Ladies and gentlemen, good day, and welcome to the Praj Industries Limited Q3 9 months FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Anuj Sonpal from Valorum Advisors. Thank you, and over to you, sir.
Yeah. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorum Advisors. We manage the investor relations for 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 third quarter and nine months ended of financial year 2024. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call 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 decisions.
The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial part under review. Now, let me introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We firstly have with us Mr. Shishir Joshipura, CEO and Managing Director, Mr. Sachin Raole, Chief Financial Officer and Director of Resources. Without any further delay, let me request Mr. Shishir Joshipura to start with his opening remarks. Thank you, and over to you, sir.
Hello?
Hello, hello, Sandip sir?
Yes, yes.
Hi, sir. Your line is unmuted.
So let me start all over again. Good day, everyone. I welcome you to Praj Industries' earnings call for quarter three and nine months FY 2024. Plus, all of you had the opportunity to go through our results for the quarter ended 31st December 2023. I would like to start today with a very exciting development. It gives me immense pleasure to share that Honorable Union Minister, Sri Hardeep Singh Puri, inaugurated the first of its kind fully integrated alcohol-to-jet SAF demonstration facility at Praj Matrix on 20th January 2024. This is a milestone achievement in Praj's pursuit of sustainable decarbonization of transportation sector. Building SAF production capabilities from biomass will lay pavement for making India an export hub for SAF for global aviation industry.
Yesterday, the honorable Finance Minister presented the interim Union Budget 2024, with aim to create a conducive environment for business growth, innovation, and socioeconomic development. There's a clear focus on leveraging captive resources in the energy mix, which is aligned with the vision of energy independence by 2047. Initiatives such as phased mandatory blending of compressed biogas, financial assistance for procurement of biomass aggregation machinery, are aimed to give boost to the bioenergy sector. The budget has also announced schemes for biomanufacturing and biofoundry sectors. These will provide environment-friendly alternatives such as biodegradable polymers, bioplastics, biopharmaceuticals, and bioagro inputs. These green growth initiatives will facilitate energy security while achieving the climate action objectives of the nation. We, at Praj Matrix, have already envisioned the necessity of biomanufacturing for the energy security and the sustainability agenda.
Coming to the business performance, the quarter demonstrated that our efforts to broad base our product mix have begun to yield targeted results. Our order book maintained its momentum with visible changes in its constitution. CBG, energy transition, climate action, services and PHAs have all contributed to this quarter's momentum. In our domestic bioenergy business, the supply chain dynamics in the sugar sector were changed, as the government ordered ban on use of sugar syrup for ethanol production in 2023-2024 supply year with immediate effect. Later, the government revised the order that allowed use of both sugar syrup and heavy mol, molasses, but with a cap of diversion of up to 1.7 million metric tons of sugar for ethanol production. The government followed it up by announcing an incentive of INR 6.87 per liter for encouraging ethanol production from C Heavy Molasses.
In order to promote alternative feedstock, the government has also made an upward revision in price by INR 5.79 per liter to INR 71.86 per liter for ethanol produced from maize. Due to these policy changes, we witnessed a very unusual quarter with no order finalization for the sugar-based ethanol plants. However, we strongly believe that this is a temporary situation. Praj has already developed solutions for mitigating the feedstock challenges for our sugar customers. We are working with customers on converting their existing single feedstock plants to multi-feedstock. We are confident that these solutions will help restore the opportunity next year. Though the sugary feedstock-based inquiries couldn't result into orders, we witnessed steady flow of starchy feedstock-based inquiries getting converted into orders. On international front, Global Biofuel Alliance is developing positively. 22 countries and 12 international organizations are now part of GBA.
Praj has already initiated dialogue with 10 countries and has interacted with over seven organizations. Low Carbon Ethanol opportunity in United States continues to be viable. However, clarity on Section 45Z of Inflation Reduction Act in United States is still awaited. This is resulting in delays in decision on capital expenditure for these projects. These clarifications are now expected before June of 2024, which can help us in converting our engineering contracts to supply of equipment in second half of FY 25. We have intensified our focus on growth of service business in both domestic and international markets. We are in the process of establishing a strong distribution network within chosen markets to offer entire suite of solutions comprising of enzyme, yeast and performance enhancements. On 2G front, the IOCL plant recommissioning is underway.
In an agreed two-stage program with IOCLL, we will establish performance of plant in the first quarter of FY 25. As for CBG, the business landscape is evolving positively. The government has announced CBG Blending Obligation, CBO, that mandates blending of CBG in CNG and PNG from FY 25-26. CBO mandates are expected to increase gradually from 1% in FY 26 to 5% from FY 29 onwards. This will encourage an investment of around INR 37,000 crore and facilitate establishment of 750 CBG projects by 2029. We have received 4 orders, which were part of the five, which with one of the conglomerates. We are now witnessing positive developments on overall inquiry pipeline in this segment. Energy transition is a very important growth agenda globally, as well as for our engineering and modularization business.
I am glad to report that almost two-thirds of the order books for this business are now from the energy transition and climate action segment. Our work on GenX facility at Mangalore is in full swing. We have completed all statutory compliances for commissioning for commencement of our operations. We expect to start the commercial production activity by mid-February in this facility. Our PHS business witnessed development of strong order book that has already crossed the entire order booking of FY 2023 in the first 9 months of FY 2024. We received first international order for high capacity fermenters as well. We also completed the first order for the water system for lithium-ion battery project that has very similar requirement for water like semiconductor application.
The zero liquid discharge business is experiencing healthy inquiry inflow now, which, while we are very close to deliver our first modularized ZLD plant, we have received the next order as well, and we are in discussion with industry for several customers to further take this offer forward. Earlier, I mentioned about the Union Budget provisions to boost biomanufacturing and biopharma sectors. Praj has always believed to invest in unfolding future, and in line with that, I'm happy to share that the installation of our demo plant for PLA is nearing to completion, and we expect the demo plant operation to start by April of 2024. Overall, the business outlook continues to be positive for our business. Before closing, it gives me immense pleasure to inform you that Dr.
