Praj Industries Limited - Q4 2021 Earnings Call: Event Participants

Praj Industries Limited - Q4 2021 Earnings Call
Friday, May 7, 2021 2:30 AM
 Event Participants
Executives (3)
Sandip Bhadkamkar, Shishir Joshipura, Sachin Raole
Analysts (9)
Unknown Analyst, Vikram Suryavanshi, Bhagyesh Kagalkar, Sandip Sabharwal, Saket Kapoor, Faisal Zubair Hawa, Nimit
Seth, Levin Shah, Ritika Agarwal
Attendees (1)
Unknown Attendee
Sandip Bhadkamkar EXECUTIVE
Welcome you to this conference call organized to discuss Praj Industries operating performance and financial
results of Q4 and FY '21, which were announced yesterday.
On this call, I have with me Mr. Shishir Joshipura, CEO and Managing Director; and Mr. Sachin Raole, CFO
and Director of Finance and Commercial.
Before we begin, I would like to mention that some of the statements made in today's discussion may be
forward-looking in nature and may involve certain risks and uncertainties. Documents relating to our financial
performance were e-mailed to you. These documents, along with quarterly presentation have also been posted
on our corporate website.
I would now like to hand over the floor to Mr. Joshipura for his opening remarks.
Shishir Joshipura EXECUTIVE
Good day, ladies and gentlemen. I welcome you to Praj Industries earnings call for Q4 and FY '21, plus all of
you had the opportunity to go through our results presentation for the quarter and year ended 31st March 2021.
. It is once again a pleasure to connect with all of you. I hope all of you are doing very and staying safe during
these unprecedented times.
I'm sure you are all observing the [indiscernible] guidelines by health care authorities and keep well and safe. I
also hope most of you are in the process of securing vaccines, if not already vaccinated, which is a very
essential measure that will help us win fight against the COVID-19 virus.
Let me now is take you through the results and overview of the external environment. I will take you through
the quarterly business highlights, industry developments, following which Sachin will take you through the
financials.
The external business environment continued developing positively for most part of the quarter, even as we
brace ourselves for the impact of the second wave of pandemic towards the end of the quarter. We have
learned to work and lay in partially locked environment, and there is a broader sense that the economic impact
due to the fiction and lockdown could be moderate compared to impact the first wave last year.
Different state governments have announced lockdown measures in varying degree and tougher restrictions on
mobility. In complete compliance with the directives, we have temporarily closed operations at our corporate
office in Pune. Our employees continue to serve our customers working from home. However, our
manufacturing plants, R&D activities and sites have continued to function with all due precautions in
accordance with the directives from the local authorities.
We are better prepared time compared to last year with significant reduction in member of unknowns and a
much better aligned processes and workflows. As an organization, we are significantly healthier with much
higher visibility on demand cycle, operation, et cetera.
A normal monsoon forecast for 2021, along with timely harvesting of rabi crops, could further entail a healthy
agitator season given degenerative crop prices and healthy water reservoir levels does boding well for the
overall economy.
Coming to the bioenergy front. In the domestic market, the center's efforts on expanding the country's ethanol
vending program through supporting regulations and measures continues to drive the demand for ethanol to
higher levels, giving boost to capacity expansion in the center.
The current lending level for ethanol in India has crossed 7.4% in the first 5 months of ethanol supply year
2021. This is the highest ever recorded ethanol blending level at an all-India basis.
Since 2014, we have witnessed the government progressively building upon the [indiscernible] BBC program,
registering an almost 4x jump in ethanol vending levels in the last 8 years. The government has recently
announced advancing of EVP 20 targets by 5 years from 2030 to 2035. This is expected to create a demand of
additional 10 billion liters of ethanol per annum. Move to encourage ethanol production, the government
further expanded the submassive feedstock by adding [indiscernible] restocks to the list in the form of supply.
A robust and remunerative ethanol pricing model, along with the interest subvention scheme is building a good
momentum in creation of ethanol production capacity across the country. To further boost the production of
ethanol, states are taking proactive steps aligned to Government of India's National Biofuel Policy in 2018, in
case in Bihar and Chhattisgarh has introduced a specific ethanol production policy to attract investment in the
sector.
The recent move to allow the direct sale of ethanol as a fuel for compatible automobiles are further expected to
support this demand. Like petrol and diesel, it is now allowed to sell 100 directly to compatible vehicles.
Praj is on sinking on advancing the sustainable transportation is reflected in our bio-mobility platform is very
much aligned with this thought process. This policy will further add to building up the opportunities for the
steady capacity expansion and extended full users across this nation.
The basic change that is being brought about the expansion of feedstock away from only molasses to expand
the sugar-based feedstock itself plus the state feedstocks in some of different grains and the cellulosic biomass,
all these 3 put together are likely to change fundamentally, the industry structure, which was either too
dependent on single feedstock base and a few location-based output to multiple feedstock around the year
across the country production level, and this is likely to change the industry sector substantially as we move
forward.
On the CBG front, in the domestic market, we are seeing policy action developing. There has been now a
notification that is earmarked that CBG produce can now be mixed directly into the CBG networks. And I
think that's a very big positive step forward for the evacuation of the gas and we expect that this and further
measures will help to build the overall ecosystem for CBG, which will help develop this business over the
midterm.
The rights to directive rollout in Europe that we've been talking about, it is now around the corner and later
this summer in Europe, they will be rolled out, and this is effective drive creation of cellulosic ethanol capacity
over the next decade.
World Economic Forum constituted initiative called Clean site for tomorrow, of which Praj also 1 of the
members. And we submitted this and recommen will report to the government for advancing the development
of sustainable aviation fuel in India. We expect [indiscernible] has become an important part of biofuel country
over 5 years or so.
Let me now take you through the highlights and the developments for the quarter. Overall, we believe we have
delivered an encouraging and robust performance. The growth in Q4 was built on top of a momentum that we
saw in the last quarter, led by the biology and engineering businesses. We are also seeing robust order booking
this quarter and ended the quarter with a closing order backlog of INR 1,748 crores as on March 31, 2021, the
setting the stage for the promising FY '22.
Our bioenergy business returned a strong performance reflected in increased business wins. We are seeing
development of robust inquiries and leads across different feedstocks in the domestic market. Brand
technology was selected to set up India's largest capacity syrup-based ethanol plant from Godawari
Biorefineries in Karnataka. As part of this project, Praj will expand the existing some to 600 KLPD using
sugarcane syrup. When commissioned, this will become India's largest capacity syrup-based ethanol plant.
The expansion will maintain 0 liquid distant by deploying Praj has taken SHIFT technology, developed in our
state of our R&D facility at Praj Matrix. The SHIFT technology is maximizing value for customers by
minimizing water and energy footprint.
Over the last 1 year, the domestic market saw a contracted capacity addition for setting up of 100 crores liters
per annum of ethanol. So we contracted for setting up 100 crore liter of ethanol capacity. And Praj is at the
forefront of building this capacity as we move forward. On the international front, with talent forced by the
pandemic impeded development dialogue in several economies and the travel restrictions led to an extended
time line for market building activities, the impact of COVID and travel restrictions does help import some of
these activities as we move through the year.
As the coal [indiscernible] will taper down, we are now experiencing restart of the dialogue on capacity
buildup and expansion in investment markets. We also expect that in the back of the U.S. returning to [Audio
Gap] will come to the forefront and we'll present a new business opportunity for us.
On the 2G front, execution of the first 3 plants in the country is on course. Equipment insulation has started at
the IOS Panipat project. The mechanical completion of the site is expected in second quarter of calendar year
'22. We expect to commission this plant in third quarter of the calendar year '22. In Europe, salinity, our latest
offering along with [indiscernible] in is finding good traction in forest residue to ethanol space, especially
Nordic regions and inquiries are progressing very constructively on this front.
On the CBG front, we back the prestigious back to order from HPCL during the quarter for setting up the CBG
project in [indiscernible] in Uttra Pradesh [indiscernible] offering is state-of-the-art ranges process to produce
CBG from rice straw using proprietary micros. The project has a capacity to focus 35,000 metric tons of rice
straw as feedstock had been generated over 5,000 metric tons of CBG annually.
In addition, the project will also generate 23,000 metric tons of high-quality solid bio manual and over 35,000
metric ton of liquid [indiscernible]. The project has a potential to save over 15,000 metric tons of CO2
emissions for the year.
We have received a contract for setting up a CBG project or a display spend was in Western India with the
capacity to produce 10 metric tons of gas per day. Praj is very proud to have that project for CBG development
from 3 independent and highest potential feedstocks, namely [indiscernible] rice straw and [indiscernible].
Through these projects, we are contributing towards the initiatives within the objective to promote CBG as a
clean, sustainable and affordable fuel.
As I speak with you, we will also commence the final stages of the commissioning of India's first 200 PPB
[indiscernible] based CBG project at our customer plant based in Uttra Pradesh. The ecosystem for the CBG is
continuing to develop, and we do hope that over period of time the system will develop and become a robust
system just the way ethanol system is over a period of time.
As for Engineering and PHS business, they have started to witness healthy trend in their chosen market
segments, and we expect that momentum to strengthen as we move ahead through the year. The 0 liquid
[indiscernible] water business, the IOCL project execution has commenced, and we also backed some key
orders during the quarter and what was very heartening for us is that many of these contracts are repeat orders
from our [indiscernible] customers, which actually goes to prove that our solutions are highly increasing
acceptance with the customers.
On the CPES front, with the global technology and EPC player, and we expect from several of these accounts.
The brewery business, the domestic market has continued to be a status quo with no new capacity being put by
1 brownfield expense, which we are building. We expect domestic demand to return based on the development
on the pandemic truck. We are beginning to see an increased activity in Africa and expect that our efforts will
stay away for a constructive development in new financial years for jewelry business in African market.
On the PHS front, we are witnessing increased activity level in entire complex investable and vaccine space.
These are the 2 states where we had positioned our solution very strongly over a bit of time. We are now
partnering in supplying of critical equipment to several leading players in the COVID investing development
program. We also see an encouraging development on inquiries from the international front, laying the
platform for a strong growth of this business.
On the operations front, our continued and steep price in input commodity costs couple with issues arising out
of a pandemic imitation does post challenge in spools and trouble [indiscernible] but our teams are focused on
ensuring that we iron out those incomes as we move ahead.
We are carefully monitoring business environment for any demand-side corrections owing to the pendant
situation, although we see no signs of that as of now. We will continue to take all measures to identify risks
and their mitigation, ensuring continuity of operations, safety of our people and continue to do our bit in price
to defeat the pandemic.
On the whole, our research, innovation, focus led customer-centric strategy, coupled with very progressive and
sustainability-focused policy environment has helped build a strong platform for driving company's future
growth.
Before we close, I would like to share, in line with our dividend payout strategy, the Board of Directors has
recommended a final dividend of INR 2.16 per share for FY '21.
With this, I will now hand over to Sachin for his comment on the financial performance. Thank you.
Sachin Raole EXECUTIVE
Thank you, Shishir. The consolidated income from operations stood at INR 567.1 crore in Q4 FY '21 as
compared to INR 296.29 crores in Q4 FY '20. PBT for the quarter stood at INR 73.
19 crores as compared to INR 31.67 crores in the corresponding period last year. Profit after tax stood at INR
52.01 crores in Q4 FY '21 as compared to INR 24.86 crores in Q4 FY '20.
For the full year ended operations stood at INR 1,304.67 crores as against INR 1,102.37 crore in FY '20. PBT
is INR 1,103.11 crores as against [indiscernible] in FY '20.
And PAT for FY '21 came in at INR 81.07 crores as against INR 71.43 crores in FY '20.
The contribution margin for the quarter as shown drop of 2.3% as compared to the last quarter. This is mainly
because of the sales mix for this quarter, mainly the higher turnover of domestic business, which is almost
72% as compared to the 69% and some impact of increase in the input costs.
Similarly, contribution margin for the year has also seen some kind of an impact as compared to the last year.
The reason being in the last year, we executed a high number of service export orders as compared to the
current year. Effective tax rate for the year stood at rupees stood at 28.3%, 16% of the last year. This year, we
are coming normal tax regime as compared to the last year where we have in the [indiscernible] regime.
Additionally, the increase in the rate is because of recognition of deferred tax liability on account of certain is
benefits, which will not be accruing in the mix.
Looking at the complete utilization of [indiscernible] credit now, and some benefits of R&D spend and excite
sales, which are going to be going in the taper down. For effective tax rate is affected to be in the range of 26%
to 28%. Export revenues accounted for 28% for Q4 FY '21. And of the total revenue, 70% is from bioenergy,
22% is from engineering and 8% is from PHS business. The order intake during the quarter was INR 650
crores with 84% from domestic market.
Of the total order intake 84% came from energy, 8% from engineering and balance 8% from PHS business.
The order backlog stands at INR 1,748 crores at the end of March '21, comprising of 85% of domestic orders.
Cash in hand as on 31st of March stood at INR 476 crores.
With this, I will conclude my remarks. Thank you all for joining. We would now be happy to discuss any
questions, comments or suggestions you may have. Thank you.
Operator OPERATOR
[Operator Instructions] The first question is from [Technical Difficulty]
Unknown Analyst ANALYST
Sir, I have 2 questions. First 1 is with regards to -- you mentioned about the CBG plant in the North India
being now operational. And you had mentioned in the previous call that in North India was supposed to start in
April and the Southern India plant was supposed to start somewhere around June. And based on the working,
how the plant is working? What is the customer response? How the entire ecosystem is developing? You see
further inquiries coming in.
So with regard to this first plant, which has now been operational, if you could share some feedback as per
how the plant is functioning? What is the customer response? And does it give you an indication now we
probably more and more inquiries, which could get converted now into orders coming in much sooner than
what probably you would have expected earlier? That is question number one, with regards to CBG.
And secondly, with regards to sir, the commodity costs, which have gone up And they continue to move up in
the last 3, 4 months also further. And so how could this impact we have not any impact by in March, though,
our gross margins have come down. But do you see this impacting going ahead in, say, next 2, 3 quarters to
come? If you could share something on that.
Hello, Shishir, are you there?

