Best Ethanol (Sugar) Stocks in India

In the Indian energy landscape the ethanol sector is a great contributor which is promoting both economic growth and environmental preservation. Investing in ethanol stocks is becoming increasingly attractive to those seeking opportunities in the green energy sector as the country focuses more on renewable energies. Recently there has been a major push to increase ethanol blending with petrol, with targets set to reach 20% by 2025 with an increase in the number of distilleries increased by 40% in 4 years. In this blog, we will understand the ethanol companies in India, the top 10 ethanol stocks in India, their advantages, limitations, and a lot more.
 

What is the Ethanol Stock Market in India?

Ethanol stocks refer to stocks of companies involved in ethanol production. This sector is gaining attention because of the Indian government's efforts to achieve energy self-sufficiency and reduce carbon emissions. The major factor that contributes to the growth of this business is the program for blending ethanol with petrol, which attempts to reduce dependency on fossil fuels. 
 

List of the Best Ethanol Stocks in India

The performance of top ethanol stocks may be impacted by consumer trends and economic factors. Investors are actively seeking out the best ethanol stocks for long-term investment, aiming for steady returns and sustained growth over extended periods. Below is a curated ethanol stocks list.

Disclaimer: This list of ethanol stocks contains data updated as of 21st  June 2024. However, it's important to conduct thorough research before making any investment decisions in these stocks.
 

Overview of the Top Ethanol Company in India

Here is an overview of the ethanol shares list 

Balrampur Chini Mills Ltd 

Under the leadership of Mr. Vivek Saraogi, Balrampur Chini Mills Limited (BCML) was established on July 14, 1975. BCML stands out as a leading sugar producer in India, operating ten manufacturing facilities in East and Central Uttar Pradesh. 

• The company has delivered a sales growth of 1.45% over the past five years.
• The dividend payout has been low at 13.2% of profits over the last 3 years.
• The company has reported net profit after tax of Rs 195.48 Crore in the latest quarter.

Bannari Amman Sugars Ltd

This company was founded in 1983 by S. V. Balasubramaniam. It has three sugar factories with cogeneration plants in Tamilnadu and two sugar factories with co-generation plants in Karnataka. 

• The debtor days have improved from 40.4 to 20.4 days.
• The company's working capital requirements have been reduced from 214 days to 146 days.
• The dividend payout has been low at 13.4% of profits over the last 3 years

Dalmia Bharat Sugar and Industries Ltd 

Dalmia Bharat Sugar and Industries Ltd formed in the year 1951, is a Small-cap company (having a market cap of Rs 3,064.36 Crore) operating in the Sugar sector.

• The stock is trading at 1.05 times its book value
• The Dividend Yield of this company is at 1.05 %
• The company has delivered a sales growth of 7.51% over the past five years.
• The company has a return on equity of 10.7% over the last 3 years.
• Working capital days have increased from 139 days to 197 days

Triveni Engineering and Industries Ltd 

Triveni Engineering and Industries Ltd is an Integrated and diversified conglomerate in areas of sugar, ethanol and engineering

• The Book Value of this company is ₹ 123, and the Dividend Yield is 0.91 %
• The company has delivered a poor sales growth of 10.8% over the past five years.
• Promoter holding has decreased over the last 3 years: -7.45%

Shree Renuka Sugars Ltd 

Incorporated in 1995, Shree Renuka Sugars Ltd does manufacturing and refining of sugar, ethyl alcohol, ethanol, generation, and sale of power. The company operates 6 sugar mills located in Karnataka and Maharashtra. 

• The total paid-up capital of this company is Rs 2,128 million.
• The Market Cap of Shree Renuka Sugars Ltd changed from ₹ 1958 crore in March 2019 to ₹ 9388 crore in March 2023 . This represents a CAGR of 36.81% over 5 years.

Dhampur Sugar Mills Ltd 

Dhampur Sugar Mills (Dhampur) is one of the leading integrated sugarcane processing companies in India.