Pramod Chaudhari has been conferred with the coveted Atal Sanskriti Gaurav Award 2023, that recognize individuals who have demonstrated exceptional dedication and contribution towards sustainable excellence. With this, I will now hand over to my colleague, Sachin, for his comments on the financial performance.
Thank you, Shishir. Good day, everyone. Let me take you, let me take you through the financial highlights for the quarter and nine months ended December 31, 2023. The consolidated income from operations stood at INR 8.28 billion in Q3 FY 2024, as compared to INR 9.11 billion in Q3 FY 2023. PBT has increased by 7% and stood at INR 919 million in Q3 FY 2024, as compared to INR 859 million in Q3 FY 2023. Similarly, profit after tax stood at INR 704 million in Q3 FY 2024, as compared to INR 623 million in Q3 FY 2023. We have seen an improvement in margin in this quarter because of sales mix, higher exports in engineering, that is service orders, and softening of material costs.
Also, the decrease in one-time other expenses and lower site activities during this quarter has also contributed in the higher margin for this quarter. For nine months FY 2024, income from operation was INR 24.4 billion as against INR 25.2 billion in nine months of FY 2023. PBT stood at INR 2.5 billion in nine months of FY 2024, as against INR 2.1 billion of nine months of FY 2023. PAT of INR 1.9 million, as against 1.55 billion for the nine months of the last year. Export revenues accounted for 21% of Q3 FY 2024, and of the total revenue, 71% is from bioenergy, 21% from engineering, and 8% is from PHS business. The order intake during the quarter was INR 10.3 billion, with 86% from the domestic market.
Of the total order intake, 81% came from bioenergy, 12% from engineering, and balance 7% from PHS business. The order backlog as of December 2023, is at INR 39.5 billion, comprising of 75% of domestic orders. Cash in hand as on thirtieth September is INR 6.4 billion. I now conclude my remarks, and I would like to thank you all for joining us on this call. We would now be happy to discuss any questions, comments, or suggestions you may have.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles.
... Ladies and gentlemen, we request you to take two questions per person. The first question is from the line of Amit Anwani from PL Capital. Please go ahead, sir.
Hi, sir. Thanks for taking my question. And first of all, congratulations for the decent set of numbers. My first question on the sugarcane-based feedstock plants. Just wanted to understand the revenue loss which might have happened this quarter, the quantum, and will there be any impact in Q4? And as you said, we got no orders on that front. So we wanted to understand in the prospective order prospects what could be the quantum of loss which can happen because of the sugarcane-based feedstock plants?
So Amit, what happened on the revenue side is that there is a, because of the policy announcement, there is a clear shift, as I would call it, a temporary hold. Obviously, customers had to reassess their projects, the bankers had to reassess the funding that they were making. So, since the time period, very short of announcement, to the time we actually, the quarter ended. So it has led to a situation that, contracts have got shifted in execution, so they have not gone away, they have just shifted in execution cycle. And, normally, the plants that we design for, sugar sector have either a molasses CS feedstock or BS feedstock. And, and then there's separate plants which can also have sugar feedstock.
So depending on how the customers have chosen their projects, but they had to reassess from the perspective of their feedstock situation in terms of what options will they work with. And obviously, this has led to a temporary shift of the timeline for the project execution. In terms of our own response, we decided that we will enable our customers to meet the challenge differently. And therefore, at Praj, we created solutions which now allows them to go to multiple feedstock and not necessarily stay limited to sugary feedstock. So we have offered solutions which can combine sugary and starchy or sugary and starchy, as well as the lignocellulosic in terms of the gas. So we have now different solutions that are being offered to customers.
They are all trying to understand their own supply chains on the feedstock side, and then they'll obviously realign their projects. So this is, as I would call, a short-term adjustment that is required, but it—we don't believe that, because the ethanol demand continues, and therefore, we are sure that industry will find a solution based on our technology offerings to move forward.
Sure. And, so wanted to understand on CBG, we already got, four orders. So now, just wanted to understand any assessment on the pipeline for next 12, 15 months. And, also wanted to understand, though there are policies surrounding this by the government because of the promotion of, biomass, is... You know, your experience with the current customers, is, is there a stronger viability which can shape up in coming quarters? And what is the current IRR, of, on that aspect, if you can highlight?
So, as you rightly said, the numbers that we reported include the four contracts for CBG in our order book. As we move forward, we see a healthy pipeline develop for the CBG projects to be put in the field. There are again, as I was mentioning earlier as well, the key question that every customer or project promoter is trying to solve is accessibility to feedstock. And that is why you probably see in the budget as well, that there is a clear provision made for by the government, indicating that they will also provide assistance for the collection and establishment of supply chain on the feedstock side. So, we clearly see a very positive development and a healthy pipeline for the CBG projects as we move forward.
The CBO announcement that I also mentioned in my opening remarks will also give it a positive push. Typically, these projects will take anything between 12-15 months to come fully online. From that perspective, I think financially, 2025, 2026, where 1% of blending has been announced, will also give the necessary runway needed for development of projects for the promoters.
So lastly, on the biomanufacturing, which government announcing, we have been working since quite long on bioplastics. So any assessment in what shape it is going to come, you know, whether it will be demo plant initially with PPP mode or any assessment with respect to quantum or the investment, if you would like to highlight?
So Amit, you know, there is no details of the policy announcement made available yet. That is the fact. However, having said that, I think what's important for us to notice is two things: One, there is a clear intention to promote biomanufacturing and biofoundry. That's the direction in which the policy will move. That, I think, is a very, very positive development. And the second point that I would like to mention here is the fact that as a leader in this business, we recognize this opportunity developing much ahead of its time, and therefore, we are able to anticipate the put R&D money behind development of a solution. And now, we are even putting up a pilot project, as I mentioned, which will get commissioned in first quarter of next year, next financial year.
