Ladies and gentlemen, good day, and welcome to Praj Industries Limited Q4 FY 2023 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 our operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you.
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 fourth quarter and financial year ending 2023. Before we begin, let me mention a few 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 quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We first have with us Mr. Shishir Joshipura, CEO and Managing Director, and Mr. Sachin Raole, Chief Financial Officer and Director of Resources. Without any further delay, I request Mr. Joshipura to start with his opening remarks. Thank you. Over to you, sir.
Thank you, Anuj. Good afternoon, everybody. I welcome you to Praj Industries' earnings call for quarter four and FY 2023. Just all of you had the opportunity to go through our results for the quarter ended 31st of March 2023. I would like to start today's call with the news of an historic development in the sustainable aviation fuel space. Last week, Praj, AirAsia and Indian Oil partnered for India's first commercial flight, powered by a blend of indigenously produced sustainable aviation fuel that flew the aircraft from Pune to New Delhi. The SAF blended in the ATF was produced by Praj using indigenous feedstock, leveraging its relationship with Gevo United States. Honorable Union Minister of Petroleum and Natural Gas, Shri Hardeep Singh Puri, received this special flight at the New Delhi Airport. During the event, Mr.
Puri mentioned that the government has plans to come up with mandates on SAF in near future. As India becomes signatory to CORSIA, mandatory blending of SAF from 2027 in accordance with the agreement will create significant opportunity. If we target to blend 1% SAF blending in jet fuel, India will require around 14 crore liters of SAF per annum, and this will translate to an additional requirement of 28 crore liters per annum of ethanol when things move on the ATJ pathway. In another significant development, our board has given us a new principal approval for formation of joint venture with Indian Oil for production of variety of biofuels. Production of sustainable aviation fuel is likely to be the first project out of this JV. India's EBP 20 program is moving ahead as per the plan.
Over and above the EBP 20 targets, ONGC have floated expression of interest for signing long-term offtake agreement with upcoming dedicated ethanol plants for additional capacity of 300 crore liters from eight ethanol deficit states, namely Tamil Nadu, Kerala, Andhra Pradesh, Telangana, Gujarat, Rajasthan, Goa, Odisha, and Union Territories of Jammu and Kashmir and Ladakh. This creates an additional potential opportunity for INR 4,000 crore. It is expected that this will go nationwide by 2025-2026. India currently has the capacity to produce nearly 10 billion liters, which is expected to increase to 12.5 billion liters by end of 2023. Several state governments have started to create supportive policies to drive ethanol production in respective states.
The Tamil Nadu government unveiled its Tamil Nadu Ethanol Blending Policy 2023 in March 2023, with a mission to improve farmer income, revive the sugar industry in the state, and to attract investments worth INR 5,000 crore in molasses or grain-based ethanol production capacity. The targets for the policy term are to be self-sufficient and meet the estimated ethanol blending requirement of 130 crore liters. Our board has given a final approval for a CapEx proposal of INR 200+ crore, considering the potential presented by several positive developments in different business areas. We are setting up a modern manufacturing facility to be housed into a new subsidiary, Praj GenX Limited. This unit will address the business needs arising out of significant developments in Energy Transition and Climate Action segment. We have very strong pipeline of inquiries building continuously.
The new facility will be set up near a major port with CapEx nearly of INR 100 crore. We are moving ahead with project development and expect to start the commercial production by last quarter of FY 2024. To accelerate commercialization of bioplastics, we are setting up first-of-its-kind demo plant for polylactic acid, PLA, with CapEx around INR 60 crore at Jejuri, near on the outskirts of Pune. This pilot facility will be used for scaling the production of food-grade lactic acid and polylactic acid. We are also setting up a new catalytic lab at our R&D center, Praj Matrix, that will need an investment of around INR 15 crore. This facility will become operational in August 2023. Coming to our business performance. Our domestic bioenergy business continued to build on its leadership position.
As we had discussed in past, majority of orders came for ethanol plants based on the starchy feedstock. Sugar mills are also setting up dual feed plants now and are adding starchy feedstock modules to their existing ethanol facilities. Our inquiry pipeline is showing a strong continued demand for starchy and sugary feedstock-based ethanol plants. On international front, low- carbon ethanol is developing as an interesting business opportunity in the United States. Owing to slowdown in the US market, this activity, while developing very healthily, might see a little shift in timelines for project finalization. We are in the process of completing field studies for several projects, which would then translate into firm business opportunity as soon as the economy returns to normal. In Europe region, we are discussing few potential opportunities for greenfield 1G projects in non-EU countries.
