Detailed Narrative
Ethanol Business Faces Policy Headwinds and Underutilization
The ethanol business experienced significant challenges in FY26, with standalone revenue dipping by 8.64% to ₹1,704 crores. Despite a production capacity of 55-60 crore litres, the company was allotted only 26 crore litres in the ESY '25-'26 tender, leading to a current sales run rate of 2.2 crore litres/month and capacity utilization below 35%. A court order for an additional 15 crore litres, valued at ₹1,062 crores, remains unimplemented due to ongoing legal disputes and OMCs' non-compliance, further exacerbating underutilization and impacting profitability.
Robust Growth and Expansion in CBG Vertical
In contrast to ethanol, the Compressed Biogas (CBG) business demonstrated strong performance, with the first plant achieving over 85% capacity utilization. Revenue from the CBG segment improved by approximately 100%, and EBITDA stood at over 55% on total revenue. TruAlt has formed two JVs, TruAlt Gas (with Sumitomo) and Leafiniti Bioenergy (with GAIL), to expand its CBG footprint. These JVs aim to commission 9 new plants within the next 9 months, increasing gross production capacity from 10 tons/day to 162 tons/day by Q4 FY27, with a debt-to-equity mix of 70:30 for funding.
Strategic Diversification into Sustainable Aviation Fuel (SAF)
TruAlt is strategically diversifying into Sustainable Aviation Fuel (SAF), leveraging recent government notifications allowing synthesized hydrocarbons in air turbine fuel. The company has signed an MOU with the Government of Andhra Pradesh to establish a 10 crore litre per annum SAF plant. This initiative is crucial for utilizing approximately 20 crore litres of existing ethanol production capacity, ensuring full utilization across both ethanol and SAF verticals, and reducing dependence on the volatile ethanol blending market.
Asset-Light Expansion in Fuel Retail Outlets
The company successfully launched its fuel retail vertical, commissioning 7 outlets under a franchisee model with zero capital expenditure. These outlets are already generating over ₹100 crores in revenue with an EBITDA margin of 5%. TruAlt plans to add 4 more outlets, bringing the total to 11, and has shortlisted 76 additional locations. The expansion pace for these additional outlets is currently moderated by the impact of the Middle Eastern crisis on crude prices, but the company aims for over 90 retail outlets by the next financial year once crude prices stabilize.
Financial Performance Impacted by Policy and Capitalization
While standalone EBITDA margin improved to 19.81% in FY26, PBT declined to ₹109.47 crores from ₹152.15 crores in FY25. This decline was primarily attributed to a ₹20 crore increase in depreciation and an ₹11 crore increase in finance costs, resulting from the capitalization of over ₹400 crores for multi-feeder plant conversions. Consolidated PAT also saw a dip to ₹96.86 crores from ₹146.63 crores. The company maintains robust solvency with a standalone debt-equity ratio of 0.61 and a current ratio of 1.67.
Government Policy and Regulatory Environment
The government has increased ethanol blending targets from 20% to 21% and mandated RON 95% for petrol, alongside new BIS standards for E22, E27, E30, E85, and E100. These measures indicate a positive long-term outlook for biofuels. However, management expressed frustration over the government's delayed roadmap for 2025-2030 and the inconsistent implementation of policies, which has created uncertainty and impacted operational efficiency in the ethanol sector.