I think that bodes well, because we are now setting the pathway for the unfolding future, if I can use that word. We are very, very positive and very excited with this development in the budget.
... Thank you, sir, and all the best.
Thank you.
Thank you. The next question is from the line of Prathamesh Sawant from Axis Securities Limited. Please go ahead, sir.
Yeah. Thank you. Thank you, sir. Good afternoon. So my question is with respect to the CBG again. So you mentioned we have a INR 37,000 crore opportunity. I just wanted to understand, so what kind of a competition we'll be facing in this front? So can we expect a similar market share like we had in bioethanol, where, you know, we had 66%-70% market share? So do we see any competition here, and if yes, who are the competitors?
So Prathamesh, first of all, I think the sector is now, got a visibility of its growth path, which is very important. The CBO policy actually creates a pathway for sector to grow, which is a very, very important thing. The second is that, when an opportunity arises, obviously, competitive forces will come into play. CBG, the technology, in several parts of the world, not exactly the same, kind of a scheme that the government of India has got, so that is very, very unique. But, in terms of, its basic technology construction, has been present in different parts of the world with different feedstocks. We ourselves have built over 50 plants in India, where biogas is produced, by treating of, effluent and distillery. So the...
As feedstock ecosystem develops, I think different solutions will come out. Now, there's treatment-based gas plant, there's rice straw-based gas plant. So depending on how the supply chains on the feedstock side develop, I think we will see a clear development on the CBG side as well. In terms of competition, yes, there is competition, and I think sometimes in a presence of competition in a very new emerging field is also a good sign, because that shows that the potential is really and truly there. It's not just one person's imagination. And the third is, which is also equally important, in the mark-- I think market share will develop over a period of time. I think all of us will try and...
I'm sure all of us will find a customer who will buy the story that we put out as an organization. But what's important is to actually go out in the field and prove this performance and promises. And depending on how each technology performs, I'm sure the market share will build based on competitiveness dimension. So to comment on market share is probably a little bit early, but we are very excited with the potential that this opportunity now promises.
Great to hear, sir, because I believe we had announced something prior, that the RenGas technology has highest yields in the market. So-
Yeah, it is. Yeah, right. Yes, it has. The point is that eventually, we will. The market share is a function of time as well, right? We have to go through this. Now that the potential pathway at least appears to be much more clearer than it was before, we are sure that as we travel along, we'll talk about it as we build the share.
Right, sir. Thank you.
We have no intention to be anything but the leader in the business.
It's great to hear, sir. So second question is with respect to your successful, you know, SAF flight. So, sir, are we seeing any interest from U.S. economy post that, like, as in new demand for ethanol plants, since we have, you know, a proof of concept now in hand?
Sorry, could you just repeat the question?
Since you have a proof of concept with respect to the SAF fuel now, so are we seeing?
Yeah
... any upgraded traction in the U.S. economy and Europe economy for the ethanol plants?
Okay. So in the United States, the Inflation Reduction Act has actually set a goal of creation of 3 billion gallons per year capacity for SAF by 2030. Now, of this, I'm just putting some rough numbers out. So of the 3 billion, about 1.6 billion is expected to go on the FR route, but beyond that, there is no pit stop for FR route. The balance, 1.4 billion, is likely to be on what's called an alcohol-to-jet route, and where ethanol will obviously play a very, very, probably the most important role as we move forward. The ethanol that is required to, for this, SAF production needs to, cannot be just a normal ethanol. It needs to get to what is called a low carbon ethanol status.
So there are already a lot of ethanol plants in United States, and the capacity exists on the ground, but now they need to become low carbon ethanol. So that creates the opportunity to convert those plants into low carbon ethanol. And as we, as I was mentioning, in the last quarter, not the December quarter, but in the quarter ending September, we announced our first order for creation of a low carbon ethanol solution for an upcoming SAF project in the United States. So that was the one that we announced. Also, because for every gallon of or every liter of SAF that we need to produce on alcohol-to-jet route, we will need the twice the volume of ethanol.
So for every 2 liters of ethanol, we'll be able to get 1 liter of SAF. So it does create a very significant opportunity. As I mentioned, there are some clarifications that are required under the IRA, when the incentives were given by the government from their Internal Revenue Service, on how the calculations for taxation, et cetera, will happen, and that's the 45Z provisions, as I was mentioning. Which are expected to be clarified in about 4-5 months' timeframe. As soon as they are clear, I think we'll see the next movement forward.
Okay, sir. The last question from my end is with respect to the margins-
Prathamesh, sir, sorry to interrupt. Can you please come in the-
Sure, sure, sure. Yeah.
Thank you, sir. The next question is from the line of Mohit Kumar, from ICICI Securities. Please go ahead, sir.
Yeah, good afternoon, sir. So my question is on the CBG. Are we seeing more inquiry, or do you think this is still some time away, till the time the first plant is commercialized? And we can see a slightly higher number, maybe end of FY 2025, when the first plants, first of our plant starts producing.
So Mohit, I will give the answer in two stages. One, the CBO program is announced from FY 2025-2026, so it's still little away, and it will take that kind of time frame to build, a plant and actually create the capacity in the country. So we expect that as we move forward through the year and maybe towards the later part of the year, we'll start to see a much more healthier, and volume development as far as inquiry numbers are concerned. In terms of commissioning the project, we have already commissioned, as I was mentioning earlier as well, there are about 50 projects that we have commissioned on, the spent wash basis, which comes out of, which is the waste coming out of the distilleries, where we can produce, the CBG.
