Top 5 biofuel stocks to add to your watchlist
Top 5 biofuel stocks to add to your watchlist | Mint Mint
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Alliance for Biofuels: Opportunities for India and Top Biofuel Companies
A total of 19 countries and 12 international organizations have agreed to join the alliance with India, USA, and Brazil, the founding member countries.
The alliance is aimed at creating and promoting the adoption of biofuels and expanding bioenergy access across the world.
What are Biofuels?
Biofuels are liquid fuels produced from renewable energy sources such as plants and algae. Some of the biofuels are ethanol biodiesel, green diesel, and biogas.
They provide solutions to the challenges of solar, wind, and other alternative energy sources.
Moreover, biofuels also have the potential to replace fossil fuels completely and decarbonize the transportation sector. This will help the world reach its carbon neutrality goals on time.
The Impact of the Biofuel Alliance on India
According to a report published by the Indian Biogas Association, the biofuel alliance can generate opportunities worth US$ 500 billion (₹4,153 bn) for G20 member countries in the next three years.
Given the tremendous availability of potential biomass in India, this is a huge opportunity for companies involved in the production of biofuels.
Let’s look at the top biofuel companies in India that have the potential to capitalize on this trend.
#1 Praj Industries
First on the list is Praj Industries.
Incorporated in 1985, the company started its journey as a supplier of ethanol plants.
Today, it is a leading company with a bouquet of sustainable solutions for bioenergy, high-purity water, critical process equipment, breweries, and industrial wastewater treatment.
The company’s bioenergy business offers a complete suite of solutions for the global ethanol industry, including process design, engineering, fabrication, and commissioning of ethanol plants.
Praj Industries has more than 50% market share in 1G ethanol, and it is the only player in the 2G ethanol business.
This makes the company a primary beneficiary of the government’s ethanol blending program.
With the rising demand for biofuels, the company has taken several measures to strengthen biofuel production capacities in India.
It has collaborated with Axens, France, Sekab E-Technology AB, Sweden, and Indian Oil Corporation to produce sustainable aviation fuel (SAF), ethanol, compressed bio-gas (CBG), biodiesel, and bio-bitumen.
Praj Industries is also heavily investing in capex to build a multipurpose catalysis lab to work on fuels such as biohydrogen.
In the financial year 2023, it commissioned its first 2G ethanol biorefinery and rice straw-based commercial-scale CBG plant for the Indian Oil Corporation and Hindustan Petroleum Corporation, respectively.
In the last five years, the company’s revenue has grown at a CAGR (compound annual growth rate) of 26.8%, driven by a growing order book pipeline. The net profit has also grown at a CAGR of 28.6%.
It also pays consistent dividends to shareholders with a five-year average dividend payout and a dividend yield of 52.3% and 1.7%, respectively.
#2 Dwarikesh Sugar
Second on the list is Dwarikesh Sugar.
The company is primarily engaged in the business of manufacturing sugar and allied products.
It also produces power, ethanol, and industrial alcohol.
For the past few years, the company has been trying to consolidate itself from a sugar company into a bioenergy company.
To meet this goal, it has been investing a major portion of its capex towards expanding its distillery capacity. This helped the company grow its ethanol production from just 30 kilo-litres per day (KLPD) capacity to 337,500 KLPD in just five years.
At present, the company has three manufacturing plants for sugar, where it manufactures close to 4.5 m quintals of sugar.
However, the company plans to cut down its production by 30% and bring down the sugar manufacturing capacity to 3.3 m quintals from the financial year 2024 to focus on producing ethanol.
Dwarikesh Sugar has been running both of its ethanol plants at full capacity in order to increase its revenue share from ethanol. It also plans to increase its exports of ethanol as the demand for cleaner fuels is increasing.
Coming to its financials, the company’s revenue has grown at a CAGR of 13.6% in the last five years on account of a growing share of ethanol. The net profit has grown at a CAGR of 2%.
The company started paying dividends to its shareholders in the last three years. The three-year average dividend payout and dividend yield stood at 28.6% and 2.9%, respectively.
For the financial year 2024, Dwarikesh Sugar plans to invest around ₹250 m to increase its crushing capacity and annual maintenance capex.
Given the company’s focus on ethanol and growing global demand for this biofuel, it is poised for growth in the medium term.
#3 Gulshan Polyols
Third on the list is Gulshan Polyols.
The company started off its journey as a manufacturer of chemicals such as calcium carbonate (CC) sorbitol, liquid glucose (LG), and starch.
However, it ventured into manufacturing ethanol. Today, it is India’s leading manufacturer of ethanol/bio-fuel, grain, and mineral-based specialty products.
