Ethanol 100: Top 5 Stocks to Add to Your Watchlist

With countries worldwide united in their fight for a sustainable future, clean energy and biofuel is a game-changer.

Ethanol 100 is the newest entrant in the biofuel space that can bid farewell to gasoline. This high-octane powerhouse is eco-friendly. Sugar undergoes pre-treatment, hydrolysis, and fermentation, after which it is distilled to manufacture ethanol.

The Indian government is taking a monumental step towards a sustainable future by aiming for a 20% ethanol blend to be used mainstream by 2025-26. Oil Marketing Companies (OMCs) are ramping up distribution of E20 to cover 12,000 stations.

Let's look at the stocks of companies that stand to benefit from this sector.

#1 Praj Industries

First on the list is Praj Industries.

Praj Industries Limited (PIL) is an industrial biotechnology company offering various processes and systems for producing ethanol and biodiesel. It also provides design and engineering services for brewery industries.

The company currently has four world-class manufacturing facilities in Gujarat and Maharashtra.

The company uses 1G and 2G ethanol technologies combined with sustainable solutions for sugar streams and lignocellulosic business.

Despite multiple challenges, the company remains at the forefront of the biofuel sector.

The R&D unit in Pune is pioneering sustainable aviation fuel (SAF) technology, inaugurating a pilot project in January 2024. It has also formed a JV with Indian Oil for biofuel production, a project established ahead of schedule compared to Brazil.

Its subsidiary Praj Gex X is taking a major step forward by setting up a Mangalore plant specifically designed to cater to the growing Energy Transition and Climate Action (ETCA) segment.

This significant investment of Rs 1 bn is under construction and slated for completion in 2024.When fully operational, it can boost the company's revenue by Rs 20-25 bn.

Praj Industries is a debt-free company with a history of expanding its own funds. Identifying SAF as the next big opportunity in biofuels, their vision extends beyond the current challenges in the ethanol market.

Globally, airlines are expected to start blending SAF from 2027 onwards. This means that these companies must start working on incorporating SAF into their operations within the next year.

Praj Industries Financial Snapshot (2021-2023)

	FY21	FY22	FY23
Total Revenue (in Rs m)	13,481	23,173	36,419
Operating Profit Margin (in %)	8.60%	8.70%	8.60%
Net Profit (in Rs m )	811	1,502	2,398
Net Profit Margin (in %)	6.20%	6.80%	6.70%

Source: Equitymaster

#2 EID Parry

Next on the list is the Murugappa group-owned sugar manufacturer EID Parry.

The Chennai-based company manufactures sugar and bio products. The portfolio expands to organic spirulina, sanitiser, natural astaxanthin, pharma-grade sugar, jaggery, and refined sugar.

It also has an R&D centre for sugarcane and tissue culture that focuses on developing new and improved cane varieties of sugar.

Currently, the company has six sugar factories with a crushing capacity of 40,300 tonnes of cane per day, generating 140 MW of power, and five distilleries with a total capacity of 297 KLPD.

The company is building new distilleries to increase biofuel production capacity.

It is also venturing into the FMCG sector with value-added products like jaggery, brown sugar, and millet, catering to the growing demand for healthy food options.

It is also embracing new-age technologies like drones for pesticide application and AI-powered irrigation systems. These investments, along with its multi-lingual app for its network of 5,000+ farmers, are expected to improve crop health monitoring, yield forecasting, etc.

The company closed some of its underperforming factories and augmented capacities in areas with better cane availability.

It has also grown its distribution network to 70,000 retail outlets to boost retail sugar sales.

Following the government's impetus on Ethanol Blending Program (EBP), the company is working on doubling its biofuel volumes from 297 KLPD in 2022 to 582 KLPD by April 2024.

As a result, the company's overall revenue could increase by 35% in the next year.

EID Parry Financial Snapshot (2021-2023)

	FY21	FY22	FY23
Total Revenue (in Rs m)	187,309	237,742	354,575
Operating Profit Margin (in %)	10.6%	10.0%	8.6%
Net Profit (in Rs m )	9,998	15,737	18,277
Net Profit Margin (in %)	5.4%	6.7%	5.2%

Source: Equitymaster

#3 Bajaj Hindusthan Sugar

Next on the list is Bajaj Hindustan Sugar.

This company is the largest sugar and ethanol producer in India.

With 14 sugar mills and six distilleries in Uttar Pradesh, the company is also a leader in by-products such as molasses, bagasse, fly ash and press mud.

More than 500,000 farmers supply sugarcane to the company, which has a crushing capacity of 136,000 tonnes per day and an alcohol distillation capacity of 800 KLPD.

It has partnered with EverEnviro, a leading Compressed Biogas (CBG) sector player, to establish cutting-edge biogas plants in Uttar Pradesh.

This capitalises on the company's massive production capacity of 500,000 metric tonnes of press mud annually from 14 operational sugar mills. This biomass will now be transformed into clean, renewable energy.

The company is on track to become Asia's largest crushing capacity owner and a global leader in the industry.

The company has two options in this partnership: sell press mud at predetermined long-term prices or become an equity partner in the CBG plant project.

The company plans a strategic approach to realise partial value for press mud through cash and equity in the CBG project.