Can you hear me?
Yes. Now, I can hear you.
As I was mentioning, the IPL commissioning has started. And early days for me to comment yet on which
impact in the market, et cetera, we are expecting, but I think we have to give some time. People would also
like to see performance for a brief period of time before [indiscernible] concludes. But right now, as far as
technology is concerned, we are moving in the right direction. And we expect that we will soon be able to
establish the full performance because it takes -- it gradually builds up over a period of time that is how the
nature of the gas plant.
So it is on track and developing well.
We have also learned lots of lessons on around what meets with them on the ecosystem. We've been working
very closely with all marketing companies with the [indiscernible] gas distribution companies, with the
customer, with the logistics providers. And it's been a great input that we have -- and learning that we received,
and we will be able -- and I must say that everybody has been responding very constructively positively. And
as the things go forward, probably this is too early for me to comment on whether we're starting to see a flow
of enter based on this particular plant. So that's early days for that.
But over a period of time, we do expect that this would happen. And the ecosystem development here
improvements will help some of the other customers to also witness and make up their mind.
Moving on to the commodity question that you got, yes, the steel price hike is uniformly impacting everybody.
So there are 2 dimensions to it. On the new jobs when we go and bid, we can definitely factor that in at that
moment in time as to what the price is, although they have been really rising at a more rapid rate than 1 would
expect for different factors.
On our existing jobs, it is going to create some more questions because as we execute and during the execution
itself stated, the costs go up, then they will have some impact. But we have -- our team is very focused, very
alert, and we are taking measures to see how we can mitigate the cost of raw materials right because there's
also a lot other costs that we have to manage. So finding a balance between the 2 is a challenge. But yes, it
does pose a challenge as we move forward.
Operator OPERATOR
The next question is from the line of [indiscernible] from Max Life Insurance.
Sir, in our order book regarding Bioenergy, if you can specify what will be our execution cycle and ethanol
plant-related how much orders will be there?
So [indiscernible], the execution cycle has not changed. It is exactly same what it used to be. And because
there's no change that has taken place in terms of any of the factors that would impact the execution cycle. So
it remains unaltered between 9 to 12 months, of course, depending on the customer's readiness as well. So it
will continue to be in the direction.
Sachin, you want to give the number on bioenergy versus engineering mix?
Sure. I can give that number. Are you interested in understanding the closing numbers, the breakup of INR 748
crores? So I can tell you the number will be around INR 1,000-plus crores in the bioenergy segment, around
INR 500 crores will be in the engineering segment and INR 115 crores in PHS.
And sir, isn't it took [indiscernible] ethanol plant, it requires in the range of around 12 to 18 months, then I
would like to know like how are the execution cycle is in between 9 to 12 months?
No, no. So I think [indiscernible] has a question from whose perspective. So if I'm the promoter of the
prospect, what you're saying is right because I need to go for an environmental clearance before I start out to
order out my plant. So it does take within 6 to 9 months to get those regulatory approvals in sometimes it can
be as long as 12 months. And -- but I'm talking about orders on hand.
Once the order then the EC already exist, okay? So from our perspective, it would be 9 to 12 months, but you
are correct that if somebody putting a project, maybe they will take a longer side, notes.
And just on the historical part and [indiscernible], if we see from 2016 till now, actually capacity-wise, mostly
ethanol capacity has quadrupled, I think from [indiscernible], but our sales were not increasing. But now
actually, again, the capacity addition is there, and we are seeing a jump in order book. What exactly there is a
change than historical in current?
So I think there are 2 or 3 factors that we need to take into consideration here. One is that there is a definitive
program for improving the ethanol brand in the country. So and a clear realization that the demand has been
now flattened out, the oil companies have come out with 10 or 5 years, right? They have already told what the
demand is likely to be for the 5 years. But they've already -- before [indiscernible] was announced. even before
that, they had given out a very significant visibility to what is the requirement going to be.
And the capacity short of that. So obviously, then capacities will be built based on the demand supply gap.
That is number one.
Number two, and I think that's an important parameter is also to understand that if you go to [indiscernible],
then we are looking at a very different kind of a cycle because As you would know that today, most of ethanol
is produced in the 3 states of Uttra Pradesh., Maharashtra and Karnataka. But is the change in the policy on the
grain side, by including the state feedstock, if we can put a broader game to this.
So there is [indiscernible], which is all the sugar companies as the natural owners. And we'll continue to build
capacities based on that because of the dynamics that happens in the sugar business. On the other hand, the
[indiscernible] feedstock actually distribute the production of ethanol across the country in every state because
[indiscernible] feedstocks are available across through the go downs in the country.
If that is what is happening, then the ethanol capacities will come up in different parts of the country, which
will lead to an overall improvement in the blending ratios because today, a lot of logistics distances and
management has to be done to move to from 3 stages to multiple states. That is the next one.
Then the third dimension that will come into place. So we look at what's happening at [indiscernible], we'll
look at what's happening at the crossing capacity expansion. And the third dimension that we walk in the
industry structure itself is undergoing a change. If you look at it from the perspective of -- let's just take 24
months ago and almost entire production of ethanol in the country was based on sugar [indiscernible] shop
them into natural oil and they'll continue to do so.
The dynamics on the sugar side the change, the export subsidies going away, surplus sugar production, very
good agriculture crop. So [indiscernible] the freeing up of the feedstock. If you look at all of these -- apart
from all the financial measures that got announced, then that is driving a good dynamic in the -- on the sugar
segment to set up capacities based on setup molasses being moved away from last and what name means is
more and more super is now getting diverted to a person of ethanol. It is also a very high value accretive
activity for the sugar mills. That's 1 damage.
The [indiscernible] feedstock, on the other hand, will bring in [indiscernible] of new set of promoters if I can
use that world for the project. You can imagine we have inquiries from developers of large solar capacities
because for them, it is a model that you create a commodity, which is electricity now [indiscernible]
commodity called ethanol based on our policy that is -- or the direct fees that are available in the system
ecosystem.
So we will see a completely new set of players also emerge. It could be OMCs, it could be developers, it could
be renewable energy focused developers, renewable energy focused funds. So this could be a very different set
of people who will walk in Because the start feedstocks actually opens the whole economy to a very different
set of dynamics. And that's what is going to happen in India. But not only in India, we are seeing this
movement across the world in several economies and where we are expecting, of course, United States
walking back into the Paris agreement is a big, big push -- positive push in the direction.
We are seeing a lot of activity emerging out of Canada, where they have announced a very ambitious
[indiscernible] program. So we see constructive developments taking place in different economies on this side
and many governments taking up to the idea that maybe this is a good solution for us to address our energy
needs. Sorry, a bit of a long-winded answer, but I hope that answers your question.
I say just to last question. The last year, we had a closing order book INR 1,000 crores and we ended FY '21 at
around INR 1,300 crores. So right now, we have around INR 70 crores. Can we expect a period of around INR
2,000 crores by FY '22 and on how much can be the sales target on your end?
Well, all I would say is this, I'm no idea what the equating your excel sheet forecast is that we can put it
together in the history some part. So yes, we'll have to see. There are factors to be, as I was mentioning, there
are -- we are assuming that business environment will remain largely unimpacted with this second COVID
wave, which is what the indicate correctly, but we have to wait and see.
Our focus is, as I mentioned, is to increase the throughput of our systems and execute the plants very, very
effectively and very -- at a fast pace. Also in a very major change that we will witness as we move forward
from here as in, is that while the sugary feedstock based plant are seasonal in nature, so there is some
seasonality in the execution cycle. The grain-based plant or [indiscernible] plant, they do not have such a
seasonal build into their requirements. So we will see a very different dynamic play out as we move forward
all favorable.
Operator OPERATOR
[Operator Instructions] The next question is from the line of Vikram Suryavanshi from PhillipCapital.
Vikram Suryavanshi ANALYST
Congratulations for strong performance. First question is basically for how is this progress of around more
than 400 projects which are there [indiscernible] subvention? Are we seeing the traction with this tripartite
agreement? Or still there facing some financial funding issues?
So Vikram, thank you so much. I think as I was mentioning, the industry structure is undergoing up on
[indiscernible]. And it's no longer just a sugar-based ethanol production story. We are going to see a lot more
[indiscernible] feedstock based capacities that come in on these 4 [indiscernible] that you do. We are seeing --
the we will see it if the first our inquiry levels are to start going up, and that has definitely happened.
Our order book has to start building with different feedstocks that definitely happened.
And for us, the good news is that for us, the [indiscernible] feedstock is a story that we have built outside India
for many years. So we have tremendous experience into building of these plants and their performance. So we
expect that experience will come to good help for us -- for us, for our customers to now start building world-
class plants in India based on [indiscernible] feedstock as well. So we are seeing very positive development.
Our inquiry levels have more than doubled on the Pacific side, probably more than quarter as well.
So we are expecting a good and constructive action. on that side.
Vikram Suryavanshi ANALYST
Okay. And second question about the increasing the landscape under the bio modality, particularly
opportunities in aviation fuel or mean all of the fuel for postal shipping or in line at way. Typically, we will put
up this kind of capacity or existing the ethanol players can with some modification to the equipment can
supply that or If you can highlight that? And how our tie-up with [indiscernible] is playing out for global
market for the aviation fuel?
Great question, Vikram. So on the sustainable aviation fuel side, our technology that we are working with
[indiscernible], which we have codeveloped with them, with a specific focus on the Indian market and since
we understood the dynamics here, it is an alcohol to jet fuel group as it is called ATJ, alcohol to jet. So our
effort is that tomorrow, if the market were to start expanding for the sustainable aviation fuel. And as we know,
that there is no electric alternative there on that front, right? You can't have electricity powered aircraft lying
down.
So for them to overcome the climate change problem and greener gas emission issue, they will have to shift to
-- the industry will have to shift to sustainable fuels. And there, the alcohol to jet route will play a very big role
because in India, as we have mean I've mentioned on the report as well as guys for tomorrow.
The route of alcohol to jet actually utilizes the current infrastructure that we have so strongly in place with our
sugar mills anal production plants that are set up with them the grain-based plants that we come up, all of them
will become the feeder plants. So it will be a different molecule of alcohol that will be produced in these
plants, and it's a 2-stage process, and then the refineries will define that all to the aviation fuel steps.
So 2-stage process, but very, very aligned to what our current infrastructure is. And we are developing this
technology with a view that our existing customers should be able to accommodate and with minimal
modifications and start producing the required alcohol variant as and when the opportunity opens up.
Operator OPERATOR
The next question is from the line of [indiscernible] Investments.
Yes. Congratulations on the excellence set of results. Firstly, if you can help me with the -- I mean, quantified
target market size correctly and how it will evolve in the coming years. And if you can break that up from
between sugar and starchy feedstock.

