & MDF are regarded as “Engineered Wood” have durability, look, texture, richness and feel of seasoned timber have excellent machinability and application properties Perfect substitute for solid timber & plywood
Products Overview
47
Industry size estimated at Rs. 1,000 Crores, about 0.49 mln. m3
90 % pre-laminated, 10% plain 60% Cheaper than Plywood Industry growing at 20 % + 50% imported Very few players – about 10 manufacturers – only 3 Agro based, rest wood based Dominated by organized sector Highly profitable from Sugarcane Bagasse (40-45% EBITDA Margin)
Particle BoardParticle Board
MDFMDF
Industry size estimated at Rs. 1,500 Crores, about 0.67 mln. m3
80 % plain, 20% pre-laminated 50% Cheaper than Plywood Industry growing at 20 % + 85% imported Only 3 manufacturers – all wood based 100% organized sector Highly profitable from Sugarcane Bagasse (40-45% EBITDA Margin)
Indian Industry Overview
Bajaj - 70% Market-share on day One
48
Cost Comparison – Plywood / PB / MDFLAMINATING PLYWOOD (18 mm thickness) Rs./Sq.Ft.
PlywoodOne Sheet - 8 x 4 size Costs Approx. Rs. 2,000 Avg. 63 Laminate Top Side - One Sheet - 8 x 4 size Costs Approx. Rs. 1,250 Avg. 39 Other Side - Polish, Paint or Cheap Laminate 15 Adhesive (Fevicol)1 Kg. fo 8 x 4 Sheet. Approx Cost Rs. 200/- per Kg. 6 Total Material Cost 123 LabourMinimum 20% of Material Costs 25 Cost of Laminating Plywood 147
COST OF PRE-LAMINATED PARTICLE BOARD (18 mm thickness) 59 (One Side Laminated, other side barrier paper)Pre-Laminated PB is Cheaper by 60 %
COST OF PRE-LAMINATED MEDIUM DENSITY FIBRE BOARD (18 mm thickness) 74 (One Side Laminated, other side barrier paper)Pre-Laminated MDF is Cheaper by 50 %
1. Pre-Lamination of PB & MDF is a Hot Press Process. Being Automatic Process, the Pressure &Temperature, besides being High is applied uniform. The quality of Lamination, therefore is very good
2. Plywood Lamination is a Cold Press Process. Being Manual Process, the Pressure, besides beingLow is also not uniform. The quality of Lamination therefore depends on individual Carpenter's skills
49
Rising Demand for Panels & Furniture • IT & ITES Sector alone demand 150 mln. sq. ft.
space creation over next 5 years*• Organized retail sector expect creation of another
150 mln. sq. ft. space over next 5 years*• Demand for housing will also be a key growth
driver as 48% of India’s population still lives in semi-permanent / temporary structures*
• At a conservative estimate of 8 m3 per 1,000 sq. ft., additional demand for Panels from IT, ITES & organized retail sector itself would be around 2.5 mln. m3
* Source – CLSA Report
No new licenses being given for wood based factories Legislative changes forcing closure of existing saw mills and plywood factories Availability of adequate quantity and appropriate quality raw materials for manufacture of Particle Board and MDF High Capital Investment is also one of the key entry barrier
Growing Demand Demand Substitution
Supply Constraints
Demand Substitution by Particle Board & MDF • Substitution of demand from traditional wood
sources such as timber and plywood, which are becoming scarce and hence expensive
• Environment consciousness mandating use of non wood furniture in all government offices
• Increasing preference for modular furniture - a major user of Particle Boards and MDF
• Mere 5% demand switchover from plywood to Particle Board and MDF will result in additional demand for Particle Board and MDF of around 0.5 mln. m3
Demand Supply Dynamics
50
m 3 p.a.2005 2006 2007 2008 2009 2010 2011 Addl. Demand
2011 / 2006PlywoodDem and * 8,400,000 8,820,000 9,261,000 9,724,050 10,210,253 10,720,765 11,256,803 2,436,803 Supply 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 Deficit *** (400,000) (820,000) (1,261,000) (1,724,050) (2,210,253) (2,720,765) (3,256,803) % of Demand 4.8% 9.3% 13.6% 17.7% 21.6% 25.4% 28.9%
Particle BoardDem and * 490,000 588,000 705,600 846,720 1,016,064 1,219,277 1,463,132 875,132 Supply ** 243,750 315,000 331,500 331,500 331,500 331,500 331,500 Deficit *** (246,250) (273,000) (374,100) (515,220) (684,564) (887,777) (1,131,632) % of Demand 50.3% 46.4% 53.0% 60.8% 67.4% 72.8% 77.3%
