Experts believe that Indian ethanol market should grow from US$2.50 billion in 2018 to US$7.38 billion by 2024. This means that this industry should be able to compound at ~14.50% between 2019-2024 as a result of higher ethanol use in applications including fuel additives and beverages. Ethanol is prominent alcoholic beverage, which is principally found in beer, cider, wine, spirits, etc. Government of India continues to reduce its dependence on imported crude oil and is providing incentives to Indian sugar manufacturers to produce ethanol for some of the Oil Marketing Companies (OMCs). As a result of this, top ethanol stocks are expected to increase their production by 3-5 folds in future to meet demand for 20% Fuel Blending Program (FBP).
Factors which include higher alcohol consumption and change in lifestyle together with higher influence of western culture should stem demand for ethanol in India. In terms of source, Indian ethanol market was divided into sugar & molasses-based ethanol, second generation and grain-based ethanol. On the basis of application, market was segmented into industry solvent, fuel & fuel additive, beverages, disinfectant, etc. Government’s focus on ethanol production from bio-mass and solid waste should act as a major source of ethanol production, which should help top ethanol stocks with healthy and stable growth prospects to improve their revenues and profits.
With this in mind, we will now have a look at some of the top ethanol stocks.
Top 3 Ethanol Stocks to Buy Now
- E.I.D. Parry (India) Ltd
- Triveni Engineering and Industries Ltd
- Dalmia Bharat Sugar & Industries Ltd
1. E.I.D. Parry (India) Ltd
E.I.D. Parry has been named as a significant player in sugar, which has interests in bright areas of Nutraceuticals business. The company has strong presence in farm inputs business with the help of its subsidiary, Coromandel International Limited. It has a 100% stake in Parry Sugars Refinery India Private Limited and US Nutraceuticals Inc, USA.
Consolidated revenue from operations of the company for the quarter ended 30th June 2023 came in at INR7,026 crore, which exhibits a decline of ~2% in comparison to corresponding quarter of prior year of INR7,144 crore. EBITDA for the quarter came at INR652 crore, registering decline of ~13% in comparison to corresponding quarter of prior-year profit of INR754 crore (before exceptional items). Consolidated PAT and non-controlling interest was INR109 crore against INR276 crore in corresponding quarter of prior year.
Profitability of sugar and cogeneration segments declined in comparison to corresponding quarter of prior year as a result of reduction in export volumes because of restrictions which were imposed by Indian Government and lower power realisations. However, it crushed higher cane volumes of ~4.01 LMT in current quarter in comparison to 2.69 LMT in corresponding quarter of prior year.
Distillery segment of the company performed better as a result of higher realisations and increased volumes attributable to new 120 KLPD dual feed distillery facility in Sankili. Further, the company started grain-based operations in Sankili Distillery.
2. Triveni Engineering and Industries Ltd
The company has been categorised as a largest integrated sugar manufacturers in India and market leader in engineering businesses, spanning throughout power transmission, water & wastewater treatment solutions, along with defence.
The company has released its results for 1Q24 for the quarter ended June 30, 2023, with revenue from operations (net of excise duty) coming at INR1197.9 crore and profit after tax of INR67.6 crore, exhibiting a rise of 1.7%.
In sugar & alcohol (distillery) businesses, the company achieved blended sugar realisation of INR37,254/MT, exhibiting a rise of 5.6% in comparison to corresponding previous period as a result of higher export realisations and relatively firmer domestic realisations. It saw highest-ever quarterly alcohol production of ~5.04 crore litres, up by 19% over corresponding previous period. This was seen because of additional capacities & expansions commissioned. There was an increase in net turnover of alcohol business by ~21% during 1Q24, as a result of higher distillation capacities.
Net turnover of the company fell by ~2.3% in 1Q24 mainly as a result of reduced turnover in sugar business while alcohol and aggregate engineering turnover saw an improvement over previous corresponding period. In Sugar business, the company’s focus is on yield improvement initiatives by making farmers adopt best agricultural practices, with the help of continual engagement with them and showing them final results in demonstration plots which have been established.
3. Dalmia Bharat Sugar & Industries Ltd
Dalmia Bharat Sugar and Industries Limited announced its financial results for the quarter ended 30th June, 2023.
Dalmia Bharat Sugar & Industries Ltd saw fairly good quarter results principally because of better operating parameters, higher distillery sales as a result of grain distillery at Jawaharpur unit and contribution from grain distillery. Sugar inventory as on 30th June 2023 came in at 1.72 Lac MT and was valued at INR30.9/Kg.
It has closed crushing for sugar season 22-23 with 3 units namely Jawaharpur, Nigohi & Ninaidevi seeing highest-ever crush. UP cane crush was higher by ~15% in comparison to last season. Fair and Remunerative Price (FRP) grew Rs. 10/qtl for SS 23-24 at the base recovery of 10.25% with premium of 3.07/qtl for every 0.1% higher recovery over base.
The company estimates sugar production for SS 22-23 to be at 32.8 Mn MT (net of diversion of 4.1 Mn MT) as compared to 35.8 Mn MT (SS 21-22) mainly because of lower yields in Maharashtra and Karnataka.
According to the company’s preliminary estimates for SS 23-24, sugar production should be ~31.8 Mn MT (net of diversion of 4.5 Mn MT).
While above are some of the top ethanol stocks, there are several other companies in the same sector which are expected to deliver strong growth momentum due to the growth opportunities provided by ethanol industry.
Indian government’s focus on ethanol production from bio-mass and solid waste should become a significant source of ethanol production in future, which is likely to increase funding in this industry, and this should benefit top ethanol companies. As per OECD-FAO Agricultural Outlook 2018-2027, demand for biofuels continues to shift to emerging economies, which should rapidly place policies favouring domestic bio-fuels market.