The company’s products include grain-based extra-neutral alcohol (GENA), ethanol from damaged food grain, country liquor, starch sugar, sorbitol, liquid glucose, and animal nutrition products such as corn gluten.
At present, the company has a 60 KLPD capacity to manufacture ethanol. It has already invested ₹3 billion (bn) in capex to expand this capacity by 500 KLPD.
Gulshan Polyols has also invested ₹1.8 bn in a greenfield project to build an ethanol plant of capacity 250 KLPD.
This will take the company’s total ethanol capacity to 900 KLPD by the end of the financial year 2024, making it a dominant player in the ethanol production market.
Given the growing demand for ethanol, the capacity expansion couldn’t come at the right time.
With the new capacity all set to be operationalized by the end of 2023, the company’s revenue and profits could potentially grow.
The company is
SDGs, Targets, and Indicators
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SDG 7: Affordable and Clean Energy
- Target 7.2: Increase substantially the share of renewable energy in the global energy mix
- Indicator 7.2.1: Renewable energy share in the total final energy consumption
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SDG 9: Industry, Innovation, and Infrastructure
- Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable
- Indicator 9.4.1: CO2 emissions per unit of value added
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SDG 13: Climate Action
- Target 13.2: Integrate climate change measures into national policies, strategies, and planning
- Indicator 13.2.1: Number of countries that have communicated the strengthening of institutional, systemic, and individual capacity-building to implement adaptation, mitigation, and technology transfer
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SDG 15: Life on Land
- Target 15.2: Promote the implementation of sustainable management of all types of forests
- Indicator 15.2.1: Progress towards sustainable forest management
Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 7: Affordable and Clean Energy | Target 7.2: Increase substantially the share of renewable energy in the global energy mix | Indicator 7.2.1: Renewable energy share in the total final energy consumption |
| SDG 9: Industry, Innovation, and Infrastructure | Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable | Indicator 9.4.1: CO2 emissions per unit of value added |
| SDG 13: Climate Action | Target 13.2: Integrate climate change measures into national policies, strategies, and planning | Indicator 13.2.1: Number of countries that have communicated the strengthening of institutional, systemic, and individual capacity-building to implement adaptation, mitigation, and technology transfer |
| SDG 15: Life on Land | Target 15.2: Promote the implementation of sustainable management of all types of forests | Indicator 15.2.1: Progress towards sustainable forest management |
Analysis
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SDG 7: Affordable and Clean Energy
The article discusses the promotion of biofuels and their potential to replace fossil fuels and decarbonize the transportation sector, contributing to clean energy. This aligns with SDG 7, which aims to ensure access to affordable, reliable, sustainable, and modern energy for all.
- Target 7.2: Increase substantially the share of renewable energy in the global energy mix – The adoption and expansion of biofuels contribute to increasing the share of renewable energy.
- Indicator 7.2.1: Renewable energy share in the total final energy consumption – The use of biofuels can be measured by tracking the share of renewable energy in the total final energy consumption.
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SDG 9: Industry, Innovation, and Infrastructure
The article highlights the biofuel companies’ efforts to strengthen biofuel production capacities and invest in infrastructure for bioenergy. This relates to SDG 9, which focuses on building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation.
- Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable – The investments in biofuel production capacities and infrastructure contribute to upgrading and making the industry sustainable.
- Indicator 9.4.1: CO2 emissions per unit of value added – The adoption of biofuels can help reduce CO2 emissions per unit of value added in the industry.
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SDG 13: Climate Action
The article mentions the potential of biofuels to help reach carbon neutrality goals and reduce reliance on fossil fuels, aligning with SDG 13, which focuses on taking urgent action to combat climate change and its impacts.
- Target 13.2: Integrate climate change measures into national policies, strategies, and planning – The adoption and promotion of biofuels can be considered as an integration of climate change measures into national policies.
- Indicator 13.2.1: Number of countries that have communicated the strengthening of institutional, systemic, and individual capacity-building to implement adaptation, mitigation, and technology transfer – The biofuel alliance and the efforts of biofuel companies can be seen as strengthening institutional and systemic capacity-building for implementing adaptation, mitigation, and technology transfer.
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SDG 15: Life on Land
The article mentions the potential of biofuels to replace one-third of crude oil imports, which can contribute to sustainable forest management by reducing the pressure on forests for fuel production. This relates to SDG 15, which focuses on protecting, restoring, and promoting sustainable use of terrestrial ecosystems.
- Target 15.2: Promote the implementation of sustainable management of all types of forests – The adoption of biofuels can reduce the demand for fuelwood from forests, promoting sustainable forest management.
- Indicator 15.2.1: Progress towards sustainable forest management – The adoption of biofuels can be considered as progress towards sustainable forest management by reducing the pressure on forests for fuel production.
Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.
Source: livemint.com
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