The Indian ethanol market has experienced significant growth and shows promising potential. In 2023, the market reached a size of USD 6512.27 million, with a projected Compound Annual Growth Rate (CAGR) of 8.84% until 2029. Ethanol dominates the market, accounting for 87.34% share in 2023.
This growth is largely propelled by government initiatives, including the introduction of E20 compliance for new vehicles since 2023 and the promotion of Flex Fuel Vehicles. These efforts have led to a notable increase in ethanol blending percentage, rising from 1.53% in 2013-14 to 10.7% in 2022. The government aims to achieve a blending target of 20% by 2025, indicating a strong commitment to promoting ethanol usage in the country's fuel industry.
Considering these statistics and looking at its promising future, making investments in ethanol stocks can be a profitable bet. Let us see the 10 trending ethanol stocks in India and how to pick them wisely.
What are ethanol stocks
Ethanol stocks are shares in companies that make, sell, or distribute ethanol, which is a biofuel made from crops like corn and sugarcane. Ethanol is used as an alternative to gasoline. Investing in these stocks lets you be part of the renewable energy and agricultural industries. The shares of these companies trade in the share market and can be categorised into:
- Ethanol producers
- Agricultural companies that supply feedstock for ethanol production
- Transportation and logistics firms involved in ethanol distribution, and
- Companies developing ethanol-related technologies
Future of ethanol stocks
Ethanol stocks have been rising steadily as the sector is on the path of growing significantly based on various government initiatives and its benefits to the environment. Here are some factors that are positively influencing the future of ethanol stocks in India:
1. Government support
The Indian government is actively supporting and promoting the use of ethanol to be blended in petrol. To reduce oil imports, the Indian government has set a target to blend 20% ethanol in petrol by 2025. Since 1016 crore litres of ethanol is required to achieve this target, the demand is likely to increase significantly.
2. Sustainability initiatives
Ethanol production supports environmental goals by providing a cleaner fuel option and reducing greenhouse gas emissions. Since India is focusing more on sustainability, ethanol stocks may witness a higher investor demand, leading to higher prices.
3. Agriculture boost
Most ethanol is produced from crops like corn, barley, and sugarcane. With the government increasing its support for ethanol, farmers can get an additional market for their crops. With farmers producing crops specifically for ethanol, the industry will be well supported, and the ethanol stocks may see a higher demand.
Popular ethanol stocks in India
Here are the 10 popular ethanol stocks in India:
Stocks |
EID-Parry (India) |
Shree Renuka Sugars |
Balrampur Chini Mills Limited |
Bajaj Hindusthan Sugar |
Triveni Engineering and Industries |
Dhampur Sugar Mills Ltd |
Dwarikesh Sugar Industries Limited |
Bannari Amman Sugars Ltd |
Praj Industries |
Dalmia Bharat Sugar |
Overview of trending ethanol stocks in India
Here is an overview of trending ethanol stocks in India:
EID Parry (India)
EID Parry is one of the leading sugar manufacturers in India. It operates several sugar mills and produces a variety of sugar products.
Shree Renuka Sugars
The company is one of the largest ethanol producers in India, benefiting from government initiatives promoting ethanol blending in fuels. It is also one of the largest exporters of refined sugar from India.
Balrampur Chini Mills Limited
This company is one of India's largest sugar manufacturing entities, with multiple state-of-the-art manufacturing facilities located mainly in Uttar Pradesh.
Bajaj Hindusthan Sugar
Bajaj Hindusthan Sugar is a leading sugar producer in India with multiple sugar mills primarily located in Uttar Pradesh. Furthermore, it also produces a significant volume of ethanol.
Triveni Group
One of India's largest sugar and ethanol producers, Triveni Group also operates an engineering business and manufactures high-performance gears and water and waste management solutions.
Dhampur Sugar Mills Ltd
Dhampur Sugar Mills Ltd. is one of India’s oldest integrated sugar companies. The organisation’s portfolio also includes ethanol manufacturing.
Dwarikesh Sugar Industries Limited
The multi-faceted, diversified company manufactures sugar and other allied products. The company has a diversified product portfolio that includes the production of ethanol.
Bannari Amman Sugars Ltd
This is an industrial conglomerate with a presence in the manufacturing, service, and training sectors. Its sugar subsidiary produces sugar and ethanol.
Praj Industries
The company is a major name in the field of bio-based technologies and engineering. It also supplies ethanol through its ethanol plants.
Dalmia Bharat Sugar
Dalmia Bharat Sugar is one of the fastest-growing companies that manufactures sugar and exports it to various foreign countries.
Factors influencing the performance of ethanol stocks
Here are the factors influencing the performance of ethanol stocks in India:
1. Ethanol demand
- The demand for ethanol as a renewable fuel source is influenced by government policies.
- Increased demand for ethanol positively impacts the stock prices of ethanol-producing companies.
2. Feedstock prices
- The cost and availability of feedstocks, such as corn or sugarcane, directly affect the production costs of ethanol.
- Ethanol producers experience margin pressures if feedstock prices rise significantly.
