If you’ve spent a few minutes on X lately, you’ve probably seen the chatter around CIAN Agro Industries. Some folks call it India’s next ethanol champion. Others say it’s the perfect example of a small-cap rush. Either way, the stock has been everywhere, with its market cap shooting up more than 18x in the past year.

So in today’s Finshots, we cut through the hype and look at the numbers to see what’s really cooking here.

The Story

You’d blink and miss CIAN Agro Industries & Infrastructure on the ticker a year ago. It was selling spices and edible oils, dabbled in agro-processing and filed the sort of results that don’t make your broker call you back.

Quarterly revenues were around ₹17 crores with a miniscule percentage flowing into profits at ₹10 lakh in the first quarter of 2024. But fast forward a year to the recent quarter ending June (Q1FY26), and CIAN suddenly reported ₹511 crores in sales and ₹52 crores in profits.

That’s a 30x revenue jump in a year!

So what changed, you ask?

Well, India’s fuel policy, for one.

The government has been aggressively pushing ethanol blending — E20, which is shorthand for saying 20% ethanol blended in petrol. The policy helps reduce oil imports, gives sugarcane farmers a steady buyer and wins climate brownie points too.

For vehicle owners, though, it’s a mixed bag. Cars and bikes not designed for ethanol blends can wear faster and mileage drops. That’s what people have been upset about, as petrol prices at the pump haven’t eased either. And there’s even a plea in the Supreme Court questioning whether the rollout is hurting drivers more than helping the country.

But for companies in the sugar-ethanol chain, this has been nothing short of a windfall.

And this is where things get interesting.

You see, CIAN Agro’s Managing Director and promoter is Nikhil Gadkari, son of Union Minister Nitin Gadkari, the most vocal evangelist for India’s ethanol push. Another son, Sarang, runs Manas Agro, also in the sugar-fuel game, and now a subsidiary of CIAN.

So one theory floating around is that most of the gains we see for CIAN have flowed as the E20 ethanol policy gathered pace (initially rolled out in April 2023). And in January 2024 CIAN announced that it’s planning to produce ethanol from CO2. And this cutting-edge idea could have been the reason why the stock gathered steam.

But did it actually start producing ethanol from CO2? Well, no disclosures by the company say so. All we know is that it signed a partnership with a Chennai-based firm called Ram Charan Group.

Which leaves two possibilities. Either the company genuinely ramped up production, cracked the tech and plugged it with the E20 launch. Or, two, the rally was mostly driven by hype, while revenues flowed in from somewhere else (which we’ll look in a bit).

So yes, the optics here are striking. But see, it could also just be the sort of policy tailwind that any company in the ethanol ecosystem could benefit from. After all, whenever the government tilts policy in favour of a sector — be it solar panels, EVs, or ethanol — the early movers usually ride the wave. The ethanol trend itself is real and industry-wide.

And we’ll leave that bit up to you to decide.

What we can do is look at the business itself and see if it’s really as good as the rising market cap, which has grown from ₹100 crore last year to about ₹2,000 crore, suggests.

So let’s start with how CIAM Agro makes money.

Well, on a standalone basis — that is, just the traditional oil and agro arm — CIAN earned about ₹100 crores last quarter. So where did the other ₹400 crores come from? Well, the consolidated side, which includes subsidiaries. You see, CIAN has a bunch of these.

It picked up Sec-One Sales & Marketing, a trader in sugar, molasses, jaggery (the stuff ethanol is made of). It added Manas Agro (which we spoke of above). And it even folded in Avenzer Electricals, Varron Aluminium, and a handful of other entities.

And just like that, a sleepy edible oil company morphed into a mini-conglomerate with ten reportable segments: Agro, healthcare, infrastructure, sugar, power, fertiliser, distillery, LPG, Motor Spirit and IMFL/CL (Indian made foreign liquor/Country Liquor).

Now of course, this transformation from cooking oil to fuel oil, with most of the changes coming in under one fiscal year, looks dazzling on paper. Maybe the subsidiaries are doing well and bringing in the money. But when you dig deeper, that doesn’t seem to be the case.

Because it seems it’s the “other income” story that’s floating the company’s boat, not subsidiaries. As this post from The Morning Context explains it…

The reported consolidated net profit of Rs 4.9 crore in 2023–24 included Rs 11.70 crore of other income. Without this other income—which is unrelated to operations and is non-recurring—CIAN would have reported a large loss of Rs 6.8 crore. What did this other income consist of? As per the 2023–24 annual report, almost all of the amount pertained to gain on fair valuation of loan, gain on reduction of lease term, and accounts written back—cryptic and highly subjective writebacks and revaluations, it appears.

Another problematic bit is the timing of other income. As much as 83% of 2023–24’s other income was booked in the final quarter of that fiscal.

Sure, things looked better in FY25. Out of ₹41 crores in profit, nearly ₹12 crores came from other income. And again, half of it was booked in the last quarter.

The other ₹30 odd crore in profits were mostly from the consolidated side. So this time, subsidiaries might be doing the heavylifting. But good luck figuring out how they’re performing since there aren’t sufficient disclosures in the filings. Even though they now make up most of the revenue pie.

Oh, and one more thing. We tried matching the ‘cash and cash equivalents’ (simply, cash balances) from the balance sheet with the cash flow statement (the one that shows how cash is earned and used), but something doesn’t add up. In the balance sheet, consolidated ‘cash and cash equivalents’ stood at ₹38 lakhs at the end of FY24 and ₹2.03 crores at the end of FY25. Tiny, but straightforward. But in the cash flow statement, the same line item — ‘cash and cash equivalents at the end of the period’ — shows up as a massive negative ₹64 crores in FY24 and negative ₹58 crores in FY25. And, very surprisingly, the auditors have happily signed off on these mismatches.

Meanwhile, debt has been rising and investments have ballooned. Sure, expansion is fine. But if sales don’t keep up, it could keep the balance sheet panting. Even interest expenses are rising every quarter and eating into profits.

Promoter holding today is 67.6%. But about two-thirds of that, or 44%, is pledged. Back in 2023, it was 72.6% holding with 41% pledged. Which means pledges are rising, and promoter ownership is falling.

Institutions, meanwhile, hold less than 0.2%. Which means the stock is almost entirely floating in retail hands, and when things swing, it’s retail investors who could feel the burn.

So what do we make of all this?

At over ₹2,000 crores in market cap, CIAN Agro is valued as if it’s already one of the ethanol heavyweights. But unlike Balrampur Chini or Triveni, which have run sugar mills and distilleries for decades at single to low double digit margins, CIAN is flashing good growth. And a meaningful chunk of that still comes padded by other income and subsidiaries that barely disclosed a business plan a year ago.

So if margins slip back to industry averages, or if cash flows don’t catch up, the premium in the stock could look less like foresight and more like froth.

Maybe the market has priced in the perfect ethanol story. Policy, politics and profits all lining up. But perfection, especially in small caps, rarely lasts long.

So yeah, if the next few quarters show cash catching up to profits, pledges unwinding and real traction ethanol, this story could harden into reality.

If not? Well, it could end up looking exactly like what sugar does best. A sweet high, followed by the inevitable dip.

Until next time…

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