Ladies and gentlemen, good day, and welcome to the Q2 FY 2022 earnings conference call of Praj Industries Limited. As a reminder, all participant lines will be in 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandip Bhadkamkar from Praj Industries. Thank you, and over to you, sir.
Good day, everyone. We welcome you to this conference call organized to discuss Praj Industries operating performance and financial results for Q2 and H1 FY 2022, which were announced yesterday. I have with me Mr. Shishir Joshipura, CEO and MD, and Mr. Sachin Raole, CFO and Director of Resources on this call. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to our financial performance were emailed to you. These documents along with quarterly result presentations have also been posted on our corporate website. I would like to hand over the floor to Mr. Shishir Joshipura for his opening remarks.
Thank you, Sandip. Good morning, everybody. Welcome to Praj Industries earnings call for Q2 and H1 FY 2022. All of you had the opportunity to go through our results presentation for the quarter ended 30 September 2021. I hope you and the families are all keeping safe and healthy. Let me now briefly take you all through the quarterly business highlights and industry developments. Following which Sachin will take you through the financials. Climate change crisis is real, and it's already at our doorsteps. It is an irreversible phenomenon that is happening even more rapidly than we imagined. The International Energy Agency, in its World Energy Outlook report released in early October 2021, has issued an advisory on CO2 emissions and environmental adversities. IEA has once again stressed importance of accelerating growth of clean and green energy.
With COP26 climate change summit in Glasgow just around the corner, Race to Zero campaign towards carbon neutrality as climate action has gained strong momentum. Industry and transportation sectors are identified as the top two energy consumers as well as greenhouse gas emitters. Together, they account for almost 50% of the total GHG emissions in the world. Bioeconomy facilitates sustainable climate action by using bio-based resources for production of biofuels and renewable chemicals and materials which have low intensity of GHG emissions. 1 billion vaccinations in India and increasing speed of vaccination in rest of the world are expected to revive economies. Business activities have gained strong momentum as demand cycles have started picking up with the beginning of festive season in August and September. Additionally, normal monsoons and better agri indicators continue to augur well for our economy in India.
Overall, all these are very encouraging economic developments in the country and globe, which we believe will further enhance the opportunity basket for Praj. Let me now walk you through the business updates. On our core energy bioenergy front, India's ethanol blending program is continuing to build on its momentum among a very, very favorable ecosystem development. The existing gap between demand and supply continues to drive capacity creation in the ethanol sector. With nearly 320 crore liters ethanol already contracted for by the OMCs for the ethanol blending year ending November 2021, EBP is expected to cross threshold of 10% in near term and continue its northward journey till we reach EBP20. During the quarter, nearly 118 crore liters of capacity was ordered to be built in the country.
With nearly 94 crore liters capacity is expected to use starchy feedstock, the momentum has clearly shifted in favor of starchy feedstock. These capacities are proposed to be built in non-sugar producing states, ensuring a widespread production of ethanol from next year. We are witnessing several changes in the dynamics of the domestic market. The average plant size is now up to 200 kiloliters per day. Starch-based inquiries have jumped by almost 250%. It has also resulted in significant growth in number of inquiries for greenfield projects, which are primarily based on starchy feedstocks. This quarter, we saw number of inquiries for greenfield projects up by more than 65% compared to brownfield projects. Globally, there is an increasing recognition on constructive role biofuels have to play to help combat climate change and reduce GHG emissions.
France recently announced a program to improve the energy mix in favor of ethanol. Bioethanol consumption in France is expected to rise to close to 120 crore liters this year. This is just an illustration of what future is likely to unfold. Several countries are now contemplating increased use of biofuels in their energy basket. I am delighted to share with you a very important milestone. Earlier this quarter, ethanol production capacity of plants using Praj's ethanol technology crossed a formidable 11 billion liters annually on a global basis. That translates to over 10% of global ethanol production excluding China. 1 billion vaccines and 11 billion liters of ethanol all augur well for a better tomorrow. Our bioenergy business has delivered a strong performance with a healthy order book exceeding INR 500 crores in the quarter.
We are clearly witnessing very strong momentum on capacity creation for ethanol based on starchy feedstock. We received highest number of inquiries this quarter. These inquiries are now one and a half times more than what we had received in the previous quarter, which itself was on a growth path. In the quarter, over 75% of the orders that we won are based on ethanol plants coming up with starchy feedstock. On international front, increasing awareness and focus on developing carbon-free economy across the world, coupled with a gradual return to normalcy in post-COVID era, is leading to an improving inquiry basket. I'm happy to share that we commissioned our single largest pharma grade alcohol plant, having a capacity of 50 million gallons per year in United States, just a few days ago. This plant is about 22 crore liters per year of capacity.
On the 2G front, we received a contract for supply of reactors from HPCL for the Bathinda 2G project. Execution of IOCL plant has progressed beyond 60% completion level now, and the mechanical completion is expected to be over by Q2 of current year 2022. On the international front, we completed demonstration of Celluniti technology based on softwood as a feedstock for a very important investor group in Nordic region. Further discussions are underway to develop a 2G ethanol plant based on this technology in the region. I'm happy to share that we are able to demonstrate all dimensions of technology during the trials.
While India builds the additional 1,000 crore liter per year capacity to address the ethanol requirement for the EBP 20 program by 2025, several new initiatives under contemplation with flex fuel engines, ethanol blended diesel program, etc., will further drive the capacity creation for ethanol in years to come. Our joint development program for ethanol blending in diesel with ARAI is continuing as per schedule. We also expect international capacities to be further augmented, especially in agrarian economies of South America, Europe, Africa, and parts of Southeast Asia, to meet the demands of enhanced blending mandates or even fresh mandates in some cases. Biogenic CO2 is increasingly generating high interest for some of the leading producers of ethanol, and we are now expanding our reach to serve customers globally with our solutions to capture biogenic CO2.
In another initiative, we are expanding our offerings in the performance enhancer space in ethanol and sugar sector. These consumable solutions help improve yield and quality of the end product. The rapid expansion of ethanol capacities on starchy feedstock is also creating a demand for expert O&M services and plant management services. RemoteBridge, a patented solution from Praj for remote plant performance monitoring system, is now being rolled out to serve this need. All these offerings will be on the revenue side of customers' operational spends. On the CBG front, Indian Potash Limited's plant based on RenGas technology is now commissioned and stabilized. CBG as alternative to CNG has been received very positively by the consumers, going by the favorable response. IOCL has developed a matching distribution and retailing system to reach the CBG to end consumers.
