Dhampur Bio Organics Limited — Credit Ratings, 10-04-2025: Credit Rating- Revision

**Consolidated Financial Results**

Dhampur Bio Organics Ltd has reported a total operating income (TOI) of ₹1,421.6 crore for the nine months ending December 2024, marking a modest increase of 2% year-over-year from ₹1,387 crore. However, the company experienced a significant decline in profitability, with net profit falling to a loss of ₹27.56 crore compared to a profit of ₹112.02 crore in the corresponding period last year. This downturn can be attributed to reduced cane availability and lower gross recovery rates, influenced by red rot infestation and adverse agro-climatic conditions.

**Operational Costs**

Overall operational costs have increased, contributing to a decline in Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) margin from 5.37% in FY24 to just 3.1% in the first nine months of FY25. The increased inventory levels, currently at ₹419 crore, highlight inefficiencies in sales and production within the cyclically volatile sugar industry.

**Balance Sheet & Cash Flow**

The company’s financial risk profile has shown moderation with an increase in overall gearing from 0.81x to 1.04x due to heightened working capital borrowings. Interest coverage has dropped to 0.94x, reflecting tighter liquidity as cash accruals decline significantly.

**Strategic Position and Outlook**

Going forward, the company is focusing on adopting higher yielding cane varieties to mitigate pest infestations and improve productivity. Despite a challenging environment, there remains potential for operational performance recovery as restrictions on ethanol production ease.

**Investor Insight**

Given the current financial performance, ongoing operational challenges, and uncertainties surrounding cane production, a cautious approach is warranted. A "hold" position may be appropriate as the company works through these difficulties with strategic improvements.