Our service business is receiving promising response from customers in both domestic and international markets. Our strong offering of an entire suite comprising of enzyme, yeast, and performance enhancers is finding a high acceptance in the market. With a view to enhance our reach and service to customers, we are building a strong distributor network in both domestic and international markets. On the 2G front, I'm pleased to share that we have produced first ethanol from our IOCL Panipat project. Our team is now focusing its effort in establishing continuous operation and reliable enhancement of the plant along with the IOCL team. As for CBG, our first rice straw-based commercial plant for HPCL has commenced biogas generation and flaring. This high- yield plant is now under stabilization and should start regular dispatch of CBG by end of June 2023.
The business landscape is developing extremely business basket. On the ETCA front, the opportunities arising out of increasing demand for sustainable energy and decarbonization of energy and downstream chemicals, blue and green hydrogen, green ammonia, coupled with growing demand for waste to energy solution, is driving the demand for modularized solution in a significantly positive way. Our traditional energy business of oil and gas, fertilizer, et cetera, is also seeing good traction, driving demand for our CPES solutions. On the ZLD front, we are working on bringing modularization approach to our offerings. We have already received our first order for a modularized ZLD system. This augurs well for future business development in this segment. Cooling business has now reached its pre-COVID level, and we expect it to translate to capacity enhancement soon. Fermentation is one of our key capabilities.
We are capitalizing on it to explore opportunities for our PHS business in a large- size, high- capacity fermenter space. We have received an interesting order for our large- size fermenters for a pharma application to be set up in Oman. We have also booked our first order in the semiconductor sector for ultra-high- purity water systems. PHS has a very healthy inquiry basket from its international markets, too. The union government is currently working on a policy, BioE3, biotechnology for environment, economy, and employment, that will boost biotechnology-based manufacturing for green growth. It aims to reduce dependence on petrochemicals in multiple sectors and attract over INR 10,000 crore investments. As a key stakeholder, Praj will participate in developing national biochemical policy as a knowledge partner. Overall, we remain very positive on continued development of potential across our bioenergy engineering businesses.
In spite of global economic challenges, we expect a favorable business environment, aided by stabilized commodity prices and an ever-increasing awareness to decarbonize the global economy. Before I conclude, I would like to share, and I'm sure all of you will join me in congratulating our Chairman, Dr. Pramod Chaudhari, who was bestowed with Eminent Engineer Award by the Engineering Council of India in the industry category for his exemplary contribution in engineering field. With this, I will now hand over to Sachin for his comments on the financial performance.
Thank you, Shishir. The consolidated income from operations stood at INR 10 billion in quarter four of FY 2023, as compared to INR 8 billion in quarter four of FY 2022. EBT for the quarter stood at INR 1 billion as compared to INR 780 million in the corresponding period of last year. Profit after tax stood at INR 881 million, as compared to INR 576 million in quarter four of FY 2022. For the full year ended March 31st, 2023, income from operations stood at INR 35 billion, as against INR 23 billion in FY 2023. EBT stood at INR 3 billion in FY 2023, as against INR 2 billion in FY 2022. Out of FY 2023 came at INR 2.3 billion, as against INR 1.5 billion of FY 2022.
Export revenue accounted for 17.4% of FY23, and out of the total revenue, 73.8% came from bioenergy, 19.3% from engineering, and 6.9% from the PHS business. The order intake during the quarter was INR 10 billion, with 76.5% from domestic market. Of the total order intakes, 82.3% came from bioenergy, almost 10% from engineering, and balance 7.8% from PHS business. As compared to the last year, export order intake has seen 9% growth, almost INR 743 crore as compared to INR 679 of the last year. The order backlog of March 23 is at INR 34 billion, comprising of 84.7% of domestic orders and 84% from bioenergy, 11.2% from engineering, and balance 4.6% from PHS business.
Cash in hand as of 31st of March 2023, stood at INR 6,910 million, that is INR 6 billion. The Board of Directors proposed a final dividend of INR 4.50, that is INR 4.50 per equity share, that is 225% of the face value of INR 2 per equity share, for the financial year ended 31st March 2023. It is subject to the approval of shareholders at the forthcoming Annual General Meeting. 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.
Thank you. We will now begin the question and answer session. Anyone wishes to ask a question, press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Prathamesh Sawant from Axis Securities Limited. Please go ahead.
Yeah. Hi, sir, congratulations for the great set of numbers. Sir, just wanted to ask my first question with respect to your JV with IOC. Just wanted to understand, what would be your capital allocation policy for the same? What kind of IRRs would you be expecting in these projects, and what kind of returns can we expect from this project?
You faded out towards the end of your question, but if you're asking what are the plans of the JV with Indian Oil, to give you the answer, currently, we have, both the boards have accorded an in-principle approval for this joint venture to go forward. Between public and private sector, there's a whole process that needs to be put in place, that needs to be gone through, and therefore, we expect it to become functional only towards the end of this financial year. As per the agreement, the joint venture will then obviously make up its business plans as it wants to go forward, as I mentioned. The purpose is to propagate the cause of bioenergy in the country.
