Bajaj Hindusthan has posted a net profit ofRs 60 crorein the June quarter as against a loss of Rs35 crore in the year-ago period, mainly on higher price realisations. Although it sold 1.4 lakh tonne sugar in the June quarter. Against 2 lakh tonne for the first quarter of FY09, a higher average selling price at Rs 23.50 a kg as compared to Rs 14.80 earlier helped it post better results. In an exclusive interview with ETNOW, BajajHindusthan Joint Managing Director Kushagra Nayan Bajaj decodes the company's financial performance. Excerpts:

Question : Can you please elaborate on foreign exchange and sugar prices contribution in your company's good show?
Answer : OutofRs72 crore profit before tax, Rs 34 crore is on account of gains accruing through the buyback of foreign currency convertible bonds (FCCBs). The rest are from operations, higher realisations, better efficiency and a small pan from interest savings. We have reduced our debt by about Rs 1,000 crore to Rs 3,000 crore after the QIP in the last quarter, though the benefit of the QIP will be reflected only in the subsequent quarters.

Question : How will you address theRs3,000-crore debt?
Answer : Over the next two years, we should comfortably be able to reduce another Rs 1,000-1,500crore of debt. Today, we have ·a debt-equity ratio of less than 1:1, which is better than 2.5:1 earlier. We intend to bring it down to below 0.25 over the next two years.

Question : What are your plans on raising money?
Answer : Better cash flows will be a key determinant. Whether we raise more money or not will depend on how the markets behave. We've recently completed one exercise and there is no hurry for now. There is no stress on the balance sheet. Stress from the balance sheet has gone .

Question :What has been the average sugar realisation for the quarter gone by and how do see it playing out during the rest of the year?
Answer : This quarter, the average realisation was about Rs 23.5/kg. We sold just 0.15 lakh tonnes of sugar ·against 2lakh tonnes for the same period last year. We are still sitting on 60%inventory. Going forward. We believe sugar prices will be upwards of Rs 30/kg.

Question : You are indicating that on an expanded capacity, you will actually have a gain of Rs 7/kg.
Answer : Next year, we believe our production will go up by 50%, partly because of slightly higher production from sugarcane domestically. Besides, we've imported 3 lakh tonnes of raw sugar at an average pricing of about 14.5 cents, which translates into Rs 22/kg at the factory, when converted into white sugar. With this our production and volumes will be up 50% year-on-year. Against 19.5-20 cents right now, we contracted the deal at 14.5 cents, which means there is potential to make reasonable money next year.

Question : Your seem to have hedged 3million tonnes raw sugar. Does that mean you are worried about sug arcane availability next year?
Answer: I think sugarcane availability and production will be almost at this year's level. There will be a demand­ supply mismatch of 5-7 million tonnes that will have to be met through imports. At our end, we've contracted about 0.3 million tonnes which will help in producing a million tonnes of sugar.

Question : How will the drought in UP affect you?
Answer : The drought needs to broken down into three regions - western, central and eastern UP. In western and central UP. we expect production to go up by 5-10%. In eastern UP. rain is a problem and we expect total production to fall by 20-25%. We have imported 0.3 million tonnes of raw sugar at 14.5 cents. Therefore, on a consolidated basis, we expect our volumes next year to increase by 50-60%.

Question :Can you give us an update on ethanol business?
Answer :The ethanol programme will end in October this year. The government is going to come out with fresh tenders for 1-3 years. Right now, we are mak ing money on ethanol though not as much as in rectified spirit since ethanol prices were booked at Rs 21.5a litre as against domestic prices of rectified spirit at Rs 29-30 a litre. With a fresh tender, the new contracted price for a couple of years will be substantially higher than Rs 21.5 which is good for our profits.