Penny stock under Rs 30: This microcap company to invest around Rs 300 crore towards setting up 250 KLPD ethanol plant, stock in upper circuit!

This investment is earmarked for the establishment of a 250 KLPD Grain Based Fuel Ethanol Plant

Kanoria Energy & Infrastructure Ltd., a manufacturer of A.C. Pressure Pipes and Asbestos Cement products, Couplings, A.C. Sheet & Moulded Goods, has recently announced a substantial investment of up to Rs 300.00 crore. This investment is earmarked for the establishment of a 250 KLPD Grain Based Fuel Ethanol Plant in Hargarh, District Jabalpur, Madhya Pradesh. The proposed project, a Greenfield venture, aligns with the Ethanol Blending Programme (EBP) initiated by the Government of India.

Ethanol Powering the Shift
Kanoria's ethanol plant represents a strategic diversification away from its traditional business line. The Indian government's Ethanol Blending Programme (EBP) has fueled significant growth in the ethanol industry, offering attractive incentives for companies like Kanoria to tap into this renewable energy source. The EBP aims to reduce dependence on fossil fuels, minimize pollution, and support the struggling sugar industry by utilizing their by-products for ethanol production.

Sugarcane Blues
However, the road to ethanol expansion hasn't been smooth. In December 2023, the government's sudden ban on using sugarcane juice and sugar syrup for ethanol production sent shockwaves through the industry. This decision aimed to address concerns about a potential 8 per cent decline in sugar production due to erratic rainfall patterns. The ban threatened to jeopardize millions of rupees invested in ethanol production capacity and hurt farmers' income.

A Policy U-Turn
Recognizing the industry's distress, the government swiftly reversed its decision in a commendable move. While still capping sugar diversion for ethanol production at 17 lakh tonnes, the revised policy allows the use of sugarcane juice and B-heavy molasses. This pragmatic approach balances the need for sugar production with the vital role ethanol plays in India's energy security and environment goals.

Kanoria's Gambit
Kanoria's decision to invest in a grain-based ethanol plant aligns with this revised policy. By opting for grains as a feedstock, Kanoria mitigates the risks associated with fluctuating sugarcane availability and government policy changes. This strategic move showcases the company's adaptability and risk management acumen in a dynamic market.

The Road Ahead
 Kanoria's ethanol foray holds promise for the company's future growth. The Indian government's unwavering commitment to the EBP coupled with increasing environmental consciousness bodes well for the ethanol industry. Kanoria's proactive diversification not only taps into this promising market but also contributes to India's energy security and environmental goals. While challenges remain, Kanoria's strategic initiative positions them for sustainable success in the evolving energy landscape.

The company is exploring the possibility of issuing redeemable preference shares through a private placement. As of the quarter ending September 2023, the promoter holds a significant stake of 73.94 per cent, while the remaining shares are held by public shareholders.The stock delivered returns of over 30 per cent in the last six months. While in the last two years, the stock has gained about 90 per cent. Investors should keep an eye on this penny stock.

Disclaimer: The article is for informational purposes only and not investment advice.