image showing ethanol
The world is moving towards clean energy and India has the target to achieve net zero carbon emissions by 2070. To meet this target, the government is exploring different sources of cleaner energy and ethanol is one of the popular names in this segment. Ethanol in India is primarily obtained through sugarcane and the recent push to the clean energy sector by the government has the markets bullish on many ethanol stocks. Investors interested in India’s Ethanol sector can check out all important details of the top stocks in this segment.
Here are the top stocks in this sector that can be considered for investment.
Shree Renuka Sugars was incorporated in 1995 and is one of the biggest names in the sugar industry. They are in the business of manufacturing and refining sugar internationally as well as molasses, bagasse, press, mud, ethyl grade alcohol, and fuel-grade ethanol. The company started with one factory in Karnataka and operates 11 mills across the globe (four in Centre-South Brazil and seven in India) with integrated ethanol and power cogeneration capacity.
The key details of this company are tabled below. Figures as of June 26, 2023
| Category | Details |
| Market Capitalization | Rs. 9,382 crores |
| PE Ratio | – |
| Return on Equity | 0.00% |
| Debt Equity Ratio | -3.47% |
| Promotor’s Holdings | 62.48% |
| Share price | Rs. 43.40 |
| Dividend yield | – |
The trailing returns of Shree Renuka Sugars are tabled below
| Period | Trailing Returns |
| 1 year | -10.05% |
| 3 years | 64.78% |
| 5 years | 26.69% |
| 10 years | 10.49% |
EID Parry Limited is engaged in the manufacture of Sugar, Nutraceuticals, and Ethanol production. It is one of the leading names in the sugar industry in India and has 6 sugar plants and 1 standalone distillery that are spread across South India. The company provides hand sanitization products and also generates 140 MW of power.
The key details of this company are tabled below. Figures as of June 26, 2023
| Category | Details |
| Market capitalization | Rs. 8,557 crores |
| PE Ratio | 9.06 |
| Return on Equity | 31.55% |
| Debt Equity Ratio | 0.02% |
| Promotor’s Holdings | 44.33% |
| Share price | Rs. 472.50 |
| Dividend Yield | 1.97% |
The trailing returns of EID Parry are tabled below
| Period | Trailing Returns |
| 1 year | -6.86% |
| 3 years | 20.27% |
| 5 years | 17.42% |
| 10 years | 13.29% |
BCML is a leading sugar company in India that has integrated its operations with distillery and power cogeneration businesses. The Company has achieved high efficiency in producing sugar by integrating its processes. The Company has also expanded its capacity by executing well-designed projects that increased its production capabilities and by acquiring other companies that were already in the sugar business. These steps have enabled BCML to grow its market share and profitability over the years.
The key details of this company are tabled below. Figures as of June 26, 2023
| Category | Details |
| Market Capitalization | Rs. 7,885 crores |
| PE Ratio | 27.75 |
| Return on Equity | 9.66% |
| Debt Equity Ratio | 0.15% |
| Promotor’s Holdings | 42.9% |
| Share price | Rs. 387.80 |
| Dividend Yield | 0.64% |
The trailing returns of Balrampur Chini are tabled below
| Period | Trailing Returns |
| 1 year | 4.30% |
| 3 years | 44.66% |
| 5 years | 42.74% |
| 10 years | 25.25% |
This company was incorporated in 1932 and is a well-known name in the sugar and engineering business not only in India but also abroad. The company is in the business of manufacturing sugar, beverages, confectionaries, and other FMCGs. The company also produces ethanol and has a 104.5 MW grid-connected co-generation establishment. Furthermore, they also have a diversified portfolio of manufacturing high-speed gears that are used in various industrial applications. In addition, the Company undertakes projects that involve designing and installing systems for water and waste-water treatment and pollution control for various clients.
The key details of this company are tabled below. Figures as of June 26, 2023
| Category | Details |
| Market Capitalization | Rs. 6,265 crores |
| PE Ratio | 3.50 |
| Return on Equity | 59.36% |
| Debt Equity Ratio | 0.08% |
| Promotor’s Holdings | 60.98% |
| Share price | Rs. 284.55 |
| Dividend Yield | 1.14% |
The trailing returns of Triveni Engineering and Industries are tabled below
| Period | Trailing Returns |
| 1 year | 19.96% |
| 3 years | 72.07% |
| 5 years | 51.04% |
| 10 years | 35.39% |
Bannari Amman Sugars Limited is among the prominent sugar producers in India and operates five sugar factories that have cogeneration plants producing electricity from the by-products of sugar production. The company also has two distillery units that produce ethanol from molasses. In addition, the company has a Granite Processing unit in Tamilnadu that processes natural stone for various applications. Bannari Amman Sugars also owns windmills in the southern part of Tamilnadu that generate renewable energy from wind power.
The key details of this company are tabled below. Figures as of June 26, 2023
| Category | Details |
| Market Capitalization | Rs. 3,492 crores |
| PE Ratio | 24.35 |
| Return on Equity | 9.51% |
| Debt Equity Ratio | 0.10% |
| Promotor’s Holdings | 58.70% |
| Share price | Rs. 2,764 |
| Dividend Yield | 0.45% |
The trailing returns of Bannari Amman Sugars are tabled below
| Period | Trailing Returns |
| 1 year | 28.54% |
| 3 years | 37.24% |
| 5 years | 13.89% |
| 10 years | – |
The basic meaning of ethanol is the by-product generated from sugar production and is a colourless residue that is a flammable liquid. It is a result of the fermentation and distillation process of sugar and has wide applications in clean energy generation. Currently, India uses ethanol blended with fuel (petrol) in the 90:10 which has helped in reducing the tailpipe emissions significantly. However, with the advancement in technology and the push to the net-zero carbon target, India aims to achieve 20% ethanol blending by 2025. This will not only be instrumental in providing better air quality but also save foreign exchange reserves to the tune of approximately Rs. 30,000 crores per year.
The ethanol market in India is not limited to fuel generation and is classified into Fuel and Fuel Additives, Food and Beverages, Chemicals, Cosmetics and Personal Care products, and others. Fuel and Fuel Additive has the leading market share in these segments and held approximately 57% in FY 2023. The Indian Ethanol market reached the milestone of 3200 million litres in FY 2023 and is expected to grow at a CAGR of approximately 5.67% up to FY 2035.
With the government initiatives and plans to increase the ethanol blend up to 20% by 2025, the E20 roadmap of the government also plans to raise the Ethanol production in the country production capacity from the current 700 to 1500 crore litres. The government has taken many initiatives to meet its targets and the positive outlook of the industry and the increased production will add to the bullish future of the companies in this sector.
The current ethanol blend used in vehicles is in the ratio of 90% fuel and 10% ethanol.
Ethanol-powered or flex-fuel vehicles can use gasoline or a blend of gasoline and ethanol. Their fuel system can adapt to different fuel mixtures. The most common blend is E10 (10% ethanol, 90% gasoline) while some flex-fuel vehicles can also use E85 (85% ethanol, 15% gasoline).
Some of the challenges faced by India in meeting the ethanol blend target include the shortage of water supply, the highly inflammable nature of ethanol and handling issues in this regard, less production capacity in comparison to the demand, limited availability of sugarcane for ethanol production and lack of sufficient alternatives for the same.
Investing in ethanol stocks can be a good investment opportunity due to various reasons like the high demand for ethanol, government support to the ethanol industry and its target of the roadmap for ethanol blending by 2025, diversification of the portfolio, hedge against inflation, etc.
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