They will, we are expecting that they will start out on a SAF project to begin with. As the development and the business model evolves, we will know what kind of investments will be called for, what role they will play in the SAF facility, et cetera. It's probably a little too early for me to make comments on intermediate of return for that joint venture. That's little out in future. I hope I answered your question.
Yes, sir. Yes, sir. Secondly, sir, some more light on the high purity business. Do we see this demand for semiconductors positive for the high purity business?
Semiconductor manufacturing facilities also need more or less a similar grade of high purity water that a pharma application needs, and that is why I made a specific mention that that's the first contract that came through for... Of course, not only for semiconductor, but even their supply chain as well.
Okay. Okay. Finally, sir, one last question from my end is with respect to the engineering segment. Do we see good traction for the CPES and business, CPES modules?
As I mentioned, both the traditional sectors of CPES that CPES has been serving, oil and gas, fertilizers, chemicals, and on the other hand, the entire, which will be served by CPES. Praj then has a new subsidiary, which will be specifically addressing the EPC opportunities. Both of them are seeing very good pipeline build for inquiry and traction. Many of the solutions that either of them would offer to different segments, would involve modularization.
Okay. What portion of it would be going towards green hydrogen or, you know, the up booming sectors?
We are right now not saying that I will only go and chase green hydrogen opportunities because our aim is to ensure that we are able to serve the needs of our customers. These are very focused customers. We don't a very finite set of customers. If they have a specific need for meeting a challenge or the solution for either a green hydrogen, it could be a green ammonia project, it could be an LNG project. What's the nature of the project is one dimension, but what's important for us is that we are able to add value. We are not going to restrict ourselves to only green hydrogen or anything like that. It depends on how the program, overall progress, of the project develops.
Across the broad spectrum, and not necessarily limited waste to energy, green hydrogen, blue hydrogen, green ammonia, there are different segments which have different needs, and we'll be serving all these segments.
Okay. Okay, sir. Thank you, sir. That is from my end.
Thank you. Before we take the next question, a reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Levin Shah from Motilal Oswal AMC. Please go ahead.
Yeah, congratulations as on good set of numbers. Sir, my first question is on the exports opportunity, and specifically, you mentioned in your opening comments that U.S. market has seen some delay. As we understand, there is a timeline under which this IRA benefits would be given to the companies who basically modularized their plans. Is this a very short-term delay that we are seeing or there is the inquiries, how will we see this order inflow coming in from these inquiries?
Look, Levin, great question. When the IRA announcements were made, there was also for the industry based in United States, they are also seeking some clarifications on the laws that have been rolled out from the IRS, because there are some tax breaks and credits that are announced there. How to avoid double counting, how do you go about specific counting, et cetera. Some of those issues are being resolved. That's number one. The banking crisis in United States has this delay is not that everything is parked three years or anything like that, but at least definitely for two, three quarters, we see a delay.
Okay. Sir, we were some of the projects we were already at a like an advanced stage in terms of doing the project work. For that also, have we seen some pause in the activity or that is progressing and it is only on the new inquiries that we are seeing some delay?
The way the U.S. projects progress is that they go through an FEL levels of studies, as they call them. These studies are three- stage. Some customers can go for two-stage , but definitely two-stage , nobody goes for less than that. Those studies have moved forward. However, once the studies are over, the next step of creating a big capital investment is something that is taking a little more time, obviously, because of the funding issues, high interest rates in the economy, et cetera. I think those are what I would call as not long lasting situations. As I said, as soon as the situation turns, we expect that this will come back on the table. As you rightly said, the IRA program goals still stay same.
They are not changing.
Understood. Sir, second question is on the CapEx. Interestingly, we had announced around, I think, INR 100 crore kind of CapEx last quarter. Now we are seeing that we'll do INR 200 crore with addition of this polylactic acid and the R&D CapEx. This will be polylactic acid plant would be this will be a pilot plant, right? We are not seeing any commercial sales coming out of this plant.
No, this will be a pilot plant, and the idea is to demonstrate a technology for PLA. Just very briefly, I won't go into details, but there are only a couple of companies in the world who have the technology today, and they are not letting it out external to themselves. They are only using it for their own capacities, and our attempt is to bring a very different dimension to this whole field and bring Praj's competence to play in terms of our understanding of the entire biological processes and ensure that we are able to provide a viable solution for PLA.
Got it. Sir, this INR 100 crore CapEx on the ETCA part under Praj GenX, what kind of revenue potential will this INR 100 crore CapEx entitle?