We also commissioned on press mud, so that is also there, and we are also in the process of commissioning based on rice straw. So all the three major groups of feedstock that are currently known are being covered, and this we are building other core, where some new feedstocks, like cotton stalk, native grass, et cetera, will also come into play. So as this ecosystem starts to develop, you're right, as more and more projects come on the ground, probably that will create a higher degree of knowledge and learning about what needs to happen on the overall ecosystem. So we will definitely, you know, see a positive development as we move forward.
Yeah, as you spoke about the U.S. opportunity, you said 3 billion SAF by 2030. Is there an intermediate target? Does it mean that the 2030—if it's a 2030 target, we get the IRA classification, it may or may not happen, given that the U.S., the election in the U.S., and this may get delayed, which means that we may not see a material order inflow from the SAF opportunity in FY25 also.
So Mohit, that's a very good question, and there is no intermediate target. However, there is an international agreement that has been signed. United States is signatory, India is a signatory. That starting 2027, January 1, 2027, 1% blend increasing every over a period of time to 50% blend will start, and it'll be obligatory and mandatory for all the airlines to follow. So that is going to create a definitive market. Now, so from the market side, there's going to be a definitive pull, that the SAF demand will emerge. And if the market side, there's a pull, I'm sure that the capacities will start to get created.
This clarification under 45 Z that I mentioned about is an important one, because that changes very significantly and very favorably the economics of a project, and that is why it's critical for customers. We are right now working on several engineering projects. So customer said, "Okay, let's get the engineering part done. Let's get the feasibility report done, so that when this notification comes as it is expected, then we can start the project and don't lose the time right now.
Understood, sir. Thank you, and all the best, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Ankita Shah, from Elara Capital. Please go ahead.
Yes, sir. Thank you. So my question was on margins. So given that, a good sales mix improved, you know, exports and, materials in fact, you know, positively aided the margins performance for this quarter, how do we see it going forward? Do you think it's likely to continue? And given that our export orders should increase post the new plant commissioning, so do you think this should sustain going forward?
The results which I mentioned earlier on the margin improvement are, yes, mainly on the sales mix, export orders coming up in a big way, as compared to the normal orders when your services orders have contributed. And one major component, which we need to definitely look at, and if you look at my last year's last December quarter results, we have seen the great impact coming up on account of softening of the material cost. So there are some elements which will definitely continue to give us the relief on account of improvement in the margin, and there will be some which might come back. For example, I mentioned that site activity was less as compared to the last quarter, which may come up in the next quarter.
So the trajectory for our margin going forward is going to be definitely on the improvement part, but not necessarily in the same proportion. There might be some here and there, but yes, the margin improvement we will keep, we will be keeping in the coming quarters also.
Got it. And, how is the order inquiries for the new plant that is, you know, expected to, you know, commission from next quarter onwards in Mangalore? How are the inquiries building up for that?
So, I think that's a great question. So that, what we are seeing now is a clear change, clear diversification of our order book, and energy transition and climate action is a very, very big part of our new dimension. And that's where Mangalore facility will be serving this particular need. The inquiry pattern is building up very, very well for this, in line with our expectation. And, we see no reason to be, or any cause of concern. We actually are very optimistic that this will continue to develop positively, because this is... Energy transition is a very, very real phenomenon, especially in the western part of the world.
Awesome. And sir, I remember you were mentioning about the pilot project for the RCM bioplastic plant also, which was underway and, you know, expected to, you know, start.
... start production. So, any update on that?
Yes, Ankita. So as I had mentioned with you earlier as well, we foresaw this need for developing an indigenous technology for bioplastics. And our PLA project is, for which we had announced the capital expenditure at the earlier part of this year, is absolutely underway, and we expect that in the first quarter of the next financial year, we will be able to commission and demonstrate, and then, of course, from there onwards, take it to business development.
Okay, sir. Okay, thank you so much, and all the best.
Thank you. The next question is from the line of Shailesh Kanani from Centrum Broking. Please go ahead, sir.
Yeah. Thanks for the opportunity. So, I wanted to understand, out of this bioenergy order book what we have, around INR 3,000 crore, what quantum would be slow moving? And also the order inflow for this quarter, INR 400 crore, I assume, is from the CBG order. So what is the remaining INR 450-odd crore, which we have got?
So Shailesh, first of all, let me start in the reverse order. So as we mentioned that this quarter was a very different quarter in its constitution because we did not see any sugary feedstock based ethanol projects getting finalized during the quarter for reasons that we already elaborated. But the starchy feedstocks continue. So what you see is that the other half that you mentioned is about the starchy feedstock based order book that continues to build. So there is no letup on that part. It was just that, as we mentioned, that there should be a small 3-4-month kind of a recalibration that is required for the project that was solely syrup-based because of the change in environment.
And then a lot of industry is now thinking, saying: Do I need to go and diversify to multiple feedstock, et cetera? So that is the impact that we are seeing.
The slow moving part of this INR 3,000 crore order, order backlog?
Yeah, that's right. INR 339.5 billion is order backlog is what we are saying. Your question is related to?
How much is this? The bioenergy part, which is roughly around INR 3,000 crore. So how much of that would be, say, slow moving, which will not be incrementally contributing to our revenues?
So related to this syrup-based plant, the order book size is around INR 250 crore.
B-Heavy would be?
B-Heavy will be another INR 450 crore kind of a thing.
Shailesh, B-Heavy also has a C molasses built into that.
Right.
It is-
It's not a single feedstock, plant, okay?
So that means that would still continue as in the past?
Yeah, so pure syrup project is what Sachin was mentioning, at about INR 250 crore. They obviously have delayed execution now. But other than that, if it's B, then B is also with a C, so that you can alternate the feedstock there already. And many customers are now opening the dialogue to say: "All right, apart from this, can I connect a starchy module to this? Can I- can we discuss even a bagasse-based ethanol product?" So there, as I was mentioning, diversity in feedstock is critical to this, and that is an effort that we have already made, anticipating this kind of a need. So we are able to offer a solution to these customers, and I'm sure that this will help them overcome this challenge.
