Ladies and gentlemen, good day and welcome to the Praj Industries Limited's Q2 and H1 FY 2026 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star, then Zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.
Good afternoon, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the investor relations of Praj Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the second quarter and half-year ended 2026. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risk and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the 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 conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now, let me introduce you to the management participating with us in today's earnings call and give it over to them for opening remarks. We have with us Mr. Ashish Gaikwad, Managing Director, and Mr. Sachin Raole, Chief Financial Officer and Director of Resources. Without any delay, I now request Mr. Sachin Raole to begin with his opening remarks. Thank you, and over to you, sir.
Thank you. Good day, everybody. I welcome you to Praj Industries' Earnings Call for Quarter Two and First Half of FY 26. Just all of you had an opportunity to go through our results for the quarter and the half-year ended on 30th September 2025. Our financial results in quarter two FY26 reflect our unwavering focus on execution, which enabled us to deliver these results despite continued challenges in the external business environment. There are headwinds, particularly in the domestic ethanol segment and in the international market due to the U.S. tariff scenario. I will now share updates on each business segment. On the domestic bioenergy business front, as you know, India has achieved its EBP 20 target. With the current ethanol production capacity in the country now meeting the EBP 20 requirements, the industry needs new avenues for further growth. Additionally, there are some negative news around ethanol blending.
However, the key stakeholders in the ethanol ecosystem, like MoPNG, ARAI, SIAM, auto OEMs, and oil marketing companies, have already come forward and clarified the points that were raised in the public domain. While there are some early signs of slowdown in the ethanol greenfield projects, we are shifting our focus on the lifecycle services and the brownfield opportunities for the installed base. These include plant enhancements, efficiency improvements, and also other co-product additions in the existing plants. On the execution front, existing project execution cycles are getting extended due to funding and some other challenges. On the international bioenergy front, there is a good pipeline of inquiries from the U.S.A. for low-carbon ethanol projects. These will benefit from the 45Z tax credits. Currently, we are executing our first low-carbon ethanol project in the U.S.A., which is expected to get commissioned by the end of this fiscal.
In Latin America, there are positive policy developments in Panama and Argentina for blending mandates. Apart from America, Indonesia has announced mandates of 10%. Vietnam plans to transit to E20 by 2026. Many countries from the Africa region also are keen to either introduce the blending mandates or increase the current mandates. On the CBG front, compressed biogas, we have started executing our first napier grass-based project. There is a healthy buildup of inquiries of pipeline based on napier grass as well as fresh muck. However, the overall market will further pick up once the national grid for gas and its connectivity improves. In our services business, there is healthy order booking for performance enhancers and the solutions around it, as well as biogenic CO2 capture solutions. On the SAF front, our Alcohol-to-Jet demo plant at Praj Matrix is now operational and has successfully produced SAF from ethanol.
This SAF demo plant is the first integrated Alcohol-to-Jet fuel plant in the world. This also is the first-of-its-kind SAF demo plant that will boost the customer's confidence in both the SAF technology and the commercial-scale investment decisions. Moving on to the engineering businesses. On the GenX front, energy transition-related projects that were announced in the past are either stalled or currently on hold. We were pursuing these projects very actively. Based on our current analysis, it will take some more time to assess the future of these projects. We have taken some definitive steps now to pivot our strategy by targeting varied customer base across different industries and markets. We are focusing on opportunities in oil and gas, piping, structure, and conventional oil and gas markets. Our brewery business is witnessing some revival in the greenfield markets based on growing demand.
On the PHS front, there is good traction for solutions for segments of high-capacity fermenters, complex injectables, and blood plasma. New opportunities are emerging from sectors like storage batteries, EVs, solar cells, and semiconductors in the high-purity water segment. Overall, despite the challenging business environment, we will continue to focus on controllable factors to deliver good performance in the second half of FY 2026. I would like to reiterate that we are committed to delivering a long-term growth vision. With this, I conclude my initial remarks, and I would like to thank you all for joining us on this call. We will now be ready to discuss any questions, comments, or suggestions that you may have. Thank you. Prior to that, I would like to hand it over to our CFO, Mr. Sachin Raole, for financial updates.
Thank you, Ashish. Good day, everyone. Let me take you through the financial highlights for the quarter and half-year ended September 30, 2025. We consolidated income from operations INR 28.42 billion in quarter two of FY26 as compared to INR 8.16 billion in Q2 of last year. PBT is INR 296.1 million as compared to INR 744.4 million of Q2 of FY 25. Similarly, profit after tax is INR 192.8 million in Q2 of FY 26 as compared to INR 538 million in Q2 of FY 25. The changes in the material cost as compared to the corresponding quarter of last year are lower on account of sales mix. Other expenses as compared to the corresponding quarter of last year are higher because of increased execution activity, as Ashish has just mentioned. Under-absorption of fixed cost at GenX has also contributed to some extent in the lower EBITDA for this quarter.
For H1 FY 2026, income from operation was INR 14.8 billion as against INR 15.15 billion in H1 of FY 2025. Profit before exceptional items was INR 392 million as against INR 1.53 billion in H1 of FY 2025. That was INR 246 million in H1 FY 2026 as against INR 1.38 billion in H1 FY2025. Effective tax rate in consolidated financials is 35% for Q2 of FY 2026 and 37% for H1 of FY 2026 because the deferred tax asset, which we are creating on the losses of Praj GenX, is at lower weight as compared to the tax rate of Praj Industries. Export revenue accounted for 46% of Q2 in FY 2026, and of the total revenue, 64% is from bioenergy, 26% is from engineering business, and 10% is from PHS business. The order intake during the quarter was INR 8.1 billion, with 73% from the domestic market.
