Ethanol, a clean-burning fuel, is derived as a by-product of the sugar industry and is produced from various plant sources like sugarcane, corn, and wheat. It is commonly blended with gasoline to reduce harmful vehicle emissions. Ethanol is recognised as a biofuel and is widely used as an alternative to traditional fuels worldwide.
In India, ethanol production primarily relies on sugarcane molasses, which is then utilised as an additive to gasoline. The ethanol industry is experiencing substantial growth due to increasing demand for cleaner energy sources, driven in part by the government’s commitment to sustainable and eco-friendly energy solutions.
Consequently, ethanol stocks have attracted significant attention from investors in the stock market.
Over the years, ethanol-producing companies in India have witnessed a remarkable surge in their stock prices, reflecting the growing interest and optimism in the ethanol sector. This trend is a result of both the industry’s intrinsic potential and the government’s emphasis on transitioning towards greener energy sources.
Now, let’s look at the top ethanol stocks in India and understand more about the industry.
Top Ethanol Stocks in India
|Name||Market Cap (in ₹ Cr.)*||Revenue (in ₹ Cr.)*||Net Profit (in ₹ Cr.)*||5 yr CAGR (%)||PE Ratio (x)*||ROE (%)*||Debt to Equity Ratio (x)*|
|Shree Renuka Sugars||11,598||9,021||-197||31.26||-58.68||–||-6.32|
|EID Parry (India)||8,972||35,244||947||19.39||11.50||37.06||0.27|
|Balrampur Chini Mills||8,116||4,666||284||39.26||23.51||9.57||0.65|
|Triveni Engineering and Industries Limited||7,262||6,310||1,792||54.04||4.05||17.06||0.34|
|Dhampur Sugar Mills||1,800||2,784||158||39.11||11.01||14.93||0.71|
Note: The above list of ethanol stocks is dated September 24, 2023. The following parameters were used to get the list:
- High ethanol producing companies
- Low debt-to-equity ratio
- Positive 5-yr CAGR
Now, let’s look at these stocks in brief.
Shree Renuka Sugars
Shree Renuka Sugars Ltd (SRSL), founded in 1995, is involved in the production and refining of sugar, ethyl alcohol, and ethanol and the generation and distribution of electricity. The company operates as a subsidiary of Wilmar Sugar Holdings Pte Limited and has a presence in various sectors, making it an emerging player in the ethanol market.
SRSL, a subsidiary of Wilmar Sugar Holdings PTE Limited, manages integrated sugar mills and port-based refineries in India. The company’s core activities encompass Sugar, Ethanol, and Power generation.
- Sugar: SRSL manufactures and markets White/Refined Sugar under the brand name “Madhur Sugars.”
- Ethanol: The company produces three grades of ethanol (Absolute Alcohol, Rectified Spirit, Extra Neutral Alcohol) as a by-product of sugar manufacturing. Ethanol is used as a bio-fuel and chemical ingredient and is supplied to the alcohol industry.
- Power: Renewable power is generated from bagasse (a sugarcane byproduct) for in-house consumption and sale to the state grid.
- Bhumadur Organic Manure: SRSL manufactures organic manure, known as Bhumadur, using sugarcane press mud and distillery spent wash.
Market Cap: ₹11,598 crore
Manufacturing Capacity: 12.5 lakh litres of ethanol per day
Key Financial Metrics – FY23:
- Revenue: ₹9,021 crore
- Net profit: -₹197 crore
- P/E Ratio: -58.68
- Debt to equity ratio: -6.32
- Promotor holding: 62.48%
EID Parry Limited, an Indian public corporation headquartered in Chennai, Tamil Nadu, boasts an extensive history spanning over 225 years. Throughout its existence, the company has achieved numerous notable milestones, one of which is pioneering the production of fertilisers in the Indian subcontinent, dating back to 1906. Presently, EID Parry Limited is actively involved in the production and promotion of sugar and bio-based products. Notably, Parry’s stands as the most ancient enduring commercial identity in Chennai.
- Sugar: Over two centuries of sugar manufacturing expertise, offering tailored sugar products.
- Nutraceuticals: Formulates science-based nutraceutical supplements, functional foods, cosmetic ingredients, and pharmaceutical formulations.
- Sanitisers: Introduced hand sanitisation products – Handkleen & Sterisafe.
- Cogeneration – Power: Aggregate cogeneration capacity of 140 megawatts, exporting 52% of generated power.
- Distillery: Produces industrial alcohol and ethanol with multiple distilleries, including a new 60 KLPD distillery erected at Bagalkot in FY22.
Market Cap: ₹8,972 crore
Manufacturing Capacity: 1,037 crore litres of ethanol per annum
Key Financial Metrics – FY23:
- Revenue: ₹35,244 crore
- Net profit: ₹947 crore
- EPS: ₹43.94
- P/E Ratio: 11.50
- ROE: 37.06%
- Debt to equity ratio: 0.27
- Promoter Holding: 44.51%
Balrampur Chini Mills
Balrampur Chini Mills Limited, a prominent Indian enterprise established in 1975, has its corporate headquarters situated in Kolkata, West Bengal, India. The company manages its operations across three distinct segments, namely Sugar, Distillery, and Others.
