Shares of Globus Spirits ended 13% higher after the government lowered the price of rice supplied to ethanol distilleries. The Ministry of Consumer Affairs, Food & Public Distribution reduced the cost from ₹28 per kilogram to ₹22.50 per kilogram, the company confirmed in a stock exchange filing.
After the announcement, Globus Spirits’ shares rose and ended 13.50% higher to ₹903.60. Other liquor companies also saw gains with United Breweries up 5%, United Spirits by 3%, Radico Khaitan up 2%, and Som Distilleries up 0.8%.
The cost reduction will make ethanol production cheaper as the primary raw materials are rice and its by-products. Reduced raw material costs could cut down on the cost of production, thus saving Globus Spirits and others alike.
In a report, InCred Equities highlighted the benefits of the Food Corporation of India’s (FCI) new rice pricing policy, noting its positive impact on grain-based ethanol production. “The adjusted rice policy and strong orders from oil marketing companies (OMCs) create a positive outlook for ethanol. However, companies that depend entirely on FCI rice policies may face sustainability issues in the long run,” the report stated.
This policy change aligns with the government’s push to boost ethanol production and support energy-related initiatives while improving profitability for ethanol producers.