MDF BoardDem and * 670,000 804,000 964,800 1,157,760 1,389,312 1,667,174 2,000,609 1,196,609 Supply ** 90,000 162,000 198,000 198,000 198,000 198,000 198,000 Deficit *** (580,000) (642,000) (766,800) (959,760) (1,191,312) (1,469,174) (1,802,609) % of Demand 86.6% 79.9% 79.5% 82.9% 85.7% 88.1% 90.1%
Total Demand 9,560,000 10,212,000 10,931,400 11,728,530 12,615,629 13,607,216 14,720,545 4,508,545
* Dem and for 2005 as per FAO Report. 5% growth taken for Plywood & 20% for PB & MDF** Supply taken at 90% of Installed Capacities of existing manufacturers & known new entrants*** Met through Im ports
India’s Demand Supply Equation
51
India is second largest producer of sugarcane in the world Lot of sugarcane bagasse is generated every year Bagasse is a valuable cellulose and can be utilised better by making PB &
MDF Board, instead of simply burning Technology for making PB & MDF from Bagasse was developed in Europe
long time back and off late to some extent in China as well The quality of PB & MDF made from Bagasse is very good. All tests
confirm that the quality of Bagasse based PB & MDF is at par with the quality of PB & MDF made from wood or wood-waste
Bagasse based PB & MDF meets Euro Board Standard EMB 1995 China National Standard GB/T/117182 1999 and Indian Standard 12406 1998
PB & MDF from Sugarcane Bagasse
52
Value Addition per MT of Bagasse Used forCo-generation, Manufacturing Paper & Manufacturing Boards
Conclusion: Value Addition to Bagasse, when utilised for making Boards, is the highest at Rs. 8,375 PMT of Bagasse, as compared to that of Rs. 156 per MT, if utilised for Co-generation or average Rs. 4,500 per MT, if utilised for making Paper.
VALUE ADDITION TO BAGASSE IS ABOUT 54 TIMES HIGHER IN BOARDS, THAN IN CO-GENERATION !!
Bagasse MT 1.00 Steam Generated MT 2.20
Kg. 2,200 Steam to Power Ratio Kg. / KWH 5.00 Power Generated / Paper Produced KWH / KG 440 250 210 Saleable @ 80% KWH 352 Rate Rs. / KWH / KG 3.00 18.00 35.00 Revenue Rs. 1,056 4,500 7,350 769,611,150 Bagasse Used (Fibre for Boards) MT 1 1 1 79,960 Revenue per MT of Bagasse Rs. 1,056 4,500 7,350 9,625 Cost of Bagasse Rs. / MT 900 1,250 1,250 1,250 Value Addition per MT of Bagasse Rs. 156 3,250 6,100 8,375
Details Unit Co-generation MDF / PB BoardsWriting PaperKraft Paper
Co-generation, Paper or Boards?
53
1. Very Strong Parent Promoted by Bajaj - India’s No. 1 Sugar and Ethanol manufacturing company
2. Assured Raw Material Availability 100 % raw material (bagasse) available from parent company
3. Captive Generation of Steam and Power 100 % generation of steam and power available from parent company
4. Cost Competitive Substantially lower production costs cause of 100 % captive raw material, steam &
power Selling price of MDF 50% lower than that of Plywood Bajaj MDF/PB has between 40-45% EBITDA Margins
5. Location Advantage Proximity to major consuming markets in north & west India where demand is far in
excess of supply Significantly lower transport costs of finished products Very few Particle Board and MDF manufacturers in north & west India
6. Project Execution Demonstrated ability to execute projects ahead of time and within costs
BEPL – Competitive Advantage
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Plants• Total 3 Plants, one each in Western, Central and Eastern U.P.
– 1 Particle Board Plant – Capacity 50,000 m3 per annum– 2 MDF Plants – Capacity 80,000 m3 per annum, each– Total manufacturing capacity – 2,10,000 m3 per annum
Product Mix• Particle Board • MDF• HDF (High Density Fibre Board)• Laminate Flooring
– All Products available in various thickness & sizes– Both Plain & Pre-laminated boards available, with options of
One Side Lamination and Both Sides Lamination
Production
started in Feb
2008, on
schedule
Project Details
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Summing Up… Going beyond Sugar...1. Sugar Business:
Capacities in place – India’s largest Policies on Sugarcane pricing likely to be favourable
3. Ethanol: The largest producer of Ethanol/Alcohol in India Taking advantage of Ethanol blending program
3. Power Co-generation: About 105 MW of surplus saleable power To add directly to the profitability
4. MDF / PB from Bagasse: Highly profitable line of Business (40-45% EBITDA Margin) Production started in February’08, on-schedule
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Thank You
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