The co-products such as organic manure from the CBG plant are fetching very attractive prices which further enhance the project viability. We have already initiated research and development programs for biohydrogen, lignin-based marine fuels, and sustainable aviation fuels based on alcohol-to-jet pathway. As for engineering and PHS businesses, we are witnessing a very healthy trend in business opportunity development and expect this momentum to strengthen in the quarters ahead. On the zero liquid discharge business, we are on course with execution of the IOCL project at Dumad, Gujarat. We are witnessing a very significant and robust inquiry pipeline across key focus segments such as metals, power, refinery, and petrochemicals. We are also leveraging our prowess of microbiology and working on developing an advanced technology for treating high TDS for wastewater streams, a real unsolved problem.
On the CPES front, working with the customers focusing on clean tech and green tech is now yielding rich dividends for the business. Our ability to conceptualize, design, and build a module is opening new business opportunities for us. We have decided to operationalize a center of excellence for modularization, which will be functional in the current quarter. This will help Praj become a preferred destination for those companies for whom skid-mounted plants, as well as enable them to speedily commercialize, their technologies is of importance. We are currently executing projects for hydrogen plants for some of the leading players in the world, and we are in a pole position to build several solutions in this space under this business model.
On the brewery front, we are beginning to see early signs of recovery and expect the business to return to normalcy over the next 12-month period. Our execution of India's largest apple juice concentrate plant is progressing as per schedule and is expected to be commissioned by March 2022. On the PHS business, capacity creation across complex injectable and vaccine space in pharma is continuing at a very strong pace, and our strategy to focus on these segments in specific is really beginning to pay rich dividends for this business. On the operations side, we continue to witness rising commodity prices, longer delivery cycles, and logistic challenges. It has almost become a norm to wake up to a higher steel price announcement every day.
The quarter witnessed 15% increase in steel price and a further 10% in the last 15 days. Global steel production capacity for stainless steel is down by 20% due to supply crisis from Chinese steel millers. These developments are putting adverse pressures on margins. To mitigate these pressures, we have taken several steps such as real-time costing, advanced procurement for critical raw material, standardization of plant capacities and equipment, development of dedicated engineering vendors, to name a few. We have expanded our dedicated vendor base and have inducted over 24 vendors with work areas near to our customer sites to improve cost and delivery dynamics. Considering the growth as anticipated, we have decided to bring forward our capacity expansion plans, and we will be starting execution of same in near future.
Building on our leadership position, we are focused on converting opportunity and potential of the market to business performance while building a very healthy pipeline for future. Before I conclude, I would like to convey my heartiest wishes to you and the family on the occasion of Diwali. Wish you a very happy, prosperous, and safe new year. With this, I will now hand it over to Sachin for his comments on the financial performance.
Good day, everyone. Let me take you through the financial highlights for the quarter and half year ended September 30, 2021. The consolidated income from operations has doubled and stood at INR 532.41 crore in Q2 FY 2022 as compared to INR 260.64 crore in Q2 of FY 2021. PBT has almost tripled and stood at INR 46.77 crore in Q2 FY 2022 as compared to INR 15.67 crore in Q2 FY 2021. Similarly, profit after tax stands at, has also shown three times growth and stood at INR 33.34 crore in Q2 FY 2022 as compared to INR 11.39 crore in Q2 FY 2021. For H1 FY 2022, income from operations was INR 918.67 crore as against INR 389.79 crore in H1 FY 2021.
PBT stood at INR 76.57 crore in H1 FY 2022 as against INR 1.15 crore in H1 FY 2021. PAT of INR 55.54 crore in H1 FY 2022 as against 0.89 crore in H1 FY 2021. Export revenues accounted for 17% of Q2 FY 2022 of the total revenue. 74% is from bioenergy, 17% is from engineering, and 9% is from PHS business. The order intake during the quarter was INR 745 crore with 81% from the domestic market. Of the total order intake, 77.3% came from bioenergy, 14.6% from engineering, and balance 8.1% from the PHS business. The order backlog as of September 2021 is at 2,235 crore, comprising of 82.7% of the domestic order.
The effective tax rate for the half year FY 2022 is 27%. During this period, the company is coming under the normal tax rate. Earlier it was under MAT, so it is now paying normal tax. That's the reason this percentage is coming around 27%, and we expect it to remain in a range of 27%-28% going forward. 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.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may 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 is from the line of Bhagyesh Kagalkar from HDFC Mutual Fund. Please go ahead.
Sir, thanks for sharing the excellent inputs on the progress being made. My question is slightly futuristic. The biodiesel and the ethanol blended diesel, these are technically two different terms. Am I correct, sir?
That is correct.
This project, the ethanol blending in diesel, so far, technically, ethanol blending in petrol has been done already at 8.5%, and we are going to 20%. What are the factors that have been holding back the industry and Praj in particular from this thing, ethanol blended diesel?
Bhagyesh, ethanol blends into petrol but does not blend into diesel. That's the technical reason for us to look for solutions that can make it possible to use ethanol for blending into diesel. Now, that means that we have to create a bridge of sorts between diesel and ethanol so that these molecules can stay in a homogeneous form. When we do that, it also then has to meet the emission norms that are specified in the country. That is why we are working with ARAI, which is the premier certifying agency in the country, to define how we can go about achieving BS-VI standards, even as we create what I call as bridging elements between diesel and ethanol to be mixed into the fuel.
This is the program that is currently underway jointly between us and ARAI. Once this solution already at BS-IV it is known that we can achieve this. We have to achieve the BS-VI standards, and work is underway right now to make this happen.
This question is regarding the ethanol blending in petrol. There's a statement from the minister that, if you have to go to 27% or beyond that, BSVI norm may not be met, so some concession needs to be opted. Is the roadmap that up to 20% blending, we have no issues on BSVI, but beyond that there is some technical issue?
The issue for blending of ethanol into petrol is not connected so much to the emission norms not being met.
Mm-hmm.
It is an issue about readiness of an automotive IC engine to accept a higher blend of ethanol. As you are probably aware, technologies are already available and being used at vast commercial scale in Brazil, where all the vehicles are flex fuel vehicles, as they are called. So they can admit 100% ethanol and 100% petrol and a mixture in between. That is the technological solution that is required. After a certain percentage of blend, we were in a conference with the Brazilian industry associations, and they were informing us that they have now tested blending up to 27% of ethanol into petrol, and they have had no adverse feedback to give as far as IC engines' performances are concerned.
Beyond that, obviously the car needs to change or the vehicle needs to change, for which flex fuel vehicle policy is what is being talked about and is necessary, which will allow the engine to operate efficiently at higher percentage of ethanol.
Okay. Just one last question. The orders from the grain-based producers on ethanol are rising, so that fits in with the hypothesis that this 20% blending can be achieved only if it is uniformly done across India, not just based on Maharashtra and Uttar Pradesh sugar feedstock. Is that the way forward?
That is absolutely correct, Bhagyesh. In fact, the starchy feedstock, freeing up of starchy feedstock for ethanol production has actually now make it possible to produce ethanol across the country, and is no longer limited to sugar cane growing states. If we produce ethanol in multiple locations in India, and the starchy feedstock is possible literally to produce it on a pan-India basis, it is possible for oil companies to then receive this ethanol closer to their local depots, and therefore blending shall go up, across on a pan-India basis.
