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Praj Industries Ltd
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Ladies and gentlemen, good day, and welcome to Praj Industries Limited Q1 FY '24 Earnings Conference Call. [Operator Instructions]. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Praj Industries Limited. On behalf of the company, I'd like to thank you all for participating in the company's earnings call for the first quarter of financial year 2024.
Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review.
Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. First, we have with us Mr. Shishir Joshipura, CEO and Managing Director; Mr. Sachin Raole, Chief Financial Officer and Director of Resources.
Now without any further delay, I request Mr. Shishir Joshipura to start with his opening remarks. Thank you, and over to you, sir.
Thank you, Anuj. Good morning, everybody. I welcome you to the Praj Industries Earnings Call for Quarter 1 FY '24. Thus, all of you had the opportunity to go through our results for the quarter ended 30th June 2023. Last week, Praj participated in the 14th Clean Energy Ministerial and [indiscernible] Innovation dialogue on the margins of the G20 Energy Transition Ministerial Meeting. Deliberations during the conference were also extended to discuss the formation of a global biofuel alliance for worldwide development and deployment of sustainable biofuels. Several national government agencies, industry and other stakeholders will be the part of this alliance. I'm happy to share that our ongoing partnership with Indian Oil to accelerate India's energy transition towards the greener future trend further reinforced. In October '21, we had entered into an MOU with Indian Oil to form a 50-50 joint venture for production of variety of biofuels. Based on approvals from both the Boards, we have now signed a term sheet for the joint venture formation.
Coming to business performance, we started FY '24 on a positive note with robust order intake and improvement in profitability. This quarter, we saw an increase in share of international order reaching [indiscernible] of the total order book, which is definitely a positive development. We started this year with the healthy order book and it continued to build during the quarter as well. Owing to differentiated delivery cycles of the order book that we had, the first quarter revenue is not reflecting the annual growth potential of the revenue cycle.
Our domestic bioenergy business capacities are continuing to be built around both [indiscernible] feedstocks. Food Corporation of India has stopped issue of rice to ethanol [indiscernible] notice. However, They said [indiscernible] rice in the open market. We are evaluating the impact of the decision and watching the developments closely since the government has clarified that the [indiscernible] program continue as per the original time lines. Domestic inquiry pipeline continues to be strong.
On the international front, low carbon ethanol [indiscernible] continues to develop positively. Currently, we are [indiscernible] studies for several projects that will translate into firm business opportunities in near future. I think [indiscernible] has advanced ethanol blending from 10% to 15%, while Mexico and several countries in Africa are also coming [indiscernible] mandates. Indonesia is another opportunity [indiscernible] announcement of 5% [indiscernible].
Our services business is receiving good traction in both domestic and international markets, especially Brazil. We are building a strong distributor network in different markets to offer entire suite operations comprising of enzyme, [indiscernible]
On 2B front, we have established successful demonstration of [indiscernible] and IOCL plant in Panipat. Talking to availability of different spec feedstock, our team is now working with Indian Oil to define necessary modification in feedstock supply system for the process plant. As for the CBG, we are beginning to witness constructive movement in the market. Indian Oil has sought EOI to set up 30 CBG plants in the country. We have received business confirmation for setting up 5 projects from our leading business conglomerate to be set up over the next 15 to 18 months, with options of 5 more plants.
The execution of the first project has already begun. The business landscape in general is very favorable so as our engineering business basket as well. On the CPS plant, we have achieved significant orders from leading [indiscernible] companies focused on oil and gas and fertilizer segments. We are taking special efforts to improve the productivity [indiscernible] at higher lows starting from H2 of this year.
On plant GenX, we have finalized the location for the [indiscernible] plant, which will be set up me Near Bangalore. Strong inquiry pipeline is building up for the ETCA segment to be served by this facility.
Our PSS business has built a very healthy order book for the year '23, '24. High-capacity fermenters are witnessing strong traction. With semiconductor space rapidly evolving in India, it will also open an increasing opportunity for our ultra HiPurity water solutions.
I'm happy to share that the PHS team has received a BioSpectrum award for the most promising company by engineering solution services to pharma, biopharma and nutraceutical industry. Overall, the business outlook is very positive for our bioenergy, engineering, and HiPurity business.
Before closing, it gives me immense pleasure to inform you, Dr. Pramod Chaudhari has been appointed as the Chairman of the Board of Governance of the College of Engineering in Pune, Technical University. Dr. Chaudhari will lead the first ever full board of governance formed after [indiscernible] became autonomous and got the status of a technical university.
With this, I will now hand over to Sachin for his comments on the financial performance.
Thank you, Shishir. The consolidated income from operations stood at INR 7.36 billion in Q1 of FY '24 as compared to INR 7.31 billion in Q1 of last year. EBITDA for the quarter stood at INR 777.03 million as compared to INR 542 million in the corresponding period of the last year, growth of -- showing growth of 43%. Profit after tax stood at INR 586.72 million as compared to INR 412.63 million in quarter 1 of the last year. Export revenue accounted for 17.2% of the quarter. Of the total revenue, 79.7% is from Bio-Energy, 13.6% from engineering and 6.7% from PHS business. The order intake during the quarter was INR 11 billion, with 64.7% from domestic market. Of the total order intake, 60% came from Bio-Energy, 31% from engineering and balance 9% from PHS business.
The order backlog as of 30 June 2023 stood at INR 37.78 billion, comprising of 78.1% of the domestic orders. Cash in hand as on June 30 is INR 8.13 billion. I now conclude my remarks, and I would like to thank all of you for joining us on this call and would now be happy to discuss any questions coming or suggestions you may have. Thank you.