Bajaj Hindusthan Sugar Financial Snapshot (2021-2023)

	FY21	FY22	FY23
Total Revenue (in Rs m)	66,887	56,076	63,606
Operating Profit Margin (in %)	2.40%	3%	4.10%
Net Profit (in Rs m )	-2,908	-2,675	-1,347
Net Profit Margin (in %)	-4.40%	-4.80%	-2.10%

Source: Equitymaster

#4 Balrampur Chini

Next on the list is Balrampur Chini.

This company manufactures and distributes sugar, alcohol, ethanol, molasses, bagasse, and organic manure. It also generates and sells power.

Currently, the company has operations in 3 segments - sugar, distillery, and others with 10 sugar plants in Uttar Pradesh with a crushing capacity of 775,000 tonnes of cane per day. The company manufactures green power using waste product bagasse instead of fossil fuels.

The recent government move to increase the floor price of sugarcane is unlikely to impact the company. The company is shifting its focus towards ethanol production over sugar exports.

With expertise in ethanol manufacture, the company is pushing innovation boundaries with India's first industrial bioplastics plant. This plant uses sugarcane as a raw material for polylactic acid (PLA) production, offering a plant-based alternative to traditional plastics. It is targeted for completion in 2027.

Currently, the company has plans to invest Rs 20 bn in the bioplastics unit. Balrampur Chini leverages internal accruals of Rs 8 bn and manageable debt of Rs 12 bn to fund this investment.

The facility for bioplastics production will be integrated into the existing sugar plant. Once installed, the plant will have a production capacity of 7.43 tonnes by 2028. The sugarcane to PLA factory at one site is expected to bring in a revenue of Rs 15 bn to 20 bn for the company.

The global bioplastics market is expected to have a CAGR of over 16% from now to 2028. PLA, a key bioplastic, is expected to dominate this market, contributing to 43.6% of the production capacity in 2028.

The company is partnering with renowned technology leaders such as Sulzer AG, Alpine Engineering GmBH, and Jacobs Solutions to make it happen.

Also, Balrampur Chini is powered by its own biogas infrastructure, ensuring a sustainable production cycle.

Balrampur Chini Financial Snapshot (2021-2023)

	FY21	FY22	FY23
Total Revenue (in Rs m)	48,396	48,790	47,287
Operating Profit Margin (in %)	15.20%	14.70%	11.20%
Net Profit (in Rs m )	4,798	4,646	2,842
Net Profit Margin (in %)	10%	9.60%	6.10%

Source: Equitymaster

#5 Triveni Engineering

Last on the list is Triveni Engineering Industries & Limited (TEIL).

TEIL is the second-largest sugar maker and a market leader in engineering. The company produces ethanol and extra-neutral alcohol using molasses from sugar production. It also provides power transmission, including high-speed and niche low-speed gears and gearboxes.

Its solutions also include engineered-to-order process equipment and water & wastewater management. Apart from the above, TEIL also specialises in defence services.

Multiple FMCG brands like Yasuda, Sansui, Panasonic, Samsung, and Symphony are from TEIL.

The company acquired a 25.43% stake in Sir Shadi Lal Enterprises for Rs 350 m. It has also launched an open offer to shareholders to acquire an additional 26% stake.

Plans are underway to commission a new dual-feed distillery at Rani Nagar, expanding ethanol production to 860 KLPD.

The company will foray into the lucrative Indian Made Foreign Liquor (IMFL) segment from April to June 2025. A new bottling plant in Muzaffarnagar is being established to support this venture.

The company has diversification plans despite its 6.7% decline in the October-December 2023 profit.

The unbundling of TTL allows Triveni Engineering to focus on expanding core assets. The company recorded the highest-ever net turnover of Rs 56 bn in 2023.

Its sugar and power business continues to perform well, with 8% YoY growth in distillery and 17% YoY growth in power transmission.

The distillery business has seen a lot of activity, with 92% of sales coming from ethanol.

It has postponed the expansion of the Sabitgarh distillery, following its policy changes to combat challenges in acquiring permitted grains at viable costs.

The company also has plans to acquire new sugar mills in other parts of the state.

Triveni Engineering Financial Snapshot (2021-2023)

	FY21	FY22	FY23
Total Revenue (in Rs m)	46,754	39,158	50,185
Operating Profit Margin (in %)	12%	17.50%	41%
Net Profit (in Rs m )	2,946	4,241	17,918
Net Profit Margin (in %)	6.30%	10.90%	36.40%

Source: Equitymaster

In Conclusion

India is at the forefront of the clean energy revolution, pioneering the adoption of Ethanol 100, compatible with a wide range of vehicles. The first 100% ethanol-fuelled Toyota Innova was launched in August 2023.

It is the world's first electrified flex fuel vehicle. This car running purely on ethanol paves the way for a significant reduction in reliance on fossil fuels.

A robust and reliable domestic industry eliminates concerns about ethanol availability.

Ethanol is a compelling game-changer in the biofuel sector as it's derived from renewable sources like sugarcane, reducing greenhouse emissions.

When ethanol consumption increases to 20% from the current 12%, the agricultural growth rate is projected to surge by Rs 2,000 bn.

The government envisions a future for vehicles running on ethanol, promoting energy independence and environmental responsibility.

Ethanol 100 has great potential to become mainstream with the proper infrastructure development.

As the government is already taking steps to expand ethanol availability, the biofuel future for India is looking bright. The country is slowly shifting towards sustainable technologies and decarbonisation.

Watch out this space as we bring more news on sugar and ethanol stocks in India.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...