Okay. One last question on the CBG. The CBG pilot plants performance is quite positive in your view? One or two small CBG we have started.
Yes, that is correct.
Okay.
We are very positive about the performance of the plant.
Okay. Thanks a lot, sir, and all the best for Makem.
Thank you.
Thank you. Before we take the next question, a reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, you may be requested to rejoin the queue. The next question is from the line of Amish Kanani from JM Financial. Please go ahead.
Yeah. Hi, sir. Congrats on a good performance. Sir, you know, coming to the order flow, I just need a short to medium term view on this. Historically, we have, you know, seasonality of, you know, first half, you know, if I average last few years. We used to get 45% in the first half, and the second half used to be 55%. Given the need of the nation where, you know, we need to comply with the blending by 2023 and there's lots of order, should we assume the seasonality the way it was?
You think a lot of orders are getting upfronted and hence it will be risky and dangerous to assume, you know, seasonality from here to, say, next six quarter where, you know, we need to reach those high blended ratios we as a country. In that context, sir, if there are lots of order inflow, is there a way to, you know, we can get some sense of are we maintaining our market share? Because in a, you know, kind of growth rate that we are witnessing, you know, maintaining a very high, you know, market share of, say, you know, 60% or plus would be challenging.
You know, your thoughts on both seasonality versus market share in the next 4-6Q ?
Thank you, Amish. That's a fantastic question. Earlier days, if you were to look at it, Ethanol production was very limited to three states on sugary feedstock, and even there, after this, all the economically viable sugar is extracted, left molasses C, so that became the feedstock. From there, we have traveled a lot, under the National Biofuel Policy in a very constructive and positive way. The sugar feedstock itself has been freed up now to include that you can take sugarcane juice and directly convert that to ethanol and, from that onto. But that still limits the production to three states, whereas now and still on the sugary feedstock, crop. Whereas now with, freeing up of the starchy feedstock as well for, ethanol, it is now become trans-India, pan-India, if I can call it.
We are able to see and we are witnessing that now plants are coming up in very different states, especially based on starchy feedstock. It will, A, widespread it. B, the grain or the starchy feedstocks are not as seasonal in nature as sugary feedstock. There'll be some impact that we will see in the balancing out of the year. But at the end of the day, there's a significant role being played by the sugary feedstocks based plant as well. That element of seasonality will stay, because that's the way nature's course is. To that extent, we will see some seasonality built in the business.
I'd also mentioned during my opening remarks that we are seeing almost 1.5x increase in the inquiries that have come to us in the last quarter compared to the previous quarter. The momentum is still continuing. I would not call it a front-ending of the order book or anything like that. I think we expect this to be continuously built maybe even stronger than where we are today. That's the expectation that we have. From the pipeline perspective, the pipeline is stronger than it was at the beginning of the last quarter. It's even stronger at the beginning of this quarter compared to the previous quarter. I hope that answers your question.
Yes, sir. Sir, second question on the gross margin side, sir. Historically, you know, we had a decent gross margin more in the band of, you know, closer to 50% plus. Of course, with the steel inflation, you know, our gross margins are low. Sir, I understand that, you know, we will have those kind of pains to bear with in, say, next one or two quarters. So the question is, given our execution cycle, which is of 9-15 months, you know, can we build a margin scenario, you know, based on the new orders and pipeline that we're getting, and you know, the kind of demand that we have?
How soon do you think we will go back to those, you know, gross margins which are more healthy? I would put it as between, say, 40%-50%. You know, a resultant EBITDA margin which we say double digit plus.
Amish, there are multiple factors, and let me start by saying that one other factor that we have to factor in is the fact that, in the overall mix, because of very high growth rate that we are witnessing in the domestic market, in the overall mix, from a percentage perspective, the international business has gone down compared to what it traditionally used to be. That's one clear reason, for because of the sales mix or the order book mix change, that it is more in, more dominated by domestic business, which is, slightly on the lower side of margin compared to, the international business. That's one dimension.
Sure.
You were, you correctly mentioned, the rising commodity prices are a concern, and we already mentioned that, yes, that is definitely going to impact. I mean, for me to pretend that it won't matter is not correct because it does matter. As I was mentioning earlier, that we have taken several measures now to see how we can, actually combat this, situation because we don't control what happens to the prices, but we can definitely control how we respond to it.
Sure.
From that perspective, we have decided on a new way of order formulation cycle, the real-time costing model. We are looking at diversifying our resource base in terms of our vendors away from our traditional vendor base to also leverage the volumes we have. The way we buy things is changing. The whole effort on standardization and mass customization, that's something that we have been driving for a year. It's not that this has arrived on our doorstep and we don't know. We were preparing for this kind of, in any case, to become more efficient. That is going to help us now as we move forward.
Different slew of measures that we are now enacting on different aspects of project execution with an effort not only to combat and overcome this adverse rise in commodity cost but also to see how we can build even better margin in our business.
Sure. I have a few more, but I'll get back to this. Thanks, sir, and all the best.
Thank you, Amish.
Thank you. The next question is from the line of Prathamesh from Axis Securities. Please go ahead.
Yeah. Hello, sir. Congratulations for a good set of numbers. My question is regarding the EBITDA margin. Sir, now that given you have taken all the measures that are reducing the impact of raw material prices, can we assume that this 7.98% would be a worst case base scenario margin going forward, like a steady state, that bare minimum margin we can expect going forward?
Well, I would give an answer with a provision, and it's like this. Yes, you can. If all things remain in similar basis, the answer is yes. We don't know how the future will unfold, and we'll see what inflation or volatility that or availability dynamics that sort of creep in on our supply chain side. But assuming that they continue to be in the same zone, what your assumption is very correct.
Okay. The second question is regarding this increased demand of grain-based distillery. Sir, do you think this food versus fuel debate would, you know, possess any threat to this hypothesis going forward? What's your view on this?
As I was mentioning, these are starchy feedstock. A substantial part of this feedstock could also be those grains that are not fit for human consumption. We have the government has thought through this policy because we do have a situation of excessive grain production in the country, and therefore, there has to be an alternative outlet for a farmer to realize their gains from having harvested that crop, right? I think this is. If you look at it from that perspective, look at what, how much do we need as a country? What should be the safety stock that the country should maintain? What should be an emergency stock that we should maintain? Assume that there is a drought and we maintain that as well.
After all these calculations, then we are still left with surplus. Rather than allowing it to go to waste, we are happy, even if it is come to a situation where it is not fit for human consumption, it's very fit for alcohol production or ethanol production. We are very, very good with that situation. From that perspective, I don't think we need to worry about food versus fuel debate because of very simple fact that we, after providing for every possible conceivable situation and safety measure, we are still left with additional feedstock, which is now being diverted for meeting an equally important demand for the country in form of energy.