Of the total order intake, 71% came from bioenergy, 16% from engineering, and balance 13% from PHS business. The order backlog as of September 30th, 2025 is at INR 44.2 billion, comprising 65% of domestic orders. Cash in hand as of September 30th is at INR 4.37 billion. I now conclude my remarks, and I would like to thank you all for joining us on this call. We would be happy to discuss any questions, comments, or suggestions you may have.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press Star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and 2. Participants are requested to use handsets while asking a question. A reminder to all the participants of this conference. In order for the management to be able to take all of your questions, please limit your questions to two per participant. Our first question comes from the line of Amit Anwani from PL Capital. Please go ahead.
Sir, thank you so much for the opportunity. First question, as you did also highlight in your remarks, the challenges pertaining to GenX. One thing we would like to understand: how much was the fixed cost absorption in H1 and Q2? Earlier, with the plan that we can achieve INR 1500 crore kind of revenue with the current CapEx, which we have done in GenX, what is the thought? Any change there? Also, update on the U.S. client inspections. Are we now not at all considering, or have they completely stalled the projects, which is leading us to look for other industries, as you highlighted, especially oil and gas? Will this change the margins for you since you are now moving the needle to at least compensate for what was expected and is not happening? More color on this front.
The first question, Amit, was related to the fixed cost. The fixed cost which we are incurring in the GenX facility is in and around INR 8.5-9 crores per month. During this quarter, there was some absorption, but not the full absorption, naturally, because the execution, which is right now happening, is at a minuscule scale because order booking itself is at a minuscule scale over there. Your second question was related to whether we are pursuing any new orders in the U.S. market or not. Of course, we are pursuing. It is not that the market is completely given up. We are figuring out ways and means of catering to that market irrespective of whatever is the scenario on the tariff.
We are, of course, dealing with a few of our customers based out of the U.S., not only in the GenX business but also in the bioenergy business. It is not that the U.S . is completely dried out and no business is expected at all from the U.S. It will still remain one of the important markets for us to pursue. Definitely, we will be pursuing that market going forward too. Your third question was related to INR 1,500 crore turnover. When are we going to get into that kind of a zone from the capacity utilization point of view? As Ashish was explaining to you in the initial remarks from his side, we are reorienting our strategy.
First, we believed when we started this facility that the opportunity across the globe, not only from the U.S. but also from the European market, is going to come majorly from the energy transition as compared to from the fossil fuel or from the traditional energy segment. Over a period of time, we realized that it is not only going to be or other; there will be less reliance on that segment, but a higher reliance is going to be still on the traditional energy or other segments. As Ashish was mentioning in his remarks, we are reorienting our strategy to bring those customers which anyway we were catering to in the earlier avatar of ours in the CPES business from Praj Industries. The focus was not there. We are getting those customers also into our focus and changing.
Or bringing those customers also into our fold. Naturally, this change is taking some time because the facility is new. Initially, when the facility inspections and the audits were happening, our first preference, because as I mentioned earlier, was on the ETCA segment. Naturally, the first set of audits happened from that industry segment and not from the other industry segment, which is right now happening. This changeover will take some time, and the achievement of this peak capacity will take maybe some more time. The plan, the way in which we are looking at, got completely shifted by almost one year. We were expecting something to happen by next year from achieving this kind of a capacity utilization. Maybe we will have to wait for one more year. Instead of FY 2027, we will see this full capacity utilization happening in FY 2028.
All right, sir. Sir, on collections, I think in Q1 also, you did highlight some challenges there. What is leading to these challenges? Is it more sustained for the current execution which is happening? Can you explain more? This is second quarter back to back, you highlighted that the challenges with the collections which are happening. Some more color as to is it medium term, long term, or are we going to solve it immediately? Something like that.
Yeah. Amit, we were referring to the challenges regarding the customers' funding arrangement for executing the projects. That projects are not in a position to reach their financial closure the way in which it used to happen maybe a couple of years back. It is taking more time because the scrutiny has gone up. The equity asked from the project owners has gone up. They are taking more time in bringing their equity. Naturally, the debt component is getting a little delayed in arranging. That is what is putting pressure on the execution cycle for our projects. We were not talking about our collection as having some kind of a challenge. We were talking about funding arrangement for our projects is taking some time. That challenge continued during this quarter also.
As you're asking a question whether it will continue going forward also, maybe it will continue for some more time. During this quarter, we have seen some of the projects which were not moving because of non-arrangement of funding. A couple of projects have actually reached financial closure, and those projects are coming to execution during this quarter. That's what we were saying, that our focus on execution has resulted in performance which we have delivered during this quarter.
Lastly, sir, on the inflow. For H1, it is about INR 1,600 versus INR 1,800. Given the challenges which you highlighted, whether it is GenX, EBP 20, ZLD, how should one think of the next 12 months of inflow? Medium term and near term, what would be the contributors? Are we going to see, obviously, this year is challenging, at least some double-digit growth in inflows next year? Again, are we going to come back next year? Some color on the near to medium term inflows, and from where are we expecting the contribution there?
