Distillery stocks lose steam as FCI halts rice supply to make ethanol

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With the Food Corporation of India (FCI) halting supplies of rice for ethanol production to distilleries, inventories in the distillery sector suffered a setback on Tuesday.

Nearly 100 distilleries across the country that rely on rice supplies from FCI to produce ethanol are preparing for the tough times ahead. It would also cause a temporary blip in the implementation of the Union Government’s ambitious target of achieving a blending of 14 per cent ethanol into petrol by November.

Shares of players such as Globus Spirits, Som Distilleries & Breweries, Jagatjit Industries, Gujchem Distillers India Ltd and Tilaknagar Industries were trading in the red. Globus Spirits was the biggest loser conceding 6.55 percent to ₹1,088.20, Gujchem lost 5 percent to end at ₹77.39 and Som Distilleries lost nearly three percent to end at 325.45 ₹. Jagatjit was down 2.5 percent (INR 150.50), BCL Industries was down 1.75 percent at INR 474.30 and Tilaknagar lost 1.06 percent (INR 167.60). However, United Spirits.

for molasses

Distilleries typically produce ethanol from molasses, which is a sugar by-product. However, just the sugarcane route to ethanol manufacturing is not enough to achieve the goal. As such, both industry and government have focused on food grains such as maize, damaged food grains, and rice available with FCI.

Globus Spirits expects the outage to be temporary. During this period, the company shifts its feedstock from rice to alternative raw materials such as broken rice and corn. “During this changeover process, we anticipate outages of 7 to 10 days in part of the West Bengal capacity and our Jharkhand facility,” a company note reads.

Bhavek Patel of Tradebulls Securities felt the sentiment was negative and “we may see immediate selling pressure amid the news but the important thing is that the government is reviewing its policy of providing surplus rice from FCI and has not banned it outright. We may see some concessions between the government and All India Distillers’ Association that may cover some losses incurred by registered players.”

However, Patel suspects that the government will be unwilling to provide all the surplus rice needed and will certainly limit the volume. He warned that “investors should refrain from buying distillery stocks for the time being even though the price looks attractive and should only venture long when excess rice supply resumes.”