[Operator Instructions] The first question comes from the line of Prathamesh Sawant from Axis Securities Limited.
Quickly, one question. Sir, I wanted to understand the export book. So what are the kind of customers do we have? What's the average order book size that we get? And what are the kind of margins compared to the domestic orders?
So Prathamesh, our -- if you look at our international business, essentially, I would put it in 2 categories. One is the business that we get for our Bio-Energy segment and the second is for our Engineering segment. Within the Bio-Energy segment, the customers are obviously those who are putting up ethanol facility. We're upgrading their ethanol facility or putting up any of the new facilities around you. As of today, it is restricted to ethanol.
On the other hand, if it was engineering, then we work very selectively with some very large technology and EPC companies, which are global leaders in their field, especially in the field of oil and gas, fertilizer, natural gas, et cetera. So they are setting up facilities for their customers. So we are not actually serving the end customer, we are serving in between the technology and EPC company. So those are 2 segments that we serve.
Okay. And the average order size for the ethanol segment would be higher on the margins?
So that depends, I mean, in terms of what is the size of the value. So it has been [indiscernible] study. It probably would be running to $1 million to $2 million like that. If it is just a study part -- If I go ahead and supply the whole greenfield project, then of course, it could run into closer to INR 150 crores kind of level. Remember that in export markets, we don't do any side activity [indiscernible] supply the critical equipment technology in engineering. Now on the other hand, if you go to the engineering side of business, where again, the order size can vary between $5 million on the lower end to -- on the upper end, it can go to as high as maybe $20 million, $30 million for contract.
Okay. Okay. And sir, on the CBG front, again, so we are seeing we are gaining traction and you've just got the order for 5 projects. So what is the average order size in this segment? And how do we play it? Are we just the technology partners or we are in EPC construction and setup of this project...
So the CBG project concerned in India, the model that is emerging in India is when the customers are looking to companies to set up the full project for them. Some other customers may have different departments and this particular customer had this requirement that we do the whole thing for them. So for them, the project size is of the order INR 100 crores per order.
And finally, just one last question from my side. So in the current quarter, we saw slight lower run rate on order execution. So is it because of the cyclicality or was there some other reason?
No, there is no other reason. It's just that the way our order book that lined up the -- and the project nature of the business. So given the size preparedness, projects [indiscernible] customer end, and the progress of the project in its entirety is such that the execution cycle got so defined that in this quarter, we could not -- there is no other reason at all.
[Operator Instructions] The next question comes from the line of Levin Shah from Motilal Oswal Asset Management.
Yes. Sir, very encouraging to see this order inflow from the international side. So we have around 35%, which is close to INR 385 crores coming from international business. And this has come -- so this doesn't include anything on the ETCA right? So one is how we are seeing this ETCA pipeline now developing? How far are we from getting that our breakthrough order which we have been talking for some time? And second, on the -- this -- if you can throw some light on this oil and gas and fertilizer segment is what we have highlighted. What is the nature of this order? And do you see more such orders from the same industry or there are other industries where we are in the free from more orders from the international market?
So, Levin, when it comes to ETCA orders, which will be served by the GenX facility, as you will appreciate, where we have our synchronization act to do to ensure that the order intake and the absolute [indiscernible] and start up production at the facility are completely synchronized. There are also steps involved in terms of approval of facilities and customer services. We are going through those steps. So we expect that in the second half of the year, we start seeing the ETCA order book buildup so that then that can start to get executed from the GenX facility because when contract comes, we do the engineering, we expect the big facility to be ready towards 4th quarter of this year. But obviously, the order book has to start at least a quarter before that.
In terms of the orders from oil gas and fertilizer, I think these are the orders where- these are segments from these orders come, but orders are again for what I would call as when they are -- for example, one of the projects is there in the [indiscernible] terminal is being setup in the United States or there is another one in which the technology is available for improving the recovery from the bottom of the [indiscernible] everything well defined. So there are different applications that are coming through. Again, all of them are largely aimed at ensuring that there's better recovery of the end product. There's a celebrity angle or self-angle with sustainable fuel. So that goes without saying -- these applications as well as [indiscernible].
So sir, even within this industry, the orders that we would be getting would be for basically carbon capture or getting the emissions in check, right?
No. These contracts are our plants and it depends -- and I can share [indiscernible] Fundamentally, these could be equipments, which are [indiscernible], pressure vessels, [indiscernible] as the case may be or a combination of these -- special purpose vessels, which then go on to the part of the overall process of the plant, which is then put together for either better recovery or a different kind of catalyst manufacturing. It could be different applications depending on what the technology all about.
Essentially, these are all focused on clean technology. As I was mentioning to earlier that they are -- all these solutions from our customers are focused on enhancing recovery and reducing the footprint of energy or of carbon, and there are different steps, right? Biofuel is one step. These are different steps within the existing setup without changing the feedstocking and refinery, what can we do, and these kind of solutions that are offered there. So there could be opportunities for many more such solutions.
Sir, and my second question was on CBG front. So finally, now we have seen some order inflow after a long wait, and we have been working on this for some time. So these 5 plants, the order that we have got, is it already in the order book or it is yet to be booked in the order book?
It's not in the order book that we reported.
And also you mentioned in your opening remarks that IOCL has indicated that they would be looking at setting up 30 plants. So is there any MOU that we have signed with them or any time line? And all these 30 plants will flow to us? Or is it that this is their mission segment in the sense that they would want to put up 30 plants?
