Kolkata Wealth Management：Best Ethanol Stocks in India 2024

8 Nov 2024

Best Ethanol Stocks in India 2024

The following table highlights the list of best ethanol shares in India 2024 as per analyst ratings. The list is based on stock ratings provided by analysts who rate a stock after a detailed study of the market-

Best Ethanol Stocks in India (as per analyst ratings)

BUY Analyst Rating (in %)

Dwarikesh Sugar Industries

Triveni Engg

Balrampur Chini Mills Limited

*Our stock selection criteria for top stocks based on analyst ratings are mentioned at the bottom of this blog.

The following table gives a list of the best ethanol company stocks in India based on their market capitalisation:

Best Ethanol Sector Stocks in India (as per Market Capitalisation)

₹ Crore

EID-Parry (India)

₹14,533

Shree Renuka Sugars

₹9,985

Balrampur Chini Mills Limited

₹11,493

Triveni Engg

₹9,853

Bajaj Hindusthan Sugar

₹5,181

*Our stock selection criteria for top stocks based on Market Capitalisation are mentioned at the bottom of this blog.

Here is a brief overview of the top ethanol shares in India as per analyst ratings and market capitalisation outlined above.

Revenue

(Rs Cr)

Revenue CAGR growth (%)

Profit/Loss

(Rs Cr)

Profit CAGR growth

Q1 FY25

3 year

5 year

Q1 FY 25

3 year

5 year

Dwarikesh

341.25

E.I.D. Parry (India)

29,413

6,746.79

225.87

Shree Renuka Sugars

11,319

-32.48

Balrampur Chini Mills

1421.59

Triveni Engineering & Industries

1300.65

Bajaj Hindusthan Sugar

1,385.68

-56.17

-33.13

Working Capital Days

Price to Earnings(P/E)

RoCE (%)

Price to Sales (P/S)

Debt to Equity

Dwarikesh Sugar

E.I.D. Parry (India)

Shree Renuka Sugars

-13.46

Balrampur Chini Mills

Triveni Engineering & Industries

Bajaj Hindusthan Sugar

-42.07

Incorporated in the year 1993, Dwarikesh Sugar Industries Limited is a producer of sugar, ethanol, power, sanitisers, bagasse, fertilisers, pesticides, molasses, and many other products.

Dwarikesh Sugar works with around 1.54 lakh sugarcane farmers across three locations spanning more than 1.17 lakh hectares. Its sugarcane procurement amounts to approximately 382 lakh quintals. Its primary manufacturing units are located in Uttar Pradesh at Bundki village, Bahadurpur village in Dhampur Tehsil, and Faridpur Tehsil in Bareilly District. It has operations in other parts of India too, such as Maharashtra, Delhi, and Rajasthan.

Particulars

Change (%)

Q1 FY25

Q1 FY24

Change (%)

Revenue (Rs Cr)

1,709.50

2102.9

-18.71%

341.25

571.21

-40.26%

Gross Profit (Rs Cr)

450.34

-3.77%

-62.85%

Net Profit (Rs Cr)

104.74

-20.26%Kolkata Wealth Management

-123.93%

EBITDA Margin (%)

12.67%

10.87%

16.56%

13.60%

-93.75%

ROE (%)

10.70%

14.83%

-27.85%

-1.18%

-121.49%

ROCE (%)

12.59%

15.47%

-18.62%

-1.10%

-112.50%

During the first quarter of the financial year 2024-25 (Q1 FY25), the company sold 6.75 lakh quintals of sugar vis-à-vis 9.70 lakh quintals in the corresponding quarter of the previous year – that’s about three lakh quintals less. The primary reason was the early closure of the sugar season 2023-24, which resulted in lower sugarcane crushing activities in Q1.

However, the company was able to sell sugar at a higher price of Rs 3,833 per quintal in Q1 FY25 compared to Rs 3,608 in Q1 FY24. That’s a 6% increase in the current quarter.

The company sold about 123 lakh litres of industrial alcohol compared to 303 lakh litres year-on-year (YoY).

Sugar is sold only against releases. So, since releases were lower during FY24, sales were also lower. In the full year FY24, the company sold 27.52 lakh quintals versus 42 lakh quintals in the last year, which included exports of about 10 lakh quintals. This year there was a ban on exports.

For the full year, industrial alcohol sales were about 94,407 kilolitres compared to 84,175 kilolitres sold in the previous year. During FY24, only 20,944 kilolitres of industrial alcohol were made from sugarcane juice and syrup, compared to 46,203 kilolitres in the corresponding period last year.

