Triveni Engineering looks to invest Rs 210 crore in sugar, transmission businesses

Mumbai: Having more than doubled its ethanol manufacturing capacity over the past year and a half, Triveni Engineering & Industries is now looking to invest Rs 210 crore this fiscal year to enhance its sugar crushing capacity and expand transmission business.
The company will invest Rs 130 crore in the modernisation of three sugar units at Khatauli, Deoband and Sabitgarh in Uttar Pradesh, managing director Tarun Sawhney said. This will help the company double its capacity for pharmaceutical-grade sugar that fetches a significant premium over refined sugar.

The investment will also help the company increase the share of refined sugar in its total production to 60% from 40%.

Typically, refined sugar carries a premium of around 75 paise per kilogram with marginal incremental cost, leading to higher margins over sulphitation sugar, the company said.

It will also invest Rs 80 crore in the power transmission business towards modernisation, expansion, and for the purchase of machinery. The company said in FY22, the power transmission business registered its highest-ever annual revenue and a 57% increase in profitability. The new investment will help continue this momentum, it said. This business has an outstanding order book of Rs 221 crore as of March 31.

Triveni increased its ethanol-making capacity from 320 kilo litres per day (KLPD) to 520 KLPD at the beginning of this month at an investment of around Rs 350 crore. With the completion of two ongoing expansion projects, the company plans to take this up to 660 KLPD by next month. This makes it one of the leading ethanol makers in the country.

Ethanol manufacturers have invested heavily in increasing their capacities, encouraged by the government's push to increase ethanol blending with petrol. The Centre recently announced plans to advance its target of 20% ethanol blending with petrol to 2023 from 2025.

Analysts at ICICI Direct noted in a report last month that the distillery sales of Triveni Engineering were expected to grow at a compounded rate of 41% between FY22 and FY24 to Rs 1,262 crore. That would account for a quarter of the company's revenue.

Sugar segment profitability would improve with better realisation, the analysts said in the report. "We estimate sugar realisation of Rs 36 (per) kg in FY23-FY24. The company is expected to generate Rs 1,530 crore of operating cash flow in the next two years, which would be utilised for Rs 500 crore capex, debt reduction, buybacks and dividends."

Shares of Triveni Engineering closed 2.66% down at Rs 230.15 Friday on the BSE, where benchmark Sensex ended 0.21% lower.