Okay. Okay, just one final question. Sir, can you just throw some light on the commercial feasibility of the second generation ethanol? Where is it up to right now?
A lot of ground has been covered since the day we actually announced the first set of projects. We have been continuously working on development of this technology, not only from the basic technology itself in terms of the CapEx and OpEx reduction, which of course is a continuous exercise, but we also focused ourselves on creating a suite of by-products or co-products, as I would call it, co-products from this technology, which enable us to actually improve the financial viability of the project. We have since then expanded to include not only agricultural residues, but also forest residues in our agreement with SECAB of Sweden under the Celluniti program, which is now co-owned between us and SECAB.
We are very clearly witnessing a progressive growth towards making it more and more commercially viable. Depending on the feedstock logistics situations, we are now in a situation that we can definitely say that the 2G technology is now progressed from a negative IRR situation to a positive IRR situation for the project. With co-product development, we are sure that it will become a reality very, very soon.
Okay. Thank you, sir. I'll get back in touch.
Thank you. The next question is from the line of Lavin Shah from ValueQuest Investment. Please go ahead.
Yeah. Thanks for the opportunity, sir, and congratulations for good set of numbers and also very healthy order inflow that we have had during the quarter. Sir, first question is on the order inflow itself. Now that, like you, spoke about in your opening remarks that the kind of inquiry level has been almost 1.5x of what we have seen in the previous quarter. Do we still maintain our guidance about progressively building on order book every quarter? Or is there a upgrade to the order inflow that we are looking out for this year?
Lavin, we are looking forward to a period which is continuously improving from where we are. That is the idea, and that's what we are working on. As I mentioned, of course, if the inquiry inflow has increased across businesses, it needs to start translating into a business opportunity as well, and we are very confident that will be the case. We are looking forward to an increasingly last six quarters and even in future we will continue to build on the pace.
Okay. Good, sir. Also on the order backlog now, if you see, one interesting thing that during this quarter we have had is the exports backlog. In terms of absolute number, that's the highest ever export backlog that we have ever had. If you can throw some light, what are the kind of orders that we have won, and what is the trend that we see now going forward in this exports order inflows?
Lavin, I think that's a great observation. The point is that we have not lost out on any international business or anything like it. It's just that the domestic business is growing at a very rapid pace. In terms of pie chart, the international pie chart looks smaller on a pie of 100. You're absolutely correct on that. I did mention that we commissioned the first project on the pharma grade alcohol, our largest in the United States. We expect that will become a big showcase for us as we move forward through the next year or so. It will help us to attract more potential customers.
We are focusing, as I mentioned earlier, on the clean tech and green tech companies looking for a solution to engineer and manufacture, and bring to life their technologies. That business of the CPES business for ours is really focused on the export side of the business. They are focusing on making that into a reality for customer and actually position themselves into a favorable spot with these companies. We are seeing that is indeed the position that we are achieving with some of them. That will augur well because all those jobs will be for the international business. Yeah.
Correct.
We have done similar focus areas with PHS, high purity business, of identifying markets where we could have a definitive play. We are looking at, as I mentioned earlier also, for the second generation ethanol, with the Celluniti application on forest residues, in Nordic region. There are several, I would call as blocks in the pipeline that would start to play out even on improving the international from here onwards. By itself it is big enough, but because the domestic it has a very high pace, we will have to, we are looking at creating levers that will grow international business also at a very high pace.
Understood. Sir, and on this, the margin pressure or the increase in the raw material prices that we have seen, which is impacting our overall profitability. Previously, what we have highlighted is that post-December, December 2020 is when up till December 2020 we had orders with like previous material prices, and post that we have started revising. Will it be safe to assume that now, in our order backlog, most of the orders would be at a revised price?
Lavin, when we began the year, we were at about INR 1,000 crore of order backlog in the year, of which INR 900 crore has already been executed. Still to go, and where there are some services there, et cetera. Still INR 500-600 crore worth of orders to still go through that cycle. But the point is this, that the commodity prices have not increased once and stabilized at that. As I was mentioning earlier, we wake up every day morning to see a new price point. Several acts that we are doing now will obviously stand us in good stead in any case.
Whenever, as and when the prices stabilize, and that's what, not even reduce, just stabilize, that they'll stop increasing this on an every day basis, we will start to see a good impact out of these actions that we are taking. As you can see, the actions that we have taken, even in worst of the circumstances, have actually meant that our bottom line is up by 1 percentage point. Yes, we can do better if the prices were stable, and we'll continue to focus our efforts on that.
Got it. Sir, just last question on the CBG front. This, the Lignity project that we were doing, first project was expected to get completed by October. Where we are? Has that project been completed, and what's the status of the balance nine projects for which we had signed an MOU?
Yeah. Lavin, the Lignity project MOU is for 10 projects, but the first project is now nearing mechanical completion, so we just have to start the process because now a new season will start, so press mud has to start flowing in from the sugar mill, et cetera. We would expect that during this quarter we'll commission the project for Lignity, and once that of course starts, then we'll start to talk to them about the future plans, because obviously they would like to experience one before they start moving on the next ones.
Yeah, just a follow-up. Sure.
But for any follow-up, may we request you to rejoin the queue, please.
Sure. Thank you.
A reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Vikram Vilasrao Suryavanshi from PhillipCapital. Please go ahead.
Yeah. Good morning, sir. Can you just give some outlook on, in terms of, licensing out and scalability of renewable products, particularly furfural or lignosulfonate and veg proteins, as well as this bio-based polymers and PHA. How do you look at licensing out opportunity and scalability of these and where we are?
Hi, Vikram. Great question. Yes, as I was mentioning, the co-products will play an increasingly important role in improving the viability of the second generation technology. We will have to see what exact route works out, because if there's a licensing route that is possible for us to actually work on, there is a possibility of co-producing facilities. We are in dialogue with some very interesting players to see under what model this co-product development on the commercial scales can take place, and we'll keep you posted as we go through the year. This is an area where very interesting work is happening right now.
Okay. Because we had some announcement on Bio-bitumen and so I thought, are we close to similar progress in PHA or other products?
Yes. No. On the PHA side, the development work is still on. On the bio-bitumen, what we have said is we have now developed a process for manufacture of bio-bitumen as one of the co-products out of the 2G lignin stream. That stays there. As well there's lignosulfonates, there is going to be other slew of products also that we are working on. As we move through it and when we are ready, we will definitely announce it. Right now, for, as I was mentioning, for the co-product that we have already developed and announced, there are interesting dialogues currently underway to see how we can commercially scale it up.
Got it. Sir, this 2G ethanol plant, particularly from biomass, how they are placed versus biomass gasification, and do we have technology and expertise in biogas gasification also? Just want to understand and clarify that thing.
