Can This Ethanol Stock’s Diversification Into CBG and Aviation Fuel Drive Long-Term Growth?

Synopsis: A leading green energy player is shifting gears – moving beyond a single biofuel into a four-pronged growth story. Despite a rocky year on the policy front, the company’s diversification push could change its earnings trajectory in the coming years.

Most companies stick to what works. This one decided that wasn’t enough. After a year of regulatory chaos disrupted its core business, the company doubled down on expansion instead of retreating – building new revenue streams in biogas, aviation fuel, and fuel retail. Here’s what’s driving this transformation and why investors are watching closely.

Shares of TruAlt Bioenergy Limited, with a market capitalization of Rs.3,987 Crore, closed at a price of Rs.465 i.e. 1.55% down from its previous closing price of Rs.472.3. It is trading at an Adjusted P/E ratio of 41.7.

From Ethanol Specialist to Bioenergy Platform

TruAlt Bioenergy, India’s largest ethanol producer, is no longer just an ethanol company. Speaking at the company’s first investor call as a listed entity for FY26, Managing Director Vijaykumar Nirani laid out a clear roadmap: the business is now built on four legs – ethanol, compressed biogas (CBG), sustainable aviation fuel (SAF), and fuel retail. The idea, as Nirani put it, is to stop being “dependent on only one source of revenue” or on shifting government policy alone.

That shift wasn’t born out of comfort. FY26 was a difficult year for the ethanol business, with revenue falling to Rs 1,704 crore from Rs 1,880 crore a year earlier. A controversial tender allocation methodology by oil marketing companies (OMCs) left TruAlt with just 34% of its bid quantity, dragging capacity utilisation below 35%. A Karnataka High Court order in the company’s favour for an additional 15 crore litres remains unimplemented, tied up in a parallel legal battle between OMCs and other ethanol producers.

CBG: The Quiet Performer

While ethanol struggled, the company’s compressed biogas vertical quietly delivered. The first CBG plant ran at over 85% capacity utilisation, with revenue nearly doubling and EBITDA margins crossing 55%. Building on this, TruAlt has formed two joint ventures – TruAlt Gas with Japan’s Sumitomo Corporation, and Leafiniti Bioenergy with Gas Authority of India (GAIL) – to scale from 10 tonnes per day of capacity to a targeted 162 tonnes per day by FY27.

Management expects EBITDA margins in this segment to stay around 50-60%, supported by secured feedstock and a possible new government policy, tentatively called “Sampoorn,” that could raise gas prices and add incentives.

SAF: A Long-Term Bet

The Sustainable Aviation Fuel vertical is TruAlt’s boldest move yet. The company has signed an MOU with the Andhra Pradesh government for a 10-crore-litre SAF plant, strategically located near a seaport, two refineries, and an international airport. A technology transfer agreement with Honeywell UOP is in place, and the company is working toward long-term offtake deals with airlines, aircraft makers, and oil companies. 

If executed, SAF could also help fully utilise existing ethanol capacity by diverting a portion of it into this higher-value segment – though a final investment decision is still pending offtake confirmation.

Fuel Retail: Capital-Light Growth

The fourth vertical, fuel retail, has been built without spending a rupee of capex. Seven outlets under a franchisee model already generate over Rs 100 crore in revenue, with four more in the pipeline. Management has identified 76 additional locations, though rollout pace depends on crude price stability. The real strategic value here, according to management, lies less in retail margins and more in capturing ethanol-blending income across the company’s own outlets.

The Bigger Picture

Despite the ethanol setbacks, EBITDA margin for the year actually improved to 19.81% from 18.98%, though profit after tax fell to Rs 80.26 crore from Rs 140 crore due to higher depreciation and finance costs tied to recent capacity expansion. With Rs 1,100 crore of working capital on hand and four verticals now in motion, the company’s bet is clear: diversification today should reduce dependence on policy swings tomorrow.

TruAlt Bioenergy Limited, formerly TruAlt Energy Limited, is India’s largest ethanol producer, operating five ethanol plants alongside compressed biogas, sustainable aviation fuel, and fuel retail businesses. Headquartered in Bengaluru, the company is listed on BSE and NSE under the symbol TRUALT.

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