Ethanol Stocks in India
To add a new category of stock in our series of stocks and bonds, we will cover Top Ethanol Stocks in India for 2023 Investment. We are already in December and whatever is left unachievable let’s push hard to accomplish in 2023 by buying rights stocks from each category. This will help in diversifying portfolios to have excellent returns when you evaluate your portfolio next year. Before we jump onto the Top Ethanol stocks in India we will try to understand the what constitute of ethanol market and its future prospects.
What is Ethanol?
During your primary schooling, you must have read about Ethanol in Chemistry. Yes, you read it right! It’s the same ethanol we are talking about. Ethanol is a bio-mass-based renewable fuel made from plant materials. Ethanol fuel is derived from food grains, grass, trees, sawdust, agricultural and forestry residues, and other materials. However, the simplest way to produce ethanol fuel is to use crops with high sugar content, such as sugarcane, corn, sorghum, barley, sugar beets, and so on.
Ethanol is also referring as ethyl alcohol and usage is wide due to its property of mixing easily with water or organic compounds. Ethanol is used as a common ingredient in the beauty and cosmetic industry. It acts as an astringent to clean skin, and as hairspray to adhere hairs, in lotions. It has the properties to kill bacteria, viruses & fungi so used widely in hand sanitizers as the main ingredient.
With the spread of Coronavirus, the usage of hand sanitizers increased many fold times so does the consumption of ethanol in this industry. Paint and household cleaning products company uses ethanol too. Many food industrialists use ethanol as a base in food additives to evenly distribute the food color and enhance the taste of food.
Most importantly, it is now recognized as renewable energy fuel. In the US, 98% of gasoline contains ethanol. E10 is a mixture in which 10% base is ethanol and the rest is gasoline. This formula helps in reducing air pollution. Due to its premium blending nature, it has got higher octane number than gasoline. It prevents engine knocking and maintains driveability.
Now we know there is a demand for ethanol in so many industries due to its premium blending property so it holds a very promising future too.
Future of the Ethanol Industry
Do we agree now ethanol is the new super fuel or not? Yes, I agree with this statement. Let me make the point straight. We as a country growing on a fast track but at the cost of the environment. In terms of the Environment Protection Index, India stands at 177 ranks out of 180 countries. So you can imagine what kind of serious damage we are doing to our environment with the rising no. of vehicles. 99.5% of vehicles in India is using crude oil which we are importing from the international market. Due to ongoing war and crude oil crisis, the price war is pushing the prices of diesel and petrol. And this is where ethanol comes into the picture. We know the solution but still, there is a long way for the Electric Vehicle market to seep in.
The future of this industry is quite demanding due to the super solvent nature of the fuel. We now believe that ethanol stocks will be a major share in the coming years. Why do we believe this? Mostly because of the government’s efforts to reduce the cost of crude oil imports. The government is now actively seeking solutions to reduce our carbon footprint. The government intends to achieve net-zero emissions by 2070. And who will assist the government in meeting this goal? Electric vehicles, ethanol, and the sugar industry.
Top Ethanol Stocks in India for 2023
After so much of Gyan, let’s check out of top Ethanol Stocks In India for 2023. Here is the list of curated stocks but none of the stocks will be from a large cap as mostly the stocks are from the mid or small cap.
Praj Industries Ltd: From the Midcap category, this is my favorite stock from this category. It’s a Pune-based company and has a presence in more than 75 countries due to its allied business across the globe. It began as a supplier of an ethanol plant and has evolved into a global company that offers a variety of solutions with a focus on the environment, energy, and agri-process industries.
The best thing about this stock is the company is almost debt free and expected to give good quarter results. The company is giving a dividend payout of 57% and has reduced its debtor’s days to 80.1 days from 105 days. And has delivered profit growth of 27.1% over the last 5 years. The only thing which I didn’t like about this stock is the promoter’s stake which is on the verge of 32.8%. But a 27% stake is with DIIs/FIIs which assures the trust in the business.
Balrampur Chinni: Balrampur Chinni has made its own name by being the largest integrated sugar company in India. It also has a distillery operation and cogeneration of power. The company is investing heavily in CAPEX and had set up the 5th distillery by pumping 320 crores. It has a market cap of 8037 crores and giving an ROE of 17.3% and has got the least debt of 481.21 Cr from the mid-cap segment. Have free cash flows of 298 Cr with 42% promoter stake and 33% of DIIs and FIIs. Not a bad bet at all!
Dhampure Speciality Sugars Ltd: The company is a manufacturer, processor, dealer, importer, and exporter of various sugar products. This company has hardly any debts on its books and is trading at 1.13 times of its book value. Have reduced their debtors’ days to 26.8 days from 52.6 days. Promoter stakes are high at 54.19% and the rest is with the public. Have little free cash flows also to meet some exigencies.
There are a few other stocks you may consider Triveni Engg, Dwarikesh Sugar Industries Ltd, EID Parry, and Ponni Sugar Ltd if you are convinced of the potential of this sector to boom in the coming days.
With the government’s financial incentives and the overall increase in ethanol demand, Indian ethanol companies could be the underdogs in the coming years. You must add a few stocks to your portfolio for sure!