Balrampur Chini Mills stands as the second-largest sugar manufacturing entity within the Indian market and has undertaken a significant transformation into an energy-focused company. The primary areas of its business encompass the production and distribution of sugar, ethanol, and power co-generation. Additionally, the company plays a role in the creation and distribution of organic fertilisers.
- Sugar: Based in Kolkata, this corporation manages ten sugar processing facilities situated in the regions abundant with sugarcane in Eastern and Central Uttar Pradesh. These facilities boast a combined daily crushing capacity of 76,500 tonnes of sugarcane.
- Ethanol and Alchohol: The company has established four distillation facilities in various locations, namely Balrampur, Babhnan, Mankapur, and Gularia, boasting a combined production capacity of 560,000 litres per day (KLPD).
- Power: Renewable energy derived from sugarcane bagasse, which includes both electricity and heat, supports sustainable development initiatives. The company boasts an impressive co-generation capability of 278.47 MW, with a noteworthy 168.70 MW being available for sale.
- Bagasse: By harnessing bagasse as a fuel, sugar mills can generate renewable energy, thereby diminishing their reliance on conventional fossil fuels.
- DDGS: Distiller’s Dried Grain Solubles (DDGS) is a valuable by-product obtained through the ethanol manufacturing process. It serves as an excellent addition to livestock feed due to its abundant protein, fibre, fat, and mineral content.
- Agri-Inputs: Balrampur Chini Mills Limited has effectively managed to repurpose 100% of its effluents through the implementation of composting technology, producing bio-compost, and achieving a sustainable zero-liquid discharge system.
Market Cap: ₹8,116 crore
Manufacturing Capacity: 5.6 lakh litres of ethanol per day
Key Financial Metrics – FY23:
- Revenue: ₹4,666 crore
- Net profit: ₹284 crore
- EPS: ₹17.09
- P/E Ratio: 23.51
- ROE: 9.57%
- Debt to equity ratio: 0.65
- Promoter Holding: 42.90%
Triveni Engineering and Industries Limited
Triveni Engineering & Industries Limited is an Indian conglomerate with diversified businesses in sugar and engineering. It was founded in 1932 and is headquartered in Noida, India. The company is engaged in sugar and alcohol, including ethanol production, power co-generation, power transmission, industrial gears & gearboxes and defence, water treatment solutions, and FMCG brands.
Triveni is one of the largest integrated sugar manufacturers in India and a market leader in its engineering businesses, spanning power transmission, water & wastewater treatment solutions, and defence. The company is committed to providing premium quality products and innovative and sustainable solutions that create value for its customers. Triveni is a fast-growing conglomerate with market leadership across businesses and a culture that emphasises the constant development of every individual.
- Sugar: The company has a crushing capacity of 61000+ Tonnes per day crushing capacity and sells sugar under the brand name “Shagun”.
- Ethanol and alcohol: The company boasts four cutting-edge distillation facilities strategically located in different regions. These include Muzaffarnagar (MZN), home to both a molasses-based and a grain-based distillery, as well as Sabitgarh (SBT) and Milak Narayanpur (MNP), each equipped with a current capacity of 660,000 litres per day (KLPD).
Market Cap: ₹7,262 crore
Manufacturing Capacity: 6.6 lakh litres of ethanol per day
Key Financial Metrics – FY23:
- Revenue: ₹6,310 crore
- Net profit: ₹1,792 crore
- EPS: ₹21.44
- P/E Ratio: 4.05
- ROE: 17.06%
- Debt to equity ratio: 0.34
- Promoter Holding: 60.98%
Dhampur Sugar Mills
Dhampur Sugar Mills Limited, established in Lucknow, India, on May 22, 1933, stands as one of the earliest and most comprehensive sugar enterprises in the country. Its inception marked the commencement of operations with a sugar mill capable of processing 300 tonnes of cane per day in 1933.
Notably, Dhampur Sugar Mills achieved a pioneering milestone in India by becoming the first company to produce sulphurless refined sugar. This accomplishment demonstrated their commitment to innovation and quality in the sugar industry.
Throughout its history, the company has ventured into diverse sectors, expanding its offerings to encompass ethanol production, refined sugar, white sugar, retail sales, and raw sugar, showcasing its adaptability and growth in a dynamic market.
- Sugar: Dhampur Sugar Mills engages in the production and distribution of various sugar products, including refined white sugar, sugar intended for retail, and raw sugar, under the brand name “Mishti”. The company boasts a substantial daily cane-crushing capacity of 45,500 metric tonnes.