So Levin, right now, they have come up with an EUI [indiscernible] public sector, so it has to be open to everybody. So they have come up with EUI for setting up 30 plants in 30 locations in India. And after the expression of interest, they have -- they specified a criteria for selection of technology and partners. So I think we have to go through those steps to see how [indiscernible] . The key point which I actually wanted to indicate was the fact that there's now a definitive movement happening in the CBG market, as we mentioned that the last almost 18 to 24 months, we have been talking about possibility of development. And now we can clearly see this is a step in that direction as we see that.
The next question comes from the line of Shailesh Kanani from Centrum Broking.
Congratulations sir. It seems that we have been working on margin accretive orders for some time, and we have been successful this quarter around. I hope this momentum continues. Sir, my question is listed to CBG only. So can you share some more details like what kind of margins you will be making? Are they margin accretive to the current order book what we have and is there any pending thing with respect to why we have not booked it in the current order book?
So Shailesh, I'll answer in the reverse order. So we have a very strict rule about how we book a contract. So if I don't get it still 30th of June, certain advances and contract sign, we don't -- even though we have agreement with the customer, we will not reflect that into our order book. We have a very strict policy on that. So that is how -- but it's now moving as I speak to you, we have spent 3 weeks from 30th June. So now [indiscernible] is there, I'm happy to share this with you. In terms of -- obviously, the -- we expect that when we build these programs and these projects, they will be value effective to the company, goes without saying. How much? I'm not really ready to say.
Fair enough. That's useful. Sir, my second question with respect to our tie-up with IOCL. So after some duration, we have been able to sign the term sheets. So can you share some further details like what kind of the capital would be allocated or where this -- will this tie-up would start fortifying in terms of order inflows, probably FY '24, '25, you can shed some more light on this term sheet?
Okay. So this term sheet is signed for the Umbrella JV. The idea is that under this Umbrella JV, we can take up the projects for different Bio-Energy products. It may be CBG or ethanol for that matters. I think it is an Umbrella JV. The term sheet is right now signed. Actual formation of the JV will take somewhere within 5 months to 6 months because there are multiple formalities which we need to take care of. And at the same time, we will utilize this period to figure it out what will be the first project, which can be taken up under this JV. As I said, it is of Umbrella JV and the structure which we are working on we'll be having an element of product by product or BioEnergy by BioEnergy [indiscernible] under this JV.
So right now, the capital outlays are not yet finalized. It is going to be dependent on which first project we are going to take up under this JV. But the Umbrella JV is going to be 50-50 between [indiscernible].
So is it safe to assume that [indiscernible] the FY '25? Most likely?
The project actually execution will take that kind of a period.
Sir, if I can squeeze in a last question. Sir, on benefit on margins. How long do we expect this margin -- the benefit of commodity prices to continue for us since we have [indiscernible] contracts. If you can share some light on that?
So on the raw material side, we have started this moving of the prices, and if it's continuing for at least last 2 quarters, we are seeing that our old orders are getting executed now, rather, we have completed all our old orders which [indiscernible] this impact of raw material. Almost all the orders got executed now. Now the new orders are coming up with the new pricing formula and new margin formula. So till the raw material prices are not going to behave that they need to behave, we don't see [indiscernible] raw materials going forward, negative impact kind of thing. So margin should start smoothing on account of raw material going forward.
That is the only reason why you see this margin up. There is also a concentrated effort we took to ensure that we improve our order book and our execution efficiencies, et cetera, which will all get reflected our supply chain. We have done many -- we have taken many steps to ensure that we're able to improve these margins, smoothing of raw material prices, definitely helpful.
The next question comes from the line of Dhananjai Bagrodia from ASK Asset Management.
So congratulations on good set of numbers. Just -- this might be a little longer-term broader question. After ethanol, is there any one particular segment like how we have tracked an ethanol where we see a very long-term opportunity where we can have the same scale up as we've seen in ethanol, so that we're very excited?
So Dhananjai, you probably recall my opening statements that I mentioned about this conference in Goa and Global Biofuel Alliance and the deliberations that were being held there. I came back extremely excited about the future of biofuels in general. And yes, so there are more than 18 senior level ministers from different governments, countries, bilateral institutions and deliberations very, very rich and one thing was very clear that biofuels are here to stay and grow in a very, very definitive level.
Having said that, I think molecule of ethanol obviously has -- by itself ethanol has multiple pathways still opening out for it's -- in terms of the E27 program, [indiscernible] vehicle advance, the biodiesel and ethanol base chemicals. So there are multiple fuels.
And then getting very specific to the question that you asked, one of the -- in the longer term that you asked, one of the biggest applications that we see globally for ethanol is its conversion to sustainable aviation fuel because that's a very clear understanding across all agencies that [indiscernible] that's the pathway on which you convert ethanol to SAF. This is the pathway here to stay with its maximum potential. So that there's going to be one big application.
[indiscernible] also is delving very, very positively, not only in India but also outside India. So we will see this and many other iteration comes -- when the third iteration that would come through would be around what happens on the different side of the equation, and that is renewable chemicals and materials because what we have talked about so far is the biomobility side of equation.
So moving -- so biomobility will be here and the next platform that we call a Bioprism which is the renewable chemical and [indiscernible] both will have a very, very long-term goal to play in terms of what happens with conversion efficiency, et cetera. So I personally believe that we will see an expanding canvas and which will continue to expand into these different dimensions of biomobility as well as on [indiscernible] chemical materials.