The idea is that, of course, INR 100 crore capital CapEx, as you know, in the modules business, we have to create a basic facility which can lift and shift heavy material. That is why a lot of investment goes into that. Once the basic infrastructure is set up, we are in a position to then leverage that for making multiple modules over a period of time. This 100 crore investment should actually potentially be able to do almost 30x-40x kind of a sale out of that facility. Over a period of time, some more automation will walk in, some specific machines can walk in. That will happen as the facility starts to develop.
The first tranche of INR 100 crore as we start to invest, our expectation is by end of this financial year, we'll be able to make it functional from a customer perspective.
Got it. Thanks, sir. I will come back in the queue, and all the best. Thank you.
Thank you. Next question comes from the line of Shailesh Kanani from Centrum Broking. Please go ahead.
Thanks for the opportunity, congratulations for excellent set of numbers, sir. First, I would like to know outlook on CBG orders, how we are seeing the pipeline, and, have we booked any orders in this quarter, recent orders on the CBG front?
CBG activity is still not at a very high level in the... I'm talking now market activity level, is still not very high. We are beginning to see an increasing interest from customers, but we're still not somewhere where I can say, you know what, there's a very healthy pipeline that is building up for inquiry, et cetera. That is slow making. As I mentioned, and also one of the facts is that while there have been a lot of expectation around different feedstocks, the fact is that there is no proven capacity on ground which customers can rely upon, and that is why the HPCL commissioning takes a very important dimension.
As I mentioned, that by end of June, we will be in a position to start dispatching gas from there, which will clearly establish a high-yield technology, which is one of the key requirements for this to go forward and become effective. There are also some more, what I would call, the last mile connectivity issues that need to get sorted out, and I think everyone, all the elements in the, in the value chain are working on resolving these issues.
The traction is slow as of now, but when we expect it to pick up?
I think, I'm probably be better placed to answer this question down the next quarter, somewhere around, because we need to see this performance establish and see how many of the issues are being resolved. We are very confident that our technology will showcase that we are able to produce best-in-class performance. Having said that, we need to wait till the proof of the pudding is there on the ground, which is not too far out, sir.
Fair enough. Sir, just wanted to understand the accounting treatment of the INR 100 crore demo plants, what we are putting up, I think two plants in total for bioplastic as well. How would that accounting treatment go? That would be debited to P&L or that would be capitalized in the, in the book? I think it will be debited to P&L, right? Sachin, you want to answer that?
Yeah. This investment is actually meant for not one product, but it is like a multi-product kind of a facility, so it will sit in our assets, and INR 100 crore will not come to P&L.
Okay.
For example, the way in which we have built up our demo plant for 2G or the demo plant for CBG, for testing different feedstocks, is sitting in our fixed assets.
Okay.
We naturally, the depreciation and operating expenses are getting dedicated to P&L, and the asset block will sit on the balance sheet side and not on the P&L side.
Okay, fair. I thought that there will be amount as in the year. Sir, only one more question. Sir, our order or our book-to-bill ratio has deteriorated, obviously, because we had excellent execution in FY 2023, so it is barely now 1x TTM basis. How does the management view this? As we are entering, are we entering into a territory where this can hinder growth going ahead, growth rate going ahead? Last question from my side. Thanks a lot.
I couldn't get the question clearly, Shailesh.
Yeah. Actually, I'll just, I'll just repeat it.
Repeat the question, please.
Our book-to-bill ratio on TTM basis has deteriorated, right? It is barely 1x in FY 2023 revenue terms. From 1.2, what we had in FY.
Your question is that our revenue booking versus the outstanding order booking, that ratio is deteriorating, am I right?
Yeah, yeah, because FY23... Yeah, yeah, understood.
Frankly speaking, the way the execution capabilities or capacities get built up, we are very confident we have started to build this capacity. Praj GenX is one such example that I gave you. We are very confident that we will be in a position to continue to build. I don't see that to be a concern point at all, whether we will be able to book and bill higher or lower number. Probably, we will do, we'll do a better performance. Capacity is not the constraint. Having said that, as we go through the year, this year, obviously, there were some...
As I'd mentioned in the past as well, that the year of two halves , one, when the commodity prices were completely different than in the second half, where those stabilized well, the movement of labor force, et cetera. We are now in a position to say that we have reached a capacity built, and where we have been able to serve even higher book and build. If we book during the year, we're going to build that.
Of course, that also depends on, A, customer cycle times, because, as I'd mentioned, especially for our 1G business, where we are building more starch-based plants, those project cycles are slightly different than a sugar-based plant for the simple fact that there are many first- time enterprisers, who are putting up those projects. Therefore, sometimes the timelines may get stretched.
Okay, sir. Thanks a lot. I'll turn back to you.
Thank you. Next question comes from the line of Vikram Suryavanshi from PhillipCapital. Please go ahead.