Sure, Amit. Like we said, the recovery is going to be there, but it's going to be slow. Therefore, the discussion we had on pivoting for GenX definitely is one of our actions that should result into a peak in the next financial year, the question that you are asking. Also, bear in mind that Praj also has a very diversified portfolio, which helps us in such situations. We have the portfolio for industrial effluent treatment and zero liquid discharge. That is certainly a market in India. We also have the pharma portfolio. We are active in the ultra-pure water market. The brewery is also showing signs of growth. All of this portfolio that we have in Praj is going to help us in that recovery path for the next year.
Any guidance for the likes to give for FY 2026 revenue growth and EBITDA margin? Thank you.
Unfortunately, we do not give any guidance. That is the policy which we have, that we do not give any guidance.
Thank you for answering, sir. All the best.
Thank you, Amit. Thank you.
Thank you. A quick reminder to the participants. Please limit your questions to two per participant and rejoin the question queue if you have follow-up questions. The next question comes from the line of Sajal Kapoor from Substack . Please go ahead.
Yeah, thank you for the opportunity. First question is on the PHS, high-purity segment, that is. We were aiming for, we're still targeting the high-end production. Capability industries, things like lithium-ion battery production, semiconductor manufacturers. What are the primary technical hurdles encountered to meet these very stringent standards? I mean, what's the current status of the expectations, the discussions purely around lithium-ion battery production and semiconductors?
Thanks, Sajal, for your question. The first point that you mentioned is on the high-capacity fermenters or some specialized manufacturing in the pharma. We actually do not have any challenges there. We have the technology. We have the wherewithal to manufacture these specialized fermenters. In fact, our pipeline for that segment is really in a healthy situation right now. As far as some of the new segments for the ultra-pure water which are opening up, and I mentioned a few earlier, it will be in the area of semiconductors, solar panel manufacturing, and also in the battery manufacturing. There, the market is just developing. It is a new market for India because these industries have not been prevalent in India. As you know, we have already got a strong presence in the pharma market, which also needs ultra-pure water for injectables.
The technology is very similar but has a different scale. We will be working on scaling it up. It's not a challenge, but it's an opportunity for us to leverage our expertise in that area. I hope that answers your question.
No, that's helpful. There are many elements within Praj. Praj Matrix is a collection of many things other than bioenergy. I know the largest cash flow contribution is still coming from 2G ethanol and bioenergy, but we have spoken about, in our annual reports, the bio-bitumen opportunity with or without CBG. We have also spoken about how different our ZLD technology is. One question specifically on our ZLD technology because there is competition. I mean, there is Triveni. There are many players in this segment. How does Praj's modular skid-based ZLD technology create competitive advantage in winning industrial contracts, especially for clients with stringent timelines and limited installation space? What differentiates Praj's solution on critical metrics, things like energy efficiency and water recovery rates, from competitors in this increasingly important market, the ZLD?
Yeah. Sajal, I think you had initially asked about the Praj Matrix. I'll throw some light on that for everybody's benefit, and then we will come to the ZLD technology as well. First of all, as you know, Praj is a technology-driven, technology innovation-driven company. We keep innovating and bringing new products in the field of industrial biotechnology. Mostly, the focus is on the biofuels, advanced biofuels included, and also the biomaterials. This forms what we call as our Praj's bioverse or the universe where we produce things from the biological sources and therefore try to help in the actions around climate change. To do that, we need a very vibrant and very effective R&D setup. That is what is Praj Matrix for us.
We leverage that for not only the existing technologies and enhancing them, but also introducing the new ones in the future. We call it the seed planting. When we sow the seeds of these new technologies, they become saplings in a few years' time and then become a full-fledged tree where we can reap the fruits. That is the whole model that we follow as far as Praj is concerned. Coming back to the specific technology that you touched upon, which is ZLD. Of course, there is competition. Competition is not bad at all. That keeps everybody on their toes. We have a very special focus on specific industrial waste treatment in metals, minerals, and mining. We also have done the country's largest project in Indian Oil in a place called Panipat, which is already operational. The specialty that.
Praj brings to the market is the project execution capability. We have a very strong project execution capability track record. We can not only just execute the project, but afterwards, when the plant is installed, we can provide the operations and maintenance services which are required by the customer because these are special operations. When we bring this entire package to the market, there is a strong presence and therefore preference that Praj can generate.
That's very helpful. Thank you so much for all your responses. Thank you.
Thank you.
Thank you. Our next question comes from the line of Amitod Singh from 361 Capital. Please go ahead.
Hi, sir. Thank you for taking my question. My first question was on the engineering segment as I can see.
Amitod, sir, sorry to interrupt. Could you please speak a bit louder?
Hello.
Am I audible now?
Please go ahead.
Yeah. Thank you. My first question was on the engineering segment. Like we can see in this quarter, the order intake has been higher year-on-year as well as quarter-on-quarter. Was this a result of Praj GenX facility taking in more orders as we are pivoting towards conventional industries?
Yeah, that's right. In engineering, the shift we have seen is that the reduced orders are coming up on the mainly critical equipment side. That was also a part of our orientation because the earlier orders used to come into another manufacturing facility, and now we are shifting into the new one. During this shifting, some orders which we had not taken on our earlier facility, that is what the change is which we are seeing in the shift in the engineering orders happening in this quarter.
Okay. Got it. Thank you. My next question was on the U.S. order that we took, $30 million MBR order. Can you tell what is Praj's volunteer of this order and under which segment will this be recorded? I'm assuming it will be recorded in the GenX facility.
