India’s leading ethanol producer, TruAlt Bio Energy (TruAlt), will raise ₹750 crore of primary capital from the IPO that closes on Monday. A large part of funds will go towards working capital funding (₹422 crore), while ₹172 crore will go towards converting its Ethanol Unit-4 (currently molasses and sugar juice based) into a dual feed plant and ₹156 crore for general corporate purposes. Promoters will sell stake worth ₹89 crore in the IPO, post which their stake will reduce by 17.6 per cent to 70.6 per cent.
Investors with a long-term investment horizon of five years and appetite for high risk can consider subscribing to the IPO. At the upper end of the price band of ₹496, the issue is priced at 24 times its FY25 earnings on a pre-dilution basis, at a 20 per cent discount to peers such as Triveni Engineering and Praj Industries. However, on a post-issue basis, the valuation will be in-line with peers. However, it is worth mentioning that TruAlt, currently sports operating margins and return ratios much higher than peers. Also, the company has an interesting line-up of initiatives such as scaling up of its compressed bio gas (CBG) business.
TruAlt has the largest ethanol capacity in the country, which currently stands at 2,000 KLPD, spread over five manufacturing units located in Karnataka. In 2021, the promoters incorporated TruAlt and over the last four years have consolidated all the manufacturing units into this entity, which were hitherto held by the promoters in other entities.
TruAlt has seen healthy growth in revenue and EBITDA, which grew 56 per cent and 64 per cent respectively in FY25 translating into EBITDA margin improvement of 0.84 percentage points to 16.2 per cent. Operating efficiencies have helped achieve this, despite a marginal increase in raw material costs in FY25.
We believe TruAlt to be a good diversification option for high-risk investors for three reasons.
First, TruAlt, which, until recently was fully reliant on sugarcane juice and molasses for its raw material, has now converted three of its plants into dual feed plants. For example, in the last two years, the FRP (fair and remunerative price, which is the government-mandated price) of cane, has increased 13 per cent, while sugar-based ethanol prices have not been revised in the last two years. This has had an impact on the margins of sugar-based ethanol producers. Now, with the completion of the conversion work at its unit-4, the company’s total dual feed, fungible capacity will now increase to 1,300 KLPD, which is almost 65 per cent of its total installed capacity.
This will help the company in two ways: The operation cycle at the dual feed plants, which was 210-250 days, due to seasonality in cane crop and non-availability of molasses post crushing season, can go beyond 330 days. The company will also have better flexibility to choose raw material based on viability and availability of raw materials, which will not only help recover fixed costs but can also result in operating margin improvement. Sugar-cane based ethanol players have traditionally had challenges with significant variability in margins, since the input price increases have been higher than the increase in end-product (ethanol) price, at least to the extent of supplies to State oil marketing companies for blending with petrol. However, the utilisation in the ethanol segment has been lower at 45 per cent, and is expected to increase, going forward.
Two, TruAlt being one of the early producers of CBG under the Sustainable Alternative Towards Affordable Transportation (“SATAT”) scheme introduced by the Government of India in 2018, this business is now gaining traction. Positioned as an efficient alternative to compressed natural gas (CNG), as India is still dependent on imported gas for meeting its CNG requirement, the company has seen this segment grow to about ₹23 crore in FY25. To expand its CBG footprint, the company is in discussions with GAIL, for investment in its subsidiary Leafiniti. They will jointly set up multiple CBG units across locations in phases, of which 20 such stations are envisaged initially. GAIL will likely hold 49 per cent stake in Leafiniti, once the transaction is complete. Besides, the company is also working on partnerships with Japanese majors for setting up five CBG plants at various locations. It is also looking to collaborate with global chemical players such as Sumitomo Corporation Asia & Oceania Pte. Ltd in the bioenergy sector. Higher contribution from the CBG segment will not only help reduce the volatility in earnings in the ethanol business given the government control in end-product prices, but can also accelerate growth given the huge demand gap.
Third, expansion into other products such as 2G (second generation) ethanol, wherein it is collaborating with Praj Industries, foray into segments such as sustainable aviation fuel, setting up of dispensing stations for biofuels will help the long-term growth of the business. The company also has ambitious plans to foray into businesses such as green hydrogen amidst others. While capital and execution may be the key risks for TruAlt Energy to action its future projects, the company’s strategy to collaborate with global partners can help them mitigate the above-mentioned risks.
Key concerns
High leverage, as of March 2025, with total borrowings of ₹1,170 crore translating into a debt-to-equity ratio of 2 times, is a concern. While this will moderate to less than 1x post the equity issuance, debt-to-EBITDA ratio as of FY25 was also elevated at 3.6 times. But out of the total borrowings, ₹940 crore is a long-term debt, secured under interest subvention scheme at significantly-low interest rates of under 5 per cent.
Ethanol business particularly supplies to oil marketing companies which continues to be controlled by the government — with the latter having the final say both on inputs and end-product realisation. However, over the years, TruAlt’s revenue from Extra-Neutral Alcohol, which is the potable alcohol with application across industries such as food and beverage, pharma, cosmetics have increased. From 7 per cent of revenue in FY23, it has increased to 16 per cent of revenue in FY25. This can mitigate the risk from the government control in the ethanol business.
The company has been sourcing raw material from promoter-owned entities. This accounts for 100 per cent of its sugar juice supplies, while sourcing of molasses from the promoter entities has reduced from 98 per cent in FY23 to 79 per cent. With the company using alternate raw materials such as rice, corn, this can potentially come down in the near future. However, investors must monitor the nature of related party transactions, post the IPO too.
Published on September 27, 2025