• Dhampur Sugar Mills is trading -0.23% lower at Rs 219.75 as compared to its last closing price. 
• It has been trading in the price range of 224.70 & 219.00. 
• The company has given -13.21% in this year & -0.83% in the last 5 days.

Bajaj Hindusthan Sugar Ltd 

Bajaj Hindusthan Sugar Ltd., incorporated in the year 1931, is a Small-cap company (having a market cap of Rs 4,155.25 Crore) operating in the Sugar sector. This company’s key Products/Revenue Segments include Sugar, Alcohol, Other Operating Revenue, By-products, Power, and Scrap.

• The Stock is trading at 0.93 times its book value
• The company has reported net profit after tax of Rs 90.56 Crore in the latest quarter.
• The company has a return on equity of -4.77% over the last 3 years.

Why Invest in Ethanol Stocks?

Investing in ethanol stocks presents numerous attractive benefits. Firstly, it allows for portfolio diversification, thereby reducing the impact of market fluctuations and risks by incorporating a distinct asset class into one's investments. Moreover, ethanol, being a commodity, can serve as a safeguard against inflation. Since commodity prices, including ethanol, often rise alongside inflation, investing in India's leading ethanol stocks can safeguard the purchasing power of your capital during periods of escalating prices, offering a valuable asset for long-term financials. 
 

How to Invest in Ethanol Stocks in India?

Investors with an interest in sustainable and alternative energy sources are increasingly opting to invest in shares of ethanol companies, making it a popular choice. Consequently, there are several avenues available for investing in the top ethanol stocks in India, including

1. Online Brokerage

Numerous online brokerage platforms provide access to a variety of best ethanol stocks in India, encompassing both ethanol producers and manufacturers. Before making investment decisions, you can conduct research and compare different options among the top ethanol stocks in India.

2. Direct Investment

Another option is to directly invest in ethanol companies in India through private equity or venture capital firms. Usually, this platform is reserved for high-net-worth individuals and institutional investors.

3. ETFs

Exchange-traded funds (ETFs) present an alternative method for investing in the top ethanol 

stocks in India. Specialising in alternative energy or renewable energy stocks, these funds usually offer a diversified portfolio of ethanol stocks, granting exposure to portfolio investing and management.
 

Advantages of Investing in Ethanol Stocks- H2 Listicles

Investing in ethanol stocks in India can provide numerous advantages. Ethanol, a renewable fuel derived from plant materials, has garnered attention as a substitute for fossil fuels. Some of the benefits of investing in the Best ethanol stocks in India include:

1. Environmental Friendliness

Ethanol serves as a clean-burning fuel, emitting fewer greenhouse gases and pollutants compared to traditional gasoline. Consequently, ethanol shares are favoured among environmentally conscious investors who support ethanol companies in India that advocate sustainable practices.

2. High Demand

Industry experts anticipate a significant increase in demand for ethanol stocks in the foreseeable future due to the growing necessity for alternative fuels. Ethanol producers in India and other nations are poised to capitalise on this trend, rendering investing in ethanol stock a potentially lucrative opportunity.

3. Government Support

Many governments worldwide offer incentives and subsidies to encourage the use of ethanol as a fuel source. Thus, government support has the potential to mitigate the risks associated with investing in ethanol stocks, thereby making them a more attractive option for investors.
 

Performance Parameters of Ethanol Shares

Apart from analysing ethanol stock prices, several factors can influence their performance. Here are some of the primary factors impacting ethanol stocks:

1. Government Policies

Governments may offer subsidies and tax incentives to ethanol producers, which can drive up ethanol stock prices. In India, policies like the National Biofuel Policy and the Ethanol Blending Program aim to promote biofuel usage and reduce reliance on crude oil, prompting investment in ethanol-producing companies. It is also estimated that by 2050, at a 20% blending level, the ethanol demand will increase to 1016 Crore litres. 