Fair enough. Sir, my second question was with respect to our international order inflow and engineering revenue booking as well. So there has been some disappointment there in the quarter. And so is there any component in the international order book, which is slow moving or has a longer gestation than what we longer execution period than normally what we have in the past?
So, on the international order book front, yes, there were some minor shifts in the order booking cycles, but the inquiries are very much healthy. They have all stayed. We do not foresee a situation where the pipeline is anywhere near... In fact, it's only filling up. It's, I can't even use the word drying up, because it's only filling up for more and more. So from that, energy transition is a clear phenomenon. We clearly see as we move forward, yes, being project business in nature, sometimes timelines may be one quarter here or there. They're not exactly aligned to the calendar month as we would like to do it, or as Sachin would like to close my year on thirty-first of December, so that may not happen.
But more than that, I think what's important is the pipeline stays healthy and growing from the targeted segments and customers, and we have absolutely no reason to believe that we will have anything but success in that requirement.
And Shailesh, one more thing regarding to engineering international orders. Our GenX has taken almost one more quarter for coming up for the pre-commercial production. So it has taken some kind of a time for, time for arranging the customers review, getting their approval and all. That is also one, one more reason for engineering orders from the international side, taking some kind of a delay of almost a quarter for that matter.
Thank you, Sachin, for that. That's, that's a great point. Yes.
Yes. Thanks a lot, sir, and best of luck, sir.
Thank you, Shailesh.
Thank you. The next question is from the line of Sandip Sabharwal from Ask Sandip Sabharwal. Please go ahead, sir.
Hi, Shishir ji. My question was specific to the second generation ethanol plants, which have been under execution for a very long time now.
Mm-hmm.
Even the Panipat plant, which you are saying will be into commercial production by the first quarter. Now, the feedback from the company, the oil company, which you are executing, is that the technology has not stabilized and the commercial production is not happening despite so much time having passed. So can you just give some clarity on this? What's happening on that front?
Sure. So yes, I mean, delay is something that is visible to all of us, so there's no denying of the fact that the project did get a delay from the original target that we had. However, what's important to understand is that the challenges of feedstock supply chain, and I did mention that even in the earlier part, the government has also recognized the need to establish and support establishment of a supply chain on the feedstock side. So one is the physical availability of the feedstock. That itself, because you appreciate that, in the whole 365 days of the year, the feedstock is only available for 15 days in a year.
So we have to make arrangements for the rest of the 350 days for it to be stored and used, et cetera, et cetera. So that's one clear dimension that has been learned as this project was getting commissioned. The second is about the quality of the feedstock, because there are, you know, one has to understand there is a feedstock that is available today, and then one year down the line, when the demand for that feedstock goes up, how do you ensure that the quality of the feedstock is correct? That is the second one. The third is, of course, then these varying degrees of quality inputs. How do you stabilize the plant? What is important is, as far as process is concerned, we have through one, end-to-end.
You put feedstock at one end, you do get ethanol at the other end, and there is absolutely no problem. We have already produced over 1.5 lakh liters of ethanol in the project. But now, overcoming this situation, we have now agreed on a plan with our customer, with Indian Oil specifically, to go through a because they would like us to go through a two-stage commissioning, recommissioning of the project. That is what we are doing, and that's why I mentioned that first quarter of next year, we'll see that happen. We are already working on it. It's not that we'll start from there now. Our team is already there, and we expect the results already in February. We'll see it in reasonable timeframe, the project up and running. Okay?
No, but then, taking it up further, like when such a big order is placed by the customer, wouldn't it be obvious that they would think through the feedback issues at that stage and not five years after the project was awarded?
Well, the point is this, that this is very new. There is no precedence. There is no supply chain established. You would agree with me that the only way this feedstock was done was by farmer would burn the thing standing. So from completely destroying it in one shot to light up a match, we are now talking of establishment of... So it does take time. This is the experience worldwide, it's not only in India. So I think the feedstock challenge is clearly understood, because there are different dimensions to it as to who harvests the feedstock, at what cost, who puts the capital, who puts the land, who stores it, who supplies it.
There are different dimensions to this, and I think some of those dimensions are very complex in nature, and I think now there's a clearly better understanding that is emerging, and we will see the results soon.
And secondly, on this biogas plant, which has been just inaugurated in UP, where there was a mention by the oil minister also. So, for that plant, has the production stabilized?
Sorry, could you just repeat the question, please?
Yeah, about the new plant in UP, which was just inaugurated by the oil minister on the-
Yes
... compressed biogas.
Yes.
Has the production stabilized for that?
No. So, just to share with you, from the day you inaugurate that, it is first start. The cycle is almost a 90-day cycle by the time you go to a stable production level, because that's the bacterial cycle, degradation of biomass. First, first start, we'll take that one. After that, it is obviously a continuous process.
So, this order was for HPCL, right?
Right.
HPCL also announced eight more plants in UP, so are you in line to get any of those?
Time will tell. Time will tell. We need to first commission this one, and prove it to them, and there are no... They've announced it, but obviously, it's a public sector, so they'll have to go through a procurement process. We will bid for it, and we are sure that, we will, we will stay competitive and bid.
Okay. Out of the 900-odd plants which might be planned over the next few years, what do you estimate, like, how many private sector will do and how many the public sector will do?
Of course. There is. I think we are in initial days, so for me to sit on a crystal ball and say private will do so much, public sector will do so much. What's important, though, is that both the sectors are building the plants, and to me, that is a good sign. It's not that only a public sector is building or only private sector is building. This clearly goes to show that there's a clear future for this form of solution, that there's a viability for these projects. And the good news is that there are several large conglomerates, both on private and public sector side, who are supporting this and are partaking in this. So I think from that perspective, it's a very positive sign. But what will be the distribution between two of them? Only time will tell.