No capex is planned for the current year because the crushing numbers were low and due to the negative surprise from the ethanol policy.

Ethanol sales were low during the quarter. This was due to the restrictions imposed by the government on the use of B-heavy molasses and juice for producing ethanol.

In Q1, the net loss of Rs 9.72 crore was chiefly due to overheads not being able to be absorbed. Going forward, the company sees this issue being mitigated.

Triveni Engineering, founded in 1932, is one of India’s largest sugar manufacturing companies. The company has seven state-of-the-art FSSC 22000-certified sugar mills strategically located in the sugarcane-rich belt of Uttar Pradesh.

Triveni Engineering works with over 300,000 sugarcane farmers. A long and close relationship with these farmers has helped the company maintain its product quality and seamless value chain.

Triveni Engineering also operates in various other businesses, viz., engineering, power transmission, water and wastewater treatment solutions, and defence.

Using molasses from sugar production, it produces ethanol and extra-neutral alcohol. According to reports, the company plans to divert 4.5 million tonnes of sugar towards the ethanol program, which amounts to almost 12% of its total sugar production. It also aims to increase its ethanol capacity from 660 kilolitres (kl) per day to 1,100 kl per day.

ParticularsNew Delhi Wealth Management

Change (%)

Q1 FY25Simla Investment

Q1 FY24

Change (%)

Revenue (Rs Cr)

6,151.40

6,310.10

-2.52%

1300.65

Gross Profit (Rs Cr)

1,620.65

2,551.00

-36.47%

301.46

-13.62%

Net Profit (Rs Cr)

1,791.80

-77.94%

-54.16%

EBITDA Margin (%)

13.20%

12.40%

11.40%

-34.21%

ROE (%)

14.21%

78.83%

-81.97%

-66.67%

ROCE (%)

17.57%

57.50%

-69.44%

Net turnover recorded a rise of 8.6% due to a 12% higher turnover in sugar sales and a 5% increase in the sale price of the sweetener. Despite the higher contribution from sugar, profitability of the sugar business was lower on lower output and higher charges by way of off-season expenses.

The industry-wide ban on sugar exports and the prohibition on the use of sugarcane juice to manufacture ethanol negatively affected revenues and profits.

During the quarter, the company did not export sugar.

While the government had set a target of 15% ethanol blending with fossil fuels, the final figure was 13%Bangalore Investment. Though content with this figure for now, going forward, it hopes this number will rise to 20%.

An interesting development was the introduction of maize as a feedstock. Triveni experimented with maize and was successfulLucknow Investment. It now uses maize too, as a feedstock for the production of ethanol, which is then supplied to oil marketing companies (OMCs).

Despite weaker revenues, the profit before interest and taxes (PBIT) for the year improved to 29.4% Y-o-Y due to cost optimisation and savings in the various projects that were executed during the year.

The company does not propose to undertake any fresh capex.

Headquartered in West Bengal and established in 1975, Balrampur Chini Mills Limited produces and distributes sugar, alcohol, ethanol, molasses, bagasse, and organic manure. The company operates power plants at the time of sugar production to fulfil its power needs and sells any excess bagasse in the market.

It has 80,000 tonnes per day sugarcane crushing capacity, a distillery capacity of 1,050 kl per day (KLPD) and a saleable co-generation capacity of 175.7 megawatts. The company operates 24 facilities across 10 locations. It uses composting technology to create bio-composts under various brands like Paudh-Sakti, Jaiv-Shakti, and Devdoot.

Particulars

Change (%)

Q1 FY25

Q1 FY24

Change (%)

Revenue (Rs Cr)

5593.74

4,665.86

19.89%

Gross Profit (Rs Cr)

1,676.81

1,256.00

33.50%

-5.77%

Net Profit (Rs Cr)

534.47

284.16

88.09%

-4.76%

EBITDA Margin (%)

14.05%

10.97%

28.08%

12.73%

13.01%

-2.15%

ROE (%)

17.04%

10.03%

69.89%

-18.90%

ROCE (%)

20.82%

10.44%

99.43%

-14.58%

Q1 FY25 revenues and profit after tax (PAT) fell over 2% and 5%, respectively. The muted numbers were mostly due to regulatory issues surrounding its distillery operations. This resulted in lower ethanol production.