Okay. This order is mainly from the bioenergy segment for providing technological solutions from our side. I will not be in a position because of our confidentiality with our customers, to give a specific order value for this, even though they have declared the full value of this project. We have a sizable role to play in that because we are providing not only technology but the critical equipment which are required for that technology. Unfortunately, I will not be able to give a specific number to this because of the confidentiality.
Got it, sir. Thank you. That's all my questions. Thank you.
Thank you very much.
Thank you. Our next question comes from the line of Sani Vishe from Access Securities. Please go ahead.
Yes. Thanks for taking my question. I want to, I mean, this is kind of a follow-up on what Amit asked. In terms of the GenX alternate avenues that we are looking for, is there any visibility for the next two quarters, anything concrete development in the other areas that we are looking at?
Okay. This visibility is on the basis of the number of audits and the agreements which we are right now entering into with our customers, which are completely coming from a different segment than the earlier segment which we are trying to cater to. In the earlier segment, we had almost completed more than 10 audits. The framework agreements were also ranging from three to four kind of a number for my earlier segment. Now in the new segment, we have almost completed four audits in the new facility for our customers. That is the indication this is like a first step to get into the order booking to happen, which we believe that we should start seeing that kind of visibility coming from quarter three and quarter four.
Okay. Fair. Finally, sir, given that there have been some delays in terms of growth that we had expected for 2026 and 2027, do you think we may have to revisit our vision 2030 or at some point maybe delay it by some extended timeline?
Yeah, of course, we will have to revisit the path, but I don't think our vision has changed. Just to make sure that it is clear, we are absolutely steadfast on the path as far as our new and diversified product portfolio is concerned. We will continue to therefore work on the new emerging areas like SAF sphere, the bioplastics, the bio-bitumen that was mentioned earlier. We, of course, also are developing our compressed biogas market with different feeds. There is a whole host of different activities that will help us. Also, not to mention that the blending possibilities in the petrol are already underway, but there is a larger opportunity for blending in diesel, and the alcohol blending in diesel is another opportunity that will happen over that horizon we are talking about. There is a lot to expect in the time to come.
That's what I would like to share with you.
It's still doable is what you mean?
Yes. We are extremely excited about it.
Okay. Thank you. Thank you, sir.
To the management, there is a slight disturbance in your line. Please give me a moment while I reconnect you to the conference. Ladies and gentlemen, thank you for your patience. We have the management back with us. We will continue with the question and answer session. Our next question comes from the line of Atul Tiwari from JP Morgan. Please go ahead.
Yeah, sir. My question is on the possibility of enhanced mandate for blending of bioethanol. So any color on where we are in that process. Both for the petroleum products and diesel?
Yeah, maybe I'll take a shot at it, Atul. Thanks for the question. First of all, let's establish that while I briefly mentioned about some of the negative sentiments in the market, all the key agencies, government agencies included, have come up very strongly with facts and figures and provided the rebuttal for all those points raised in the public media. Therefore, ethanol for us is certainly a good fuel to have for the country. It helps farmers. It helps in becoming more energy self-reliant. It helps in bringing down our foreign exchange spend. It helps in reducing pollution. It also therefore helps in making a pathway for other high-value fuels like aviation turbine fuel when you convert it into SAF. We remain quite optimistic about the medium to long-term outlook of ethanol getting due attention in the time to come. We don't have any insights about the.
Blending mandates to go from the current levels of 20% to higher in the immediate future. We do not know about it if it is happening. In the medium to long term, if we have to share our thoughts, we are absolutely very confident that we will have that.
Okay. Sir, any update on, I think, the technical trials are on for blending in diesel? Any update on that?
Yes. The diesel blending is going to be a little different than the petrol blending. The component that needs to go in there is isobutanol, not ethanol. Praj has the technology to produce isobutanol at scale. The trials are currently being planned along with the oil marketing companies and other relevant agencies who are experts in this area, like ARAI. Praj is a pretty strong participant in all this set of actions which is going on as we speak. Once those results are looked at, validated, it can open up the opportunities for diesel blending as well. Also, as you know, the diesel consumption in the country is at least two and a half times to three times more because of the transport sector usage. That opportunity can be larger than the EBP-20.
Sir, just some color on this isobutanol technology. The feed stock is the same as ethanol, right?
Yes. The feedstock is the same for making isobutanol as well.
Okay. Thank you.
Thanks.
Thank you. Our next question comes from the line of Shiv kumar Prajapati from Ambit Investment Advisors. Please go ahead. Mr. Shiv kumar Prajapati, are you with us?
Yeah. Hi, sir. Am I audible?
Yes, you are audible, sir. Please go ahead.
Yes, sir. Thanks for the question. My first question is on the other expenses part. I believe including the losses from GenX as well, but still the other expenses are quite high for the quarter. Can you explain why?
If you look at our project execution, there are two components. One is the equipment manufactured by us and the procured goods as well, which forms a part of our supply, which sits into my material costs. When I execute the activity on the sites or the execution, even if it is happening at my end, all those expenses sit into my other expenses. If you see the difference, this time is on the material cost, which has come down as compared to last year because the material cost component or the material-related activity was less.
The labor activity that is on the convergence side or on the site side, the activity was on the higher side. That is why my other expenses are on the higher side.
Got it. Got it, sir.
Sir, our gross profit margins have been significantly improved for the last five to six quarters. We even touched more than 50% as well. What has changed for us?
Okay. If you are comparing with maybe a couple of years back when the material cost was definitely on a higher side, which has come down to some extent, it is now on a very steady state basis kind of a thing. One quarter on a quarter, you will keep on seeing these changes because of the sales mix also, because the moment I am having more export sales coming up or more engineering orders.