Fantastic. And sir, where would we be placed that obviously, ethanol, we've managed to crack, but let's say, in the size of, let's say, biomobility or the other programs, where would we be in the segment? Have we -- the proof of concept has been done? Or how would that be looking?
So Dhananjai, we have, obviously, put a great responsivity in our shoulders that if you were leaders in ethanol, then ethanol starts to branch up to different applications and different molecules. We don't give up our leadership position easily, right? So we are very focused on working on that to ensure that we also have what should I say, our place in the front, when it comes to the other solutions that I mentioned about. So we have no intention to give up. We actually are working both at our R&D center metrics and with our teams and our customers to ensure that we continue to build them a position..
Okay. Sure. And would there like be -- is the opportunity is so big that it is not be able to quantify? Or is it too early to even get into all of that for some segments?
It's little early for me to quantify because we don't know, but just to give you some idea -- just to give an idea. And this is -- and certainly trying to think on the run now as you asked this question.
Let us say, 1% blend happens for SAF and I say 1% lend, okay? So that will create an opportunity for about INR 14 crore liters of SAF in India, and talking not globally, just in India. And when comes the aviation markets, India is a growing market, fast-growing market, but we are not a big market yet. So SAF 1% lending you need 14 crore liters of SAF that would be 28 crore liters of ethanol.
So that's the equation for every 1% in India. In United States, already, a program is announced for 3 billion gallons, which is 1,200 crore liters over the next 5 years. So we will see a very vastly expanding landscape for SAF which is, by far, the largest application, is going to be even bigger than the ethanol sell because the [indiscernible] we need ethanol, and we also need conversion of ethanol to SAF.
The next question comes from the line of Lokesh Maru from Nippon India Mutual Funds.
Congratulations for excellent set of numbers [indiscernible] again. So just one thing I wanted to get a sense on. In our previous con calls, you had highlighted that since our base is quite heavy, right, because of the -- [indiscernible] ways that we have seen in the last 2 years. So this year could be kind of flattish on order intake, but you are seeing growth yet again. And you have also highlighted 5 CBG projects, which could come up to INR 500 crores, confirmation already in our next order [indiscernible] for the quarter, right?
We are also seeing traction across all our segments, be it [indiscernible] could be the end of year [indiscernible] not in U.S. So is it fair to assume or understand that we might out do our own expectations and rather post INR 4,000-plus crores of order into further year? Is it safe to assume that? or how would you portray the picture going forward? Since everything is falling in place for us again within adjacent segments of [indiscernible] itself for the year?
So Lokesh, thank you. As we have been talking that the horizon and the canvas is expanding from a single feedstock, single product to multiple feedstock, multiple product horizon, and we talked about different molecules, ethanol. We talked about CBG. We have talked about SAF. We talked about [indiscernible] chemicals and materials, the applications that they expand. So both in India as well as international market, the ETCA segment that we talked about, the clean tech segment that we have mentioned, even this quarter, the order book -- [indiscernible] order book is reflective of that. So we have seen that we are no longer restricting ourselves just to one segment or one market, but we are actually expanding our offerings and our solutions to a much wider market with wider product range, wider solutions range with wider feedstock.
So it's a multiplier effect, so you're right that -- so we do not want [indiscernible] of course, a very important program to which we are very proud participant. At the same time, we are also ensuring that as we start to grow forward, we are also able to build alternate revenues which will then take up even further ahead, and that's the game plan that we have and that's what we are working upon. Because we strongly believe, and that's [indiscernible] that there will be expanding applications of ethanol, which will create multiple opportunities for us both here as well as outside India.
So we're safe to assume recurring INR 1,000 crores or plus order inflows for the year -- subsequent...
Sorry, couldn't catch your question.
So is it fair to assume INR 4,000 crores of order inflow for the year?
So that's our range, that's our target, but we can't commit to the number which you like to consider from your point of view. But yes, we are not looking [indiscernible] we are looking further growth and we are looking for higher numbers.
The next question comes from the line of Amit Anwani from Prabhudas Lilladher Private Limited.
My first question is I just go back to understand -- what is the current status on when we had to be tendered out [indiscernible] if you could throw some color on that. And second thing [indiscernible] and I assume now I think [indiscernible] tendered our plant would be more focused on grain based. So can we expect the near term at least quarter 1 impact will be there for the domestic bioenergy option?
So when the [indiscernible] program was started, then obviously, as the program started to roll out, 2 factors happened. One, of course, as you are aware that feedstock for utilized to add not only [indiscernible] base, feedstocks were expanded [indiscernible], et cetera, but also [indiscernible] feedstock and [indiscernible] feedstock. So the feedstock got expanded on one hand. And when we went to the first phase, the government is [indiscernible] as to where are these capacities coming up, in which states of India? What kind of fuel and ethanol requirement is there and then we know that we mentioned last time that they're realized it in 9 states of India. There is still going to be deficit capacity production because not enough capacity is being built in those 9 states [indiscernible] income there.
As we move forward, I think the next stage is both capacities that got ordered out are actually getting built on the ground and that will be the next step that will be put through. And I think from there, it will start to move forward because it is also our understanding that not everything that got ordered out may get built or may perform at it's designed plan capacity level. I would like to believe that [indiscernible] plans will work at the brand capacity. There will be different factors that could lead to that from a customer's operation perspective. So I think that will further drive capacity creation.
