Top 7 best ethanol stocks to invest in India 2024

Ethanol, a fundamental product derived from the sugar industry, serves multiple sectors including plastics, polishes, plasticisers, pharmaceuticals, and cosmetics. The rising demand for biofuels in India has spurred the expansion of ethanol companies in recent years. This growth trajectory has resulted in many ethanol firms achieving robust quarterly performances, with several witnessing their stock values triple compared to the previous year, thereby generating substantial profits.

Ethanol market in India

Because of the increasing importance of the renewable energy industry and the Indian government's goal to reach 20% ethanol-blended petrol by 2025, the ethanol market in the country is experiencing growth. Numerous government efforts have been put forth to encourage sugar mills and boost ethanol production.

By the year 2023, the Indian ethanol market reached a value of USD 6,512.27 million. A growth rate of 9.16% is projected to persist, leading to a value of USD 4.15 billion by 2029. Consequently, ethanol stocks offer a special opportunity, attracting investors who are highly interested in the industry.

Given the increasing popularity and need for ethanol, here are the top 7 ethanol stocks to invest in India 2024.

1. Balrampur Chini Mills Limited

Based in West Bengal and founded in 1975, Balrampur Chini Mills Limited is an Indian corporation that manufactures and delivers sugar, alcohol, ethanol, molasses, bagasse, and organic fertilizers. The company runs power plants while producing sugar to meet its energy requirements and sells extra bagasse in the market.

The machinery has the ability to smash 80,000 tons of sugarcane every day, with a distillery capacity of 1,050 kilolitres per day and a saleable co-generation capacity of 175.7 megawatts. The company operates 24 facilities across 10 distinct locations. Furthermore, composting techniques are used to create bio-composts sold under various names like Paudh-Sakti, Jaiv-Shakti, and Devdoot.

2. Shree Renuka Sugars Ltd 

Shree Renuka Sugars Ltd, based in India, is mainly involved in the production and distribution of sugar, ethanol, and power. The ethanol company in India not only manufactures but also sells bio-fertilizers and bio-pesticides. They are the biggest ethanol producer and manufacturer in India and one of the top 10 ethanol manufacturers in the country.

3. Triveni Engineering and Industries Ltd.

Triveni Engineering is among the top sugar production companies in the nation. The white crystal sugar is manufactured by seven plants in Uttar Pradesh. It is among the biggest producers of ethanol and its expansion is swift. During the period stretching from FY 2018-19 to FY 2022-23, its revenue increased by a compounded annual growth rate (CAGR) of 19% and its net profit surged by over sevenfold.

In addition to sugar, its other areas of business include defense, power transmission, and water solutions. In terms of performance, this is among the top ethanol stocks for investors in India. Given its robust performance, Triveni Engineering is considered one of the top ethanol stocks for investors in India.

4. Bajaj Hindusthan Sugar  

BHSL stands as one of India's leading producers of sugar and ethanol. Based in Maharashtra, the company operates 14 sugar factories spread across locations like Gola Gokaran Nath, Thana Bhawan, Budhana, Palia Kalan, Khambharkhera, among others. Together, these facilities have a collective capacity to process 136,000 tonnes of sugarcane daily and produce 800 kilolitres of alcohol per day.

The business is a significant ethanol manufacturer, currently producing 38 million liters per year, aiming to raise output to approximately 218 million liters annually. In addition, Bajaj Hindusthan Sugar produces around 430 megawatts of electricity using bagasse at its sugar factories. It additionally runs 5 coal-powered power stations, producing an additional 450 megawatts for the local power network.

5. Khaitan (India) Ltd

Khaitan (India) Ltd, an Indian holding company, produces sugar for the Indian consumer market. The Tickertape Scorecard reveals that the company's free cash flow has increased by 30.75% in the past 5 years, surpassing the industry average of -9.2%. The stock is also displaying positive indications of being profitable, achieving an overall score of 6.9 for profitability and efficiency. Moreover, the stock is not in the overbought area, which means it is a favorable moment for investors to evaluate it.

6. Kothari Sugars and Chemicals Ltd

Kothari Sugars and Chemicals Ltd is an Indian company that produces plantation white sugar, alcohol, and power. In the past five years, there has been an annual revenue growth rate of 16.28%, surpassing the industry average of 9.46%. In addition, the company has witnessed a growth in its market dominance from 0.48% to 0.64% in the past five years. The Tickertape Scorecard also indicates strong ratings in profitability and efficiency, scoring 7.2. Currently, it is also situated in the underpriced and overbought zone, presenting an ideal opportunity for investors to contemplate.

7. Dhampur Sugar Mills Limited 

Just like Balrampur Chini Mills Limited, this company is also one of India's integrated sugar manufacturers. They have the capacity to handle 65 million litres of Ethanol per year. The company is divided into sugar, chemicals, energy, and power business segments.

They have also put money into various sustainability and renewable energy initiatives like wind energy projects and more. Their cutting-edge distillery system allows them to generate top-notch ethanol.

Are Ethanol Stocks Worth Investing In?

Considering investing in ethanol stocks may be a beneficial option for investors seeking portfolio diversification and profit from the increasing need for sustainable fuels. Nevertheless, as with any investment opportunity, there are certain aspects that must be taken into account.

Company Fundamentals: Analyzing the financial performance, production capacity, and technological capabilities of companies involved in ethanol stocks is crucial for investors. Businesses with solid foundations might be more able to endure changes in the market and take advantage of chances for growth.

Market Dynamics: Government policies, oil prices, and consumer preferences all impact the demand for ethanol. Comprehending these factors may assist investors in estimating the possibility of expansion in the ethanol industry.

Long-Term Outlook: The future prospects for ethanol stocks are influenced by factors like the speed of renewable energy integration, technological progress, and regulatory changes. Investors need to take into account the future potential of the ethanol market prior to making investment choices.

Risk Factors: Just like any other investment, there are potential dangers involved in investing in ethanol stocks. Some of the risks are regulatory, commodity price, and technological in nature. Investors should evaluate these risks and take into account their risk tolerance prior to making investments.

FAQs

Q. Should we invest in ethanol stocks?

A. Investing in ethanol stocks can offer several advantages, such as: Renewable Energy growth: Focus on lowering carbon emissions has intensified, leading to higher demand for renewable energy sources like ethanol.

Q. What is the future of ethanol in India 2024?

A. FAS New Delhi expects India's ethanol production for 2024 to reach 6.35 billion liters (BL), less than a 1 percent change down from last year due to projected decline in sugarcane production and depleting rice grain storage.

Q. Who is the biggest ethanol producer in India?

A. Bajaj Hindustan Sugar Company, based in Mumbai, is India's largest producer of sugar and ethanol, primarily focusing on ethanol supply. Established in 1931, it emerged as a trailblazer in the Indian Sugar Industry.   

Q. Is ethanol business profitable in India?

A. On average, ethanol production from any raw material can earn a business Rs. 20-25 per litre of profit. The raw material has a significant impact on the profit margin. The best way to save profit is to store raw materials such as sugarcane during their season.

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