Engineering in the sense the services order if I'm executing, which doesn't have a material cost component. Naturally, it looks like that gross margin has suddenly gone up. The moment there is a higher component of equipment and material cost goes up. Generally, that's the reason why we keep on saying that look at the composite cost of other expenses and material cost to arrive at the realistic margins for us because these activities keep on changing. Depending on the accounting standards, we have to keep on accounting those costs into material or other expenses.
Understood, sir. Sir, this order that we got from the U.S., around $30 million. Is this the order that you highlighted four to five quarters before that 20 plants need to be converted to a lower carbon ethanol kind of thing?
Is it related to that, or is this a different one?
No. It is exactly the one which we had earlier mentioned that we are working on, this low carbon requirement of the U.S. market. We are working on that order. There are multiple inquiries on which we are working. This was the first order which we backed. This order, by the way, is not $30 million. $30 million is the overall cost which my customer is going to incur. Someone was already asking a question, what is our proportion? Unfortunately, I cannot guarantee you a proportion of that. Yes, this order is related to low carbon. Even in the opening remark, we had mentioned that we are actually executing. This is in an advanced stage, the execution of this order which is going on.
Understood.
Is this the first order that was brought into the market and we won it, or is it?
Mr. Prajapati, I will please request you to rejoin the question queue for follow-ups as there are other participants waiting in the queue.
Sure, sure. Thank you.
I will just close this question in any case. Yeah, this is the first order which we are executing. This is going to be a first commercial demonstration in the U.S. market of this kind of an order, which is meant for low carbon. Naturally, it will set a trend for that market. As I mentioned earlier, we are entertaining many more inquiries in that market for this kind of a segment.
All right. Thank you for answering.
Thank you. Our next question comes from the line of Vikram Suryavanshi from Philip Capital. Please go ahead.
Yeah. Good afternoon, sir. I think most questions answered. Just on the shipping side, was there any correct adjustment in this quarter because earlier we used to report it separately?
Yeah. Good catch, Vikram. When we were discussing with the auditors, auditors specifically mentioned that you are not supposed to, or you are not. As per the standard, you are not supposed to make a mention of that line item, which will only come up at the year-end. That is the reason why this line item has not come in the published accounts. Just for the information, this quarter we were having a profit of almost INR 30 million or something on account of fluctuation of foreign exchange.
Understood. Was there any order booking from CBG side during this quarter? You highlighted the traction particularly in APR graph and PRISM model, but in near-term, what kind of ordering or specifically this quarter, how was the scenario?
Vikram, of course, we just do not give a specific number for this segment. Yes, we do have a CBG order, but it is not for Greenfield. We are working on some kind of a capacity enhancement for the existing plant, and that order is sitting in our order book right now.
Okay. Understood. Thank you, sir, and all the best.
Thank you, Vikram.
Thank you very much. Our next question is from the line of Aditya Mungia from Kotak Securities. Please go ahead.
Yeah. Good afternoon, everyone, and thank you for the opportunity. The first question I had was more on the difference in margin movement in standalone and consolidated numbers. Just to put a context to this, your standalone profitability has improved quite appreciably on a QoQ basis as the execution has grown about 30-odd percent. While your consolidated profitability has only shown a small improvement on a QoQ basis. In spite of a similar kind of, obviously, overall uptake in execution. I'm a bit confused as to why this sharp uptake in execution is not impacting consolidated margins beyond the 100 basis points improvement that has been reported on a QoQ basis.
The change you are talking about, June quarter versus September, or September versus September?
This is September versus June. Okay. The premise was that your subsidiaries, obviously, the issues of under-utilization aside, which is impacting both quarters, your subsidiaries or your overseas business has typically better margins. One would have anticipated better traction in consolidated margins on a QoQ basis. That's not happened.
Yeah. So, point noted, Aditya, but if you look at, there is basically one main reason as compared to June quarter. The September quarter, we are having more execution activity. That execution activity was having naturally more cost, which is sitting in my other expenses. That was not the scenario in June quarter. June quarter, the activity was on a lower end, but of course, the margin looked lower because the activity itself was on the lower side. Top line was also lower. The change has not been reflected because of that on the standalone basis. On a consolidated basis, the change is happening because of the subsidiary company's losses. Naturally, between June and September is also there, which has impacted my change in the margin between standalone and consolidated.
Sure. Maybe we can take it offline, but it seems that standalone is reacting fine on margins. That's a concern, which is not.
Sure. Definitely, Aditya.
I'll go on to the second question. I just wanted to get a sense from you as to how much of your business today, let's say, of the INR 8.1 billion of inflows that you have gotten or INR 16 billion for the first half, how much were linked to bioethanol projects? And how to think through them over the next six months or so?
Sorry, your voice was a little low, but if I have understood your question, you are saying that in the order intake of INR 8.1 billion of this quarter, how much is from the bioenergy?
How much is from domestic bioethanol or ethanol projects?
Okay. The split is definitely not there, but we have a sizable intake also from the domestic market in the bioenergy segment. It is not only international. Of course, international is there, but domestic orders are also there.
Yeah. Could you give us a sense of how much? See, if CBG target were not to be revised.
Sure. We will send that number out separately because right now I'm not having immediately on my hand, but we can definitely let you know that.