Sorry, in your question, what is going to be the sugary feedstock-based ethanol production verus starchy, is
that the question?
Yes. I wanted to understand, I mean, what is the current target market size and how will it evolve in the
coming years? [indiscernible] feedstock.
All right. So as I said, if we have to meet the EBP 20 target by 2025, we have to add 1,000 crores liter of
capacity into the system. Nearly 60% and thereabout -- so you can say, 60% to 2/3 in that range will come
from starchy feedstocks and 1/3 will come from sugar feedstocks with additional cap
Sure. So what is the current payback period for the customer based on starchy feedstock?
Sorry, I couldn't get the question.
What is the current payback for our customers starting this starchy feedstock production?
Well, there are factors, for example, the land cost, the proximity to the market, the cost of capital to an
organization, which is different from different people. The capacity itself of the plant, if you put up a larger
capacity plant, obviously, more effective payback period. So it varies. It could vary -- in some cases, it could
be 3 years, it could be 5 years of that order. It depends on different factors.
Okay. Lastly, on capital allocation front, I mean how do you foresee the excess capital considering we are
having strong free cash and idle cash on the balance sheet.
Sorry, could you please repeat the question? I couldn't catch it.
Yes. How do you perceive excess capital on the balance sheet considering we are having strong free cash and
idle cash on the balance sheet?
So I think, first of all, we are very happy that we are in a situation that we have cash on balance sheet, and we
are not looking at raising any debt of any kind, number one. Number two, as I was mentioning, As we move
forward, a lot of development will take place on the bio mobility platform itself. I think 1 of the previous
questions was around what happens to biomethanol, what happens to sustainable aviation fuels. And a lot more
that we already laid out to the platform for.
So we have to see what kind of investments we will need to put on the technology side to be able to be ready
for driving the change. for making it happen and being at the forefront of it, which has been our legacy so far.
So I think we have to have a judicious understanding of what kind of expenses we need over what period of
time, and we will take the correct call on that with respect to that.
And yes. Viraj, if I may add, I'm Sachin. The projects are also under execution. So we had to execute all the
order book of INR 1,800 crores, which we are sitting on. And actually, on the basis of payment terms, we had
received the advances against those.
So naturally, it will go, some portion will go for working capital also for that matter. So what Shishir
mentioned is on the investment on the capital side. But second thing which we'd like to also keep on investing
into working capital, which will be requiring for the execution of these projects.
Operator OPERATOR
[Operator Instructions] The next question is from the line of [indiscernible] from JM Financial.
My question was in terms of the capacity, what is the capacity today, total distillery capacity in India? And
how much of that is based on grain and sugar respectively?
Are you asking what the current installed capacity?
Yes, sir.
We can probably [indiscernible] information because I need to give you an exact number on those. So because
this depends on the feedstock that the companies have opted for, et cetera. So most of the capacity today on the
ethanol side of the equation is sugary feedstock, most of the capacity in India today is to sugary feedstock
because there was no policy around starchy based ethanol product starchy feedstock and ethanol production
thereof.
So whatever production that we see today of sort of 350 crores liter, 400 crores liter, that is coming out of a
sugary feedstock only. And today, the gain capacity that exists in the country is mostly used for portable and
other higher news alcohol production.
Understood. And the second half in terms of -- sorry.
[indiscernible]
Certainly. And in terms of the capacity, those 400-plus applications the government approved for the interest
[indiscernible], what kind of capacity do you see getting actually added given the issues they're facing,
whether it is land or environmental clearance or other funding What kind of capacity addition do you foresee
in the next, let's say, 3 years of source? And how much of that would be sugary feedstock?
Let me put it like this. So if you look at the year that went by, year ending margin. Our -- if you will all the
capacity in the country, it's like nearly 100 crore liters to the country's cities, okay. 1, 12 liters of capacity will
be it different stocks.
Now on the other hand, if we have to meet the EBP 20 program in 2025, we have 100 crores listers, okay that's
the second view point for you. [indiscernible] 2/3 markets, so they like 400 crore liters of their plants as well.
So if we have to add another nearly 8, ninefold more -- eightfold more capacity to this, and I said that most --
we expect as we move forward, 2/3 of the capacity will be built around static stock and 1/3 we be built around
suit stocks. And by the time we reach 2/3 when we would have, as I mentioned earlier, we would have also
proven on the ground the logistic ethanol for which we are building these 3 plants. So sellers feedstock base at
all. And I think that is when we will also start to take that market because that's a very, very different
proposition because that solves -- and I would mention the like 2 program in Europe, which is actually focused
on cellular cited stock.
So we will have to look at these different dimensions of how they play out. In India, only in India, we expect a
lot more capacity to get built up based on tactics and not -- and a little less on silty stock as we move forward.
All of the super in a very, very big base.
Fair point, sir. If I could ask 1 more, just a clarification, in terms of the blending there is slight confusion in
general in terms of the existing vehicles, how much can they take without any equipment issues or with certain
replacements? How much can they take [indiscernible]?
Pardon me, I will have a slightly long answer to this question, but so I understand it. So I was attending a talk
from the Brazilian opportunities. And as we know that they are the leaders in the field in the world. They have
demonstrated that they have gone up to 27% blend with no change, okay? It more change in the vehicle that
gone to 27%. But that's what they have achieved.
I'm saying, on the other hand, if you look at what is required to be achieved, there are 2 dimensions to that
okay. One is when I blend If I know as annual automobile manufacturer. And if I know that the fuel is going to
be [indiscernible], for example. If I know that fuel is going to be [indiscernible], I can then tune my engine at
What the [indiscernible] allows me to go to much higher compression ratios without the problem of knocking
because there's great oxidation agent with a high opting number called ethanol presenting mix. which lags the
whole mixture that an opt-in number.
But if I don't have that information, then I have designed my vehicle for [indiscernible], if I can use that word,
okay? That is for the normal petrol, with a lower compression ratios because I know that if I go for high
comprises it's not, then I will not be able to operate the vehicle.
So it's also a matter of striking of having uniform availability of fuel across the country, designing a vehicle to
that so that we can directly leverage the whole -- a whole potential of the fuel that is available. In absence of
that, You will have a vehicle, which is designed for a fuel, which will work for nearly since year, but we may
have some -- may not be able to scale up to the best possible performance level, which may be better than what
it is currently. So that's 1 in.
Second is, I think, up to E15, at least for sure, there is no change that may be required in most of the vehicles.
And I'm saying this based on my knowledge of my past job that, that may not be required. Beyond 15, 20,
there will be some changes in the gas case as that may be required, but no fundamental changes that can be
called for unless you redesign the vehicle to take advantage of this higher octane number, et cetera.
Operator OPERATOR
The next question is from the line of Bhagyesh Kagalkar from HDFC Mutual Fund.
Bhagyesh Kagalkar ANALYST
Yes, 2 questions. One is on the RCM opportunity. Can you throw more lights in the loans? And secondly, on
the CBG front, we now in lending of nose a lot of pressure. On the CBG front, what is the infection point now
that we are sort of post CBG plant that government are talking of big numbers from CBG plants allover India?
So Bhagyesh, great questions, as usual. RCM, I think we need to understand it this is at different stages. So the
first part of rCM is the core products that will come out of our [indiscernible] ethanol system, the 2G plans that
we are commissioning. And now we have developed 2 very, very -- and some more are in the pipeline. 2 very
strong core products that could be upgrade use on the country and for the industry.
You know that we currently imports, for example, we have developed cohort called bitumen. Bitumen is
completely important today in India. But now we have developed a process that can take the lignin and relate
to produce bitumen. And it is currently under testing.
So when that happens, that becomes a very good source for country to substitute an imported product, okay?
There's another 1 called on But also we today also, we are importing entire quantities in a foray the material
that is used for concrete mixing. When you build you've seen confirm Siemens, this is an element that actually
holds the moisture and the segment together. So that allows the [indiscernible] to take place between what we
see in the different elements. So 2 examples I gave you, which will start to launch.
So there's a core product cycle of RCM that will go out in the field that will help our customers who are
already existing as well as the new ones. Then there is a whole range of products that come out because we
have been looking at [indiscernible] activity. We have been looking at our ability to look at different molecules
and there are products in the pipeline that will come to start to roll out and there are suite of them that will
come out.
And then, of course, there's a third one, the big [indiscernible], which is what happens in the bioplastics and
upward stages. So different bases of development right now for different products, and we will keep talking
about them at the appropriate time. That's on RCM. On CBG inflection point, I think, as I said, that We had to
commission the first plant and 1 is successfully to understand the core ecosystem this part of technology, but
more than technology, I think, also how the rest of the elements of the ecosystem work the CBG system, the
oil marketing companies, we're telling at the pumps, the vehicle population changeover, how people will
