PRAJINDNSEQ2 FY2321 October 2022

Praj Industries Limited

9,323words

121turns

17analyst exchanges

0executives

Key numbers — 40 extracted

rs,

cial and environmental spectrum. Introduction of flex fuel vehicles, ethanol driven power generators, diesel blending program etc. are likely to drive future demand beyond EBP 20. Earlier this month,

11.2 million

to the business updates, Our bioenergy business, In 2021-22 sugar marketing year, India exported 11.2 million tons of sugar which clearly indicates that we have enough sugary feedstock available for ethanol

Rs.876.58 crore

quarter and half year ended September 30, 2022 The consolidated income from operations stood at Rs.876.58 crore in Q2FY23 as compared to Rs. 532.41 crore in Q2FY22. PBT has increased by 40.6% and stood at Rs.

Rs. 532.41 crore

0, 2022 The consolidated income from operations stood at Rs.876.58 crore in Q2FY23 as compared to Rs. 532.41 crore in Q2FY22. PBT has increased by 40.6% and stood at Rs. 65.78 crore in Q2FY23 as compared to Rs. 4

40.6%

tood at Rs.876.58 crore in Q2FY23 as compared to Rs. 532.41 crore in Q2FY22. PBT has increased by 40.6% and stood at Rs. 65.78 crore in Q2FY23 as compared to Rs. 46.77 crore in Q2FY22. Similarly, Profi

Rs. 65.78 crore

rore in Q2FY23 as compared to Rs. 532.41 crore in Q2FY22. PBT has increased by 40.6% and stood at Rs. 65.78 crore in Q2FY23 as compared to Rs. 46.77 crore in Q2FY22. Similarly, Profit after tax stood at Rs. 48.1

Rs. 46.77 crore

crore in Q2FY22. PBT has increased by 40.6% and stood at Rs. 65.78 crore in Q2FY23 as compared to Rs. 46.77 crore in Q2FY22. Similarly, Profit after tax stood at Rs. 48.13 crore in Q2FY23 as compared to Rs. 33.3

Rs. 48.13 crore

78 crore in Q2FY23 as compared to Rs. 46.77 crore in Q2FY22. Similarly, Profit after tax stood at Rs. 48.13 crore in Q2FY23 as compared to Rs. 33.34 crore in Q2FY22 For H1FY23, Income from Operations was Rs. 1

Rs. 33.34 crore

6.77 crore in Q2FY22. Similarly, Profit after tax stood at Rs. 48.13 crore in Q2FY23 as compared to Rs. 33.34 crore in Q2FY22 For H1FY23, Income from Operations was Rs. 1606.45 crore as against Rs. 918.67 crore in

Rs. 1606.45 crore

crore in Q2FY23 as compared to Rs. 33.34 crore in Q2FY22 For H1FY23, Income from Operations was Rs. 1606.45 crore as against Rs. 918.67 crore in H1FY22. PBT stood at Rs. 120.01 crore in H1FY23 as against Rs. 76.

Rs. 918.67 crore

o Rs. 33.34 crore in Q2FY22 For H1FY23, Income from Operations was Rs. 1606.45 crore as against Rs. 918.67 crore in H1FY22. PBT stood at Rs. 120.01 crore in H1FY23 as against Rs. 76.57 in H1FY22. PAT of Rs. 89.

Rs. 120.01 crore

Income from Operations was Rs. 1606.45 crore as against Rs. 918.67 crore in H1FY22. PBT stood at Rs. 120.01 crore in H1FY23 as against Rs. 76.57 in H1FY22. PAT of Rs. 89.39 crore in H1FY23 as against 55.54 crore

Guidance — 20 items

Shishir Joshipura

opening

“India’s EBP 20 program is marching ahead of its target.”

Shishir Joshipura

opening

“Our execution activities are at their optimal levels with multiple project sites in different geographies.”

Shishir Joshipura

opening

“Our first project in Brazil is on schedule for commissioning at the end of this year.”