All right. Thank you.
Thank you. The next question is from the line of Manish Beria, from Investors. Please go ahead, sir.
Hi there. We are trying to become a long-term investor of Grasim. Just wanted to understand. I mean, if you can just build, help us build conviction, if you reiterate your FY 2030 target. I think you have said about 3x revenue. So is that still achievable? That's the first. The second is on the margins. We almost reaching double-digit PAT margins. So is this something we should look forward with more export that is higher margin, and also services being contributing more? So double-digit margin is possible or not. The third is, I mean, we are less capital intensive. I mean, the ROC and things are very good. So what will be our capital allocation policy, like dividend, buyback or infusion, whatever it is.
What will be our capital allocation there? Thank you.
Thank you. Thank you, Manishji. So let me start first. We have absolutely no reason to believe that we will not meet or beat our target that we set out of 3x growth. In fact, if you go and see, we, we were saying some things in that conference as well, where we had set out a vision for the company, where an important segment was around bio manufacturing and and we are delighted that the government has also indicated the same in their policy direction as well. So in bioenergy, already there's a big push. Sustainable aviation fuel, there's a big push. The global CBG, there's a big push. Now on the bioplastics and biomanufacturing, there's a big push.
So all the sectors that we are serving, and where we have a leadership in the business and market, in domestic market as well, very clearly the indicators are that those are all potentially growing pathways. And I think if the business is growing, obviously there's no reason to believe that we will, as I said earlier as well, that we have absolutely no intention to give up on our leadership position. Internationally as well, we see two quick, one is the SAF, which will drive development of capacities worldwide, United States to start with India. There are several other factors that favor India as a preferred destination for SAF production. And we will talk about it as we travel through the year over the next 12 months.
The next point that I want to make with you is that the Global Biofuel Alliance that I mentioned in my opening remarks has become a very, very strong platform. Already 22 countries are a member, and over and all the important organizations that needs to be part of an ecosystem to make things favorably developed are already the member. We are already in dialogue with several, I think if I remember the number correctly, 10 member countries, to see how we could develop, help them develop their own bioenergy programs and how what role can technology play. So everything that is in terms of potential, in terms of landscape, in terms of pathways, is positively developing in all our business areas.
There are more business areas around energy transition that I already mentioned. That is also developing very, very positively, and we expect that that will become a very, very significant component of our business numbers as we move forward. So, fermentation is going to become a big technology, so that is the core strength of Praj. So several of our businesses, not only on energy side, but bioenergy, renewable chemicals and materials, PHS, all of them will benefit from this strong, core of, core, strength of Praj's, which is fermentation. So overall, both in, even in international markets and domestic markets, the drivers are all in positive direction. We expect that that is, that- and that is I'm so confident that the clear direction, guidance that we've given will be met without any problem.
Coming to your second question on around the margins. We remain confident, as Sachin already explained, that and I'm saying this, that we have margins don't happen overnight. So we've been working very consciously at improving our margins over a period of time. Several actions that we have taken in terms of changing product mix, focusing higher on international, getting a higher role for technology. Of course, softening prices of raw materials have also helped, no question about it, compared to the period two years ago. We have also seen this particular quarter where the cyclicity is a little less, which is a little less margin business for us going down, and maybe they'll go up again in the fourth quarter, again, in terms of market dynamics changing.
So it's an overall mix. We are very confident that we'll continue to be positively developing as we move forward. It may move, it may have different quantums of change, but all the quantums will be on the positive side. That is a confirmation and comfort.
On the capital allocation?
Yeah. So on the capital allocation side, I don't think I can play the role of my entire board, because this is a board matter to be discussed into how we will do about, go about allocating our capital. What's more important is, for us to understand is, that we will continuously be focusing on development of the new, because we strongly believe that the whole renewable chemical and materials landscape will start to unfold in front of us, in mid to long term, and that will call for investment now. So we will make sure that we don't shy away from those investments, and we make prudent investments. So a lot of our capital allocation will go towards building capacity and capabilities, both.
In terms of what happens with dividend size, not for me to discuss, it's a board matter. So as and when that comes up, we will let you know.
Thank you.
Thank you.
Really appreciate your answers.
Thank you. Thank you, Manish.
Thank you.
Thank you. Ladies and gentlemen, please press star and one to ask questions. The next question is from the line of Faisal Zubair Hawa from H.G. Hawa and Company. Please go ahead.
... So, what is the kind of R&D spend that we are targeting going forward? And secondly, if there is this one product, you know, which we have still not, you know, marketed enough or we are not getting enough traction, but you feel that, you know, deeply that this will succeed big time, what could be that product? And, is there some target within the company also that, you know, new products should, you know, at least contribute like one third or, or one quarter of revenue three years hence?
On the R&D spend, our momentum will continue, presently, because-
Can you give a percentage to it? Spend.
I will not be able to give exactly percentage per se, but I will say that we are looking at for the next year, the CapEx in the range of, again, maybe INR 30-40 crores. The revenue expenditure, which will be mainly on the development side and the facility which is coming up now for PLA, another INR 30-40 crores, we will be investing on the OpEx side. So total investment which will go in R&D in the next year will be in a range of INR 70-80 crores. Whatever will be that percentage of my next year, next year's turnover.
Sir, about the B-block, blockbuster product that could come up and the return and any kind of strategy with the new products.
So when you are talking about new products, if you look at, starting from second generation to CBG to SAF and now PLA, these are the new offerings which are coming up in the market from our side. They are of course, at different stages of commercialization, but we believe the potential, and I'm sure you also believe the potential for all these segments is pretty, pretty huge, going forward. For example, CBG, we were talking about CBG since last two years, and now it, now it is really taking its roots. And if you look at the technology naturally got developed at our end, and technology is absolutely unique from the form of the yield, which someone was already mentioning about, or from the preservation of feedstock. There are many unique, features which we have introduced because of our R&D development on that side.