Let's understand. Biogas is one way of, or, CBG as it's called in India, renewable natural gas as it's called outside, is something that is, one process through which you can take an organic mass and convert that to an end product. There's another route which is a cellulosic biomass. You take it and through another process you convert it to another end product called ethanol, right? Biogas plants by nature are small and distributed. Ethanol plants are centralized and not distributed. Plus, both of them serve very different needs. One is a liquid fuel, one is a gas fuel. One is, it produces ethanol, which can be directly mixed into a fuel, or it can be used as a building block for building further products upstream.
Therefore, we have to look at it how it produces differently in terms of the development, right? The gasification dimension that you use is slightly different because one can look at gasification of a biomass either from a perspective of converting it to CBG or create a biogas and then convert that to ethanol. That's another route that can take place. Different technologies are currently at play, and we'll have to see as to which technology finally holds ground in terms of being commercially viable, being accessible and prove itself. There is a biogas outlook, which is CBG, CNG route, RNG route. There is another one where you can gasify and then convert that gas into ethanol, so that's another route.
The gasification to ethanol is still not at commercial scale. It is being still contemplated to be put up there. We have not reached that space. You've probably heard of a company by the name LanzaTech. They are the ones actually taking it forward. There again, the gasification challenge on biomass side are still to be addressed.
Understood. Yeah. That was helpful, sir, and thank you very much.
Thank you.
Thank you. The next question is from the line of Ankit Gupta from Alchemy Capital. Please go ahead.
Hi, sir. Sir, in your PPT I am reading a remark that from October 2021, incentives to sugar industry have doubled. Can you, sir, tell me has there been a policy change this month or something?
This was based on the allocation of, or the diversion of sugar to the production of ethanol. The incentive is-
Got it.
For the diversion of the sugar for higher production of ethanol. That's what you must be talking about the recent announcement on that front. It is basically going to help more production of ethanol. That was the reason why this was incentivized.
Got it. Sir, you gave some numbers on the starchy feedstock orders in this quarter. I missed those numbers. Can you give them again?
Sir, I said that nearly 75% of capacity that got ordered out in the country this quarter was for starchy feedstock-based ethanol production.
Got it. Sir-
In crores that we have seen or being ordered out, nearly 75% is on starchy feedstock.
Got it. Sir, just primarily on the rice front, but now since the orders have been given, we must be doing the feedstocks primarily.
Sorry, could you please repeat your question?
I was saying, the raw material is rice now? Broken rice, or which are the key raw materials now?
The broken rice, maize, the feedstock that is not good for or not fit for human consumption.
Got it.
Additional feedstocks. Yeah, there are different categories, but you're right, broken rice is one of the primary materials.
Got it. Sir, last question from my end. You in the last call you'd mentioned something about Brazil also that we are in discussion for some of the orders. Has any progress been made on that front?
Yes. We do have our first order from Brazil. I should have mentioned that to you. Thank you for pointing it out. As I was mentioning to you and you're aware that in the past we have shared that we have tied up with a company called Dedini in Brazil to take our technology to the Brazilian market.
Yeah.
Owing to what I would call as a different rate of recovery or slower rate of recovery from the pandemic, Brazil market has not been very active. We do see return of activities, and we have actually signed our first deal for technology transfer, in which case it is mostly technology transfer and not too much of equipment supply for one project in Brazil based on 2G.
Okay. Thank you so much, sir.
Thank you.
Thank you. The next question is from the line of Kenil Mehta from Omkara Capital. Please go ahead. Mr. Kenil Mehta, your line is in talk.
Hello? Yeah.
Hello.
Sir, over last 4 years, the revenue run rate of Praj HiPurity Systems is approximately INR 150 crore-INR 160 crore. What are the reason why we cannot scale up the business? Why are the margins have decreased over the years from 26% to 15%?
Praj HiPurity's business, if you understand, it's a very niche catering to a specific industry called pharma industry. The offerings from ours which were there for, again, for a very specific requirement of a purity of a water and getting into majorly into formulation side. Now the scenario is changing and more bio-based pharma which is happening, fermentation or a bio-based pharma which is happening where our applications are far more applicable. That's the reason why we will be seeing a change happening in PHS now onwards, where the vaccination and the bio-based or fermentation-based pharmaceutical investment which is going up now. That's the change which is going to happen.
The margins which you are talking about, you must be talking about very old margin set numbers, which were there maybe in the period of
2017, 2018.
Yeah, yeah. Almost four years back. The margins have now come at a very different level right now considering the market scenario. Yeah.
Also, sir, I wanted to know for biodiesel, for diesel, so mixing diesel and ethanol, there should be higher burning temperature capacity. Do you think ethanol has that power to mix with diesel compared to petrol?
Kenil, first of all, ethanol blended into diesel does not make it biodiesel. Biodiesel is a very different product and ethanol blended diesel is a different product.
Okay.
As I was mentioning earlier, ethanol is not directly mixable into diesel and therefore we need a bridging element and that's the work that is going on right now, to ensure that happens. In terms of combustion, there is no problem at all because ethanol is an oxygen-releasing agent, so that actually helps the process. Having said that, what is important is to ensure that the tailpipe emissions are also in line with the regulations. The blending has already passed the BS4 test and we now need to pass the BS6 test and that's the work currently underway between Praj and ARAI.
Okay. No question from my end. Thank you.
Thank you.
Thank you.
The next question is from the line of Srinivas from Mirabilis Investment. Please go ahead.
Yeah. Hi, Shishir Joshipura. Congratulations on the quarter. The first question is, like, if I see the last three quarters, we have won orders of roughly about INR 1,600 crore in the bioenergy segment. I presume about 80-85% would be, say, 1G, which is maybe around INR 1,300 or INR 1,400 crore. One point I wanted to check was, what has been the kind of a win ratio for the projects that we have bid for. I mean, how many projects we would have bid for to get these kind of order wins?
I think what happens is that if you look at the way market moves, people would ask us for bids even when they start to contemplate a project, to see as to what is the project outlay, make the basic feasibility reports, submit to the bankers for funding, et cetera, et cetera. And I'm not talking to them. Those inquiries are many. But
Yeah.
If you look at it from the perspective saying when a serious bid has been made by us and our market share is indicative of that, so at about 60-odd% of market share, that's where we are. You can take it at 6 out of 10 is the bids that we win.
That continues to be the same as per historical trend.
Yes.
Let me also add our process of bid-no-bid is also very stringent. It is not necessary that we'll keep on bidding for every project which comes on our way. In that sense, even though the market share is 60%, the win ratio is definitely higher.
Okay.
Yes.
Here you are also counting the projects that you may not have bid for. I mean.
Absolutely.
Yeah, correct.
The market versus what you actually want.
That's right.
Yes.