- This impacts their profitability and, consequently, stock performance.
How to pick the best ethanol stocks
Let’s learn how to choose the best ethanol stocks in five easy-to-understand steps:
Step I: Research the market
- Begin by understanding the ethanol industry's:
- Market demand
- Regulatory policies, and
- Technological advancements
Step II: Identify key players
- Spot leading ethanol companies involved in various stages of the ethanol value chain.
- Pay attention to companies with:
- Strong financial performance
- Robust growth prospects, and
- Sustainable business models
Step III: Evaluate financial health
- Assess the financial health of ethanol companies.
- Analyse key financial metrics like:
- Revenue growth
- Earnings stability, and
- Profitability ratios like gross margin and operating margin
Step IV: Assess debt levels
- Evaluate the company's debt levels and liquidity position by using metrics like:
- Debt-to-equity ratio
- Current ratio, and
- Proprietary ratio
Step V: Predict growth potential
- Look for the growth potential of ethanol stocks.
- You can do so by analysing factors such as:
- Historical revenue growth rates
- Projected future earnings, and
- Expansion plans
Step VI: Diversify your portfolio
- Remember to diversify your investment portfolio
- Select a mix of ethanol stocks from different companies and sectors
- Reduce risk by spreading your investments across companies with different:
- Market capitalisations,
- Geographical locations, and
- Business models
Benefits of investing in ethanol stocks
Here are the benefits of investing in ethanol stocks in India:
1. Environmental sustainability
Ethanol is a global renewable energy source supporting local and global sustainability efforts. With the Indian government’s increasing support, the sector may witness increased international investments, further leading to a rally in ethanol stocks.
2. Hedge against rising oil prices
Ethanol is an ideal substitute for petrol, and its price increases with the increase in petrol prices. Hence, it is an ideal substitute for hedging against rising oil prices for consumers and investors.
Check out the list of stocks in other sectors!
- Electric Vehicle (EV) Stocks
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- Green Hydrogen Stocks
- Stocks Under Rs. 20
- Defensive Stocks
Is investing in ethanol stocks risky
Investing in ethanol-related companies comes with performance-related risks that could decrease their stock prices and impact your overall portfolio returns. Let’s see some major risks:
| Commodity price risk | Regulatory risk | Technological risk | Environmental risk |
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The performance of ethanol stocks is impacted by changes in:
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Technological advancements or disruptions in ethanol production processes affect the competitiveness of ethanol companies and their stocks. | Environmental factors such as extreme weather events, water scarcity, or natural disasters affect:
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Factors to consider before investing in ethanol sector stocks in India
Here are the factors to consider before investing in ethanol sector stocks in India:
1. Government policies
The Indian government is promoting the ethanol sector significantly and may offer tax benefits and subsidies to producers, which can positively influence stock prices. Consider whether the government is planning or launching a new policy that may increase the product and, ultimately, stock prices.
2. Weather conditions
Ethanol is produced through crops such as corn, barley, and sugarcane, which need ideal weather to produce. Natural calamities like higher-than-needed rain, droughts, etc., can lower production and negatively impact ethanol stock prices. Hence, look at the weather conditions and forecasts before investing.
3. Crude oil prices
As ethanol is considered a substitute for petrol, its price increases with the increase in the price of petrol. You can look for an uptrend in petrol prices which may increase the ethanol prices too, allowing you to make profits.
4. Ethanol production capacity
Ethanol production capacity also impacts ethanol stock prices. If production is higher and stable, companies can effectively meet demand, potentially increasing ethanol prices.
5. Exchange rates
Companies producing ethanol can also export it to foreign countries, where exchange rates can impact their revenue. If the local currency is weaker, the exports will become more competitive, and companies will earn more revenue, potentially increasing the stock prices.
6. Financial performance
The financial performance of ethanol-producing companies is a vital factor in the performance of the stock price. If the financial performance is positive, the stock price may increase. In the event of losses, the stock price may fall.
7. Supply chain reliability
Ethanol-producing companies with a reliable and consistent supply of raw materials can produce more ethanol and effectively meet demand. Look for such companies, as the consistent supply of raw materials can positively impact stock prices.
8. Competition
Before investing in ethanol sector stocks in India, consider competition by evaluating market positions, industry dynamics, and technological advancements. See if a specific ethanol-producing company is generating more revenue and profits than its competitors, as its stock will have more potential to increase in price.
Conclusion
Ethanol stocks represent shares of companies involved in producing, distributing, or using ethanol as a fuel source. Several factors influence the performance of ethanol stocks. These primarily include ethanol demand, feedstock prices, and regulatory policies.
To pick the best ethanol stocks, you should research the industry, identify key players, and evaluate their financial performance using certain key metrics like debt-to-equity ratio, current ratio, 5-year average returns, etc.
However, to limit capital losses and maintain the overall portfolio returns, you must diversify your investments and invest in a mix of ethanol stocks with varying market capitalisation and business models. Also, keep learning about finance and stay updated on the latest industry trends and market developments to make informed investment decisions.