There is another dialogue that we have not talked about yet, but it will start to become material in time to come. And that is the carbon intensity of the ethanol that is getting produced because as I was mentioning that we will need ethanol as a feedstock for SAF production. And there, the carbon intensity of the ethanol being produced will become a very, very important step. And that itself could create another set of facilities for low carbon ethanol production in the country.
So I do not have a number, but I think this is a rolling ball. And right now, we don't see, as I was mentioning in my opening remarks as well that we are not seeing any slowdown in the inquiry pipeline, given the fact that there is a temporary dip right now because of the HCI decision on rights, but we believe that, that would not be -- the supply chain will realign themselves for our customers, and that's what they will do in a short period of time, and that's how we'll move forward in the country.
[indiscernible] to be tendered out, if you would like to throw some color there?
No. So there is no tendering of the projects, Amit. What the government does is they look for supply confirmations from the producers. They get information that we oil companies get, then they map and see in which state there is deficiency, are they going to get it. So it's really -- what I would call it's very on-the-ground reality kind of a process. So once that check happens, then we will know what's the deficit, in which state or in which part of the country and where is the [indiscernible] and then it gets sort of readjusted again.
Yes. Sir, just actually, I was trying to understand to meet EBP20, how much crore liters is pending for to be tendered out. If you have an...
So as I -- this is what I'm trying to explain. There is no tendering out when -- right now we have EBP10 right, as a country, that's between 10 and 12. Now when that starts to move forward from 10 and 12 up to 20, so there is step-by-step process through which you have to go. So the first aim of the government is to actually make sure that EBP10 is available across the country, at all the outlets. So that's the first step. So depending on this volume development across the country and availability, they will decide how much they want. So this is not a fixed number right now. We are -- right now, the current production capacity is able to meet EBP10, our target is to go to EBP22.
All right. So my second question on CBG. Already, you highlighted that there will be 5 plants in pipeline in INR 100 crores each. Wanted to understand more with respect to liability of CBG plants? And second thing on our market share, any competition there and what is addressable market out of INR 100 crores each plant? And what are the capacities in each plant?
So Amit, there are very different factors right now. So we -- as we were mentioning earlier for over the last -- the last 2 years, we've been talking about how the CBG market will come into being, given the fact that the whole ecosystem needs to co-develop and some of it has to happen before and some of it happens along with the plant, et cetera, et cetera. So we are seeing that movement happen now because basically, some of the very important players have started, as I mentioned, India Oil is already taking -- taken out Indian Oil for 30 plants. So that ecosystem will start to roll out in a structured sort of fashion. And that is what would lead to creation of this capacity. The pipeline that we have talked about -- as I mentioned earlier, each plant for us is of cost out of INR 100 crores, and we'll be -- try over the next 12 to 18 months.
Right. And this SAF opportunity, are we expecting any orders in the next 12 to 18 months, 24 months? Any color on that?
I thought I should also answer one more question if you ask. So yes, there is competition in CBG space. We are not -- there are good companies. There are multinationals, there are India headquartered companies that are competing within the field. So that is how it's progressing. What was the question on SAF?
Sir, is there any visibility in the next 12 -- 24 months to get some orders on SAF?
So I think there is -- I do not know -- yes, they will have to be capacity build because there is none right now. So if we have to grow and blend SAF in 2027, 1st January onwards, there is a compulsion across the world for airlines to start blending, you start using blended fuel. So that is for sure. And we can work it backwards. So the next 12 months, surely, we should see some kind of, yes, what I would call as the attraction of the market. We have talked about the India Oil JV. Sachin was mentioning about it being [indiscernible] biofuel SAF is one of them. And we are -- we will work with them to see how company's needs can be fulfilled under the [indiscernible] JV.
One last question, if I can squeeze in. This quarter, the order inflow of INR 1,100 crores, I can see the engineering business at INR 340 crores, which is much higher than the previous 5, 6 quarter averages and even the full -- closer to the full year last year. So are we expecting this trend to continue as you highlighted the opportunities in the export markets in the coming quarters?
So I think what's important to notice is that Indian businesses will become a significant portion. We have been working on that. I've talked about it, the EPC opportunity that I talked about in the second half of the year will definitely unfold under the engineering umbrella. So we are confident that our engine businesses will also continue to grow. There are more international orientation businesses. So we'll see that as export businesses, which is good for the company. So we are confident that as the phenomena of energy transition and climate action starts to unfold, as I was mentioning in second half of the year onwards, we'll start seeing a very constructive movement for all the booking -- for our engineering portfolio as well.
The next question comes from the line of Vikram Suryavanshi from PhillipCapital.
So just looking at our execution number, [indiscernible] how being able to maintain on Y-o-Y basis. But what I was really looking at slightly better execution given the kind of strong growth in order book as well as now we are reducing seasonality of our execution. So was there any [indiscernible] execution or how do we look at execution pickup going forward?
So Vikram, the [indiscernible] these orders got executed during this quarter. And I think in the opening remarks, Shishir was mentioning the same thing. The execution requirement from the customer was of a different nature. And that's the reason how it got reentered into our revenue. We strictly follow the timeline or the ask from the customer for the delivery from our side. So what was required to be delivered, that was delivered in this quarter 1.
And two, the value of order intake is also very important to decide how the execution happens. So we are seeing some kind of higher order book coming up in the March month even though we looked at it from the quarter point of view. So naturally, the initial phase of engineering was going on and not on the delivery side we had done anything for those projects. I think those projects will start coming up in a bigger way from H2 site. So we will see execution far bigger or far more than the H1 as compared to what we are seeing currently.