Sugar sales volumes and realisation grew by 3.1% and 5.5%, respectively. The earnings before interest and taxes (EBIT) margins of the distillery business rose by 96 bps y-o-y to 19.1%.

Sugarcane crushing was lower by about 54%, and sugar production fell by about 48%. This was due to lower sugarcane availability. This in turn negatively affected the distillery segment. Also, the fixed overheads could not be absorbed fully in this quarter owing to a lesser number of crushing days (season). Consolidated revenue was up 2.3% YoY to Rs 1,422 crore on a 3% growth in sugar volumes and a 5% growth in sugar realisations.

EID-Parry (India) Limited is engaged in the production of sugars, sanitisers, super grains, and nutraceuticals. Based in Chennai, it is part of the ₹57,000-crore Murugappa Group.

The company is renowned for establishing India’s first sugar plant in 1842. It operates six sugar plants and one standalone distillery across South India, with cutting-edge facilities for sugar crushing, co-generation and distillation. These state-of-the-art plants have a combined sugarcane crushing capacity of 40,300 TCD, co-generation capacity of 140 MW and a distillery capacity of 417 KLPD. It works with over 100,000 farmers by training them on scientific methodologies to increase yield and productivity.

Additionally, EID Parry leads globally in organic spirulina and microalgal products. Its nutraceuticals business includes major international certifications and manufacturing plants in Tamil Nadu. The company also has subsidiaries involved in refined sugar and farm inputs.

Particulars

Change (%)

Q1 FY25

Q1 FY24

Change (%)

Revenue (Rs Cr)

29,413.11

35,244

-16.54%

6,746.79

7,026.45

-3.98%

Gross Profit (Rs Cr)

6,766.56

7,322.00

-7.59%

-8.51%

Net Profit (Rs Cr)

1,617.00

1,827.00

-11.49%

225.87

-30.48%

EBITDA Margin (%)

-15.73%

ROE (%)

24.67%

32.10%

-23.15%

-41.06%

ROCE (%)

-45.65%

-36.21%

During the quarter, YoY revenue was lower due to lower release, and no exports.

In the distillery operations, Q1 sales were about Rs. 3.9 crores litres, consisting of 1.73 crore extra neutral alcohol (ENA) and 2.17 crore litres of ethanol. YoY, sales were 3.43 crore litres, of which 1.2 crore litres were ENA and 2.23 crore litres of ethanol. The average price realisation was Rs 64.31 per litre compared to Rs 61.8 per litre in the previous year.

Going forward, policy changes in ethanol blending, exports, and MSP will set the tone for the company.

Shree Renuka Sugars is one of the biggest ethanol producers and sugar refiners in India. The company’s green energy business includes producing ethanol for blending into petrol and generating electricity. It is one of the major contributors to the Indian government’s ethanol blending program. The company operates eight modern sugar mills, some of which produce ethanol.

The company has an ethanol production capacity of 1,250 kl per day. It is aiming to increase this capacity even further.

Particulars

Change (%)

Q1 FY25

Q1 FY24

Change (%)

Revenue (Rs Cr)

13,319.00

47.66%

32.83%

Gross Profit (Rs Cr)

1,921.70

1,570.36

22.37%

23.30%

Net Profit (Rs Cr)

-627.20

-196.70

218.86%

-166.2

-138.9

19.65%

EBITDA Margin (%)

13.95%

-44.01%

ROE (%)

ROCE (%)

20.89%

11.74%

77.94%

-2.50%

-8.80%

-71.59%

(Will be updated after AGM is conducted on 24 September 2024.)

Bajaj Hindusthan Sugar Limited is one of the top sugar and ethanol manufacturers in India. Based in Maharashtra, it operates 14 sugar plants in Gola Gokaran Nath, Thana Bhawan, Budhana, Palia Kalan, and Khambharkhera, among others. These plants have a combined crushing capacity of 136,000 tonnes of sugarcane per day and a distilling capacity of 800 kl of alcohol daily.

The company is a major ethanol producer, making 38 million litres annually, with plans to increase it to around 218 million litres a year. Additionally, Bajaj Hindusthan generates about 430 megawatts of power from bagasse at its sugar mills. It also operates five coal-fired power plants, generating an extra 450 megawatts for the state grid.

Bajaj Hindusthan is a major player in the sugar industry in India. During the 2021-22 sugar season (October to September), the company accounted for a significant 12% of the sugar production in Uttar Pradesh. However, its debts have been a problem for a long time.