- Chemicals/Distillery: Dhampur Sugar Mills, established in 1933, has transitioned from sugar production to diversify its offerings. In FY 2020-21, it expanded into ethanol production. The company also manufactures ethyl acetate and country liquor, showcasing its commitment to growth and adaptability in the ever-changing market landscape.
- Power: They were pioneers in India, installing a 105kg per square CMS boiler and a 20 MW turbine to boost steam yield from bagasse. This technological leap allowed us to tap into the full potential of sugarcane in the country, leading us to diversify our offerings beyond sugar production into the realm of renewable energy.
Market Cap: ₹1,800 crore
Manufacturing Capacity: 2.5 lakh litres of ethanol per day
Key Financial Metrics – FY23:
- Revenue: ₹2,874 crore
- Net profit: ₹158 crore
- EPS: ₹24.63
- P/E Ratio: 11.01
- ROE: 14.93%
- Debt to equity ratio: 0.71
- Promoter Holding: 49.08%
The Ethanol Market Across the Country
In recent years, there has been a notable surge in the demand for Ethanol due to a heightened focus on eco-friendly products. Ethanol, primarily sourced from crops like sugar, wheat, and corn, has emerged as a solution to reduce the environmental impact caused by crude products.
Furthermore, the cost of Ethanol has been on the rise as countries shift their focus toward energy transition in response to climate change policies.
Recent research from the International Energy Agency suggests that India is on track to surpass the United States and Brazil to become the third-largest consumer of Ethanol globally by 2026. This is not surprising given India’s ambitious goal to increase its Ethanol consumption to 3 billion litres between 2017 and 2021.
While various factors, including overall transportation fuel demand, pricing dynamics, and specific regulatory frameworks, have contributed to this trend, government regulations have played a pivotal role in driving Ethanol demand. Consequently, future projections indicate a sustained increase in Ethanol demand.
India has set an ambitious target to achieve net-zero emissions by 2070. This objective is expected to receive significant momentum through concerted efforts in the Ethanol, sugar, and electric vehicle sectors. Companies involved in sugar and Ethanol production in the country are poised to capitalise on substantial growth opportunities stemming from these developments.
Factors to Consider Before Investing in Top Ethanol Stocks in India
- High Dependency on Sugar Production
The ethanol sector’s performance is closely linked to the sugar industry, which, in turn, heavily depends on factors such as monsoon patterns, irrigation capabilities, and overall water availability. The availability of water significantly impacts sugarcane production, as this crop requires substantial water resources.
- Growing Global Demand
The growing demand for ethanol is driven by its reputation as a more environmentally friendly energy source when compared to traditional fuels like crude oil. This heightened demand is particularly notable in countries like China, where there is a notable shift towards biofuels. This increased demand, along with speculation about its future growth, makes ethanol an attractive investment opportunity.
- Portfolio Diversification
Diversifying one’s investment portfolio is a common strategy among investors to mitigate the risk associated with market volatility. Including a variety of stocks and bonds in a portfolio can help spread risk. Ethanol investment can be a straightforward method of diversification.
- Safeguarding Against Inflation
Investors also turn to commodities to safeguard their investments against inflation, which erodes the value of money over time. Ethanol, being a commodity, can serve as a hedge against inflation. When inflation rates rise, commodity prices, including ethanol, tend to follow suit.
- Massive Industrial Opportunities
The ethanol industry is massive and offers multiple investment avenues. One indirect approach is to invest in companies involved in various stages of ethanol production. These companies’ stock prices are often correlated with ethanol prices. Given the size of the ethanol industry, there are numerous stocks available for investment, providing investors with ample choices.
Why Ethanol Stocks Can Be a Good Investment?
Investing in ethanol stocks in India can be a good option for several reasons. Here are some insights from the search results:
- Growing demand for cleaner energy sources: The Indian government has set a target of achieving 20% ethanol blending with petrol by 2025, which is expected to boost the demand for ethanol in the coming years. This has led to a surge in the ethanol share prices of ethanol-producing companies, with investors showing keen interest in this sector.
- Ethanol is a renewable fuel: Ethanol is produced from plant matter, making it a renewable fuel source. As the world moves towards sustainable and green energy sources, ethanol is expected to play a significant role in meeting the energy demands of the future.
- Ethanol stocks are on the rise: The stock market has shown a keen interest in ethanol stocks, and the ethanol share prices of ethanol-producing companies in India have risen significantly over the years. This trend is expected to continue in the coming years.
- Government support: The Indian government has been promoting the use of ethanol as a fuel additive to reduce the country’s dependence on imported crude oil. This has led to several policy initiatives and incentives for ethanol producers, making it an attractive investment option.
To sum up, ethanol represents a significant potential as a versatile mega-fuel. Its adoption has the potential to yield substantial savings in oil import expenditures while also contributing to environmental conservation. This concludes our examination of the top ethanol stocks for the year 2023.
Indian ethanol firms might quietly emerge as promising contenders in the foreseeable future, thanks to the government’s attractive financial incentives and the growing global demand for ethanol.
Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.