switch over from diesel to gas because There's a substantial price difference in the pump between the diesel
and the gas and so on.
So there are different perspectives that will have to be built in. I think what's happening currently is, a, it is
moving in the right direction. It is still early days to say we'll start to develop into the INR 1,75,000 crore
opportunity that the government is eventually planned for. But I'm sure that this is a very important first step in
the direction for us to demonstrate that it works. It works and these are the financials and that's how it works.
And I'm sure that, that is something that we will know during this quarter, okay.
And from there, we will build -- so early days of CBG, very promising outlook based on what has been
announced so far at very umbrella level. But I think we'll have to connect the ground relative to that and then
see how that looks.
Operator OPERATOR
The next question is from the line of Sujit Jain from ASK Investment Managers.
Congratulations for the excellent set of numbers. I had 2 quick questions CBG opportunity you just spelled
out. What incentives would be needed to democratize it outside the oil and gas, refineries and marketing
players? And in terms of risk, what happens when crude oil prices go down, if a month pricing is linked to
crude, does that change the economic across cycles? Will the players -- will they be able to make money? And
what are your thoughts about terminal value of fossil fuels vendors because government at the same time is
pushing EVs as well.
All right. So let me start. So first and foremost, I think what's important is on the CBG side, as I was
mentioning, the retailing of the energy and the automotive and in the country today is managed at all
marketing companies. And now we have a new set of players, especially in terms of the city gas distribution
companies. And there's a big push, as you know, to set up the city gas distribution network.
And I think that's a huge plus for CBG businesses there. In the recent policy announcement, the government
has said that this gas will be blended into the CGD network and then the ATM net pricing network mechanism
will take place of pricing at the end-user end. So very clearly, a push saying, no, we have to go sustainable.
See, we are not a country that is living a carbon tax or anything like that. But these are the policies through
which you can actually ensure that the right kind of energy sources are put to use from a carbon perspective
aside.
Moving from ethanol to crude in India, it has been clearly spell out so far that the pricing of ethanol is not
connected to the crude oil price, for 2 reasons, I think. One is this is very farm community connected prices.
Because what do we have in abundance? We have an abundance and who is the larger stakeholder for us is the
farmer and the agriculture producer. And we are not a country which has been lifted the crude oil reserves that
you dig a hole and you find crude oil. That's not the case for us.
So obviously, our environment and the policy, our environment on the entire mechanism that is rolling out will
have to get anchored itself around the agriculture dimension of the [indiscernible] and over a period of time,
world over, crude oil is not going to be -- over a period of time, is not going -- it's not a long-term field that
everybody is getting because of the associated problems of GHG emission, et cetera. So, so far, as it remains
connected to the agriculture benefits and then the farmer and feedstocks pricing thereon, I don't see a problem
for ethanol in India. So I think there's been more than enough indication and support and actual rollout in the
direction.
In terms of the vehicles, I think what we have to understand is that the -- I'm very happy to ask this question.
So we mentioned about a platform called bio-mobility. What does it mean? What bio-mobility platform stays
is that we should create sustainable fuels that will reduce the carbon footprint and will be sustainable in long-
term for the automotive vehicles. Now if you look at biofuels, what is actually happening with biofuels is we
are using excess infrastructure. We still use an IC engine.
And I think it is a huge point that we need to take note of as a country. IC engine undertaking our typical car
and IC engine-based car has 17,000 parts. An electric car had 700. So remember 700 versus 17,000. The
17,000 parts are made across automotive value changes is are all part makers to make sense.
Today, we employ nearly 10 million people who are based -- who are dependent on these parts being made.
When you're bringing biofuel, all of them, say in their supply chain, without exception. But you bring an
electric vehicle, most of them will vanish. One big news.
So we don't want job destruction. We want job creation. We want the job protection, and we want value
addition. So I think in where you use the current infrastructure for distribution and retailing, so not no big
investment in that dimension. And most important, as I said, we don't change the user at all.
I am as users don't even notice this, right? We just go the same proof, and we will drive our vehicle. So it's not
changing the user habit at all. And that's a big plus in favor of biofuels. On the other hand, will there be
electric vehicles? Sure, there will be electric vehicles, and they'll coexist. I was just reading a news today.
If you take China the equation in the world, the total number of electric vehicles sold in the world, last year
was about 5 million or so. China is another half, so equal 10 million. If you compare it to the total vehicle
version in the world, it's still -- this number is still raising fast because starting from 0. But this is -- so it will
coexist. It will come into the play.
It will have its own market. But for India, I think we need to ask different set of questions. We cannot do what
Sweden or Finland can do. Our economic talents and compulsions are very different.
And 1 quick question is on technology. Is it all built in-house? Any royalty payments, and for future
technology as well?
Sorry, I didn't understand your question.
The technology is developed so far, were all in-house or there were some royalty payments, et cetera, and in
the future sa well the technologies that you're talking about which will get developed. Any tie-ups basically in
terms of what is the impact on the P&L?
So let me answer the thing. First of all, we are extremely proud of the fact that we have our own R&D. We
have a state-of-the-art R&D center, which is absolutely world-class, and so recognized in the industry segment
globally as well. And we have invested our time, effort, money, sand, blood, tears, everything, our passion, our
commitment into developing our own technologies, and that is what we've been rolling out in the marketplace.
We also realize that as we go forward and more of interaction start to play takes place between different
platform like biology and chemistry, IT services and biology and so on, we cannot say that we know it all.
So we'll have to collaborate. And I think that's a good way to grow for any organization that we bring our
table, somebody else come and both put together becomes 1 plus 1 becomes 11%. So that kind of
collaboration.
We already have quite a few go [indiscernible] and we'll bring them to table as and when that is required. And
of course, if people bring their own technology, they will be -- there will be a, what I would call a comment to
that remuneration for all of them. None of them is going to be such that they will impact our P&L or anything
like that to the contract by combining 2 technologies and bringing it forward to a better level, will actually be
able to do better.
Operator OPERATOR
The next question is from the line of Vas Rishi, an individual investor.
Unknown Attendee ATTENDEE
I just wanted to find out, like if you're talking about this opportunity being so big in ethanol and later and CBG
also. Don't you think that a lot more players will come? So what's the mote which like Praj would have? Can
you just comment on that?
So I think what's most important is we have a track record. We have developed technology and invested into it
for [indiscernible] So if somebody wants to come and become Praj today, they either have to go back 20, 25
years into the time line and start developing from the and everything along the way. We have customer
relationships in 75 countries across the world, which are very deeply rooted. Not easy to upscale. There will be
competition, as you said.
It's opportunistic. There's a lot of echo operator.
Sir, your voice is getting cut.
Operator OPERATOR
Yes. Actually. your audio is breaking up as well, sir. [Operator Instructions]
Okay. So sorry, this completely broke my chain of So, Rishi, could you please tell me the question that you
asked? This completely broke my part.
So basically, the question was, if the opportunity is so big.
Yes, yes, yes. So if the opportunity is so big, and I was saying that surely competition been working. But what
we have invested in technology development, what we have invested into our customer relationship and most
important, what is our track record, that's not something that we would be able to copy overnight. At the same
time, I always believe that the offer is big and some competition is always good because that actually proves
that the market is really expanding. It is expecting players.
It is -- there are more people than one -- than us who are also seeing the same story that we are seeing. So I
think from those perspectives, it's a good thing to happen.
Competition also drives innovation, so that's a good thing to happen. But having said that, I think for anybody
to come anywhere near what we are today, they will have to have an equal pedigree at the back end to be able
to command equal, I would say, share of respect in the market. So no different [indiscernible] we are very, very
proud of what we have developed over a period of time. Not easy to compete.
And can I ask my second question?
Yes.
So I had heard an interview of yours some maybe months ago, in which you had talked about this incremental
1,000 crore liter, which would be required for this 20% blending in the next 4, 5 years, of which like you
thought -- you said the outlay would require around INR 1 lakh crore for which which Praj the addressable
opportunity would be around INR 14,000 crores. So do you expect that kind of order book for the next 4, 5
years? And if so, like when do you see the run rate improving to some -- to those kind of levels? If you can.
So Raj, we have begun to -- see those numbers are valid. We have begun to see the traction being built. I was
mentioning in an earlier [indiscernible] doubling the level of inquiry itself already. We have built -- we are
currently contracted to build 100 crore liters capacity in the country. So it will start to -- and our numbers are
reflective of that.
So as the capacity starts to get built, now if it gets [indiscernible] therefore, but we have built in 6, then we