To resolve this issue, it had undergone two debt resolution plans. That still didn’t solve the issue and Bajaj Hindusthan owed banks about Rs 4,771 crore. Of this, a maximum of around Rs 1,192 crore was owed to SBI. The company was declared a non-performing asset (NPA), and SBI and other banks took the company to the National Company Law Tribunal (NCLT).

However, the NCLT allowed SBI to withdraw the petition when the management said it would pay the entire dues. In fact, banks would not have to take a haircut in this case.

Particulars

Change (%)

Q1 FY25

Q1 FY24

Change (%)

Revenue (Rs Cr)

10,832.70

24.72%

Gross Profit (Rs Cr)

1,921.70

1,570.36

1464.9

41.08%

Net Profit (Rs Cr)

-627.20

-196.70

16.43%

EBITDA Margin (%)

-78.61%

ROE (%)

ROCE (%)

While you might find ethanol stocks appealing for investment, it is in your best interest to consider the influencing factors before making a decision. Some of these critical factors are as follows:

The Indian Government may offer subsidies and tax incentives to ethanol producers, influencing stock prices positively.

Policies like the National Biofuel Policy and the Ethanol Blending Program promote biofuel usage, encouraging investment in ethanol companies. You should check the ethanol blending targets set by the government in the past and for the future and see if these targets are being met.

While looking for ethanol stocks for investment, study in detail the demand for ethanol in the country and the potential for exports.

Ethanol production relies on crops like corn and sugarcane, which are sensitive to weather. Droughts, floods, and other extreme weather events can reduce crop yields, negatively affecting ethanol production and stock prices.

Ethanol is used as a fuel additive with petrol and diesel. When crude oil prices rise, ethanol becomes more attractive, potentially increasing the stock prices of companies in this sphere. Conversely, falling crude oil prices can lead to decreased demand for ethanol and lower stock prices.

The production capacity of ethanol companies is crucial. Higher production capacity allows companies to meet demand effectively, potentially boosting stock prices. Also, the technology used and efficiency levels in ethanol production are vital factors prospective investors should consider.

Ethanol producers may export their products, and fluctuations in exchange rates can impact revenue. A weaker local currency can make exports more competitive, increasing revenue and potentially elevating stock prices.

You should carefully analyse the ethanol company’s financial performance by examining its revenue, profit, cash flow trends, growth ratios, and debt levels over the recent years. When evaluating ethanol stocks, prioritise companies with robust financial statements.

When considering investing in the best ethanol stocks, prioritise companies that have a consistent and reliable supply of raw materials like sugarcane and maize, besides infrastructure for manufacturing and sales. This helps reduce the risk of production disruptions and ensures smoother operations for the company.

Ethanol stocks compete for sales through auctions held by oil marketing companies (OMCs). Companies with better margins will have an advantage over their peers.

Also, look for companies that command a bigger market share, as their strengths would be greater than those of other smaller players.

Prospective investors should look at entry barriers for new entrants. The lower the entry barriers, the greater the competition, and vice versa.

Factors such as availability of raw materials, regulatory environment, capital requirements, availability of latest technology, and ready buyers are some of the factors that need to be looked at closely.

It is important to study the management quality to be able to decide on investing. If the company is being led by a team of professional managers, that will give a lot of comfort for all investors – current and prospective.

If the company has a track record of making profits and sharing it with the shareholders, a transparent management style, and not giving undue shocks to investors, the investing public would have a good view of the company.

Thorough research and a balanced approach will help you make informed investment decisions in the ethanol sector. Seek professional advice if needed.

Investing in ethanol stocks requires careful consideration. Factors like commodity prices, government policies, and competition from alternative fuel sources influence the ethanol sectors.

While there is potential for growth in this sector, regulatory changes, market dynamics, and technological advancements can impact their performance.

Before investing in ethanol stocks, it is crucial to undertake research and stay informed about industry developments and government policies. Make sure you regularly review your investment strategy to keep it aligned with your financial goals and risk tolerance.

The ethanol sector in India offers promising investment opportunities amidst the country’s increasing focus on renewable energy sources and reduced reliance on fossil fuels.

Before investing in the top ethanol stocks in India, it is crucial to understand the various factors that influence the market. Moreover, seeking advice from a financial expert who can help you select the best ethanol stocks for maximum return on investment will be a good idea.

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Kolkata Wealth Management：Best Ethanol Stocks in India 2024

Kolkata Wealth Management：Best Ethanol Stocks in India 2024

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