Analyst Meet / AGM - Analyst Meet

26-Mar-2014, 05:42
Praj Industries held its Analyst meet on 25^th March'14 which was addressed by Mr. Pramod Chaudhari Executive Chairman

Key highlights

• Current order book position of the company is around Rs 900 crore. This is about 1 times sales. Order intake in FY'14 is about Rs 700 crore, of which about 30% are export orders and rest are domestic orders. Emerging business order intake now stands at around 35%, with ethanol and breweries, the mature business constitute the remaining order intake.

• The new emerging business which consists of water and waste water treatment, high purity water (neela system), critical process equipment business now constitute about 30% of turnover as compared to about 0% in FY'08. Management expects the business to contribute about 50% of total turnover

• Emerging business has diversified customer base in sectors like sugar, beverages, pharma, cosmetic, agro chemical, high end industrial product and biotech. The delivery cycle of emerging businesses are short compared to its mature business. High purity water business has delivery cycle of 3-4 months, water business has 6-9 months; process equipment has about 5-7 months as compared to ethanol and breweries business of 12-14 months and 10-12 months respectively.

• Indian market size of pure water is about Rs 600 crore and the company sees huge opportunity in it due to high entry barrier. The Neela system, subsidiary of the company is already qualified with most of pharma and cosmetic companies globally.

• As per the management, margins have bottomed out around 8% level. In the past investments have been made in people and processes for mature business and the pie of emerging business is growing. Margins certainly are looking up from here onwards. Also operating leverage should also support the margin, as the company has sufficient capacity that it can raise turnover by another 30-40% standing at same level.

• Company has made several Investments in the past 4 years and management is confident of reaping the benefits in next 4 years.

• Mature business has market share of about 65% in domestic space and 30% in international ethanol market. The company has laid down various avenues to expand the business.

• Like ethanol, the company intends to take the breweries business also into overseas market, where currently it is only a marginal player. As of now it caters only to domestic brewers. Recently the company has received orders from large beer company SAB.

• The company also has plans to take emerging business internationally in a big way. Currently international contribution within emerging business space is around 12-15%.

• The company will also be launching the 2^nd generation ethanol process plant in Q1 of FY'15. Currently testing is happening on demo plant which can reduce the costs of an ethanol plant to around Rs 120 crore. Nearly 50% can be funded through Government subsidy. This plant would demonstrate the 2^nd generation ethanol making process, which would produce ethanol from cellulose instead of molasses or starch. This should help clients understand benefits of reduced capex/opex as compared to 1^st generation process. This could be a huge opportunity if materialize well as it can run on multiple feedstocks and give multiple outputs. Globally, only 3-4 players are currently exploring this technology.

• Company is also exploring into bio products business such as livestock health and nutrition business in South East Asian market and for human health and wellness businesses in India.

• Management expects order book position and margins to improve going forward.

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