Highlights.•Chitosan-cellulase nanohybrid was synthesized and characterized to improve the pH, temperature and thermal stability.•Cellulase and Nanohybrid was immobilized in alginate matrix and activity was detremined by CMC hydrolysis.•Reusability of immobilized enzyme was studied by recycling after each hydrolysis step.•Untreated and pretreated sugarcane bagasse was hydrolyzed by free enzyme and immobilized enzyme.•Hydrolysates obtained after hydrolysis were subjected to fermentation to produc...