Stock market analysts claim that the latest notification by the Government of India (GoI) about the pricing of ethanol blending is the reason why these industrial alcohol manufacturing stocks are soaring today. The price increase for the ethanol that the public sector oil marketing companies (OMCs) purchase from distilleries was agreed on Wednesday last week by the Cabinet Committee on Economic Affairs, which is led by Prime Minister Narendra Modi. Companies in India that produce industrial alcohol would gain from this.
Because there aren’t many businesses on Dalal Street that deal in industrial alcohol, market analysts claimed that Dalal Street is undervaluing the benefits these firms are anticipated to get. They urged investors to add Praj Industries and Global Spirits stocks to their portfolios.
According to Vaibhav Kaushik, Research Analyst at GCL Broking, regarding how these industrial alcohol producer companies would profit from the GoI’s decision, “Due to rise in ethanol prices, companies other than rice makers, who produce ethanol from the broken rice, would be a major beneficiary as GoI has barred rice maker companies from selling molasses for ethanol blending. These restricted enterprises are anticipated to record increased profits and order books in the next quarters since the demand for molasses for ethanol blending is increasing regularly.
On why industrial alcohol maker companies are skyrocketing today, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “The Cabinet Committee on Economic Affairs has given its approval for a hike in the cost of ethanol procured by the public sector oil marketing companies (OMCs) from distilleries. After this nod, price of ethanol from C-heavy molasses have gone up from ₹46.66 to ₹49.41 per litre. The price of ethanol from B-heavy molasses has been hiked from ₹59.08 per litre to Rs60.73 per litre as well. This hike is going to benefit industrial alcohol maker companies like BCL Industries, Global Spirits and Praj Industries. As such companies are limited on Dalal Street, these stocks have surged over 5 per cent during early morning deals.”
Further on today’s market:
SBI reported a mixed-bag quarter, with NII below forecasts due to a contracting margin but greater treasury income boosted profitability above of expectations. In a typically poor quarter, business growth is still modest, but the bank anticipates solid growth in the upcoming periods. The NII and total profitability will continue to be supported by a greater proportion of floating loans (MCLR), which might gain even more from re-pricing, the brokerage company stated. This is true even if deposit costs rise.
It projects SBI to achieve RoA and RoE of 1.0% and 17.8% in FY25. The firm maintained its target price of 700 per share and kept its ‘Buy’ rating.