divide by 6. So we'll have to see how that number plays out. But definitely, we are very, very confident that on
the ethanol side of story, we are looking at a very -- at a really final definitive period of time where CapEx will
take place, and we will have a very major role to play because we are the leaders in the business.
I said, around INR 14,000 crores for you as per present estimate of yours?
As I said, whether that 14,000 plays out in 4 years or 6 years, that time will tell. So I will not be able to look
into crystal ball over that period. But yes, as those numbers are valid, and we expect that if the current
momentum continues, we'll start to see conversions of those numbers happening.
Operator OPERATOR
The next question is from the line of Barath Sheth from Quest Investment.
Congratulations, Shishir bhai and Sachin on excellent performance. And I believe the traction, which we were
expecting has started, I mean, from this quarter end. Now Shishir bhai, I have a question on the domestic side
on the CBG, where in CBG, we have -- I mean, OMC is one of the largest main -- a key player in the whole
ecosystem. And we have with this gas process, we have got an order from HPCL. So if you can elaborate --
where there are also a lot of byproducts.
So how do we perceive the -- and this order and how to really benefit us in over a period of time? And sir, that
second thing on the engineering, which was a small piece of the business so far has now started country
booting and where we have taken a lot of excel in the past. And third you in your opening remarks stated on
the rate 2 policy. So if you can elaborate a little more on that?
Sorry, Bharat, I didn't get the third question.
In your opening remarks, you stated on this rate to policy in the Europe?
Yes. Yes. Yes. Okay. So Bharat bhai, on the CBG supply chain ecosystem developing, I think, it's very, very
important.
And it will have to be demonstrated over time. OMCs will remain a very important player in the whole chain
because at the retail end of the supply chain, they are the ones who -- the actual vehicle users will connect with
but CBG is also finding a very big traction now with the CGD network as they are built over a period of time.
The city gas distribution systems will -- I am having a lot of disturbance operator.
Operator OPERATOR
[Operator Instructions] Mr. Joshipura, you go ahead, sir.
Yes. So Bharat bhai, so CBG chain on the supply side, on OMCs will have growth to play on the retail side,
the CGD network coming into play. I think we will see -- and that's what I was mentioning earlier as well that
the ecosystem development is critical for any product to reach its end consumers or targeted consumers. And I
think we are learning that, that is something that will happen. The push is in the right direction.
But then it will take some time to build, but this will definitely be moving in the direction.
On the engineering part of business, as you mentioned, yes, that we have been talking about it, that the 0 liquid
discharge business of ours high-purity systems these are the businesses that are really beginning to gain
traction now because there's also an equally big concern now. The regulations are there. The corporates are
more aware. They are more conscious about not getting out any afferent liquid out of their operations. And I
think all of that, if we look at it from those perspectives, I think it's very, very important part of many process
plants, the large industry to set up 0 liquid discharge systems.
And I think that is where we have a significant role to play. We are also beginning to see a good traction
building up, as I was mentioning about high-purity system business, where we have been focusing on complex
injectables as a space to own our offering over a period of time. And with the advance of the capacities in the
country, and we are part of many of those efforts now. We are seeing a good traction build on complex
injectable space and vaccine space in our play there in as well. So good times going forward for PHS as well.
Moving to brewery currently, not much can be said. We have a dominant position in the business. But right
now, the business itself is not going because of when it is in pandemic impacted industry. So as and when it
comes back, surely, we will have the role to play there as well. And there, we are also focusing right now, as I
was mentioning, on the Africa as a market because that's where we see some capacity build taking place, and
we are beginning to see a traction build there as well.
So overall, CPES business, as I mentioned, we have been investing into our relationship with some leading
organizations in the world and some of the big players in respect of industrial segments. And we are expecting
the story to turn as we move forward in the future period.
On the rep policy, as I had mentioned, we expect -- because of the pandemic, it got delays, the rollout got
delayed, but is now expected that in this summer, we will see the rollout taking place where policy, what it
fundamentally says is that moving forward, all the future blending will be focused on cellulosic ethanol or
second-generation ethanol. So obviously, a lot of capacities will have to come up. We are already in dialogue
with a few organizations there who are -- who are thinking together slightly ahead of the curves and who are
talking about setting up capacities. So as and when the development takes concrete shape, we will definitely be
you, but that's a big opportunity and we expect that over the next 10 to 12 years, almost 30 to 40 plants will
come up of different capacities to address that opportunity in the European marketplace.
Sorry Shishir bhai to disturb you, but I mean, my question was this order from OMC itself based on this rise
base this thing and where there are a lot of other byproducts are also. So how do we really see this order, I
mean, over a longer-term playing out for us? What exactly it can, I mean, demonstrate for Praj?
So Bharat bhai 2 things. There are 2 basic stocks for, as we know today, and there will be more as we move
forward. But as we know today, one is the press mark that comes out of the sugar mills. And the second is the
rise straw in a big way. There are other agricultures as well and other base but I think these are 2 big ones that
we see.
Others will also start to add to the queue. It was important for somebody to set up a rice to baseline. It's not
there anywhere in the world. Somebody has to put up a plant. It was a competitive bid that we bid for.
There were other companies that we're competing, and we won the contract because at that time we were able
to showcase a much higher performance on rice straw. We'll have to build that. It is under construction -- not
construction, under execution right now. But sometimes in the first quarter of the next calendar year, we will
see that plant come to commissioning. And then it will be a clearly demonstrated proof of what can happen out
of rice straw.
If that happens, already, there's a big movement right now out of state of Punjab, where Punjab energy
development is already awarded several contracts and tenders and licenses for rice straw-based gas production.
So we do see a good traction buildup over the year on that one. And I think one must -- because the feedstock
is abundant, which is a good part. And that, to me, is the typical dimension. Can you hear me?
Yes.
Yes. So I think what's important is to say focus on the opportunity, make sure that we have the right
installations and differences, and we work with the leaders in the field. And we are working with several other
different kind of players. Their ESG funds. There are development, renewable development companies.
Their individual entrepreneurs are very, very different dynamics of the customers who are going to put up the
CBG plants, different dynamics for people who will eventually sell the CBG because that obviously is a very
different the CBG networks and the all marketing companies, retail outlets and things like that. So that is why I
said that there's an ecosystem under development. That's not the case for right? The ecosystem already exists
in a very, very defined way, but that's a very old industry as well. So we expect that as the ecosystem starts to
take roots, this opportunity will also start to take shape in a good way.
Operator OPERATOR
The next question is from the line of Sandip from Asksandipsabharwal.com.
Sandip Sabharwal ANALYST
I just wanted to understand that, I don't know whether you earlier, or [Technical Difficulty]
Operator OPERATOR
Sorry to interpret you, Sandip. Your audio is not very clear, sir.
Yes, I just wanted to understand that similar size plants, let's say, the plant, with feedstock as either sugary or
start with feedstock or a similar size plant, what could be the cost differentials in them? What would be the
benchmark? I don't know whether you covered it earlier or not.
You need to say, how much is it cost to set up 100 sugary versus starch, is that the question?
Yes, Sugari, starchi or the [indiscernible]
So let's see first. So on sugary-based feedstock because it is captive feedstock, the dynamics are little different.
And as opposed to see because that is not a captive feedstock or any more of the people. It's not a capital
feedstock. So different dynamics there in terms of handling, et cetera.
So -- and, of course, is well. Also, the capacities are different. So for example, if you look at the sugary base,
now the capacities are going up because of the et cetera coming into play. But there are plans at 60, 100 KLPD
kind of capacity. But we don't expect and starch combination to be at that level.
We expect that the more plants. There will always be a small capacity plant build because of different
considerations there for example, now, many sugar companies are also saying that, "Can I have a bolt-on
model for using feedstock in the non-sugar season, nonseasonal period?" I use -- I don't how the plant at the
seasonal part. And then in the nonseasonal part. So they're also -- then they can decide either to turn down the
capacity or can build the same a bolt-on on the plant as well. So we use some of the infrastructure that exists
for the sugary plant as well.
So there are different combinations. I will not be in a position to give you a number thing. You know what, 100
KLPDX and for sugar and starch. That may not be the right way to look at it because there are various
different considerations to this dynamics.
But can we say that as far as starch-based plant, the costing will be higher than for a sugary one?
That is correct. That is generally speaking right.
And when do you think your first of the second-generation plant will start producing?
I had mentioned that, that we are completing this in second quarter of the next calendar year. And by third
quarter of next calendar year, it will commissioned.
Operator OPERATOR
The next question is from the line of Gautam Rathi from CWC Advisor.
So I just wanted to understand, if we look at your revenue overall, and as we understand your revenue, it
mainly has 2 components. One is basically the CapEx part, which the customer does. And then there is some --
