There are rumblings of a major change regarding vehicle fuel in the country. On one hand, the common man is expecting cheap and clean fuel, on the other hand, the government is also emphasizing on promoting green energy. In this direction, the proposal to install ‘E100 fuel pumps’ (pumps with 100 percent ethanol fuel) in the country has gained momentum. The Indian Sugar and Bio Energy Manufacturers Association has demanded from the Central Government that ethanol distilleries should be allowed to directly open their fuel pumps. If this proposal is approved by the government, it will prove to be a big trigger for the energy sector as well as the stock market. According to market experts, if this happens, then this decision can lead to a huge rise in the shares of three major companies related to ethanol and sugar business.
If rules change, companies’ profits will pick up pace.
Under the current system, ethanol is not used directly as fuel. Oil marketing companies (OMCs) buy it and mix it with petrol. But, the Indian Sugar and Bio Energy Manufacturers Association has presented a new outline to the Ministry of Petroleum and Natural Gas. If the government gives green signal to this proposal, a completely new market will open for the ethanol industry. Once the new system is implemented, companies will be able to supply E100 fuel directly to customers. The biggest benefit from this will be that there will be a huge reduction in the cost of supply chain and the production capacity of the companies will be utilized to the maximum. The simple mathematics is that by getting a new market, the scope of earnings of the companies will increase.
Balrampur Chini Mills
Balrampur Sugar Mills is being named prominently among the biggest beneficiaries of this possible change. It is among the largest integrated sugar and ethanol companies in the country. Over the years the company has continuously expanded its ethanol production capacity and is currently a major supplier to the government’s ethanol blending programme. The shares of this company with a market cap of about Rs 11,893 crore registered a strong presence in the market on July 6. Its shares were trading at the level of Rs 570 with a gain of about 1.4 percent. This company has not disappointed investors in the long term, it has given an excellent return of 61 percent in the last five years.
Triveni Engineering and Industries
Similarly, Triveni Engineering and Industries may also gain wings from this new policy. This company is mainly active in the fields of sugar, ethanol, engineering and power transmission. Keeping in view the future demand, the company has recently increased its ethanol distillation capacity significantly. The market capitalization of this company is around Rs 10,197 crore. On July 6, its shares saw a rise of 0.84 percent and were trading at Rs 462. This stock has proved its dominance in the market by giving a strong return of 131 percent on the capital of its investors in the last five years. The introduction of E100 fuel pump can give a new flight to the biofuel business of these two companies.
Dalmia Bharat Sugar
Dalmia Bharat Sugar and Industries is also standing strongly in the list of stocks which are excited by this news. This company is deeply involved in sugar, ethanol and renewable power business. The company is continuously increasing its ethanol production to avail maximum financial benefit from the government’s biofuel policy. Its market cap in the stock market is around Rs 2,985 crore. There is huge enthusiasm about this company among investors, the effect of which was clearly visible in the trading session of 6th July. A huge and tremendous rise of 8.95 percent was recorded in the shares of the company, after which the share price jumped to Rs 371.
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