Yeah, good afternoon, sir, and congratulations for good numbers. I just wanted to take this question from Levin forward, that low- carbon opportunity, what we're talking about USA, is it more linked to the, say, 3 billion gallons requirement of SAF only, or is there a possibility that USA, apart from SAF, there could be increased demand for even existing ethanol base also, just to get a landscape of this low- carbon opportunity?
Vikram, for production of SAF, very clearly, and especially on the ATJ pathway, where ethanol becomes a feedstock of SAF, the requirement is clearly for low- carbon ethanol. That's number one. All such applications where one wants to follow an ATJ pathway, a low- carbon ethanol is a necessary input that is required, so plants will have to decarbonize their processes. That is number one. Number two, the process of decarbonization is also a process for improving efficiencies of the existing plant. It's not only decarbonizing, it also improves the efficiency significantly. There are plants who are now talking to us because it makes economic sense for them. Forget about the low- carbon argument for the time being. They are saying it makes sense for me.
For example, one of the solutions will cut their steam consumption by up to 90%. When that kind of a thing happens, their operating costs go down and margins improve. Obviously, they also the producers who are thinking in terms of being cost efficient, improving their margins, improving the energy efficiencies, they are differently focused. Remember that lot of capacities in the United States were built at least 20 years and before that. Okay. Therefore, lot of those plants are now coming up for a refurbishment of sorts because they will need to improve. A benefit of all these would also be that they'll be able to go to a low- carbon ethanol. There are different levers that will drive that market for low- carbon ethanol.
The big lever amongst them is obviously the requirement SAF.
Okay, got it. One more question on this CBG. You highlighted about side infrastructure will take some time to pick up. Just to get within that, if look at the sugar company side, particularly from press mud opportunity to CBG, is there any, how is the feedback coming from that? Probably, they can have their own requirement for transportation requirement of, say, sugar factory and all that. Can that ecosystem work in a closed loop for sugar companies from, like, press mud to CBG and use within the their basically factories? How is that opportunity, is it practical?
Yes, Vikram. For the sugar companies, very clearly the press mud to CBG also offers a very attractive opportunity now, for on multiple counts. Also let us understand so because there's a proven commercial working model on the ground, proven on both north and south of India. Having said that, I think what is also very important is to understand that for the last two years or so, a lot of mill owners and the customers of ours were also busy setting up press mud capacities. This is also a question of prioritization at their end as to what they want to start first and then start next.
The third is that press mud-based plants have a very positive thing in their favor, that the output, which also includes fermented fertilizer, organic fertilizer, that is of a high grade. That becomes very easy for them to get an additional steam. As we move through the year, we expect that a lot of sugar companies will start thinking positively about setting up their own capacities.
Got it. Before just closing, can you share what was the grain and sugar order mix in our order inflow for this quarter, broadly?
Sorry. Is the question how much, what % of our booking was starch base? Is that the question?
Yeah, and sugar base in our, this quarter's order inflow.
Just give me a second. Okay, sugary feedstock, versus that was about 60% at the yearly basis. 60% of the capacity came on starchy feedstock and 40% on sugary feedstock.
I got it. Thank you very much, sir.
Thank you. Next question comes from the line of Lokesh Maru from Nippon India Mutual Fund. Please go ahead.
Thank you. Congratulations, sir, on excellent set of numbers and execution. My first question is on the same breakup of sugar and starchy feedstock-based orders within bioenergy for the quarter in Q4?
Sorry, what's the question, Lokesh?
The same breakup, which was there for the year, 60/40, what would that breakup be for the quarter?
It's pretty similar. I mean, nothing much to choose, fairly similar.
60 on starch and 40 on sugar. Sir, one question on this side, sugar side. Like you had highlighted last time, that India had the production of cane was at all-time high levels of 40 million metric tons, right, last year. This time it has come down by 10% or so. Are you seeing any moderation on the sugar side? At the same time, given that broken rice prices are quite contained at this point in time, is it helping you on the starchy on inquiries on the starchy feedstock, order inflows by any chance?
So-
How is it shaping up at this point in time?
Lokesh, one clear thing is that in a manner of speaking, the sugary feedstock gets restricted to few states. Whereas starchy feedstock does not have that kind of a restriction, right? It can... As I mentioned, the government is also pushing for, quote, unquote, "ethanol drought states," to starchy feedstock. All these eight states that I mentioned are starchy feedstock. There is no sugar cane there. As we start to spread the EBP 20 program reach, more and more ethanol would be required also to be served into non-sugary states, which are not the traditional producers of ethanol. We do believe that there'll be a push, or there'll be continued, higher share of business for starchy feedstock.
Having said that, I think sugar mills are also understanding their, a very, very important role that they will play in this overall program. I don't think we are going to stop at EBP 20, it's going to go, the ethanol is going to become a very important element of our overall energy mix. They could get an, a very important dimension for us to remember, we have not talked about it before, is the fact that sugar-based ethanol is low- carbon intensity ethanol, as far as India is concerned. This is a very important dimension in favor of sugary ethanol, sugary feedstock-based ethanol. We'll have to see as to how it goes.