which is basically the revenue recurring item, which is basically, say, the AMC as well as the which we sell to
them, right? So if you can just give us some color, what would be the mix in the CapEx and the consumable
part, if I take your revenue of this quarter of say INR 600 crores, what would be the mix? And if you can give
us some examples as to what kind of consumables are there in what processes these goals? How is it -- or what
was the AMC revenue share in the case of a CBG plant? So if you can just give us some brief understanding,
that would be great.
Could you just elaborate your second question again? The first one, I understood. The second one?
On the second part, if you can just help us understand what would be the -- see, so if you get a CBG project
over INR 35 crores or INR 40 crores, what do you think would be the future AMC probability for that? What
we would get, right? Say maybe INR 1 core was AMC contract before maintaining those plants. So if you can
just help us understand?
Okay. So on the first part, so I don't probably have -- the -- I understand question saying what business -- what
part of that business is addressing customers' revenue side of expense as opposed to CapEx side, if I
understand your question correctly.
Yes. Yes, perfect.
Yes. So if you -- at a very broad level, today, the devil side of business for us today is off started of maybe 5%
to 6% of our sales. It's not a large number.
Okay. Fair.
7% and thereabout. It's about that number. We are understanding that maybe there is a very different way of
focusing on this business and increase this business. That's what we -- that's one of our plan steps to how do
we do that because we realized that it -- if a position differently is there, someone customers, and I think from
there, we should be able to move it forward. In terms of the INR 35 crores plant that -- or any CBG plan that
we'll put up, what are the future AMC revenues? I think it depends.
I'm sorry to use the word depends, but what the feedstock is -- the different feedstock may have different
potential. But typically, each of these plus can represent to us a potential -- revenue potential of depending
maybe inr 1 crore of INR 2 crores, in that range per plant per year.
Okay. Okay. And also, can you just help us understand where is this set of technology, right? So we understand
in that technology also, you also add some consumables, which you give it to your customer, right? Is it
correct?
Yes.
And is it a very large component because you have to source this setup for a longer time, right? Because these
are generated over 3, 4 months and you have to store it for the whole year or, say, 9 months. So is it a large
component to this consumable?
So the storage that is required is to ensure that the Praj does not be great, okay? And we have to ensure that
when we take it because during the season, nothing happens. The post season as you rightly said, after 5
months of season are over, if I'm trying to produce ethanol in the 11th month of the season, then how does the
sale behave. And I think in order to ensure that the whole feedstock is unadulterated, it's still at its good
quality. It is still able to produce the feedstock in a good sense of way. So it depends on what capacity of you
put up, and there are many amities with which part of the country are putting it up, how many months of sugar
season that is there.
And I think the first plant that we are demonstrating at the commercial scale is currently -- they finished the
storage, so the bio-syrup making. And now they will start to use it over a period of time. So we'll have some
more information as we move forward through the year on that one. And then probably [indiscernible] share
that with you.
Okay. Fair enough. Fair enough. Just if I can have 1 follow-up question on this. So how are you looking at this
part of the revenue, which is basically the more on the OpEx side over the next 3, 5 years or maybe 10 years?
How do you look at it? So are you planning to scale this up? And are there some efforts being taken on this
part?
So I think what we are seeing now with this increased activity and the role of microbes or microbiology into
this whole value chain. A lot of opportunities will open up for us, and we are cognizant of that. And I think we
are -- we have decided that we will start to work on creating a very focused business around, if I can, is the
service side or revenue side of customers' model, there are 3 levers that we want to use. One is, of course,
entire these microbiology-led additives, performance and answers and that dimension into the business. So
secondly, is going to the O&M services that we'll provide to our customers.
And the third is we have launched a very ambitious program for digitalization, where we will be able to bring
a remote performance monitoring an announcement system to our customers, where we'll be able to look at
different dimensions of plant performance and go on a proactive fashion to customers and say, you can
intervene -- we can stop this failure from happening or we can give net base or we can stop this cost from
leaching from this point and so on. So there's a whole host of services that will emanate out of this. So these
three will combine and take it forward as a very focused business vertical as we move forward, leaving the
time frame that you mentioned.
Operator OPERATOR
The next question is from the line of Saket Kapoor from Kapoor & Company.
Saket Kapoor ANALYST
Sir, as you told that the way forward would be the starch-based ethanol rather than the sugary based. So how
are these existing affordable alcohol players your prospective clients? And what kind of electrifications are
applicable in case in their plant, so that can simultaneously produce or they can ship to -- it's not direct instead
of the ENA trajectory since it attracts a lot of state levies? So how does this math hold, sir, understanding?
No. I think the portable ethanol -- alcohol is a very different segment. E&A segment is very different. There is
a definitive market out there. Right now, a bit subdued because of the lot downs and things like that.
But otherwise, very definitive market out there. So there will be people who will keep on serving this segment.
And I think -- so there's a definitive market and there's a definitive demand. So I'm sure they'll find the price
point. It's pretty aggressive right now.
So that's #1. I think #2, which is equally important, is the ethanol production out of stake it stack, and that's a
different cup of So I don't know whether an E&A producer would like to stop producing E&A and go to
ethanol production, but there are a lot of projects that are coming up that people are asking for both, saying,
"Okay, I want also E&A as well as small and that our technology permits."
My question was that only. The existing potable alcohol players, having the feasibility can easily go for the
same because they have the feedstock ready and the experience with them. So that is a good proposition for
them.
Yes. So as I said, it depends on their contracts with the -- because as we can surmise the end users or their
customers, what kind of contracts they have with them, what capacities they have to serve. So -- but if they
want, they can add a section to the plant, that we allow them to produce ethanol. They can also -- when they
set up a new plant capacity also, you can think in those having both possibilities.
Because of the procurement is assured by the OMCs. I'm just talking about the to 3 which you are elaborating
to. So the procurement is there. And since you have told that geographically, only the 3 parts -- there are only 3
states contributing maximum amount of the starchy part -- sugary part. So any portable alcohol player having
the ground come up with a starchy capacity? That could be a good availability for them.
Yes. What you're saying is valid. So they obviously -- their experience of handling the whole feedstock and the
management of thereof, and so they understand it. I think you were very correct. An engineer speak,
technically, their plants for ethanol and the E&A are slightly depend at some stage onwards.
There's commodity, and then there's some state there before. But you're right, the experience is coming very
handy. So they can all be the future ethanol producers as well. And that's what I was alluding to that the
industry structure will change. Today, ethanol process is dominated by sugar companies.
As we move forward, the industry structure is set to change. It will know -- there'll be another new players that
will come in, especially in the starchy side of feedstock. The developers, the ESG funds, the the renewable
energy development companies, many, many other OMCs, the E&A producers. So there are very different set
of customers who will come into the play. And it's no longer the only sugar producers who will be producing
ethanol.
Yes. Last point on the order booking part, sir, 17 70 is the order book as on the even date. So so, taking into
account the execution cycle, the second half generally looks the bulky one in our engineering as an
organization, and the first half is slightly more sober. So is this the same time line depending upon the
execution which you are going to do for the first half? Or this time the screen up will look rather taping off
than -- which was for the last year? Just to have an understanding on that, sir.
No, no, great question, Saket. So we have -- actually, we don't want that -- the steep curve that we have to
climb every time. That's not a good idea because then we don't end up -- when we end up using our resources
inefficiently. But this time, we -- our focus is to even come as much as we can. I'm not saying that we will
even it out completely, that's not possible.
But -- because also, we are in a growing demand arena. But yes, it's much more smoother than it has been in
the past, if I can use that word.
Right, sir. And order addition for the last quarter, sir? If you could quantify just for the January, February,
March quarter, how much has been the net order addition out of the total order?
For the last quarter, total order intake was INR 650 crores.
INR 650 crores, and we have an execution of INR 550 crores.
INR 550 crores, yes. That's right. You're right.
Operator OPERATOR
The next question is from the line of Faisal Hawa from HG Hawa & Company.
Faisal Zubair Hawa ANALYST
So my first question is in terms of the overall ecosystem and in particular about the feedstock availability for
either CBG or ethanol. So is the feedstock available continuously? And is there any issue in procuring the
feedstock? And what is the cost of the feedstock for either CBG and ethanol projects? So that would be my
first question.
So for ethanol, the feedstock supply chain is very well established. So the sugar mills, you continue to get the
sugarcane and there onwards. And now as we are mentioning the on -- if I just look at from an ethanol
perspective, the feedstock definitions have changed, what used to be only a where all the sugar is expected and