Shishir Joshipura

opening

“The success of this project will pave way for many projects in domestic as well as international markets.”

Shishir Joshipura

opening

“Our Zero Liquid Discharge business we see a good business potential mainly from the private sector and expect few important contracts likely to conclude in H2 of FY 23.”

Shishir Joshipura

“Sorry, if you’re looking for the straightforward number based on what is the current capacity already deviated and ordered and what is the balance, balance will be in some ways in a range of 500 crores to 600 crores which we saw at the beginning of this year, something has got ordered during this quarter.”

Shishir Joshipura

“Number two, the bigger and actually the biggest opportunity is going to be the lignocellulosic feed stocks, which is why we are so positively looking forward to commissioning and handing over of the IOCL project, because that will prove beyond any doubt that the feedstock to stay.”

Shishir Joshipura

“So maybe a little later in the time, we will be able to answer this question in a more affirmative way, but we are clearly beginning to see activities beginning to develop in that space.”

Ravi Dharamshi

“Will we be able to still stick to 10% plus kind of margins guidance?”

Shishir Joshipura

“So we are not giving any guidance on what exactly it will look like, except to tell you that, #A, we believe that the highly volatile commodity price changes that we saw are hopefully behind us and that should have a clear bearings on what we do forward.”

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Risks & concerns — 7 flagged

The challenges around volatile commodity prices, global inflation, supply chain imbalance though softened, existed throughout the quarter.

— Shishir Joshipura

But right now, I don’t think that’s the challenge at all.

— Shishir Joshipura

So we are not giving any guidance on what exactly it will look like, except to tell you that, #A, we believe that the highly volatile commodity price changes that we saw are hopefully behind us and that should have a clear bearings on what we do forward.

— Shishir Joshipura

But, sir, what is the impact of this commodity volatility in overall, maybe if you can give a ballpark figure for the first half?

— Dikshit Mittal

Rather last year it was higher than 1%, now at least in H1 we are seeing the lower impact of that, but the impact is still there.

— Sachin Raole

And sir post this IOCL Panipat plant being commissioned, is there any pipeline of inquiries from the domestic oil and gas companies for say additional plants, I understand it’s expensive, but maybe the domestic oil and gas companies would go further as a whole but the way oil prices are volatile and their balance sheets are bit impacted.

— Amish Kanani

Probably that’s the phenomenon that we’re seeing people are beginning to value what we are able to deliver in difficult markets with certainties and even if there are some, what we call it, even if there are difficulties, we have the knowledge and the organization will and commitment to set things right and that’s what is trending us in good deal.

— Shishir Joshipura

Q&A — 17 exchanges

Sir, what explains the difference between standalone PBT of 82 crores versus consol PBT of 65 crores?

Shishir Joshipura

Dhananjai, we can’t hear you. Sir, what explains the difference been standalone PBT of 82 crores versus consol PBT of 65 crores? In other income, we have 20 crores dividend income coming from the subsidiary company, which is standing in our standalone results. But in consolidated, the 20 crores naturally gets knocked off. That’s why the consolidated PBT looks lower than standalone. Okay. And sir, our operating cash flow is negative this quarter because of higher receivables, any comments on that? More than higher receivables, actually we had gone ahead with the increase in inventory this time,

Sir, first of all congratulations for clocking, all-time high quarterly revenues. Sir my question is with respect to ethanol current capacity, current production capacity, as per you what is the current capacity in India and domestic business, what is the capacities we are having ethanol production?

Shishir Joshipura

So, Shailesh very clearly government has said that there is now a 10% blending that has been achieved in the country. So from the capacity perspective, that’s where we are we need to go to 20%. So we are at the halfway mark as far as capacity is concerned in terms of what is required. So, last we checked we were at 850 crore liters and ordering book of further 300 or 400 crores was already tendered, so I just wanted to know the opportunity pending on the order pipeline? Correct. So as we had said last time as well, when the EBP-20 program started, we had roughly estimated that 1,000 crores lit

I just wanted to check on the CBG. Are we starting to see any kind of traction on the ordering front?

