Join us as we chat with Athar Shahab (MD) and Nishant Dalal (CFO) from Zuari Industries Ltd. They dive into the company’s evolution from Zuari Agrochemicals, its ventures in sugar, real estate, bioenergy, and more.
Rumela Banerjee: Hi, this is Rumela Banerjee and joining me today, Athar Shahab, Managing Director and Nishant Dalal, Chief Financial Officer at Zuari Industries Limited Ltd. Many thanks for joining.
Mr. Athar, a legacy brand for the last five decades, tell us about the origins.
Athar Shahab: Thank you, Rumela. We are an offshoot of the company called Zuari Agrochemicals. As part of an internal reorganization exercise, we were created initially as Zuari Global Ltd.
in 2011. And at that time, the idea was that all the non-agri businesses should be housed in Zuari Global. So the businesses of sugar, real estate, financial services, and furniture were all put under Zuari Global.
And we were also assigned the task of holding the strategic investments of the group. So that’s how we have evolved. And of course, we carry the Zuari name and the whole legacy of Zuari Agrochemicals that was established in 1967 by our late founder, Dr. KK Birla.
And I think we carry that forward in the sectors of our interest, which are the sugar bar and ethanol business, the real estate business, and now the newly started bioenergy business. And of course, everything else that we inherited, such as the financial services, the furniture, and so on.
Rumela Banerjee: What are the biggest challenges you face as a company? Being in the agri business, are you subject to the usual vagaries that come along with agri? And how do you overcome it?
Athar Shahab: See, there are three sets of factors that impinge on anybody in the agri industry.
First set of factors are actually natural factors. So a large country like ours is affected by all kinds of natural elements. And they have an impact on all the agri commodities.
And they go through various cycles. We are also impacted by not only the natural events, but also the various infestations and so on and so forth. The second set of factors are around government policy and regulation.
So you have the whole set of challenges around the political economy and the agri sector is very closely intertwined with the core of the Indian economy. And therefore, there are many policies that the government has put in place to ensure that the sector operates within certain boundaries. And while a lot of this comes as a support, a lot of this also means that you have to be very careful about what you can do and what you cannot do.
And lastly, the challenges of reaching out to the customers and consumers, the supply chain. We are also part of a global supply chain as well as a domestic supply chain. So both on the issue of sourcing of raw materials and then distributing the finished products across the country.
I think the issues are quite familiar, but we’re very proud that we contribute to the economy of the country at a very fundamental level. We are a very respectable group and a respectable company. People trust our company and our brands.
And I think we take a lot of pride in making a difference to the farmers and other stakeholders in the agri-economy of the country.
Rumela Banerjee: Sugar, a key business and a highly regulated one, how has your experience been working in the industry?
Athar Shahab: See, sugar has gone through multiple cycles, but I must say that in the last few years, the government has taken many positive steps. So you had the big push towards making bagasse-based power.
So a lot of the sugar units actually set up bagasse-based four-generation units. And long-term BPAs were signed with sugar companies, which was very helpful. Then we were all encouraged to set up ethanol plants.
So most of the sugar companies will now have distilleries attached to them. So from purely producing sugar, now we have become an integrated complex. Where we have sugar facilities, we have power generation facilities, and we have distilleries.
And as you know, India has a large ethanol blending program, so it all feeds in very well into the overall energy transition story. But there are a couple of things that, of course, affect the industry negatively. For the last couple of years, we have not been able to export sugar, and that has affected the performance of most sugar companies.
There was also a restriction on use of syrup to make ethanol, and that also impacted the performance of the companies. But overall, we are very positive about the future of the industry. And I think this industry has really transformed the state of Uttar Pradesh, which is now known as Gannapradesh, as you probably know.
And we are very happy that we are playing a very important role in the growth of that industry, Rumela. And time permitting, we can also talk about a number of initiatives that we are taking to improve our yield or to bring in digital tools and techniques in all aspects of our cane development and operations.
Rumela Banerjee: We’ll go to you now, Nishant. How do you work around upping margins, profits in a commoditized business like sugar?
Nishant Dalal: See, we are focused on both our, you can say, growth in both top line and bottom line. So for us, our focus has been on opportunistic sale of sugar in the domestic market when exports are not there. And when we got the opportunity to export earlier, we have used and leveraged our global connections with trading houses, and we are able to get much better realizations even on our exports.
So that’s how we are continuously monitoring the market. We do various data-driven decision making, which helps us predict also based on seasonality of, you can say, sugar market, we are able to, you can say, get those insights, which help us get better margins. Then even in the ethanol space, if we talk about it, we are very meticulous, you can say, controlling our complete quota for ethanol, which is allocated to us where we get better yields.