There are many other questions to be solved. I'm sure that as we go forward, we will see a different dynamic emerge on this space. As of today, as we see it in the immediate future, yes, starchy feedstock will be higher than sugar.
Given that if, let's say the monsoons are lower than expected, the precipitation is lower than expected, in that scenario, are you expecting any policy from the government to, you know, so that these projects on starchy feedstock side as well, and both sugar as well, are not hurt from a margin point of view, if at all there is inflation, within both these commodities, agri commodities?
I have no view to give you on this as to what government should or will do, because we don't know that. We are still forecasting normal monsoon. We'll have to see how that thing develops out. I think what is very important, though, that. If should such a situation arise, I think that's when we will start to understand the value of 2G ethanol that we've been talking about for quite some time. That the eventual solution lies in our ability to use the waste feedstock. I think that by that time, of course, we'd have also, as I was mentioning earlier in our opening remarks, we would have stabilized the IOCL Panipat plant as well. I think that would be a very, very big test for us.
I mean, I say us, it's all of us, not only Praj, but all of us, who are the involved entities, to ensure that we are in a position to create a sustainable path forward. We clearly see that when, as and when as we start to move to the future, and not only for this monsoon, I'm talking in general, that there will be a definitive, play for the 2G feedstock-based, ethanol production as well, because that is the lowest carbon intensity ethanol.
Sure, sir. Understood. That's all from my side. Thank you.
Thank you. Next question comes from the line of Amish Kanani from JM Financial. Please go ahead.
Yeah. Hi, sir. Congrats on a good set of numbers. Sir, you know, as we also, previous quarter.
Can't hear you at all.
Sir, is it better?
Yes. Thank you.
Yeah, sir. Sir, our outstanding order book, you know, if you see on a year-on-year basis, has grown by 20%. Our win rate on order inflow, if you see, last five quarters, you know, it had moved, jumped from INR 700 crore, say, six quarters back to now between INR 900 crore-INR 1,050 crore. The question is, sir, what is the kind of pipeline that you're seeing, sir, which gives us some idea of, you know, the growth coming for us on a short to medium term? Long-term growth, we have been, you know, seeing a lot of technologies, you know, which gives us a comfort that there will be a growth.
On a short to medium term, on a high base, if you can give us some sense of, you know, how the growth will be by now. Thanks.
Yeah. You know, I'll tell you a little bit of a story, kind of an answer on this one. Our chairman always tells us that we have to move in terms of our mental thinking, of being a single feedstock, single product, kind of an approach, which was, you know, you put a one feedstock at one end, and you get ethanol at the other end, to a multi-feedstock, multi-product thinking. I think that is what is going to play out in future as we go. We have already started to see some signs of it, you know, CBG plants produce fertilizers. If we have ethanol plants, they produce energy. They also produce CBG, depending on how you treat.
I think there are multi-- feedstock was no longer sugary, it's also starchy, it is also cellulosic. We are beginning to see a different, dimension emerge, where multiple feedstocks in one end and multiple products at the other end. I think that's what is going to be the future. Future is not, what we've seen in the past. Future is very different than what we've seen in the past, but it's very exciting. It's very big. Therefore, we believe that we will be in a position to see a completely different, game play out. Different segments will emerge.
Coming back to the specific question that you had, we are, as I said in my opening remarks as well, for our 1G business, for our 2G business, for our CPES business, especially modularization, and for the ETCA-related business, where it is completely different landscape opening, we see a very, very healthy inquiry pipeline. We see no reason why we should be slowing down in any case.
Okay. Thanks, sir. That helps. Sir, on the margin front, you know, we have seen double-digit margin, you know, which we were always aspiring for. The question is, you know, twofold. One, if you can explain us, if possible, between, you know, what was helping a richer product mix versus, say, you know, commodity price inflation, which is, you know, slowing down. In that context, on a yearly basis, how should we look at the sales margins for FY 2024? Thanks.
Amish, as I had mentioned, we were of two halves. First half, we did not have. We still had the impact of the ever-increasing commodity prices in a volatile fashion. Second half of the year saw that moderate and cool down. I think that's been, let me not say anything, that's been a good big factor for us to be able to manage. The second is the fact that we are also in a position to move to a healthier product mix by establishing higher value. We've taken some tough decisions internally to ensure that we are able to protect our margins.
Our teams are focused. We call it a not just a growth, but healthy growth. That is how many of our efforts have been focused in that direction, both in terms of how we improve internal processes. We are not going to talk about it, but there's a big effort underway in digitalization of our operations, driving standardization for our plants. There are different levers that we are using to ensure that we are able to become not only big, but also healthy.
Okay, sir. That helps. All the best.