Shishir Joshipura

We are beginning to see some activities developing. As I mentioned, the policy very, very supportive policy that came out from the UP government is just about two weeks old. So maybe a little later in the time, we will be able to answer this question in a more affirmative way, but we are clearly beginning to see activities beginning to develop in that space. So there were some issues regarding the supply chain, those have been sorted out, policy-wise, supply chain-wise, financing-wise everything is in place and ordering is the only thing left or there’s still something that we need to get righ

What we are looking at is that how or when we can see the pickup in export given the geopolitical situation because I know we are doing extremely well in domestic market, but probably export is a area where we can also do much better and how we can see pickup up in that area that is my first question. And second on bio-CNG side, now informative priced conditional in terms of not only CBG prices but even byproduct prices also, so is that helping to really see the ground level pickup or how is your heading on opportunity?

Shishir Joshipura

So Vikram, on the export side your observation is bang on. So as we had mentioned that we expect the second half at least to start changing on the order booking side and probably that will reflect as we travel through the few next four to six quarters in terms of sales as well. But we first obviously, so already, as Sachin was mentioning, it’s not our order book is low, it’s just that the domestic is progressing at a very different speed. Having said that, we are also cognizant of the fact that we need to increase the speed of our international order book and that’s what we’re focused on and w

Sir, my question is regarding the BIOSYRUP tech. Can you help me understand what’s the update and how people are adopting it, especially sugar companies are you seeing any demand coming from them?

Management

Yes. So, Isha, could you please repeat your question?

Isha Agarwal

Yes. Sir, my question was regarding the BIOSYRUP tech, so just wanted to understand how are we seeing the sugar companies adopting the decent tech, are we seeing any good demand coming up on this BIOSYRUP tech? So Isha, when we developed the BIOSYRUP technology, it was in the purpose to demonstrate that syrups can become a sustainable feedstock that can enable ethanol plant connected to sugar mill to run right through the year and not be dependent on seasons time. So that was the purpose of demonstration of the technology. Obviously, there are some other dynamics which have to be resolved in t

Sir, my question was just on margins itself. So because the kind of growth we have seen on the topline, so at least operating leverage should have played outright in terms of the EBITDA margins. So as you mentioned there, because of export and domestic mix margin is low, but does that mean that domestic orders we are basically taking below 7% kind of margins or there is something else that I haven’t seen?

Sachin Raole

So not necessarily. I was only saying that the blended margin will go up only if there is an export element coming in. And if you look at in this entire revenue mix, export revenue is very miniscule in the first half, because another element, as I was mentioning about the construction activity there is a little less as compared to the supply portion, so the blended is looking like this. It doesn’t mean, of course there will be different projects and different businesses carrying different margins investments so not necessarily their domestic is carrying lowest and that’s the reason why it is g

Thank you, sir. Sir, two questions. Number one was on other expenses. So other expenses right now would be 20%, right and it is more or less around the onsite expenses and labor charges and travel and freight, which form major component of it. So it has been trending mostly downwards in last two years, but as our topline goes up, first should remain where it is, but other expenses which is variable in nature should also go up in tandem with the topline. So any guidance or any comments around how would you look at this, this component as percentage of your topline going forward and in this fisc

Sachin Raole

Your observation is right. Mainly these other expenses, as you mentioned are completely related from the business activity point of view and major component of that is sitting in the project activity. So currently, if we are doing 80 projects and tomorrow if we are going to do 150 projects, the absolute number will change, percentage will remain more or less in the same kind of range, because it’s almost 90% variable in that sense. Can you provide how much volume were we be able to do in last quarter, like we have the case number, but could you also provide the volume number in terms of KLPD o

Sir, two parts question. So, one you did mention exports might see some traction in the second half at least from the order book side. If you can give us some sense in the past, we were hoping for some 2G orders from EU, but maybe the war has kind of appreciated that environment. So if you can give us some sense of whether that’s happening and in that context, you did mention about Brazil, Canada, and Mexico. So if you can give us some sense where is the traction and what is the kind of pipeline or inquiry there?