what is left was given for ethanol production. Now lots and lots of sugar companies are also opting for making
the juice and then taking it directly to ethanol production without sugar production in between. So different
companies have different strategies, depending on their market and their understanding of their product mix
environment.
So that's one change that is happening. But we are seeing a lot more capacities that are coming up for ethanol
as opposed to only based. Molasses already, a lot of capacity has moved to that. So different feedstocks there.
So for them -- and the pricing is decided based on what is the FRP for -- or MSP for sugarcane and their
onward the whole blockchain.
On the grain side, government has already specified the grain prices go down. And there's a corresponding
ethanol price. If you don't buy from there and buy in local market, then there is different pricing. So different
strokes, different feedstocks, different sources, different ethanol price points.
Okay. And my second question would be in the HPCL project and Godaveri bio-refinery project study of
them, could you please share the contract value in rupee terms? And also on the HVGL project that can
produce about 5,000 tonnes of CBG by processing 35,000 metric tonne of feedstock. So that is about 15% gas
yet. And I also read that IOCL has set up a CBG plant in the South in Tamil Nadu. So that can produce 15
tonnes of CBG from 290 tonnes of feedstock per day.
So that is about 5% of gas. So is it true? Or is it right to say that your technology that is Rengas technology can
produce maybe double of what the other technology can? Or am I wrong in my calculation?
So rather than making a bold stating we have doubled to everybody else. We are saying, yes, the number that
you gave does show that. And we are very confident of what we will produce, which is our understanding
really a benchmark yield because nobody -- no one is anywhere near. There are other technologies which are
slightly better than the one that you mentioned. But overall, our process is very, very efficient.
And that is what I was mentioning in my earlier answer to one of the questions that once they get established
at a commercial scale on the ground, then probably it will completely change the dynamics of this space. We
have to wait for that. Right now, we are able to demonstrate this. We are able to claim this. We are able to
guarantee this.
But people sometimes also want to see, right? So the key part. Also, we are running a demonstration plant here
in our R&D, which is a reasonable size, where we will be able to showcase to customers. But right now, of
course, there are a lot of restrictions on travel, et cetera. So people are not in travel. But other than that, yes, we
are very confident that our technology is absolutely -- and by a long margin, best-in-class yield.
Okay. And sir, could you share the contract value for the HPCL and Godaveri projects in terms of rupee?
No, we are not at liberty to do that.
Operator OPERATOR
The next question is from the line of Agam Shah, an individual Investor.
Congratulations on a good set of numbers. Most of my questions answered.
Operator OPERATOR
The next question is from the line of Nimit Seth from GP Advisory.
Nimit Seth ANALYST
Congratulations for an excellent quarter. My question is also on the CBG. You could not share the value of the
contract. Could you give us an idea at what revenue such a project can generate, just a ballpark number, for the
person who puts up such a subject? 5,000 tonnes of gas and the subsequent bio fertilizers approximate?
Approximate. I don't have a calculation in front of me. So that -- it's about INR 46 to INR 47 a kilo is the gas
price, okay? You will -- water revenue get about -- 30% of the revenue will come from byproducts, so that you
can add to that. That's a lot.
Nimit Seth ANALYST
Sorry, how much is -- will come from byproducts?
30% of the gas revenue.
Nimit Seth ANALYST
30%. Okay.
Operator OPERATOR
The next question is from the line of Rohan Advant from [indiscernible]
Sir, my question was on strategy, a very basic flection and just pardon my ignorance. Sir, when we talk about
CBG, can the existing distribution that we have be used for CBG? And in terms of end-user is automobiles or
the industrial user gas and our CBG, be used for all those end users to cars need to be modified. So how is this
ecosystem on a downstream business. I understand the upstream sort of feedback of feedstock-led issues. But
on a distribution basis, how is this system current?
Yes, Johan. So all CNG can -- CBG can go and substitute entire CNG. So there's one-to-one substitution, no
problem at all. The second is CBG is a more efficient form of CNG. So in which can you're using CNG, if you
use CBG, you're likely to get about 10% higher efficiencies compared to what you get with CNG.
So that's the second part. The third -- when we were talking to NCS, they made us understand that it takes
about 6 to 12 months for an ecosystem to develop around it. But once the gas starts to become available,
people start to convert their vehicles because it is very cheap. You pay nearly 90 bucks -- 80 bucks, 90 bucks
for diesel at the pump. This is at 55, 56 in that range.
So there's a clear distinction between the rate that we paid for diesel versus gas. So that pushes a lot of people.
And then the conversion kits come up. They are limited by the use and availability certainties, the availability
of the gas and which the CBG coming to different locations, very localized, I think a lot more churn is
expected, and the speed is expected in promotion as well.
Okay. First, on existing CNG car, can you [indiscernible]
Yes, you should more efficient. It's much more efficient than CNG. You get more milage, which is critical to
every Indian user, right? It's not. It gives 10% more.
Sir, and just lastly, when you signed up the opportunity over the next 5 years or whatever time space to get to
20% lending between INR 14,000 crore, if that's the market side, and we'll get a market share of that? Or is
that the price for charging?
Sorry, could you please repeat? I couldn't hear the questions clearly.
Yes. When you sized up the opportunity as INR 14,000 crores, that gives a potential revenue that 20% lending
will the in that, the market potential and trail get a market share of that or impact an opportunity that from
summary?
This is the size of the market that we can address.
Operator OPERATOR
The next question is from the line of Levin Shah from ValueQuest Investment Advisors.
Levin Shah ANALYST
Yes. Congratulations on a wonderful set of numbers. My first question is on this order booking. What we have
seen, so like you have been alluding to this in past few quarters, that inquiry levels have gone up substantially,
and they were, in fact, doubled versus what we had previously. And if you look at our order book during this
quarter, that is reflecting the same in the numbers now.
So we have received around INR 550 crores of order from bio-energy versus like INR 200 crores or INR 250
crores quarterly run rate that we were doing. So do we feel that this number, I mean, that inquiry translating
into order book has already started happening from this quarter and going forward, this trend should continue?
Yes, that is our expectation. Because if all of these are true that we have to have 20% lending by 25%, that
means INR 1,000 crore liter. That means 400 plants the government, free up of stocks, feedstocks and
therefore, so many inquiries and people are to put up the capacity because the demand is definitely there. Yes,
it's sure.
Levin Shah ANALYST
Okay, okay. Sir, my second question is on margins again. So like we all know that commodity inflation is
something which will impacting everybody. And also, at the same time, if you look at our business mix, our
exports share as a percentage of total is going down. So do we see that margins overall will remain at the same
level? Or is there any scope for improvement from here on?
So Levin, as you rightly said, it's a mix bag. What happens to how fast -- I mean, it's not that we are seeing the
export market is that that domestic is seeing a big boom. That's #1. #2, as we go to starchy feedstocks, we
expect that our margins will get better in domestic market is going, okay, compared to sugary feedstock. So
that's the second one.
Third is, what happens to the mix of -- at what moment, size of project, capacity of the project, they're
different dimensions, and of course, the commodity prices. So no company can be less if there's a steep price
hike, right? And to some extent that over a period of time, we will be able to absorb and manage it and pass it
on to our customers. But there could be a brief period of few contracts where we will not be able to do that. So
-- so maybe short-term commodity prices, we will not be able to pass on to our customers. In long term,
definitely, yes.
Levin Shah ANALYST
Okay. Sir, and last question is on this, so Godawari order that we have received. We have announced that order
in the month of April. So that is not part of our existing order book as of March, right?
No, it is. It is.
Levin Shah ANALYST
We have announced that in the month of April. So I thought that would.
No, no, the order was for March itself. Announcement came in the April first week.
Levin Shah ANALYST
Okay. So that is already reflecting in our current order.
That's right.
Yes.
Operator OPERATOR
The next question is from the line of Rajesh Kotari from Alfa Accurate Advisors.
I have 2 questions. First is, you mentioned that total current ethanol capacity in the country is about 350 crore
liters. And also you mentioned somewhere that you have added 100 crore liter, and let's assume competitor
about 45 crore. So that comes to 145 crore litter. So are we trying to say that 1 year back, the total eternal
capacity in the country was only 200 crore liter?
No, no. What I said was, the current capacity that we are able to supply of the 350 crore liters, 350 crore, 400
crore liter, off the order. Currently, the supply is already there. So it's being produced in the country. And what
I said was that on -- if I look at my order book, what orders I booked in the last financial year, and I sell that all
out to capacity on the ground, that will add 100 crore liter capacity on the ground.
And if you look at market share dynamics, and I'm saying, okay, if we got 100 crore, our competition, all of
them put together before 40 crore. So country is contracted for setting up -- adding capacity of 140 crore liters
on ground to the existing capacity. What we need to add is 1,000 crore liters. So that's the numbers.
Ritika Agarwal ANALYST
What is at the current install capacity, 350 crores, right?
Yes, yes, correct.
So 350 crore you are saying is existing capacity, plus 140 crore already ordered during last 12 months or so,
and total was.
And another 1,000 crore to get added. Not total, another 1,000 crore, delta capacity.
Another 1,000 crore, is it? Okay. So basically -- got it. And second question is for 1 crore liter, what is the
typical opportunity size for us?
Sorry, I couldn't get your question.