Okay. Sure, sir. That's good to hear. Second question is on the engineering business. I think, couple of years back we had this change of strategy where we said we will tie up with some of these large, global engineering, contractors and win critical process equipment kind of a business from them. If you could just take us through the journey of what has happened. I understand COVID must have disrupted, but broadly, what progress have we made, over this period of time?
Sure. You know, as I was mentioning earlier, this is the business which actually focuses on select customers, actually 16 total, globally that they work with. These are the companies that are focused on bringing clean tech, green tech solutions or gas-based plants or industrial gases, very high specialty chemicals. That's the segment that this business serves. One of the key, as I mentioned in my opening remarks also, one of the key trend that we see there is customers doing two things.
One, there's a clear China plus one strategy at play right now where they are saying that they would like to have an additional source for their demands to be served out of a country other than China, which is definitely helping India as a country and us as well in turn. But more important than that is the fact that they are looking for capabilities of conceptualization, engineering and construction of skids, what we call modules. Okay. The plants on skids, and that is something that we have a unique position because we can do all of that. That is, we can conceptualize, we can engineer, we can manufacture, and we can assemble as one organization.
There are not many organizations which can do all of this in one place. There are few, not that there are none, but there are very few organizations who can do this. That is where we are creating a niche space for ourselves, because companies which are developing technologies on their own but have no wherewithal to do these next steps to actually see the commercialization of it. We are seeing some of our customers are really marquee customers in the world. They are absolutely top end of their, segments. They are number one or number two in their businesses globally. These are the customers with whom we are working to develop this business. This is something that we expect to be very, very strong as we start moving forward.
Good. If you don't mind,
Mr. Srinivas
Could you share some?
Sorry to interrupt-
All good. I'll get back.
For any follow-up. Yeah. Thank you. The next question is from the line of Manish Jain from Moneylife Advisory. Please go ahead.
Thanks for the opportunity. Yeah, just wanted to understand the business economics. If a 150 KLPD plant costs INR 130 crore, not including land, what is the minimum component of this INR 130 crore that could be your business?
Well, typically, I would say that at a minimum level, it's about one third of the investment that will flow to our technology and process plant. That's a thumb rule basis.
Okay. One third. Oh, okay. Got it. The second question is, where do you expect to see the high purity business in the future, like in the next two, three years?
As I was mentioning, and I think Sachin also mentioned, we are seeing a good traction build on the biopharma side of the business. That is where we actually have a lot of offerings to make. Even on the non-biopharma segment, we are very clearly seeing development in terms of complex injectable space where we have actually focused our offerings. We are also now making the strategy to offer and go beyond just high purity water to include fermentation and associated solutions in our offerings. We do expect that these augur well for us to actually go and produce a much larger and more comprehensive solution for pharma companies that will help this business grow further.
This is what I think, Sachin also mentioning that, it is breaking away from its traditional INR 150 crore kind of level at which it was to move up the value chain.
Okay. Thank you. That's it from my case.
Thank you. The next question is from the line of Rajamohan Vaikuntaraman, a Professional Investor. Please go ahead.
Yeah, thank you for the opportunity, and, congratulations on an excellent, set of numbers. You have indicated to strong momentum in, starchy-based, feedstock. You had also previously indicated to 2G ethanol taking more than two years to commence, serious commercial production due to the overall economics. It was heartening to note negative IRR has turned to positive. Could you marry the two and tell us, what are the major reasons on the ground are we seeing such serious cost economic improvements to drive this interest quicker than probably even you anticipated? In this context, do you think it is a realistic estimate to generate, 65% or 650 crore liters from starchy feedstock by 2025 deadline, in the additional capacity that is, going to be implemented?
Mr. Rajamohan, if I understand your question correctly, so what has happened? If you, I'm going to give slightly broadish answers, and if that does not address what you say, please feel free to ask a follow-up question.
Sure.
Globally we have seen in several markets starchy feedstock leading because they don't have sugary feedstock. They're using the United States, for example, is almost entirely based on starchy feedstock production market. There are different markets in the world which use different feedstock. India did not have a policy that permitted use of starchy feedstock for production of ethanol, and that is what has changed with the change in the ecosystem and the amendment in the policy dimensions, which has now freed up because with sugary feedstock we were limiting everything to three states. That was no longer feasible if we have to achieve higher blending levels. It'll also mean a proper
There has to be base fuel available in the country, and I think the base fuel is set to change to EBP10 now as we move forward across the country. That means we'll get wherever you buy, you'll buy EBP10. That's not the case today. Some states have higher blending, some have low, or some have even zero. So we don't get the same fuel across the country today. We do get different fuels. Starchy feedstocks are not second generation, they are first generation technology as far as we are concerned. So and very proven in international markets. We've been doing it for years together. So very proven technology from our end. That's something new for the country, but not new for us because we have built these capacities globally as well before.
We clearly see a shift, as I was mentioning, a big momentum building up because now obviously it means that. I had mentioned this in a couple of calls ago, that the fundamental structure of the industry is changing from a single feedstock, single ownership for ethanol to multi-feedstock, multi-location, multi owner kind of a structure, which is what we are witnessing, which is what we'd said that should happen and that is what exactly unfolding on the ground. Did I answer your question?
Yeah. What I was actually quite intrigued by was the negative IRR turning to positive. Was that a surprise to you or did it happen as you had anticipated?
Blood, sweat, hard work. That's what made it happen from negative to positive. We have been working at it. We have a demonstration plant set up. We are putting our resources, we are putting money, we are putting efforts, we are developing it. We are leveraging everything that we know. We are talking to customers, we are talking to supply chain partners. We are doing everything we can to actually move because we as a company strongly believe that that's where the future is. That is what is likely to happen. Europe will be the first place that will lead that because that is a real solution that cuts down CO2 emissions like nobody can, right? Almost 80%-85% reduction in CO2 emissions compared to normal energy sources.
We strongly believe that eventually the world will have to go that way and we are doing everything right now to reduce the basic CapEx and OpEx, but also improve the feasibility by developing co-products. Because I think at the end of the day, we must make sure if it is commercially viable, it'll anyway groom and pick up and have its own spot in the sun or in the mix, right? We are working on co-product development, Bio-bitumen, lignosulfonate, two examples from there. We are working on many others. We are very confident that as we move forward our effort. We are continuing this, we are not resting. We are continually engaging ourselves to improve the technology, reduce the CapEx, reduce the OpEx, create co-products and improve the feasibility of the plant. It's hard work.
We are not surprised at all.
Okay, wonderful. My second question was considering this R&D capability of yours as well as the existing ecosystem that is very promising, do you feel when the raw material prices, especially stainless steel, start to head south, do you feel there is serious potential for margin improvement which could possibly leave your 12%-13% that you attained in the last quarter far behind, in the say medium term?
Yes, Raj. If what you say happens, then we should be where you think we should be.
Okay. If I can squeeze in one final question.