Shishir Joshipura

So Amish, as I was mentioning, there are driving forces in the market. So we are clearly seeing blending mandates coming in Mexico and Canada. So the illustration was that this energy transition is a phenomenon where all economies and countries are thinking increasingly in terms of being their own producers of their energy needs, is something that is now visible. These are initial proofs, but I think that is the first dimension. Second is, we clearly see the demand emerging for decarbonized fuel more and more and, as you know biofuels are a clear answer for that, irrespective of the mode of tr

Sir, this is on the CPES segment, if you can highlight what kind of equipment are you supplying and specifically you mentioned something on the hydrogen fuel cells, et cetera side, so what is the equipment, what is the exact play that we have over there?

Shishir Joshipura

So Aman, in case of CPES, as mentioned that modularization is a big offering from that business and what we do is, given a process and the process is not ours, somebody else’s. Given a process, we are able to conceptualize an engineer a plant that gets modularized, so that the site work is reduced to minimum that’s the basic concept and for blue and green hydrogen projects, that’s becoming a big demand because on multiple counts, #A that many capacities are being set up,# B only a handful of companies globally have the wherewithal and technology to actually give the process licenses for these.

So Aman, just to very quickly close the answer, yes we are working very closely with several leading technology providers in the world. Our agreements do not permit me to state their names. So that I won’t be able to do.

Management

So my question is with respect to exports, as you have already highlighted few things about it and on the bioenergy side anything, just wanted to understand this engineering business which is more export-oriented as I understand. Can you go to what levels in next two, three years and how if at all we have to see let’s say in the next two, 2.5 years how the business mix is going to change. And second point is on the margins obviously I understand that you cannot share the nitty-gritties on that, but anything directionally where the margins are heading in each of these two sub-segments would be

Shishir Joshipura

So just to be answering the second question first. If I tell you that our effort is anything but to drive it noteworthy in both the segments it will be a wrong answer, so that’s what we’re attempting to do. Yes, there are factors that we have to, and the challenges that we have to meet and overcome, but fundamentally the effort is to take it not only in the direction. In terms of your question on the engineering businesses, probably this call is too shorter duration for me to ask Sachin to make an explanation. You probably hold our capabilities in too higher regard that we’ll be able to do an

So sir, I have two questions. So one is regarding now that we have launched the second generation IOCL plant, I want to understand what is the commercial feasibility of this 2G plant like, have we achieved commercial feasibility or we are dependent on government subsidies for the thing?

Shishir Joshipura

Okay, Prathamesh so let me tell you this. So first of all, this is a global phenomenon and there are markets where it is feasible to put up a 2G based plant. As I was mentioning in India, the 2G ethanol rates are still not specified and that needs to get specified, obviously and that will determine the viability as well. We need to commission but what’s more important is to understand that this is the technology that cuts the emission by 85%. And that no other technology can do so when the focus shifts to GHG reduction or carbon footprint reduction, the cost dynamics because we don’t have in I

Just on this fermentation side, when you’re talking about PHS, what is the level that we can see in terms of inquiry pipeline in terms of volume or value anything that you can share for the domestic market where we are currently and if you could provide some metrics for context like where could China possibly be as of today or any other Western country, so that we can gauge the overall opportunity size for the fermentation side, I’m talking in terms of the pharma side for fermentation.

Shishir Joshipura

Mainly in the Praj HiPurity side? Yes. So I’m sorry we’re not in a position to answer the question as compared to China, because the industry itself is at a very nascent stage right now in India as compared to what Chinese fermenter capacities are. So we have to see how the industry develops. We are clearly seeing a trend by which the dialogues as well as some specific capacity is being created by especially the early leaders in the industry. So it is still very early to probably a question is more rooted a year down the line and that’s when we’ll be able to answer it in a more affirmative way

Sir, could you please elaborate in your statement you said comprehensive ecosystem is being setup by UP for CBG and other biofuels, because whatever I have inquired with people, they say to get even the rice straw and other agri raw material there is a lot of problems here, the farmers are not giving their due.