I mean for 1 crore liter capacity, what is the typical size of order for us if 1 crore liter is the capacity?
No, that is difficult for me to answer. So reasonably, I don't do the -- it depends on what the stream. So is it Is
it B? Is it syrup? Is it grain? Different capacities, different feedstock plus brownfield versus greenfield,
debottlenecking, there are many factors that go to decide the capacity per liter. So that would be a difficult
number for me to give out.
Okay. But putting in reverse 1,000 crores.
Yes. What we said is the 1,000 crore liter is about 14,000 crore opportunity for the company to address.
Understood. And sir, my second question is this -- the [indiscernible] pardon for my ignorance, this business is
-- so you have a bio-energy. And if and all thing what you are right now talking about that goes into bio-
energy, right?
Sorry, come again?
This opportunity of 14,000 crores what we are talking about, now is 120 crore whatever, last year what we
have booked, that segment goes into which segment bio-energy or.
That's bio-energy.
Okay. Understood. Understood. So how do you see the scope of the engineering segment over the next 2, 3
years?
That's what I was mentioning earlier answer, that we are looking at a progressive growth there as well to 0
liquid system, we are very positive and optimistic about the fact that, that is something that will get built up.
Our price high-quality system, which is serving this whole vaccination and complex injectable change in the
pharmaceutical space that is looking at a resin growth territory. We are looking at our CPS business, which
serves customers, large engineering and technology companies outside India, they are on a recent past. So
those are the engineering businesses except brewery, which currently we said that because of the situation in
the country, we don't expect new capacities to be built, at least not in the foreseeable future. So that's the oen
that will take a little time to build up.
Otherwise, all of them are already [indiscernible]
Operator OPERATOR
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management
for closing comments.
Thanks, everyone, for your time today. In case you have any more questions, you can write us at
[email protected]. Once again, thanks a lot for you.

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Praj Industries Limited - Q4 2021 Earnings Call

Friday, May 7, 2021 2:30 AM

Sandip Bhadkamkar EXECUTIVE

Shishir Joshipura EXECUTIVE

Sachin Raole EXECUTIVE

[Operator Instructions] The first question is from [Technical Difficulty]

Unknown Analyst ANALYST

Sandip Bhadkamkar EXECUTIVE

Hello, Shishir, are you there?

Can you hear me?

Sandip Bhadkamkar EXECUTIVE

Yes. Now, I can hear you.

Shishir Joshipura EXECUTIVE

So it is on track and developing well.

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Sachin Raole EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Vikram Suryavanshi ANALYST

Shishir Joshipura EXECUTIVE

So we are expecting a good and constructive action. on that side.

Vikram Suryavanshi ANALYST

Shishir Joshipura EXECUTIVE

The next question is from the line of [indiscernible] Investments.

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Sorry, I couldn't get the question.

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Sachin Raole EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Are you asking what the current installed capacity?

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Understood. And the second half in terms of -- sorry.

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Shishir Joshipura EXECUTIVE

Bhagyesh Kagalkar ANALYST

Shishir Joshipura EXECUTIVE

Unknown Analyst ANALYST

Unknown Analyst ANALYST