Rajamohan.
Sure.
Yeah, go ahead. It's okay. Go ahead, Raj.
Okay. Yeah. On the CBG side, you have previously indicated to the entire ecosystem getting seriously off the ground in two years. What is your estimate of the annual business from this segment, say after two years? In diesel you have indicated to the work you're doing with ARAI. Do you have any timelines to share? Thank you.
On the second question first, what are the kind of timelines that we anticipate in which we should achieve the desired test? The testing cycles last for almost 12 months. Once we give a solution, it will take 12 months of testing cycles for it to come to a stage of saying, all right, now this solution, when ethanol is mixed into diesel with this kind of bridging element, it is able to meet the Euro six norms. Or sorry, BS-VI norms. That is what is likely to happen. There are we are also as we move into that space, we are also understanding that there are different standards that are prevalent right now based on the kind of engine. Stationary engines have a different emission norm.
If it is agricultural machinery, it is still an IC engine, but very different norm or no norm for that matter. There are very different norms for different kind of engines, and we are working on a comprehensive plan. If we pass the BS-VI test, then everything else is covered in any case. We are going to work. Right now we are focusing on getting this off the block. I would say 18 months kind of a timeframe is what is required for this to be achieved because 12 months is a testing time on the blending side.
Yeah. On the CBG side, what is the kind of business you estimate after two years?
On CBG side, SATAT program is obviously very ambitious, which is called for setting up of 5,000 plants. Now, that ecosystem development at what pace it happens, you know, the city gas networks, the policies to blend CBG into the city gas networks. There could be a play that could also emerge around how does the biohydrogen space develop. There are different drivers for CBG to develop, but right now we'll assume that the basic SATAT driver is what will kick in.
We should be looking at least, and I'm not saying 5,000 plants is a long journey to be undertaken, but obviously it should start out by at least if not more, 100 plants a year, and that itself is an INR 5,000 crore opportunity.
Wonderful. Thank you so much, Mr. Joshipura, for entertaining my additional question and wish you the best.
Thank you. All the best.
Thank you. The next question is from the line of Tanvi Bhandari from Hem Securities. Please go ahead.
Hello, sir. Sir, just two questions. First, would you give us any guidance in terms of your EBITDA? And also, you know, March we had seen very good numbers and obviously your execution cycle is anywhere between 9-15 months. What kind of revenue guidance would you like to throw for the coming quarters or maybe for the full year?
Tanvi, as a policy, we don't give any kind of a guidance. I can only hint, give you on the basis of the, backlog of the order book, which we are having, and we are anyway talking about how the margin is going to, span out for us over a period of, next one year. I think that should be the only possibility from us to give any kind of idea. Otherwise, as a policy, we don't give any kind of guidance.
Okay. Just one thing, as you said, your order inflows has been increasing every quarter and will be increasing every quarter. After March, you know, even in June and September quarters, we are not able to see that kind of revenue growth as we saw in March 2021. Just your outlook on that.
Yeah. Tanvi, the scenario is definitely changing. Last year naturally the story was different. Definitely for the first half, June was naturally completely different because of COVID. Traditionally, first two quarters we have seen lower revenue because of the site activities gets impacted because of the rains and all that. That's why third and fourth quarter sees higher volume on the revenue side. If you look at the order book, the buildup, the way in which it is happening, it is on a quarter-on-quarter, we must have seen in last six quarters the buildup is definitely on a higher side. That's what we said, that it is going to be on an increasing trend, the way in which it looks like the current scenario.
The revenue buildup is also supposedly to happen in a similar fashion, but completely depends if there are more site activities supposedly to be done, then the first quarter might be little lower. That possibility cannot be ruled out. Over a period of next one or two years, if you see, sequentially we are seeing only the numbers are on the upward track.
Okay. Just one last question. You know, with government's more focus on the ethanol blending program, there are more players coming in despite the fact that you have a very handsome market share. How do you see this competition creeping in?
Competition is intense, and I think that's a good sign because that actually means that the markets are very healthy, the demand is robust. The fact is that the competition is there, very much there. Our only problem is that the competition is almost coming from what I would call as unorganized sector. And therefore, it puts what I would call as very different pricing dynamics in the market, and that's where it becomes to play out a little difficult. Other than that. That's in the domestic market. In international markets, we have country-specific competition. We've been meeting them head on in every single case. You know, that's something that has actually made us better, is the way I would look at it.
It has pushed us to do better. It has pushed us to different levels of technology. I did mention this, but I just wanna take this opportunity again to share this. I did mention a number, and I do not want the significance of that number to be lost on anybody. 11 billion liters of capacity being delivered through Praj plants now globally, which is if you exclude China because we don't have figure on China, that's nearly 10% of the global capacity that we have built. We are very clear in terms of our leadership position and what needs to happen going forward.
Just one last question.
Tanvi Bhandari.
Uh, just-
Yeah, go ahead. Go ahead, Tanvi. No problem. Go ahead.
Sorry, just one last thing. You know, with the commodity prices rising up, the contracts that already are there, do we have a pass-on effect or that we could pass the increase in raw material price that is building the pressure on our margin? How do we see the raw material price? Will there be a price increase in our final products?
Tanvi, we do not have a price variation clause with our customers because that's not the trend or the established norm in the industry. Once we get an order, our costs, our prices are locked, costs can be floating, and then that's where we've been talking about that that's what is impacting. If it was so that we could pass on our, inflationary pressures to our customers, well, then, obviously we'll have a very different conversation right now. Yeah, it is a fact that this is happening and, this is a fact.
What we've done is we have also changed the way we used to approach the field, as I was mentioning earlier, without elaborating on the call, just to tell you that we do have a what I call a real-time cost model now, under which we bid, and we try to minimize the impact of the runaway commodity price increase. The problem is that, as I was mentioning earlier, you wake up every day in the morning to see a new price point for steel. That is something that is not a very easy problem to solve. I'm sure that as the prices stabilize and this runaway trend of everyday increase stops, we will be in a position to do much better than where we are today.
Okay, sir. Thank you so much.
Thank you, Tanvi.
Good luck in future.
Thank you so much.
Thank you. The next question is from the line of Himesh from Sequent Investments. Please go ahead.
Hello. Thanks for the opportunity, sir. In the opening remarks, you mentioned that we are looking for capacity expansion. Can you throw some more light on that?
Yes. As I mentioned that we are seeing a very healthy order book develop for us in both ethanol as well as our CPES business, which is based out of our Kandla factory. We are looking at actually from the perspective where we are sitting, we were thinking that maybe somewhere around 2024 March, right? 2023 March, sorry. 2023 March is when we should start looking at capacity expansion. The way the markets have responded and our technology has found acceptance and the business development speed, we believe that we will have to move to a stage of advancing our capacity buildup plan at least by one year.