Shishir Joshipura

So, your question is correct Sagar, that it has to happen. So first and foremost there needs to be a policy which sort of encourages people to do the right thing right. And that’s what where the government can do. The actual action on the ground will have to be translated by industry, by farmer cooperatives, maybe a more action even on a state level. So, what I meant to say was that the depth and the quality changes are indicative of government’s desire to make this into a successful program. Today we are all talking about the ethanol program with such because the 2018 biofuel policy actually

Sir, what is the progress on diesel blending, we are developing a binder, so I wanted to know.

Shishir Joshipura

Yes. That is still a project that is under-progress and we will let you know once we are ready with it very soon. Okay. And sir in sustainable aviation fuel, when will you get the first order? It’s not about getting the first order Ravi, it’s about understanding that what needs to happen. So there’s still dialogue going on as to, because even if I put up a plant there must be an agreement to buy as SAF and use it in the aircrafts. So, we have to go through that phase in US, which is a leading market in the world right now. I was there two weeks ago and even they do not have any capacities toda

Hello, everyone. Thanks a lot for your time today. If you have any more questions, please feel free to write us at info@praj.net. Thanks again for your time today. Wish you a very Happy Diwali. Thanks.

Management

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Speaking time

Shishir Joshipura

Moderator

Sachin Raole

Dhananjai Bagrodia

Shailesh Kanani

Dikshit Mittal

Amish Kanani

Amit Anwani

Ravi Nadar

Ravi Dharamshi

Opening remarks

Anuj Sonpal

Thank you. Good afternoon everyone and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the investor relations of Praj Industries Limited. On behalf of the company, I’d like to thank you all for participating in the company’s Earnings Call for the Second Quarter and Six Months Ended Financial Year 2023. Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s concall may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decision. The purpose of today’s earnings call is purely to educate and bring awareness about the company’s fundamental bu

Shishir Joshipura

Thank you, Anuj. Good day everyone. I welcome you to Praj Industries’ Earning Call for Q2 & H1 FY23. Trust all of you had the opportunity to go through our results presentation for the quarter ended 30th Sept 2022. It is once again a pleasure to connect with all of you. Let me now briefly take you all through the quarterly business highlights and industry developments. Following which, Sachin will take you through the financials. We closed Q1 FY 23 on a strong note with a healthy growth in order book and delivery volumes. The challenges around volatile commodity prices, global inflation, supply chain imbalance though softened, existed throughout the quarter. However, with continued focus on customers combined with our technology prowess and increasing favorable business environment, we were able to stay the course. Global economy continued to face headwinds in form of geopolitical situation, high inflation and continued uncertainty and volatility on energy front in several parts of the

Sachin Raole

Thank you, Shishir. Good day everyone. Let me take you through the financial highlights for the quarter and half year ended September 30, 2022 The consolidated income from operations stood at Rs.876.58 crore in Q2FY23 as compared to Rs. 532.41 crore in Q2FY22. PBT has increased by 40.6% and stood at Rs. 65.78 crore in Q2FY23 as compared to Rs. 46.77 crore in Q2FY22. Similarly, Profit after tax stood at Rs. 48.13 crore in Q2FY23 as compared to Rs. 33.34 crore in Q2FY22 For H1FY23, Income from Operations was Rs. 1606.45 crore as against Rs. 918.67 crore in H1FY22. PBT stood at Rs. 120.01 crore in H1FY23 as against Rs. 76.57 in H1FY22. PAT of Rs. 89.39 crore in H1FY23 as against 55.54 crore in H1FY22. Export revenues accounted for 17% of Q2FY23. Of the total revenue, 74.7% is from Bio-energy, 19.5% from engineering and 5.7% is from PHS business. The order intake during the quarter was Rs. 981 crore, with 92.8% from the domestic market. Of the total order intake, 85.1% came from Bio-energy

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