2. Crude Oil Prices

Ethanol is commonly used as a gasoline substitute. Therefore, when crude oil prices increase, ethanol becomes more appealing, potentially boosting the stock price of ethanol producers. Conversely, a decline in crude oil prices reduces demand for ethanol, leading to lower ethanol stock prices.

3. Weather Conditions

Ethanol is derived from crops like corn, sugarcane, and wheat, which are vulnerable to weather fluctuations. Droughts, floods, and other extreme weather events can diminish crop yields, resulting in reduced ethanol production and lower stock prices.

4. Ethanol Production Capacity

The production capacity of ethanol plays a crucial role in determining ethanol stock prices. Companies with higher production capacity can meet ethanol demand, potentially increasing stock prices.

5. Exchange Rates

Many ethanol producers export their products, and fluctuations in exchange rates can impact revenue. A depreciation in the local currency can make exports more competitive, boosting revenue and, consequently, ethanol stock prices.
 

Things to Consider Before Investing In Ethanol Shares

While best ethanol stocks offer a promising investment opportunity, there are several factors that should be taken into consideration before making any investment decisions.

1. Financials

Before investing in an ethanol company, it is crucial to thoroughly analyse its financial fundamentals. This involves carefully analysing the company's balance sheet and cash flow statement to assess factors such as debt levels, promoter share pledges, and available free cash.

2. Technical Analysis

High valuations of ethanol companies should be approached with caution. Additionally, it is advisable to consider technical indicators such as moving averages, support, and resistance levels for each stock before making an investment decision.

3. Regulatory Environment

Given that ethanol producers are often associated with sugar mills, investors should stay informed about regulatory changes related to sugar, sugarcane production, and other relevant factors as sugar is one of the most regulated commodities in India.

4. Feedstock Analysis

Evaluate the sources of feedstock used by ethanol companies for production. Companies with diversified and sustainable supply chains for feedstock are better positioned for stability.

5. Oil Market Dynamics 

The performance of ethanol stocks is closely tied to oil markets, as ethanol is primarily consumed by oil marketing companies. Therefore, it is essential to monitor developments in the oil market when considering investments in ethanol stocks.

6. ESG Factors

Ethanol stocks often attract environmentally conscious investors. It is important to analyse companies' commitment to sustainability, their efforts to reduce carbon emissions, and their corporate governance practices.

7. Competition

Ethanol stocks face competition, particularly during ethanol auctions conducted by oil marketing companies. Companies with strong margins are better positioned to outperform their peers in sales.
 

Challenges Associated with Ethanol Stock Investing

Investing in Best ethanol stocks can present lucrative opportunities, but it also comes with its share of challenges. Some of the notable challenges you may face  when investing in ethanol stocks in India include:

1. Price Volatility

Ethanol stock prices are heavily influenced by the fluctuating commodity prices of corn, which serves as the primary raw material for ethanol production. Both corn and ethanol prices are subject to significant volatility, making it difficult to predict future returns accurately.

2. Competition from Alternatives

Ethanol producers and manufacturers in India face stiff competition from alternative fuel sources such as electric vehicles and hydrogen fuel cells. This competition can reduce the demand for ethanol shares and limit the growth prospects of ethanol stocks.

3. Political and Regulatory Risks

Ethanol stocks are also susceptible to political and regulatory risks. Changes in government policies and regulations, including alterations to tax incentives and subsidies, can have a substantial impact on ethanol company stocks. Investors in ethanol stocks need to stay abreast of evolving regulations that may affect the industry.
 

Conclusion
Investing in the best ethanol stocks can be a strategic move for long-term portfolio growth. Ethanol stocks in India present a distinctive opportunity driven by government-led demand and the growing stature of the renewable energy sector. While they hold promise for growth, investing in ethanol stocks requires a prudent assessment of inherent risks and market dynamics, given their close association with the sugar sector and the volatile nature of oil prices. To start building your renewable energy stock portfolio, download a stock trading App.