Maybe lastly, anything that you would want to highlight on the comment made on the pipeline being strong in biogas-based plants, but still it may take time for us to benefit. Maybe the allied question, anything that is happening on the bioplastics side that you would want to highlight as an opportunity for this fiscal?
Okay. I'll take the bioplastics question first. Aditya. Of course, this is a new technology, and we have developed it in-house for India. We are talking to both some of the domestic India customers and some of the international customers. There is no firm project that we have booked yet, and our business development efforts are ongoing in the bioplastics area. What was your first question? Sorry, I forgot.
I was just trying to kind of, whether we should. See, our thought process was that biogas could be an area wherein recovery would happen pretty soon in terms of orders.
Can you be a little louder, Aditya, because your voice is very low?
Okay. Okay. I'll try to be louder. Essentially, the context is that this is linked to the biogas opportunity or CBG opportunity. The more we see through Reliance's annual report and how they talk about things, it seems that the sector is going to see a lot of activity. You say so in your pipeline as well as it being seen traction. Should it translate into sizable orders in this year, this coupled with the OMC JV that we have, or will the wait extend into fiscal 2027? What are the impromptu results over here that we need to kind of consider?
Now we got your question, Aditya. Yes, we are also quite optimistic about the CBG segment of our business. In fact, we are one of the few companies who have successful installations running at capacity for compressed biogas for different types of feed. We believe that as the gas economy of India develops, gas generation will steadily increase within the country, and CBG will play a major role in that. Of course, what it needs is for gas to be distributed properly, it needs a good pipeline infrastructure, the national grid for gas, which connects with both the industrial as well as the city gas distribution network. It is happening as we speak right now. As more and more segments get connected and there is an evacuation that happens from the plants, more and more demand and supply will get connected.
This is a steady progress. To make the long story short, CBG is an important area for us to focus in the future.
Aditya, just to answer your question related to domestic orders, which are almost in a range of INR 300 crore out of the total order book which we had clocked in this quarter.
Can these completely dry up in the second half? If so, are there mitigating measures?
Not necessarily because. What Ashish was explaining about how we are focusing on different elements and segments within bioenergy itself. Not only in the international market, but also in the domestic market. The highlight was, yes, there will be slowness in the greenfield projects because the capacity is already achieved, but there will be a lot which will be happening on the technology announcement, field announcement, productivity announcement. Cost reduction, steam reduction. There are many solutions which we do have for our customer base. That is the segment which will start playing out in a bigger way. Our focus will be majorly on that side. That is what was mentioned in the earlier comment of ours, that it will be on the brownfield side more than on the greenfield side. That does not mean it will be completely drying up. That is like an.
Extreme kind of a scenario which is not right now visible, especially the inquiries which we are handling currently.
Maybe last thing, and I'll then fall back into the queue. The cash flow from operations was impacted in the first half with the buildup of contract assets happening. Is this something that is going to reverse, or should one think through different commercial terms at which incremental execution will happen? That's the last question of my side.
I think by December, January, most of our dispatches under that CIP will start moving out. It is a matter of next two, three months where we will see the reversal of this blockage of capital which we have seen in this particular segment of contracts in progress that will start moving out. The scenario on the operating cash flow will change to that extent. It is a matter of next two, three months because your observation is right. The CIP is a little on the higher side because of the execution activity which has gone up during this quarter.
Thank you. I'll fall back into the queue. Thank you.
Thank you, Aditya.
Thank you. Our next question comes from the line of Mayank Bhandari from Asian Market Securities. Please go ahead.
Thanks for the opportunity. I just wanted to understand. How is the impact of the duties on the U.S. tariff?
Please be a little louder, Mayank, if you don't mind.
Sir, I just wanted to understand how is the impact of the U.S. tariffs on your business panning out.
Okay. U.S. tariff, we like to look at into two segments, Mayank. One, the orders which we are currently executing and the business which we are expecting from that market. Currently, all the orders are getting executed without having any issues because another aspect which we need to understand, the impact of U.S. tariff is technically not on our account because tariff is supposedly to be paid by my customers. Whatever orders which we are currently executing are going on as per the plan, customer is also not changing the execution pattern or execution cycle which we are going for. Going forward, we like to definitely see how it is going to span out. Not only from the.
Possibility of new orders, how they are going to come up, we have to also figure it out how we are going to service them also, whether there are any ways and means of figuring it out, how the impact of tariff can get reduced. There are naturally. What I can say, there are different options or there are different approaches of handling that kind of a scenario. It will not be proper from our side to explain what exactly we are going to do about it, but there are ways and means, the way in which we are trying to figure it out. It is not that U.S. market is not going to be a market for us going forward. We are definitely catering to that segment also, especially what we just mentioned on the low carbon.
People are very, very keen on having those low carbon solutions from our side. What has actually happened when we calculated the effective tariff rate and the way in which customers are coming back and talking to us, their payback period is getting affected maybe by five months to six months because of this tariff. Still, the solutions which we are offering for that market, they are still attractive. The impact is not going to fail very, very badly to that extent, especially in the bioenergy. In the segment of equipment side, that is the engineering side, we are still figuring it out how and what should be the ways and means of handling that. Yes, it is a matter of discussion, a matter of what I can say, figuring it out, the strategy to deal with this kind of a scenario.
Are we favorably placed then or competition here from other countries like Taiwan, Korea, China?