That is something that we will do it during this quarter, and once we are ready with our numbers, we'll let you know, but that's something that's definitely going to happen.
Okay. There's no amount of the CapEx that you have finalized yet?
No. We will be finalizing during the quarter, and we will inform you at an appropriate time. We'll definitely be looking at investing into capacity build.
Okay. Thank you.
Because of the much, very high pace of order book inflow.
Fair enough. Thank you.
Thank you. The next question is from the line of Bharat Sheth from Quest Investment. Please go ahead.
Hi. Good afternoon. Congratulations, Shishirbhai and Sachin.
Hello, Bharatbhai. Thank you very much.
Sir, we are working on several technology apart from whatever we have announced. If you can give some color, which are the other technology we are working and what stage we are? That is one. Second, we have been hearing that all these chemical company and where we are working with them, they generate a lot of polluted sludge also, which generally people don't, I mean, touch. There are also company now which have started that they are retreading and selling as a alternate fuel. Any color on that?
Bharatbhai, in terms of technology, we continue to strongly focus on both the platforms, Bio-Mobility as well as BioPrism. Bio-Mobility is around, so we have, as you know, ethanol is a very clear solutions in all form, first generation, second generation, also, CBG. Those are the, what I would call it, surface transport solutions that are already up out there. We are also then working on developing solutions for the other modes of transport, which is the air and the sea or marine, as it is called.
Okay.
Yes. We are developing technology now on ethanol-to-jet pathway, which is where we believe that, because of unique position of ethanol in India, it could be a good solution for the Indian market if we want to move from ethanol to jet fuel production, and that's the technology that we are working on right now. We are also working at creating technology for biohydrogen, the green hydrogen. One is the electrolysis route, which everybody's putting on the plants. We believe that, there is also an alternative route that can use the other abundantly available commodity called agricultural waste or forest residues that could be used to create biohydrogen. That's another work that is underway. I was mentioning earlier about co-products development.
Too, we already mentioned, Bio-bitumen and lignosulfonate. There are some others also in the pipeline. That's all on the Bio-Mobility platform. On the BioPrism platform also, there's work going on around PHA and other bioplastics and other products that we are focusing on, which are an outcome of bio-based processes. Like bran wax, there is alginic acid. There are many of these products that also we are working on simultaneously to see as to how we can leverage what we know to create a better solution for the customer.
What stage are, I mean, all this technology and when do we really see, I mean, something, I mean, commercialization or pilot level coming up?
These are different levels of development, each of these technology. Not that they are not at all the same stage. We have a very elaborate process of what's the technological readiness level of the development we are doing, what's the commercial readiness level, and each of them are at a different stage. I won't be able to answer this on the phone, but as and when an opportunity arises, we'll be happy to share it with everybody, as to where the development is. They are all under development. They are all at a different stage, different points of curve, and I'm sure that we are progressing in the right direction and you'll hear more about it as we move forward in the future.
Simultaneously, sir, are we also evaluating, I mean, this chemical sludge which is generated and which, I mean, people don't touch, I mean, very difficult to treat, and now people have started here treating this and using as a alternate fuel?
A lot of our effort is focused on what I would call as using biological waste or organic waste and find an alternative, convert them to usable form finally. We haven't looked at toxic waste, if that's the question that you have.
Correct.
I'm expanding the definition now. The only area where we are right now really focused, and I mentioned that, is this ultra-high TDS waters which come out of some of these processes and are almost like concentrated slurries right now. These are the waters which are not easy to treat and there is no treatment. We are working on developing a microbiological solution for that which hopefully will address that demand as well.
Okay. Thank you very much and all the best, sir.
Thank you for the time.
Thank you.
Thank you. The next question is from the line of Levin Shah from ValueQuest Investment. Please go ahead.
Yeah, yeah. Just a follow-up, sir, on this. Sorry. You said that earlier we were looking at capacity expansion post March 2023, and now we are preponing it. Sir, what is the kind of expansion that we are looking at? Even with the current capacity, what is the kind of turnover that we can do?
If I look at it, Lavin, you remember I had said that last year, last quarter was a test for us, that can we deliver that out of our system, and we could do that, and we could easily see that we are able to align ourselves to that kind of a volume. If you take last year's quarter and multiply, it's about INR 2,200 crores. We are now at a stage that we have proven that that was not a, you know, this quarter also has gone up to 500+. As we move forward, it'll probably go even higher, as we move through the quarters. We are...
Now we are. We have a fairly good what I would call understanding of the speed at which our order book is developing, the speed at which we can execute and the capacities not only around creating factories, but it's also about engineering capabilities, our supply chain capabilities. We are taking a holistic view and seeing how, through which levers, and there are different levers for different capacities, we can actually build our capacity up. One of them would be manufacturing capabilities. It's not the only thing. We have to look at our whole value chain and then decide what elements play out where.
Right. Sir, and with the existing capacity, what kind of turnover can we do?
We actually cannot put a number in terms of turnover per se, but we believe that it should be able to take care of, to a great extent, our current order book. The capacity expansion which we are talking about is basically to balance what should be outsourced and what should be manufactured in-house. That's the reason that rebalancing which we are looking at, and from that point of view, and of course, looking at the inflow of orders, we decided that we need to prepone the decision of this capacity expansion. The capacity expansion plan, it is actually at the planning stage, and we decide the proportion between outsourcing and actual capacity expansion, and that's the reason we will not be able to put a right number right now.
Maybe in the next call, we will be in a better position to let you know about it.
Sure. Thanks. Sir, just lastly, like you spoke about the kind of inquiries that we are seeing from starchy-based feedstock and overall the trend moving towards starchy-based feedstock. Sir, if you can just throw some light about which are the kind of players or the industries who are putting up these plants. Are these the same sugar companies that are investing or is there some new investors that you're finding over here in the starchy feedstock basis or no?
Well, the answer is a mixed bag, Lavin, because we are seeing even sugar companies putting up dual fuel route plant which will have sugar and starchy feedstock. We are seeing infrastructure companies coming forward and putting up only starch-based feedstock plant. We are seeing some development funds trying to put it. We are seeing some people who are in what I would call as commodity production industries. They are also wanting to come forward and put a plant here. It's a mixed bag. What is definite is that it's no longer only sugar mills who are putting up a plant. There are different slew of investors who are coming. There are companies which are solar development companies who develop solar parks. Okay? Those who are focused on renewable energy development.
We are seeing a whole array of very new kind of investors coming forward and putting up their own capacities because one thing is for sure, this is a very definitive solution for combating the climate change and reducing GHG emissions.
Okay, understood. Thank you, sir.
Thank you, Lavin.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.
Thanks to everyone for your time today. If you have any further questions, feel free to write us at inquire@praj.net. With this, we conclude the call today. Wish you a very happy Diwali and prosperous New Year.
Thank you. Ladies and gentlemen, on behalf of Praj Industries Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.