List of Ethanol Stocks to Invest in 2024

Ethanol stocks are shares in companies producing, processing, and distributing ethanol, a biofuel and cleaner alternative to fossil fuels, tied to renewable energy.
List of Ethanol Stocks to Invest in 2024
3 min
14-December-2024

Ethanol stocks represent companies involved in producing, processing, or distributing ethanol, mainly derived from sugarcane and corn. In India, the ethanol market reached USD 6512.27 million in 2023, with a CAGR of 8.84% projected until 2029. Government initiatives, like E20 fuel compliance and Flex Fuel Vehicles, have boosted ethanol blending from 1.53% in 2013-14 to 10.7% in 2022, targeting 20% by 2025.

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.

Popular ethanol stocks in India

Company Name

Market Cap (Rs. Cr.)

Piccadily Agro Industries Ltd

7,239.12

Sir Shadi Lal Enterprises Ltd

208.87

SBEC Sugar Ltd

314.75

Khaitan (India) Ltd

49.29

Kesar Enterprises Ltd

164.00

KCP Sugar and Industries Corp Ltd

628.83

E I D-Parry (India) Ltd

14,359.52

Bajaj Hindusthan Sugar Ltd

4,981.14

Magadh Sugar & Energy Ltd

1,198.92

Balrampur Chini Mills Ltd

11,555.19

Shree Hanuman Sugar & Industries Ltd

16.11

Shree Renuka Sugars

9963.46

Triveni Engineering and Industries

9858.07

Dhampur Sugar Mills Ltd

1596

Dwarikesh Sugar Industries Limited

1523

Bannari Amman Sugars Ltd

3237

Praj Industries

13992

Dalmia Bharat Sugar

4580

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Disclaimer: The market capitalisation values mentioned above were fetched on 4th October 2024. These values are subject to change based on various factors such as market conditions, company performance, and economic trends. Please refer to the SEBI or stock exchanges' websites to obtain the most current market capitalisation for any particular stock.

Overview of trending ethanol stocks in India

Here is an overview of trending ethanol stocks in India:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. Dalmia Bharat Sugar

Dalmia Bharat Sugar is one of the fastest-growing companies that manufactures sugar and exports it to various foreign countries.

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.

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 most preferred 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:

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!

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

● Ethanol prices are influenced by commodity market trends.

● These trends increase volatility and can expose you to price risk.

The performance of ethanol stocks is impacted by changes in:

● Government policies,

● Regulations, or

● Subsidies affecting the ethanol industry.

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:

● Ethanol production, and

● Supply chains

 

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.

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Frequently asked questions

Why are ethanol stocks good opportunities for investments?

Ethanol stocks can be a promising investment due to their environmental benefits and increasing demand for alternative fuels. As a cleaner-burning fuel, ethanol reduces greenhouse gas emissions and aligns with global sustainability goals. Government support and incentives further bolster the industry. However, investors should be aware of potential risks like fluctuating commodity prices, competition from other biofuels, and economic downturns. Thorough research and diversification are crucial when considering investments in ethanol stocks.

What factors should I consider before investing in ethanol stocks?

While ethanol stocks present an intriguing investment opportunity, a comprehensive analysis of various factors is crucial before making investment decisions. Financial health, valuations, regulatory changes, feedstock supply, oil market dynamics, ESG considerations, and competitive landscape are key aspects to evaluate. By carefully considering these factors, investors can make informed decisions and potentially benefit from the growth of the ethanol industry.

How can I stay updated on the latest developments in the ethanol industry?
Stay informed by following financial news, industry reports, and regulatory updates related to the ethanol sector. Utilise financial websites, stock market analysis platforms, and reputable sources for industry insights, market trends, and company announcements.
How profitable is ethanol business in India?

The profitability of the ethanol business in India can vary depending on several factors, including the type of raw material used, production costs, and market demand. However, on average, ethanol production can yield a profit of Rs. 20-25 per liter.

One of the most significant factors affecting profitability is the cost of raw materials. Using sugarcane as a raw material during its harvesting season can be more cost-effective than sourcing it during the off-season when prices tend to be higher.

While the ethanol business in India holds potential for profitability, it's essential to consider various factors and conduct thorough research before venturing into this industry.

Will ethanol stocks go up?

The future of ethanol stocks appears promising due to several factors:

  • Rising Global Demand: The increasing global demand for renewable fuels, including ethanol, is a significant driver for the industry's growth.
  • Government Support: Governments around the world, including India, are implementing policies to promote the use of ethanol as a fuel additive. This support can boost the demand for ethanol and, consequently, the performance of ethanol stocks.
  • Technological Advancements: Ongoing research and development in ethanol production technologies can lead to increased efficiency and reduced costs, making ethanol a more competitive fuel option.
Should we invest in ethanol stocks?

Deciding whether to invest in ethanol stocks depends on various factors and your individual investment goals. Here's a breakdown of the potential benefits and risks:

Potential Benefits:

  • Renewable Energy Demand: Ethanol is a renewable fuel source, and increasing demand for renewable energy can boost ethanol production and stock prices.
  • Government Policies: Government policies promoting renewable fuels and biofuels can positively impact the ethanol industry.
  • Diversification: Investing in ethanol stocks can diversify your portfolio and reduce overall risk.

Potential Risks:

  • Commodity Price Fluctuations: The price of corn, a primary feedstock for ethanol, can impact production costs and profitability.
  • Competition from Alternative Fuels: Competition from other renewable fuels like biodiesel or electric vehicles could reduce demand for ethanol.
  • Economic Conditions: Economic downturns can affect fuel consumption, impacting demand for ethanol.
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