TruAlt Bio Energy IPO: Should investors subscribe?

Core Viewpoint - TruAlt Bio Energy is raising ₹750 crore through its IPO, with significant allocations for working capital, plant conversion, and corporate purposes, while promoters will reduce their stake to 70.6% post-IPO [1] Financial Overview - The IPO is priced at ₹496, representing 24 times FY25 earnings on a pre-dilution basis, which is a 20% discount compared to peers like Triveni Engineering and Praj Industries [2] - TruAlt has experienced a 56% growth in revenue and a 64% increase in EBITDA for FY25, leading to an EBITDA margin improvement of 0.84 percentage points to 16.2% [5] Operational Capacity - TruAlt has the largest ethanol capacity in India at 2,000 KLPD across five manufacturing units in Karnataka [4] - The company is converting its Ethanol Unit-4 into a dual feed plant, increasing its total dual feed capacity to 1,300 KLPD, which is 65% of its total capacity [6] Strategic Initiatives - The company is expanding its compressed biogas (CBG) business, which has grown to ₹23 crore in FY25, and is collaborating with GAIL to set up multiple CBG units [8] - TruAlt is also exploring partnerships for second-generation ethanol and sustainable aviation fuel, as well as green hydrogen projects [9] Revenue Diversification - Revenue from Extra-Neutral Alcohol has increased from 7% in FY23 to 16% in FY25, helping to mitigate risks associated with government control in the ethanol sector [11] Related Party Transactions - The company sources 100% of its sugar juice from promoter-owned entities, while the sourcing of molasses from these entities has decreased from 98% in FY23 to 79% [13]