Same thing is happening on SAF. SAF, we just mentioned about inauguration of our fully integrated demo plant, which is one of its kind. It showcases the entire end-to-end kind of production capability, technology and facility which can be built up. The best part, it is on a modularized form.
And sir, are we doing anything to improve our branding at an international level, where, you know, we could stand strong against the Japanese suppliers and, you know, really build up a large amount of trust? So any kind of branding initiatives that we are doing to do this, I know it's a B2B business, but still, you know, the-
Thank you. I think it's a great question. We are very conscious in ensuring that our brand presence is felt. And what better to say than proof of this, than to say that the Nobel equivalent of prize equivalent of bioeconomy, which is the Carver Award, was awarded to Dr. Chaudhari, who's our chairman, and who is the only non-American to have received this award over the years. So, you know, and that's treated as Nobel of the industry. So, and there have been several other, you know, accolades that have come our way, whether it was through Bloomberg, whether it was through Biofuel Digest. So in relevant platforms, we are making sure, A, that we are known, we are present in those forums, we are contributing to those forums.
We are a go-to company when people think of customized solutions. We are, we're a go-to company when people think of multiple feedstocks versus what... Yeah, when it goes to the whole, the entire effort that G20 conference launched around Global Biofuel Alliance, that is something that we are, we are playing the role that is expected of us. We are contributing in any which way we can. Of course, our customers are our biggest ambassadors. So in countries of over 100 countries, over 100 countries, we have plants and solutions that we established. Those guys are our real ambassadors in respective geographies. So yes, as you rightly said, we are not a B2C company, so you will not see us doing a jingle on television.
But, surely there are forums where we make our presence felt through contributions that we make, and the participation that we do.
Sure. It will also help to have, you know, a much better LinkedIn presence, you know, because there our, you know, updates are pretty, you know, not very regular. And secondly, sir, is there anything that we plan to do on the waste to energy front also? Because that could be also very big sector in India, and Hitachi has bagged very big project also from Anthony Waste. So do we have a very good product there also?
So we have a lot of focus on what we call as aggregates to energy. Obviously, those CBG is a solution in that space. Second generation technology solution in that space, even first generation for that matter. Our energy transition and climate action solution for modularization has a... Within that, within that business, there is a segment of waste to energy, where we are working with some of the companies in the world, and I think Sachin mentioned that, that there our ability to conceptualize a process to an engineering solution and then convert that to a modularized solution, is something that is finding a lot of takers. So different strokes maybe, but yes, definitely, waste to energy will also be a. But right now, there is no plan at our end to work on municipal waste to energy projects.
Directly, as a technology development.
I really appreciate your answering my questions so well, sir.
Thank you. Thank you.
Thank you. The next question is from the line of Dhaval Shah, an individual investor. Please go ahead.
...Good afternoon, Shishirji. I just have a query. We had announced a JV with IOC six months back, and then there is no further update about that JV, what we are going to do about it. Similarly, in our last few conferences, you had announced and detailed discussion about Europe going for 2G ethanol plants, so then there is no further update how we are addressing that market.
All right. Thank you. Sorry, that was a mishap from our end. Thank you for pointing it out, Daljit. So on IOCL JV, both the boards have approved the JV. We have agreed on the language of the agreement, we have the structure of the JV. It's a process because this is now a public sector to a private sector partnership. So there's a process of approval from NITI Aayog and DIPAM, et cetera, which is currently underway, nothing that we can influence directly. It's a process that will take its natural course. And we expect that soon we will hear about an approval, and once that approval comes, we'll be able to develop.
There is several activities we are doing in anticipation of that approval on the sideline, and you will hear about them as soon as this. Right now, my lips are sealed, but once the JV is formally announced, in terms of approved by NITI Aayog and DIPAM, we will be able to talk about. We are already working on the sidelines to development of a pipeline of projects for IOCL JV. Coming to Europe 2G, then, yes, you're right. There's been a bit of a slowdown in the activity in Europe that we witnessed, but now the activities have picked up, and we are now beginning to see active dialogue that is taking place with a couple of interested parties who now want to go ahead and evaluate.
The critical dimension, of course, to this is the fact that we also have to commission the IOCL project at Panipat. This is what I mentioned, that we'll be able to commission it in the first quarter of the next year, next financial year. And as soon as we do that, I'm sure that we'll be able to showcase that it is possible to do this, and then we'll be able to move show some positive developments on that dimension. Thank you so much.
One more thing, sir. We're not showing any top line growth this year. Can we expect some movement in top line growth going into FY 25? Can we have some top line growth and numbers also aligning to our vision?
So Daljit, it's a very good observation, and as I was mentioning in the answer earlier, that because of this... So there are two major shifts that happened on the domestic side. One was the policy on FCI rice allocation, second was on the use of syrup for sugar production for ethanol production. In both, what we have seen is that this has meant that customers had to reassess, as well as their bankers had to reassess the project viability and look for alternative resources, et cetera, so that is, that will delay. So you will actually see an order book which is that will carry forward into next year, which is a very healthy one. And that will indicate to you how the whole year will unfold. Yeah.
Yes, there is a delay, and this delay has meant that... And the announcement came at such short notice that we did not have time to find an alternative because time period was too short. But, you will be able to definitely see a healthier order book being carried forward.
Great. We hope that everything align as per the vision, because we've been aligned to your vision since long.
Thank you so much.
Yeah. Great.
Thank you so much.
Thank you. The next question is from the line of Sagar Dhawan from Value Quest. Please go ahead, sir.
Yeah. Hi. Thanks for taking my question. Sir, my question is on 1G ethanol. Just wanted to understand, you know, sir, what kind of feedback are you getting for your, from your sugar-based ethanol customers on the viability of their operations with C route, and, you know, possibly dual feed as well? So with the kind of incentive increase that we are seeing right now from the government side, as you mentioned, on C as well as maize, what is, what is the level of viability that right now they are seeing?
