Indian Oil, Praj Industries shares surge up to 9% on JV for biofuels

Shares of Indian Oil Corporation Limited (IOCL) and Praj Industries rallied up to 9% on Friday after the companies inked a pact for strengthening biofuels production capacities in India. Earlier in October 2021, both the companies entered into an agreement to form a 50:50 joint venture (JV) for the same. The biofuels covered under this agreement include Sustainable Aviation Fuel (SAF), Ethanol, Compressed Bio-Gas (CBG), Biodiesel and Bio-bitumen, among others.

Boosted by the development, shares of biotechnology company Praj Industries jumped as much as 9.5% to hit an intraday high of ₹405.90 on the BSE, while the market capitalisation rose to ₹7,369 crore. Early today, the stock opened higher at ₹380 against the previous closing price of ₹370.55.

Similarly, IOCL shares soared 2.6% to hit a fresh 52-week high of ₹101.20, after opening higher at ₹99.25 against Thursday’s closing price of ₹98.60 on the BSE. The share price of the state-owned oil marketing company has risen 55% in the last 10 months, from its 52-week low of ₹65.20 on September 29, 2022.

Domestic brokerage Prabhudas Lilladher in a note said this development is positive for Praj and SAF, CBG, Biodiesel to be next growth driver for Praj in medium to long run. “We believe Praj is well poised to benefit from upcoming opportunities, given its strong leadership in domestic ethanol plants (~50% market share); global presence and focus on future-ready technologies like 2G plants, Compressed Biogas (CBG), ECTA, SAF etc.”

The brokerage has assigned a “Buy” rating to the stock with a target price of ₹475, a potential upside of 17% from today’s intraday high level.

Both companies in a joint statement on July 6 said they have signed a term sheet to advance plans to strengthen biofuels production capacities in India.

"The collaboration with an Indian biofuel major – Praj, is a remarkable milestone in IndianOil’s green energy transition journey. It will strengthen our resolve to achieve our goal of net-zero operational emissions by 2046 and maintain our leadership in the green energy domain,” said Shrikant Madhav Vaidya, Chairman, Indian Oil.

Vaidya also added that India being an agrarian economy, offers the advantage of sufficient availability of feedstock. “The indigenous biofuels will be a game changer in helping India chart its decarbonisation journey. Biofuels offer a win-win situation by reducing dependence on crude imports, boosting the rural economy, and offering sustainable, cleaner mobility options.”

Pramod Chaudhari, Founder Chairman, Praj Industries said, "We are proud of our partnership with Indian Oil, which is further reinforced with this important milestone. Biofuels positively impact the socio-economic and environmental aspects thereby facilitating sustainable development. Readying India to build sustainable aviation fuels production capacity in pursuit of clean skies is our priority, to strengthen Atmanirbhar Bharat.”

In a bid to be self-reliance in the energy sector, the country has aggressive plans to reconfigure the transportation fuel mix with biofuels. Biofuels are an integral part of India's flourishing bio-economy that plays a significant role as a sustainable climate action tool.

Indian Oil and Praj have collaborated in the past as well. The nation’s first-of-its-kind advanced biofuels refinery at Indian Oil’s Panipat complex is based on Praj’s proprietary 2G technology. This year in May, Indian Oil and Praj partnered with AirAsia India and flew India’s first-ever commercial passenger flight powered by a blend of ‘indigenous’ Sustainable Aviation Fuel.

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