IFB Agro Industries Ltd is expecting 2023-24 to be a “challenging year” for its alcohol business and expects the margins to be impacted due to excess supply, increase in prices of non-edible grain and fuel cost. The company had registered nearly 31 per cent drop in gross revenue from operations on a standalone basis at ₹1,571 crore for the year ended March 31, 2023.

The company had invested in the capacity expansion of the distillery unit from 110 KL to 170 KL per day during 2021-22 but could not operate the distillery at its full capacity, as supply of Extra Neutral Alcohol (ENA) in West Bengal is now more than the demand.

“With setting up of excess capacity of ENA in the State along with increased demand of the non-edible grain by the ethanol plants, margin in distillery is likely to be impacted due to excess supply, increase in the prices of non-edible grain and fuel cost,” the company said in the latest annual report (2023).

Absence of import fee on ENA from other states along with high input cost has further put the margins under pressure. While all major States in India have levied an import fee in order to protect their State distilleries, there is no import fee in West Bengal but it levies duties on export of ENA, which has put distilleries in the State in a disadvantageous position in comparison to those in the neighboring states.

The abnormal increase in the prices of the India Made Liquor (IML) from January 2023 by the Bengal Excise Department will have huge impact on the demand, as the same has been made unaffordable for the people at the bottom of the pyramid. The IML business witnessed a sharp decline in volume in the industry during the year as there has been a sharp increase in the prices by 30 per cent (MRP). The company has made several representations to the excise department and has written letters to West Bengal Chief Minister, Mamata Banerjee to reconsider such exorbitant increase in price.

“The business continues to face issues as reported earlier and in order to maintain the continuity of the business and to protect the interest of all the stakeholders, the company paid around ₹18 crore towards subscription of the electoral bonds during the year. The company has further paid ₹15 crore towards subscription of such bonds in April 2023. The stiff competition along with the issues faced has led to decline in the volumes by nine per cent,” it said.

Marine products

The company registered nearly 30 per cent growth in revenues from marine exports due to better demand in export market. Margins improved to close to 3.3 per cent during 2022-23, as against 1.7 per cent during the year ago period backed by higher volume with efficient raw material buying, strict control on overhead and better working capital management.

The company will focus to improve margins by strengthening its marketing reach by adding new supply destinations, reducing overhead and by increasing overall efficiency, it said.

Marine aqua feed business revenue grew by 38 per cent and the company’s own branded fish feed — Nutrisigma and Nutrafeed — witnessed a revenue growth of 59 per cent.

The company is setting up a fish feed manufacturing facility at Balasore, Odisha to strengthen its position in the fish feed segment. The plant is expected to start the commercial production from March 2024.

Marine domestic food business grew by 87 per cent, due to higher sale in the HORECA segment.