TruAlt Bioenergy Ltd.

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By Nitin Negandhi

TruAlt Bioenergy Ltd.

TruAlt Bioenergy Ltd. (TBL), derived from True Alternate Bioenergy, commenced operations in October 2022 to manufacture and market ethanol from distillery processes. The company operates four units with an installed capacity of 2,000 kilolitres (kl) per day and plans to expand this by 35% to 2,700 kl per day by 2027.

TBL is raising Rs. 750 crore through a fresh issue of 1.51 crore shares at an upper price band of Rs. 496, along with an offer for sale aggregating around Rs. 90 crore. The net proceeds from the fresh issue will be utilised for:

– Setting up multi-feedstock operations at a cost of Rs. 173 crore, aimed at reducing dependence on sugarcane juice, sugar syrup, and molasses by shifting towards alternate grain-based feedstocks.

– Funding enhanced working capital requirements amounting to Rs. 425 crore.

TBL operates in an industry dominated by large sugar-integrated plants and sources over 75% of its raw material from the group’s flagship sugar company.

Financial Performance:

The company has achieved a CAGR of 58% in revenue and 80% in profit after tax over the two years ending March 2025. Other income, which contributes nearly 40% of its profit after tax, comprises interest subvention from the Government, claimable for five years starting April 2023. While the income has been booked as certified by NABARD, it is yet to be received from the Government, highlighting the need for higher working capital.

Its interest costs rose over threefold to Rs. 144 crore in FY25 from Rs. 35 crore in FY23. These higher costs have been partly offset by interest subvention included under income from other sources.

Future outlook:

TBL is expanding capacity and diversifying to utilise alternate feedstocks. The company has entered into a joint venture with GAIL (Gas Authority of India Ltd.) to set up compressed biogas plants by processing organic waste into clean fuel and organic manure. It has also signed a memorandum of understanding (MoU) with Sumitomo for potential collaboration in the bioenergy sector, involving the development of four compressed biogas plants, with future projects planned in ethanol and Sustainable Aviation Fuel (SAF).

Currently, SAF accounts for only 0.3% of aviation fuel usage due to nearly double the production cost compared to conventional aviation fuel. The partnerships with GAIL and Sumitomo aim to achieve economies of scale and reduce costs. Additionally, TBL plans to expand beyond Karnataka and Maharashtra into new states such as Odisha and other high-blend mandate regions under the Government’s Ethanol Blended Petrol Programme.

Valuation and shareholding:

Post issue, promoters will continue to hold over 70% of the capital. At the upper price band, the company will have a market capitalisation of Rs. 4253 crore. The diluted EPS of Rs. 18.6 as on 31^st March 2025 discounts the upper price band by nearly 27 times, while the weighted average EPS of Rs. 13 discounts it by over 38 times. In comparison, large listed integrated sugar players like Balrampur Chini Mills and Triveni Engineering trade at a P/E multiple of around 28–30 times.

The current grey market premium (GMP) of Rs. 70, representing a 14% premium to the upper price band, appears to have already factored in the positives. However, the sugar and ethanol industry remains highly sensitive to Government policy changes. TBL continues to rely heavily on the group’s sugar mills for feedstock, despite its positioning as an energy company. Some of its expansion plans remain at an early stage and the sharp rise in topline and bottom line ahead of the IPO raises questions about sustainability.

Listing in a falling / bear market: A recently launched IPO was trading at a positive GMP on the issue date – got listed at a discount to its issue price in a week’s time due to bearish market conditions.

 Investors should always keep this in mind while investing.

Disclaimer:

The writer is not a SEBI registered analyst. He and his friends and relatives may or may not participate in the IPO. Investors should consult their financial advisor before investing.  Grey market premium is just an indicator and should not be relied upon.