I will not say whether we are favorably placed or not placed because every order is very unique. Every opportunity is very unique. The competition is of a very different nature every time. Tariff scenario is still evolving. We do not know what is exactly going to be the final one for everyone, for that matter, because every day there are changes which are happening. I mean, every time we assess the opportunity, depending on what kind of a competition is there. It is not what I can say, a common parameter or common yardstick which we can apply for the U.S. market and U.S. opportunity.
I think the tariff announced was 26%, which was later reduced to 10%. Is that, number-wise, it is correct?
26 to 10? Sorry, which numbers you are talking about?
Announcement of tariff was 26%. I think this was discussed in last call also.
No, sir. Okay. Okay. You are referring to the effective tariff rates which might be applicable to foreign customers. As I was telling you earlier, there are different ways and means of handling it. Every order, the modus operandi of that execution will define the tariff rate. It is not necessarily going to be 26%. In some cases, it might be 17%, 18%, 30%, depending on how the order is, that specific order is getting executed. Very, very different. That is what I was explaining earlier. The approaches are very different and unique for each opportunity.
Thank you, sir.
Thank you, Mayank.
Thank you. Our next question comes from the line of Shailesh Kanani from Centrum Broking. Please go ahead.
Good afternoon, everyone. Thanks for the opportunity and congratulations for the good performance considering the macro environment. Sir, first question is related to our CBG. In terms of number of projects, what we have in terms of feedstock, their completion timelines, because last time I remember we were supposed to complete some project in the month of October or November somewhere. Can you just give some details on that front in terms of breakup, in terms of summary of those projects?
We do not have the summary in front of us right now, Shailesh. Maybe we can separately come to you on that. There are several projects which are ongoing under projects belt right now, and they are on different feedstocks, and they are at different stages of execution.
Some of them are already completed and producing the gas at capacity, and the customers are realizing the cash flows through those projects. I think that is what is the scenario. The pipeline is also getting developed nicely for the next few years. As I said, as the infrastructure for distribution and evacuation of this gas develops further in the country, because you must appreciate that most of this generation will happen in the rural or remote areas, but most of the consumption happens in the large cities where either the compressed biogas is used in the cars or it gets used for the domestic cooking usage. Therefore, the industry will develop at a certain pace, and we are obviously a key participant in that ecosystem.
Fair enough. I'll take that offline. My second question is with respect to margins. So we have done very well on the international side. I think we have dropped highest quarterly revenues. So just wanted to understand, is there any one-off delivery which has happened during the quarter? And second, we have historically always mentioned that the international orders come with a 500- 600 basis points extra EBITDA margins. So. Weren't the margins a little bit subdued in that context?
Yeah. So Shailesh, the answer which I had given earlier on the margin said that margin gets defined based on the sales mix. During this quarter, I had also mentioned earlier that we had done a couple of service orders which doesn't require material naturally, and this is the deliverable of the drawings and designs for the projects which we do.
In this quarter, that quantum was higher as compared to the June quarter or the September quarter. Naturally, almost everything on the top line gets added into my bottom line because of the services element. Otherwise, my fixed cost is anyway there. That is the reason this margin improvement starts looking very differently because of the delivery of different kinds of orders. Your question related to international is right. International orders have different margins as compared to domestic margins. That is for sure. Going forward, we like to see how that space is also going to span out. As someone was asking us a question related to tariffs, we like to really figure it out how this changing dynamics is going to have a change in our margin segments too.
Just to supplement that, the reason I was trying to understand is because this time around, we have nearly 50% of our revenues coming from international. From that context, I was trying to understand.
Yeah. Yeah. If you look at, rather, earlier we had mentioned that one of the orders which we are executing currently in the Africa region. Region by region, our margins are different. Every region is not giving us the similar kind of a margin. Even Africa margins are better than India margin, but not as good as European or American margins. Naturally, what you are observing, that's right. International contribution or other international revenue is on the higher side. Correspondingly, what we would have got, the margin on the bottom line from the international side is not to that extent.
Just the other part of the question, was there any one-off or this summary can be expected to be sustaining for the second half?
There is nothing one-off. It is absolutely the nature of business which we are into, the jobs which we are doing, the regions which we are catering to, everything is absolutely the same. There is nothing one-off.
Okay. Can I squeeze in one more question?
Please go ahead quickly.
Yeah, yeah. Sure, sir. On the domestic front, if you can give some customer profile, you have mentioned that on the bioenergy, that's ethanol. Predominantly, we have received around INR 300 crores of orders out of total INR 800 crores. If you can just give some understanding in terms of the customer profile, what is your interaction with them? Because we do know that there is an oversupply in terms of capacity of ethanol. How are they viewing it? How are they assessing it? Also, in terms of the customers, how is the pipeline vis-à-vis last year and this year? If you can give some numbers on that front as well.
Yeah, I think there is a fair amount of data that you can find in the public domain, right?
While at the aggregated level, the demand and supply have this imbalance, which means the demand right now is less compared to the capacity available in the country for ethanol. When you peel the onion, so to say, and get to the details, different states and different regions have different capacities and therefore different demands. Within pockets within the country, there are still opportunities that are existing. That is why my colleague Sachin mentioned to some other callers that this is not going to be a complete dryout in the second half of the year, but there will still be opportunities in the capacity additions, enhancements, etc., in the ethanol market. The customers are also thinking the same. They are, of course, wanting more usage of ethanol, also more pathways and how to use ethanol for many other purposes other than the EBP20.
I think there is a good discussion happening in the ecosystem of this ethanol market.
Thanks a lot, sir. That is very useful. And best of luck, sir.
Thank you.
