From sweet to synthetic: Balrampur Chini's ₹2,850 crore plastic gamble

Mint

09-07-2025

Mumbai: With India's sugar sector increasingly constrained by government price controls and climate volatility, Balrampur Chini Mills is making a ₹2,850-crore wager on a new growth engine: bioplastics.
The country's second-largest sugar producer is setting up its first plant to manufacture polylactic acid, or PLA, a biodegradable plastic derived from sugar. The facility, expected to be operational by early 2027, will be built next to its existing mill in Kumbhi, Uttar Pradesh, and consume roughly 10% of the company's sugar output, according to Stefan Barot, president of Balrampur's chemicals division.
The plant will have a production capacity of 80,000 tonnes per annum, Barot said in an interview in Mumbai.
Balrampur is targeting ₹2,000 crore in annual revenue from the new unit, with Ebitda (earnings before interest, taxes, depreciation, and amortization) margins of 35% at full capacity.
Analysts at Elara Capital expect a more gradual ramp-up: 60% capacity utilization by the second half of fiscal 2027, rising to 75% by FY28. Their models forecast ₹180 crore in Ebitda during second half of FY27 and ₹520 crore for the full year FY28.
While the PLA factory is still under construction, the company has begun importing the material to test market appetite and onboard clients. Barot said he was in Mumbai to meet with prospective customers.
A premium, but lighter, product
Initially, Balrampur plans to target single-use plastic substitutes—bags, straws, sticks, and water bottles—with its PLA offering. The material is not ideal for packaging carbonated drinks, Barot noted, but is well-suited for premium food and hospitality applications where higher packaging costs can be absorbed.
The cost, however, is significantly higher than traditional plastics, roughly two to two-and-a-half times as much.
But analysts at JM Financial argue the effective cost differential is narrower due to PLA's lower weight. For instance, a 250 ml water bottle made from polyethylene terephthalate (PET) requires 13 gm of material, costing about ₹1.3. The same bottle can be made from just 6.5 gm of PLA at ₹0.25 per gm —raising the cost to ₹1.63, only 25% higher.
The material could also be processed using the same machinery that is used to manufacture PET, the JM Financial analysts noted. 'Moreover, the PLA manufacturing process consumes 65% less energy compared to that for traditional polymers. Thus, switching to PLA requires no additional machinery cost and entails lower operational cost compared to PET."
Valuation uplift or mirage?
Bullish analysts see the PLA push as transformative for Balrampur, offering an ESG-friendly growth driver beyond the volatile sugar-ethanol cycle.
JM Financial values the PLA unit at 15x FY27 Ebitda, versus just 8x for the company's traditional sugar and distillery businesses.
Phillip Capital echoed this view in a February note, calling PLA 'a scalable growth model" that could command a valuation re-rating for the company.
But not all are convinced. InCred Equities, in a 5 June report, argued that bullish earnings multiples are misleading.
'We disagree with the complex P/E logic currently applied to the company by consensus, which, we believe, has led to significant discrepancies in target valuation," InCred analysts wrote. 'Input dynamics across sugar, ethanol, and PLA remain fundamentally similar."
InCred's bearish thesis on India's sugar sector rests on four concerns: chronically low domestic sugar prices, erratic export opportunities, rising cane costs, and—now—climate change. 'The unprecedented heatwave in CY25, likely to be followed by record rainfall, reinforces our cautious stance," the note said. 'We also see a high likelihood of an increase in cane prices—where political compulsions are expected to override policy logic."
Still cane-dependent, for now
A key risk, as InCred flagged, is that PLA production doesn't reduce Balrampur's reliance on sugarcane. PLA is made by fermenting sugar into lactic acid and then polymerizing it into plastic. The company's Kumbhi plant will run on food-grade sugarcane, the same input exposed to erratic weather and policy shifts.
Barot acknowledged the challenge.
In the long term, he said, the company plans to diversify beyond cane sugar as the input material for PLA. A lot of biowaste including crop stubble that is normally burned in northern India contains significant sugar content which is not fit for human consumption. However, these sugars could be used to make PLA, Barot added.
This shift would require separate infrastructure, as waste sugars cannot be processed in the same mills that handle food-grade material. Still, Barot said it's a viable alternative over time.
Can India's sugar industry pivot?
Balrampur's PLA bet comes as India's ₹80,000-crore sugar industry is grappling with rising input costs, regulatory ceilings, and climate shocks. PLA, while promising, is still a niche market.
In 2022, India prohibited the manufacture, import, stocking, distribution, sale, and use of 19 single-use plastic products including plastic cutlery, straws and sticks. Many states have also introduced additional prohibitions on plastic items including 250 ml single-use water bottles.
The economics also hinge on government policy.
Uttar Pradesh, where all of Balrampur's 10 sugar mills are located, has introduced a Bioplastic Incentive Policy which offers about 50% capital subsidy disbursed over seven years post commissioning of the plant when capex exceeds ₹1,000 crore. The state government also offers subsidized loans, 10 years of electricity duty exemption and 10 years of net state goods and services tax (GST) reimbursement to bioplastic manufacturers.
Cumulatively, these benefits could amount to twice the original capital invested by Balrampur Chini Mills, as per an estimate from analysts at Systematix Institutional Equities.
Barot, who joined Balrampur in March 2024 after 13 years in the European bioplastics industry, said his immediate focus was to operationalize the maiden PLA plant. Once the plant becomes operational, he will whether a larger plant could deliver better yields.
Whether this pivot marks a new chapter for India's sugar sector—or ends as a costly misstep—will hinge on how well Balrampur executes. For now, the industry is watching closely.