Thank you. Next question comes from the line of Utsav Mehta from Edelweiss AMC. Please go ahead.
Hi, sir. Good afternoon. Thank you for taking my question. I just wanted to know the amount of customer advances on our balance sheet, and what is the quantum of retention money?
Sachin, would you please? That is your territory.
Yeah, sorry. My phone was on mute. The customer advances are in the range of almost INR 700 crore.
Retention amount out of the receivable should be in the range of INR 100 crore-INR 120 crore.
Okay. Just wanted to understand, you know, year-over-year, we've seen almost an INR 300 crore increase in receivables. That's as much as our EBITDA. Is it primarily happening? I mean, couldn't be happening only because of retention. If you could just throw some color as to why such a sharp increase in receivables?
That you are looking at in the absolute number, but if you look at in terms of number of days, receivable number of days, rather, there is a reduction of almost, you can call it as a flat-ish, but from 86 days now it has reduced to 83 days. INR 1,000 crore turnover happening in the last quarter, naturally, because of the payment term, that money is supposedly to start coming in this quarter. That's the reason why you are seeing that jump in the absolute number of receivable, but in number of days terms, it is 83 days versus 86 days of the last year.
Understood. last bit on retention. If you could just throw some color on, you know, what are your typical kind of, retention clauses in your contracts?
We are actually trying to do away with retention to a great extent. Whenever there is a new contract, new customer, new territory, there might be a issue coming up on retention, but otherwise, as a policy, we are doing away with retention, and that's the reason we are seeing reduction in the number of retention over a period of time, even though the turnover is, the top line has grown to this extent as compared to the last year. Our retention absolute number has remained very, very range-bound. Generally, we try not to have a retention, but yes, if there is a clause for retention, this money is linked to mechanical completion of our project and doing the trial run, and subsequent to that, retention money coming back to us.
Okay, it's not typically six months or 12 months in terms of...
No.
Okay, understood.
No, no, no.
This is very useful. Very useful. Thank you so much for your time.
Thank you.
Thank you. Next question comes from the line of Alpita Gupta from Nivesh Mitra. Please go ahead.
Hi. Congratulations on a great set of numbers. My question was regarding volume. When we look at the order book numbers, they are, I'm sure, affected by inflation and prices, too. If you could give any clarity on what kind of volumes, maybe in terms of number of plants that were commissioned or, you know, any other way.
Alpita, the problem is with that there are six business areas. I find it very difficult to give you an equivalent unit number, which will... Just to give some idea. I'm not saying that that is the correct measure or anything like that. You can imagine we have a similar problem on our shop floor. How do I determine what capacity I have got?
Mm-hmm.
One of the things that we did was to create an equivalent unit concept.
Mm-hmm.
Where we sort of reduce everything to an in what we make, okay? That is part of what we actually deliver to our customers, in what we make. We saw on a yearly basis, doubling of our output volume from the previous year on an equivalent unit basis. I don't know whether that answer your question, because, you know, different businesses for me to go and explain to you what's the equivalent capacity.
No, that helps. doubling from previous year, that means FY 2022 versus FY 2023, right?
That is correct.
Okay.
Again, that is what we make. Again, the order mix can change, where what we make has a higher content compared to what we buy and sell. When we put up a project, there are a lot of things that we buy, 1,000 pumps and valves, instrumentation, that we just have to integrate it into our system, but we don't make them, right? There are different. Depending on the nature of the project, where are we putting it up, what's the feedstock, what's the customer level of competence? I think there are too many of variables there. You can come up and ask me, "Oh, so you double the unit, then how come your sales didn't double?
Mm-hmm.
That's not the way to look at it.
No, I understand. Yeah, yeah, fair enough. Understood. Any guidance for the next three to five years, either in terms of volume, like, you know, the common unit that you mentioned or the top line or EPS estimates, any guidance for the next three to five years?
No, we would not be able to give you a guidance of three to five years. I mean, then I will have a very different job if I could do that accurately. Having said that, I mentioned that the new investment that we are making in the GenX facility, for example, and that's just one of the things that we are doing, It will create a capacity equivalent to 30 to 40 times of the investment that we have made over a period of time.
Mm-hmm.
We'll continue to do that in our other parts as well. Where I need not do a greenfield project, but a brownfield expansion of our own capacities, and that's something that we have worked on a module where we have created some very highly dedicated vendor base for some of our technologies, for some of our offerings. It's not my own work, but it is still, they only work for me under my quality program, under my disposition, even under my material. There are different modules that we are deploying to see how we can use our capital to its best possible extent.
All right. This is the last question. Yeah, please go on.
Alpita, additionally, as a practice, we don't give a guidance.
Correct.
We talk about what are the business prospects.
Correct.
Possibilities and opportunities, but we don't give a guidance as a practice.
