Risk of ethanol sector started playing, companies are not getting the desired ethanol allocations due to over capacities. Standalone small distilleries’ are getting good allocation as compared to Big players.
BCL not yet disclosed the allocation details, even if they get some less allocations then they may able to divert some capacities for ENA production.
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Exited completely after listing to con call. As there is low allocation they will try to increase production of ENA, which is lower price as compared to ethanol.
Even though maize prices dropped in market, they are not able to get the maize at cheaper price and 40% mandate to produce ethanol from FCI rice would pull the margins down further.
It’s very unlikely to utilize the upcoming 150 KLPD facility effectively
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Things happened as expected, price corrected 20% from Nov.
ENA production pulling down margins and Sales aswell. Even though Maize is available at 18-19/- BCL is not getting the mazie at this rate, during earning call management told that 20-21/- is the avg procurement price.
Same is applicable to gulshan poly aswell, but they are getting maize at very low price for MP plant.
Now live prices are below 17/-, if these levels sustain for few months then ethanol makers can make good margins. There will some uptick in the bottom line due to lower maize prices, 150KLPD commissioning and 25% stake purchase in Svaksha distilleries.
Now valuations also very attractive in single digits PE multiples, one should consider policy framework risk always.
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