Got it. Yes. And second question...
Sorry, Vikram. So add that [indiscernible] is one more factor, which plays an important role in the civil activity and civil activity is generally in the scope of the customers of ours. Till they are not ready, we just can't put up our plant out there. So we have to wait for that activity to get over. So that's one more element which generally plays its important role in the first quarter.
Right, right. So I was actually more keen that was that very significant because we also have manufacturing in Gujarat and all, so probably unseasonal rain and other disturbance was there.
Yes. So -- and one more thing which I must say here Vikram, from the revenue from our side for execution or capability building, which we had to do on our side, we are ready to take higher loads also, [indiscernible] in the March quarter. So there is no problem on our side to get projects executed. So it was only the rain is the order booking had happened, the requirement from the customer side. And the last one, you can mention on the [indiscernible]. Those were the factors which played it through in this quarter.
Understood. And second question on the CBG projects, we have already discussed a lot, but just to get a sense of the feedstock, what kind of feedstock these projects are on and particularly, will the strategy pushed into CBG networks through pipeline or basically these are the stand-alone projects where convention will be nearby. So if you can give some idea about feedstock and the distribution side of these projects?
So the projects which we just talked about under the [indiscernible] those positions are going to be based on agri-based so there are agri-based projects.
And the second part of your question was related to whether it is going to get connected to CBG. We have to see whether there are going to be a part of CBG network or they are going to be part of the [indiscernible] network from the distribution point of view.
It could be mix of both, Vikram. Actually, depending on how the CBG network develops. Customers, an ideal situation is to push this into the CBG network. But it depends on where the plants are and where the city networks are so. That's the question that is still -- it's not a -- it's not in determining factor for customers to set up the plant. But obviously, the CBG network, it will definitely help.
Okay. And the gas of [indiscernible] how much in terms of or something like if you can give something in terms of outflow side of capacity for each project?
Each of these plants will be [indiscernible].
The next question comes from of Naushad Chaudhary from Aditya Birla.
Some clarifications. Firstly, on the CBG and other future projects in terms of overall business economics, especially on the margin and working capital side. Would it be similar to our existing model or there would be changes in terms of especially on the working capital and nuances from the customer side?
So because of the synergy or because of this new order inflow which we are [indiscernible], I don't see any significant change in the working capital cycle, repayment terms, the advances and all that are more or less in line with what we are currently doing. So I don't see a big change happening on the working capital because of this order intake, which is going to happen.
Okay. And second, on the CBG order side, you located 30 projects Indian oil is planning and [indiscernible] so we have got -- does that mean 25 has gone to other players? Or is it yet to be announced?
Naushad, both these items or both these statements of ours are independent of each other. 30 plants of IOCL is what's been just what I can say announced by them. They have floated the EOI. We are not talking about IOCL remitted these 5 CBG plants. We are talking about very different state of customer for these 5 plant for which we [indiscernible].
Let me just clarify on the CBG. We are talking about it for a reason because the question was always used to be asked to us that what is happening on CBG front, is there any development or not. Technically, we are for the first time announcing even the LOI on a call, generally, we don't talk about LOI, or we don't put a number for an inquiry basket. But for the first time we wanted to give you a flavor of what is happening in the market, how the market is expanding, what market is thinking, what we are doing on this front?
But let me clarify, these 5 plants which we are talking about are not set of 30 plants announced by IOCL, they're independent of these 5 plaints.
All right. Right. And in terms of the size of the plant, if I'm not wrong, initially, it was expected to be, I think, a lower INR 100 crores CapEx per plant, is it something at the higher end of the CapEx or future projects should be of similar size or should of be lower size?
So it depends what is the capacity going to be for a plant, and that's what is going to decide the CapEx. As earlier mentioned, the capacity is going to be in the range of 20 tonnes per day. So naturally, CapEx is going to be on a higher side. Earlier, we used to talk about 10 tonnes plant, 15 tonnes plant. So those were smaller as compared to what we are talking right now. So the CapEx will completely depend on what is the capacity of the plant.
And our existing order book does not reflect the CBG orders, right?
Some portion, not of these 5, which we have mentioned. Because this 5 -- again, I'm clarifying these are LOI. These are not orders. They are not forming part of our order book.
Okay. And lastly, last year, we're talking about some biofermentation plant, we had cracked some U.S.-based pharma customers and also some of the projects we are working on in the Brazil and we were expecting it in FY '24. So anything you want to touch upon on these 2?
We are referring to our international order or other international projects which we executed for pharma grade approval?
Yes, yes.
Okay. That was during the period of OECL. So naturally, the requirement of pharma grade was at its peak, and that's the project which we had executed. Currently, there is no big requirement coming up on the pharma side. So we are not executing any pharma grade [indiscernible] plant right now.
[Operator Instructions] The next question comes from the line of Ash Shah from Elara Capital.
I just had one question. The IOC JV will be functional by the end of FY '24. So hence, for whichever CBG plant, that IOC puts up, will it be via this JV? Or will it be open to the outside market competition as well?
The CBG project that gets decided to be put under the JV structure will obviously go through that. And as Sachin was mentioning, the JV is an umbrella JV. So there is special purpose vehicles below the umbrella JV that will actually be set up to put up these projects. To be very specific on the answer, there is no restriction for IOCL not to put up the project outside of JV or for us to set up the project outside of this JV. This is -- in that sense, it is not binding to each other.
Okay. And is it the same case for all the other biofuels as well like a SAF, biodiesel and all the other ones?