Operationally, also, we are working on, you can see, improving the operational efficiencies across the complete value chain of the sugar business. So we are doing a lot of varietal changes in sugarcane crop cultivation, which helps us get better sugar recoveries, if you know about our numbers. So we have, there is a tremendous improvement in recovery over last year.
And then operationally, other decision making, as well as you can see, if we talk about our growth also. So we are working on various incubation projects, wherein we are working on better value-added products in our sales mix. So these are the few factors which are helping us, you can say, stay ahead of the margins as compared to the industry as a whole.
Rumela Banerjee: Athar, so you have a massive distillery under construction. What sort of ROI are you looking at and when will the operations begin?
Athar Shahab: We have a distillery under construction in Lakhimpur, Aira, next to the sugar complex that we have. It will be a 180-KLPT distillery, grain-based.
And you know, I can’t disclose the exact ROI, but what would suffice to say that this ROI is very much in line with what other industry players can expect. We have access to the latest technology through our partners, NVN, which is one of the leading players in ethanol in Europe. And together we want to build a high-quality biofuels platform.
So we are very excited about our first project and we look forward to building a large portfolio of bioenergy facilities.
Rumela Banerjee: What have your focus areas been in the last few years?
Athar Shahab: We are right now focusing, Rumela, on three growth verticals. The first one, of course, is our core business of sugar power and ethanol.
And you have probably noticed that the operational performance of this business has improved. And we are working constantly on improving all aspects of the operational performance and applying, as I mentioned earlier, a whole lot of digital tools and techniques to further improve our efficiency. The second growth vertical is real estate.
And in the real estate business, we have delivered projects in Mysore. Three phases have been delivered, four phases under construction. We’ve also delivered a project in Goa, and our real estate company is building a project in Dubai, which should be delivered sometime in early 2026.
So put it together, I think there is a fair bit of capability built in the last decade or so. And I think this business is poised for growth. And we are looking for multiple opportunities, both on the land that belongs to the group itself, as well as external opportunities.
The third vertical that we are targeting is biofuels. And in biofuels, as I mentioned earlier, we have this very important strategic relationship with NBN of Europe. And I believe that we should certainly be able to make a significant presence in the Indian bioenergy sector.
Rumela Banerjee: Nishant, we have seen an amazing improvement in the profit EPS of the last three years. What do you think has driven that?
Nishant Dalal: So if we talk about the greater emphasis we have put, I will say our last three to five years is on, you can say, utilizing our capacities to the optimum level and improving the operations. So if you look at our operating EBITDA and EBITDA levels, there is a considerable improvement which has yielded better profits and hence the improvement in EPS.
Another key factor is the various other business of the group, other than SP, also if you talk about, so the real estate as Mr. Arthur just talked about. So our real estate projects also, if you talk about in the last three years, there have been considerable improvement across the industry also, and we have also benefited from that. Our domestic real estate projects are also yielding us better, you can say, returns as well as our global project or overseas project of Dubai, which will be, you can say, about to, will go about to handover stage in next one and a half year to two years.
So that will further drive our EPS and profit, profitability of the business.
Rumela Banerjee: Just like you have mentioned, you have a significant number of financial investments in the group’s operating entities, including Texmaco Rail, Mangalore Chemicals, all big names. Are these long-term permanent holdings for Zuari or are they more tactical?
Nishant Dalal: See, they are all our strategic investments. Zuari Industries being an operating company with operations in sugar, real estate and others, we are also the apex holding company for the advanced group. Similarly, if you talk about Chambal Fertilizer, which is a pretty core strategic investment for us, we have been the promoter for Chambal since 94 and continue to be that, which are our long-term strategic investment. Then even on the engineering side of the business, so Texmaco Rail and Texmaco Infra, we are the promoter entities and these continue to be the strategic investment for us.
Rumela Banerjee: Nishant, what do you think of the call auction process by SEBI? Would you consider participating in it?
Nishant Dalal: Well, Rumela, the circular outlines specific criteria applicable to various listed investment companies or investment holding companies. These companies are typically those which have minimal or no day-to-day operational activities and they focus primarily on investing in various asset classes, including shares or any other listed security. For us, Zuari Industries, this classification is not applicable.
We are an operating company and the investments which we hold are as a hold, which are strategic in nature.
Rumela Banerjee: Mr. Shahab, what is the best way to look at the true intrinsic value of the company according to management?
Athar Shahab: As part of our strategy, which we have mentioned earlier as well, is that there are large land parcels that the company owns and the company has been selling those land parcels to other people. Now as and when those land parcels are sold, obviously they impact the top line and bottom line.
So, I think anybody who is looking at our company has to look at these different parts of our company and apply an appropriate methodology to arrive at the value. That’s all I can say.
Rumela Banerjee: Alright, that’s all for now. Thank you for your time and many thanks for watching.