Shares of Praj Industries, a leading player in the field of bioenergy, rallied 15.5% in early trade on Monday to hit an all-time high of ₹598 apiece. This remarkable rally followed India's launch of the Global Biofuels Alliance on Saturday, wherein Prime Minister Narendra Modi extended an invitation to G20 nations to participate in the initiative. The appeal aimed to elevate global ethanol blending with petrol to 20%.
The Alliance was launched by Modi along with a host of global leaders, including US President Joe Biden, Brazilian President Luiz Inacio Lula da Silva, Bangladesh Prime Minister Sheikh Hasina, and Italian Prime Minister Giorgia Meloni, on the sidelines of the G20 Summit.
India achieved a 10% ethanol blending target for the Ethanol Supply Year (ESY) 2021–22 by June 2022, surpassing the originally planned date of November 2022. The country is now aiming to achieve a 20% blending rate by 2025–26.
Meanwhile, biofuel alliance can generate opportunities worth $500 billion in the next three years for G20 countries, said PTI, citing the Indian Biogas Association (IBA) report.
Bioenergy/Biogas, in principle, has the potential to replace fossil fuels completely, especially to decarbonise the transport sector, said IBA.
It stated that an initial investment of $100 billion in financial support will be required to trigger the biofuel industry, five billion for each G20 partner in the next three years.
In 2016, the G20 adopted a voluntary action plan on renewable energy, which committed members to increase the share of renewable energy in their energy mix. India significantly increased its share of renewable energy in the overall energy mix and grew at a CAGR of roughly 22% in the last six years, according to the IBA.
As per the Ministry of New and Renewable Energy, current biogas and CBG production in the country is 1151 MT per day, and with the push for the sector, even with conservative estimates, it can go up to 1750 MT per day by 2025 in the next few years.
There is a tremendous availability of potent biomass in India, and harnessing all of these as the CBG plant's feedstocks will lead to a whopping production capacity of 170,000 MT of CBG per day, good enough to replace one-third of the crude oil imports or three times the imported LNG.
The average cost for each biogas plant is $4.25 million, and with the government's target of 5,000 biogas plants, this is a huge opportunity of over $200 billion, as stated by the IBA.
Amid this backdrop, Praj Industries is well-positioned to benefit from the Ethanol Blending Program. The company is a global leader that offers a range of sustainable solutions for industries such as bioenergy, high-purity water, critical process equipment, breweries, and industrial wastewater treatment.
With its dominant share of more than 50% in 1G ethanol and its status as the only player in 2G ethanol, the company is poised to take advantage of the rising demand for biofuels, including ethanol blending in diesel and flex-fuel engines, according to analysts.
In Q1 FY24, the company signed a term sheet for JV formation to advance plans to strengthen biofuels production capacities in India. Various biofuels covered under this initiative include SAF, ethanol, CBG, and biodiesel, among others.
The shares have gained 24% in a month and rallied 787% in the last three years and 534% over the last five years.
06 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before making any investment decisions.