mumbai, July 10 -- With India's sugar sector increasingly constrained by government price controls and climate volatility, Balrampur Chini Mills is making a Rs.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 Rs.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 Rs.180 crore in Ebitda during second half of FY27 and Rs.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. 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 Rs.1.3. The same bottle can be made from just 6.5 gm of PLA at Rs.0.25 per gm -raising the cost to Rs.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." 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."...