All right, fair enough. Just the last question from my side, pardon me for a basic question, but, you know, how do you compare ethanol blending versus the upcoming EV revolution in the Indian vehicles?
Alpita, it is something on which we're very happy to dialogue with you. Maybe you can set up a separate call.
Sure.
We have a very definitive view on why. Broadly, one line for India, or for that matter, for any agrarian economy, the right solution is a flex fuel vehicle and not EVs.
Okay.
Unless electricity comes entirely from renewable sources.
Mm-hmm.
There is absolutely no case for electric vehicle, at least not on the grounds of pollution-free, and, you know, it doesn't reduce the pollution.
Okay. The targets of EV set up by the governments will not affect, you know, our industry growth?
The point is this, that the industry is moving in direction, and I think somewhere along the line, we as consumers become more and more aware of this issue, I'm sure that there'll be. I'm not saying that there is no space for electric vehicles. Please do not read it that way.
Mm-hmm.
Probably they'll coexist along with the modern technology. Please appreciate that today we already have a huge vehicle park on the ground of nearly 100 million vehicles in India, which are based on IC engines. We can't just switch them away. They're already there. There's a whole setup in the infrastructure in the country to distribute fuel. We don't have for electricity. There are many, many things. At the same time, the enemy is not IC engine, the enemy is greenhouse gas emission, and that's the problem that we need to solve.
All right. All right, that really helps. Thanks a lot.
Thank you.
Thank you. Next question comes from the line of Aashav Patel from Molecule Ventures PMS. Please go ahead.
Sir, congratulations to the team for a robust set of numbers. Over last three years, our revenue base has shifted from close to INR 1,000 crore top line annually to INR 1,000 crore quarterly, which reflects our execution, excellent execution skills. In the meantime, margins have remained same, around 9% range. In other cap good companies, what we see is because of lean manufacturing structure, as and when the top line increases multifold, the operating leverage kicks in, and margin expansion is visible. Due to our steel, RM increase, especially the steel prices, we have not seen our margins increasing in line over last two years.
Now, as newer orders comes into the execution and, proportion of older, orders get reduced, how do you see margins going forward, say, in FY 2024 and FY 2025, assuming the steel cycle remains, steel prices consolidate around the current level?
Ashav, as Sachin said, we will not give a guidance for future numbers or anything like that. It's not the policy of the company. Obviously, the period that you described, we came through a very highly volatile and increasing-
Mm-hmm.
price trend for commodities. That is hopefully not right now in front of us. That obviously will help. It was damaging. Our product, our project life cycles are long. When we get the order to the time we actually buy the material, there's a, which we can get because we have to engineer the plant first. There are, there was a COVID period, so there are differently, what are the external adverse factors, they have all sort of went away. We expect that as we move forward, we'll be able to manage a better performance. This is something that I had said at the beginning of this year, that as we go through the year, we will see year of two halves.
First half, again, on the lower side, and you can see that from our quarterly margin numbers as well. I had mentioned that we will move to a more healthier regime in the second half of the year, and that's what we've been able to do.
Okay. Okay, sir. That's all from my side. Thank you.
Thank you.
Thank you. Next question comes from the line of Ajit Murur from Anand Rathi. Please go ahead.
Hello? Hello.
Hello, Ajit.
Yeah, hi. Can you hear me?
Yes, we can.
Okay, great. Congratulations on great set of numbers. My question is on the strategy. Are you, as Praj Industries, trying to get into actually making the biofuels versus just being the process consultants and process manufacturers, process equipment manufacturers? Is that the strategic direction?
No. Let me answer it like this: In our current businesses, our basic business model is from technology, engineering, manufacturing, production, and in some cases in India, even help customers with their operations. We call it the TEMPO model, T-E-M-P-O. That is what has driven us so far, and we have no reason to believe that anything else is required to be done for these businesses. If a new business, of course, the horizon opens up, and that has a different set of dynamics in the market, we'll have to react to that, right?
Mm-hmm.
We cannot say, "Yeah, model, market dynamics can be anything." What we have said is that in our current businesses, with our current business model, we are very confident that we'll continue to grow the way we have. However, if a new horizon opens up and that has a different set of requirements... Just like I was mentioning to you, if you'd come to my company three years ago, you would not have heard the word distributor in our company at all. That is not who we were. Now I talked about a distribution channel being set up, both in India and international markets for our solutions business, for our PHS business, because that's the need of the hour. That business model will evolve with period of time.
There is no such thing that we want to become producers of fuel, not at all. We have no plans right now to compete with our customers.
Okay, got it. I think that was it from my side. Thank you for answering the question.
Thank you.
Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to 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, feel free to write us at info@praj.net. We look forward to see you again next quarter for this interaction, and have a nice day. Thank you.
Thank you. On behalf of Praj Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.