Thank you. Our next question comes from the line of Sandip Sabharwal from asksandeepsabrawal.com. Please go ahead.
Mr. Gaikwad, it's good to see that after many, many quarters, we have a more conservative conference call where you are getting a realistic picture of where the company is going. Because we have been used to having very bullish conference calls based on opportunities we have, and then the delivery does not come. Now, many people have asked many questions. As a composite, over the last three, four years, the company has talked of four big growth opportunities: 2G ethanol, CBG, bioplastics, and this SAF. Can you, as a composite answer, actually update all of us as to where and how you see these opportunities panning out? I know there have been separate questions asked on different segments. Since you have just taken over, from your perspective, if you can answer, it will be great. Thank you.
Yeah, sure. Sure, Mr. Sabrawal. I think your observation, we take it as a compliment. We do want to be as sort of transparent and as realistic when we have this dialogue every quarter as possible. You can, of course, give your feedback as we move forward on our dialogue. Coming back to these new technologies, predominantly, Praj has been one of the very significant players in the development of ethanol as a market in India. Our Founder Chairman was, in fact, very instrumental. He is known as the ethanol man of India. We get connected with ethanol always. We must realize that along the way, in the last few years, we have done a lot of good seed planting for the advanced biofuels, which go beyond ethanol.
First of all, because of this food versus fuel debate that started a few years ago, Praj was one of the pioneers in thinking about waste to energy and therefore creating the second-generation ethanol from the agri waste. India is blessed as far as agri waste is concerned because if we can put it to use, then we will be one of the largest producers of the biomass in the country. It is estimated to be around 750 million tons every year. If we can convert that technology to make ethanol, that will be really helpful for farmers, for the country to become independent in terms of energy sufficiency. There are many other advantages. I need not get into those details right now. 2G technology for us is already bought by three oil marketing companies: Indian Oil, BPCL, and HPCL. Indian Oil plant is completely.
Commissioned right now, and the trials are ongoing. We are working on some of the initial teething issues that we encountered. We are very hopeful that by end of this fiscal, which is by March, we will be able to get to our target production. Efforts are on in that area. It will be followed by the other two projects. As you know, the government also has realized the power of second-generation ethanol. They have recently come up with a policy that people can take these non-food feedstocks, and if they make those 2G ethanol, it is allowed to be exported to different countries. That is a very welcome change. This was announced as recent as the September of this year. We are looking forward to that development.
We believe that there are not too many players in the world who have been very persistent and standing behind the second-generation ethanol technology. Praj has been. I think in the time to come, that entire tenacity that Praj has shown will give us an advantage in the global market as well. That is as far as 2G is concerned. I think I sufficiently talked about CBG, and that is a segment that we are also very hopeful about. Gas economy is required for India, and CBG really helps in developing that gas economy, reducing the LNG import over a period of time, which is also running into billions of dollars for India. If we produce it using biomass, that will be really beneficial to the nation's overall mission. As it comes, the third one, the technology that I touched upon very briefly was the
SAF or the SAF. A lot of people have talked about SAF, and there are different ways to get to SAF. The one that will really survive in the long term will be converting ethanol to the jet fuel. That's called as E2J. Again, in that E2J technology, multiple people have talked about it. I'm really proud to share with all of you that in the country today, we have a real demo facility where on one side, when you put ethanol, we can run continuously the plant to get the SAF that is certified for usage in the airplanes. This has taken some time to develop as a market for various reasons. There is no doubt in my mind personally and in general in our minds that this is a market that will provide a new path for.
Ethanol to get converted into a higher-value fuel. That is a technology that Praj has. The other thing that Praj also has is not just the technology, but also the engineering capability that will help the customers to construct a commercial-sized plant for SAF. That is another advantage that we need to keep in mind when it comes to SAF. Lastly, I would talk about the bioplastics. In that particular portfolio of bioplastics that Praj is working on, the first one that we already have ready as a technology is the lactic acid or the polylactic acid. We have, again, a demo plant based on our research and development efforts, which a lot of people come to visit us and have a look at it because they want to see and touch and feel it.
We have an advantage, therefore, that we are able to not only demonstrate to them the technology, but also share with them the path to scale it up for a commercial-sized bioplastics plant. We have some discussions already going on, but because there is no order that we have yet booked, there is still some time before we see the revenues coming from these efforts. I thought this is some quick overview of some of the technologies. I touched upon the IBA earlier, the isobutanol, that will be useful in blending into the diesel. Again, that is a large opportunity that Praj would like to participate. This is a bouquet of different and new technologies. They essentially are coming from the bio sources. Therefore, it is going to be good for the climate change actions. We have created what we call as the bio-verse.
This is a term that we would like to use going forward, which is actually a combination of the biofuels and the biochemicals and materials all put together. To implement these technologies, we also have the engineering and the modular and equipment manufacturing technologies and manufacturing locations that will kind of complete the cycle for our prospective customers. Does that help in getting an overview?
Sir, Sandip, sir's line has disconnected.
Nope. I'm sorry to know that.
No worries.
I hope it was useful to the other listeners too.
Ladies and gentlemen, we will take that as our last question for the day. I would now like to hand the conference over to the management from Praj Industries for the closing comments.
Yes. Thank you, everyone, for your time today and questions. If you have any more questions, feel free to write us at info@praj.net, and we will be happy to give answers to your questions. Once again, thanks a lot for your time today. Have a nice day, and we look forward to interacting with you in the near future. Thank you.
On behalf of Praj Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.