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Wednesday, October 29, 2008

Pioneer Distilleries Ltd:A very hot counter

Scripscan:Pioneer Distilleries Ltd

Story:This Hyderabad based company is engaged in the production of ENA, RS, DS, CO2 and Ethanol at its factory in Nanded. Fine Grade ENA made by the company finds place as R/M for renowned liquor brands of Mcdowell, Shaw Wallace, Radico Khaitan etc. Basic R/M for ENA is molasses which is abundantly available around its factory area. Company has also obtained licence to use grain as alternate R/M for making alcohol. There is market for grain based alcohol but presently production cost is on the higher side. In future, company can take decision to go for grain based alcohol if profitability in the same comes at par with molasses route. Sheer size of India's distillery market is growing rapidly and attracting attention of global players. Last year's performance of the company is one of the best in the industry and hence the recommendation to buy.Company is planning a merger capex of around Rs. 100 crs.The company has started production of Ethanol and obtained orders from BPCL, HPCL, IOC etc. Company also doubled its production capacity of distillery from 50,000 litres per day to 1 lakh litres per day.Pioneer distillery has commenced work for setting up a 5 MW Bio-gas Power Plant including setting up of effluent treatment plant at Rs. 40 crs. It should be functional in Q1, 08-09. This Plant is eligible for carbon credits and company should get around Rs. 4 crs. worth CER in 08-09. Power generated will be sold to Mah. Power Grid.Further it has 400 acres of land purchased at very very low price where the effluent is used for growing some crops. Market Value of this land alone works out to more than Rs. 100 crs. (nearly Rs. 100/-per share).The company at present is quoting at just 2 times its expected 1 year forward earnings.One of the best bet to own in present market conditions.

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