Ethanol is a renewable fuel produced through the fermentation of sugars found in crops such as corn, sugarcane, and wheat. In India, ethanol is primarily produced from molasses, a by-product of sugar production.
Ethanol has gained popularity in India due to its use as a blending agent with gasoline to curb vehicular air pollution as well as reduce the country’s reliance on crude oil imports.
As of currently, India’s industrial ethanol production capacity stands at 13.80 billion liters (BL), with 8.75 BL from molasses and 5.05 BL from grain feedstocks. The Indian ethanol market is expected to reach US$ 6.83 billion by FY 2030.
The Indian government has set ambitious goals in its National Policy on Biofuels to increase domestic bioethanol production and decrease reliance on foreign oil, aiming for a 20% blending rate with petroleum by 2025. To achieve this, India is facilitating and subsidizing entrepreneurs in setting up new distilleries or expanding existing ones, whether molasses-, grain-, or dual-feed-based.
There are three stocks of ethanol-producing companies whose net profit compound annual growth rate (CAGR) has exceeded 20% over the last three financial years.
BCL Industries Ltd
BCL Industries Limited is one of India’s largest agro-processing manufacturing companies with diverse businesses and vertical integrations. BCL Industries Limited is engaged in Edible Oils, Rice Milling, grain-based Distillery and Real Estate. It is present in Punjab and West Bengal.
The company’s revenue has increased from Rs 1,427 crore in FY 20-21 to Rs 2,129 crore in FY 23-24 during the past three years. During the same period, net profit increased from Rs 42 crore to Rs 96 crore, accounting for 31 percent of the 3-year CAGR.
On Friday, the shares of BCL Industries Ltd closed at Rs 54.50, down 1.14 percent from the previous closing price. The company has a market capitalization of Rs 1,484 crore.
BCL Industries Ltd is one of the largest grain-based manufacturers of Extra Neutral Alcohol (ENA) and ethanol in India. Last year, the company commissioned a 200 kilo liters per day (KLPD) ethanol plant, taking the total distillery capacity at this facility to 400 KLPD.
BCL Industries Ltd’s shares have declined by 3 percent in returns over the last six months and 21 percent over the past year.
Magadh Sugar & Energy Ltd
Magadh Sugar & Energy Limited is primarily engaged in the manufacture and sale of sugar and its by-products (molasses, bagasse and press-mud), denatured spirits including ethanol and power. The Company is part of the K. K. Birla Group of Sugar Companies.
The company’s revenue has increased from Rs 952 crore in FY 20-21 to Rs 1,097 crore in FY 23-24 during the past three years. During the same period, net profit increased from Rs 27 crore to Rs 116 crore, accounting for 62 percent of the 3-year CAGR.
On Friday, the shares of Magadh Sugar & Energy Ltd closed at Rs 651, 0.44 percent from the previous closing price. The company has a market capitalization of Rs 917 crore.
Magadh Sugar & Energy Ltd operates three sugar mills with a combined crushing capacity of 19,000 tonnes crushed per day (TCD). Additionally, the company has two distilleries for ethanol production, one located at Narkatiaganj and the other at Sidhwalia, with a total ethanol production capacity of 150 kiloliters per day (KLPD).
Company shares have declined by 18 percent return in the last six months and 77 percent in a year.
Vishwaraj Sugar Industries Ltd
Vishwaraj Sugar Industries Ltd does production and sale of sugar, alcoholic spirits by distillation, including ethanol, blending and bottling of Indian made foreign liquor, vinegar and generation of power.
The company’s revenue has increased from Rs 425 crore in FY 20-21 to Rs 550 crore in FY 23-24 during the past three years. During the same period, net profit increased from Rs 8 crore to Rs 14 crore, accounting for 21 percent of the 3-year CAGR.
On Friday, the shares of Vishwaraj Sugar Industries Ltd closed at Rs 15.88, up 0.25 percent from the previous closing price. The company has a market capitalization of Rs 298 crore.
Currently, Vishwaraj Sugar Industries Ltd has an existing ethanol plant capacity of 100 kilo liters per day (KLPD). The company is investing Rs 250 crore to set up a new greenfield ethanol plant in Karnataka with a capacity of 250 KLPD (2.5 lakh liters per day). This new 250 KLPD ethanol plant is expected to be completed and commissioned by 2026.
Upon the commissioning of the new 250 kilo liters per day (KLPD) ethanol plant, Vishwaraj Sugar Industries Ltd’s total ethanol production capacity will be augmented to 350 KLPD.
Written by Omkar Chitnis
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