Yes.
The next question comes from the line of Ankita Shah from Lara Capital.
So wanted to understand the margins. We have seen a good improvement in EBITDA margins. And I just wanted to understand if the [indiscernible] of the same. So what kind of margins you make in the CBG segment and export orders will be in what range?
Ankita, your voice was cracking, but if I understood your question related to EBITDA margin for CBG and export. So the margins more or less for all the biology projects are going to be in some kind of a range. And it's a niche area where we are just putting up now. So it will take some time to discover what will be the right EBITDA levels of CBG projects. Yes, our export projects definitely carry a higher margin as compared to our domestic project that much I can tell you.
Exports will be in what range?
Exports will be definitely -- at least 500 basis points would be higher than the domestic projects.
And why [indiscernible]?
For a reason because in the domestic projects, we execute on the -- we execute the project, and then we do the project activity, which carries comparatively lower margin as compared to the engineering activity and manufacturing activity. In the international market, we only do engineering. We do supply of equipment, but we don't carry out project activity there.
No site activity.
No site activity. So that's the reason why these margins are looking different as compared to domestic and international.
Got it. Got it. And also for I take cognizant of the improvement in the export order that has happened. But if I look at the segment-wise, Bio-Energy has gone down and also on absolute terms, order inflow on a Y-o-Y basis has kind of remained stable. So is the understanding of the market opportunity for the Bio-Energy segment is slowing down or we are slowing down here or any impact on market share? So just wanted to understand order inflows from the Bio-energy segment.
Ankita, I think 1 quarter number will be very wrong for us to make any options. Although what you are seeing is very valid observation. As I was mentioning to you earlier that the nature of -- or the pie of -- the overall pie shape and size and [indiscernible] is set to change for us. We talk in terms of both domestic versus international. So we are paying more international -- so relatively speaking, more international. That's what I mean. Relative to -- not less domestic, but in a percentage term, obviously, the international business starts to grow, it will occupy a larger pie -- a larger slice of the price. So the domestic business will also grow.
A different -- and as we mentioned, we are not seeing any lit up on the Bio-Energy pipeline as well, on the ethanol pipeline as well. But if it comes to ethanol as a segment, there again, domestic plus, what you'll see on the Bio-Energy side or the export side as well. We mentioned about the U.S. opportunity and you and I are both aware that right now, U.S. market are a little slow on the decision-making or into the interest rate hike that are taking place there. But I know from the equity level and our engagement dialogue in what we are doing on the ground in terms of the engineering efforts that I mentioned about the FPL studies that we are in for several of our customers with the low carbon ethanol.
I think that is the start to -- there may be a quarter mismatch that they won't exactly be making, but nothing other than that. So I think we are equally bullish both on Bio-Energy segment and engineering domestic and export.
And sir, just one last on the EBP side, you said you have already reached 10% to 12% of blending. So how much awarding is still yet to reach 20% blending. And how much do you expect the [indiscernible].
So Ankita, as I mentioned, at the country level it's between 10% and 12% now and we need to go to 20%. So that means that the availability of ethanol has to almost double from the current levels, if not more. And then there are other factors that will come into play that was the regional or the state-wise availability, so we may have some imbalances to be corrected out there. There may be another balance or imbalance situation arising out of the fact of feedstock availability. There will be another one out of the operations efficiencies of the installed plants and their capacities and their seasonality, the monsoon rains within some state it happens.
So those factors will also start to play in. I think we have -- we have not gone through one full grain cycle yet. So I think it's the first time that we will go through a grain cycle this October when we'll start to understand what kind of offtake, what kind of stock level, what kind of supply chain that needs to get established. So maybe a little early for me to comment. But just to tell you that we are still at halfway of our journey on EBP20.
The next question comes from the line of Sagar Kapadia from Anvil Shares.
Sir, can you give me the breakup of the international orders INR 385 crores, they're into which segment energy, Bio-Energy or engineering?
Sorry, Sagar. Will you please repeat your question, because your voice is not clear.
Sir, this international orders we have got, INR 385 crores this quarter? Can you just break them up into the Bio-Energy segment or engineering segment, this figure?
There is a small segment in this quarter from the Bio-Energy, but the large component of this is from the engineering business.
And sir, from which geography, USA, EU or Brazil?
Or the engineering business, it's USA.
Okay. Sir, that is what I want to know. And sir, one more thing. The INR 100 crores CapEx you are going to put in the prior GenX. So what is the effect over which you have kept for this CapEx?
So the first leg of investment we are looking at around INR 100 crore and on the full capacity utilization of this facility, it will be somewhere about INR 1,500 crores.
INR 1,500 crores.
The next question comes from the line of Jay Shah from Capital PMS.
Congratulations for a good set of numbers. Sir, I just want to know one thing that there is so much bullishness and order book about ethanol. But sir, the products of ethanol at least in the sugar industry [indiscernible] and are we also working on any technology where we can treat the spend was because disposing the spent wash is a big issue, right?
So what's the question?
Do we -- are we working on technologies that can help also these distilleries to treat the spend worse?
Yes. Yes, of course, we already have several solutions in that space. And as you know, all the distilleries are now 0 liquid discharge. So we have definitive solutions in that space of 0 liquid discharge. And depending on what -- so if somebody can opt for CBG production out of spent wash, somebody can opt for power generation out of spent wash. And that -- and I'm taking this when we use our spent wash is more around the sugar-based distilleries, but they're also grain-based distilleries that will also produce their own equivalent of spent wash and that is a very fine news in terms of the animal feed DDG it is called. And so there are several positions and all of them are available from our -- and all of them.