So, Sagar, I think the question is that this is a question of product mix for the sugar companies, right? How much sugar, and therefore, how much ethanol, how much, which is... And that mix is something that says, how much is their export, how much is their domestic sale? What's the price of the sugar versus what's the price of the sugarcane? What's the cash flow situation of sugar side versus what's the cash flow situation at the moment? I think that's the balancing that they will have to do. And that's what I was mentioning, that we understand that this could be a, it's not a straight line equation, it's a complex equation.
We want to help them solve some of these by actually offering the multi-feedstock plant to them, saying: "All right, if one feedstock does go in a different direction, that does not allow you to produce ethanol for reasons of economics, well, you can always opt for another feedstock that is available to then produce ethanol." Because the demand for ethanol is not going away. That's a fact. The EBP 20 program is very much here. The economy is running, India is growing, so all those directions are ticking. So I think what has to happen is that we need to create flexibility at the input side, and that is what we are attempting to do.
We do see we clearly see the dialogues are starting, but I'm sure that over the next four, five, six months, we will see a development of dialogue where the sugar-only sugary feedstock-based companies or ethanol production facilities will look for diversifying their feedstock base.
Okay, got it. And so when you say diversifying, would that mean that the diversified plants will have sugar as well as maize as an input? You have the capability to provide that kind of a plant?
Yes, we can. Yes, we can.
Okay. Sure. Sure, sir. Okay, can you tell us about the inquiry pipeline that you're right now that you're seeing on dual feed, any, any quantum?
Already inquiries have begun. Customers are now. We also built a plant for a couple of our sugar customers, which was what we call the dual feed plants. They're already there, up and running. So there is proof on ground, and we had already anticipated this. We had been dialoguing with our customers to diversify their feedstock. Some of the guys, the early leaders, have taken what I would call as that step already in anticipation. Some will take now because now they see a different reality in front of them.
Okay, got it. And sir, last question on this front. What is your current, in the current order book, what is the mix of dual feed plants in one year?
We'll get back to you on that. I don't have it available, readily on my hand.
Sure, sir. Sure, sir. Last question from my side, actually, it's on SAF. So you mentioned that you're working with some of the customers already in the U.S. on the engineering side, just to be ready beforehand.
Hello, Sagar?
Yeah.
Can you please come in the loop for the follow-up question?
Sure. Thank you. Let Sagar finish this one because he already asked you a question. Yeah.
Yeah. Sir, just on the pipeline on SAF side, you're working with few customers on engineering side, you mentioned earlier also, you've given some numbers and you're working with some customers. Can you just tell us how many customers are you working with right now? How many plants are you already working with on the engineering side?
We are working on six projects, where this engineering is underway one way or other.
Okay. That's it from me, sir. Thank you so much.
Thank you.
Thank you. And the next question is from the line of Lokesh Maru from Nippon India Mutual Fund. Please go ahead, sir.
Thank you. So just one question from my side. Wanted to understand what is the kind of two changes on when we say that we will be able to provide a multi-feed solution to our existing customers. So what is the kind of additional cost it might take to, you know, add this functionality to the existing plant? And then, what kind of loop do these customers have to go through if, for example, say, they need INR 25 crore extra for 100 KLPD, will they have to go back again to the banker for to approve the loan? And, you know, just want to understand the cost and the addressable market for us, and your view on, you know, how much of that addressable market you'll be able to convert in next 12 months.
Because more than looking at it as a challenge, I see this more as an opportunity for us to actually, you know, cross-sell our solutions at this point in time.
Yes. So I think you said it very correctly, because we have always believed that when a challenge is present in the ecosystem, it actually creates an opportunity as well. We just need to do a different thinking, and that is how this whole multi-feedstock option came about. We've been talking to some of our customers, and that's what I was mentioning in earlier answer as well, that we have actually already built commercial scale plants, which are running with multiple feedstocks on ground. So that's number 1. Coming to your question then, what's the feedstock? What's the alternative feedstock? What capacity do they want the alternative feedstock to actually be built for?
Because sometimes somebody can say, "I have 100% capacity to be built, so I have 100% standby." Somebody can say, "Well, I'm okay to run it at 50% for some time," if that becomes the question. So there are many of these questions that needs to get answered for me to give you a saying that... Yeah, and depending on that, and how much cash, their cash location or capital location policy is, they may or may not have to go to a banker or a financial institution for funding. They may even fund it internally. The thing is that you're an existing producer, the demand for end product continues to remain same, and now you're diversifying only to address the feedstock challenge. So, that depends on the location of the plant. There are many factors.
I will not be able to give you one ready-made kind of numbers.
No, sir. So a similar opportunity like this to cross-sell dual feed solution, does it exist in maybe other geographies like Brazil, U.S., Europe, even in Southeast Asia? Are there... What is the kind of competition there could be next time?
The multi-feedstock thing is India, but we are also beginning to see this emerge in Brazil.
Okay. The kind of competition?
Every market has a different competition, so Brazil has its own competition because the structure of the market is different. India will have its own competition because structure of the market is different here. So good. Competition is good. We have, we have no problem with competition. I think it's good to have competition, because that keeps everybody, the whole entire ecosystem very healthy and competitive. So that's, that's good for everyone concerned. Maybe we have more to talk about it, a few couple of quarters down the line when things start to crystallize. This is very new. This is just literally a month old, month-and-a-half old phenomena that has happened.
I think what is very important is for customers to see what the forward future looks like in near term as well as midterm, and that will decide how we will move forward.
Sure, sir. Understood.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to management of Praj Industries Limited for closing comments.
Thank you, everyone, for your time today. In case you have any more questions, please feel free to write us at info@praj.net. We will try to answer all your questions. Thanks again for your time today, and have a good day.
On behalf of Praj Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.