So we have -- you are saying we have -- we already have use cases where the distilleries are using our solutions to treat their spent wash?
Yes, Yes. There are already 45 plants in the country that use spent wash for production of biogas and those plants have been supplied that for many years now.
The next question comes from the line of Manish Goyal from ThinkWise Wealth Managers.
Sir, my question is related to in terms of our evolving new technology on 2G for advanced biofuels as probably the challenge would be there on generating the incremental requirement from nonfood-based feedstock. So just like to know how is our technology partnership with Sekab and Gevo evolving for our foreign into international markets. And I believe Sekab had already done a pilot plant with the forest material residues. So any sense on how is it -- how the technology is evolving and how is Praj relationship building up with these 2 partners?
And then related question in terms of our own independent technology, which we have implemented at IOCL, how is the yield competitiveness improving in terms of how much are we near to the commercial viability as compared to the traditional ethanol? How has it progressed maybe in the last 2, 3 years? And where do we see it going forward? And also, we were expecting some breakthrough for 2G technology from the Europe market after some of the customers. Any progress on that?
And sorry for the longest question, but also related is that is Praj dependent on both these partners, Sekab and Gevo for the international market orders.
So Manish, thank you. Great question. So first of all, we enjoy a great relationship with both Sekab and Gevo. So just to clarify on the 2G ethanol technology, where the question was. We have our own technology when it comes to -- that we have technology for both. But when it comes to treatment of every residues like rice straw or wheat straw, et cetera, then we call it infinity and that is 100% Praj only. When it comes to forest residue treatment for ethanol, the technology is owned -- jointly owned between Sekab and Praj, yes, you're right.
But Sekab has a pilot plant in Sweden that they operated for many years. But we actually partner with them to help them take the technology development to commercialization level and we are now ready with it. And the technology is owned -- jointly owned because us and Sekab. And we have the responsibility to take this forward in the market, which is what we are doing now. So we are in dialogue with several customers in Europe for both Infinity and [indiscernible] as we call the technology that we have in the forest residue side to treat. And with Gevo, the relationship is different. With them the relationship is about the entire pathway of the SAF story that we talked about of being somewhat that feedstock to an intermediate call and then convert them to SAF that is where we are working with Gevo.
We will work with them when they put up their own projects, and we will also be front-ending the technologies when it comes to [indiscernible] because that's the role that we have and executing the job as well.
So any -- like maybe if you can give a sense as to globally how these technologies are evolving, how would Praj be probably positioned in that?
For second-generation ethanol, we have said this in the past as well that the most likely first market for this technology is going to be Europe because of the red 3 mandates that had been stable there and approved and passed into law. So we expect that will be positive movement on the war through everything into a bit of a turmoil, but now as being settled down, we have begun to see reopening the dialogue, and I'm sure that once the European summer is over and people are back to their workplaces, we'll start to see traction in that session as well.
So very clearly, Europe is a big market where this will happen. And we are in dialogue with several customers to set up these services for them. As we go through the year, we'll keep you updated. There are -- as you have correctly surmised, the world is watching on the Indian Oil project which we are just commissioned. And as I mentioned earlier, there is a recalibration required on the supply chain of the feedstock. Right now, we're not able to get the feedstock [indiscernible] system because of the different [indiscernible] availability. So that is being corrected now. And as soon as that is correct, we'll be able to keep you informed on what next. But once that is established, then we will be able to take it to the world.
Okay. But in terms of yield improvement or maybe commercial viability side, what do you expect, sir, where are we in terms of...
So Manish, as we see the yields are fairly okay right now and we can see changing the yields, but then there's also an operating cost question that's come in to being at what cost you want to improve the yield. But the good development for both the [indiscernible] and infinity space, second-generation [indiscernible], the development of core products. So I think that is the important dimension there as to what can we do because when we start treating a stock or a forest residue, several streams come out, the [indiscernible] screen as I call them. And these streams have to be then for the process to create higher value-added products for example, we can create bio-bitumen, we can create renewable natural gas or CBGs we call it in India. We can produce fertilizer, we can produce [indiscernible].
There are different streams that one could take up for evaluation. And I think that is important that how the core products develop, you'll be happy to note that we have already developed the bio-bitumen stream, we already developed the technology for lignosulfonate, we've already done the technology for [indiscernible]. We've been working here constantly to ensure how can we improve the viability of these projects and these plants. There are other question as well as to what price the second-generation ethanol price there because it is very low carbon intensity ethanol. So obviously, it is very different from the other ethanol, which has a very important role to play in the that market starts to develop. So we will see this development. It is slightly long term, but this is what we'll see in this space. I hope I answered the question.
Yes, sir. And sir, when do we expect the 2 more 2G plants, it's mentioned in Annual Report that HPCL and...
Yes, they are progressing well. We have supplied all the equipments from our end that we are supposed to do. The projects are now on the construction stage, and we expect that during next year, they will start to -- the second half of next year is when they'll go up for commissioning.
And sir, last question on the -- our pilot plant, which we are probably setting up [indiscernible] and probably food grade as well. So when we do -- when does that plant starts?
That would start at the end of this year.
I now hand the conference over to the management from Praj Industries Limited for closing comments.
So thank you, everyone, for your time today. In case you have any more questions, please feel free to write us at info@praj.net and we look forward to meet you again on next analyst call. Thanks again, and have a nice day.
On behalf of Praj Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.