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Praj Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Praj Industries Limited Q2 and H1 FY '25 Earnings Conference Call.
[Operator Instructions]
Please note that this conference is being recorded.
I now hand in 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 for 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 -- first half ended September 30, 2024.
Before we begin, let me mention a cautionary statement. Some of the statements made in today's earnings conference 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 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 hand it over to them for the opening remarks. We firstly have with us Mr. Shishir Joshipura, CEO and Managing Director; and we also have Mr. Sachin Raole, Chief Financial Officer and Director of Resources.
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 day, everyone. I welcome you to Praj Industries earnings call for quarter 2 and H1 of FY '25. I trust all of you had the opportunity to go through our results for the quarter ended 30th September 2024.
Let me start today's call with an important development in biopolymer space. Earlier this month, Praj's first of its kind demo facility also India's first, for biopolymers was innovated by Honorable Union Minister, Dr. Deepender Singh, Minister of Science and Technology.
This facility showcases our capability in renewable chemicals and materials space. This facility will demonstrate Praj's indigenously developed solutions in the RCM space. This integrated facility houses fermentation, chemical synthesis, separation and purification sections along with other supporting sections and is spread over 3 acres. This facility showcases production capacities of 100 tonnes per annum for lactic acid, 60 tonnes per annum for lactide, which is equal to 55 tonnes per annum of PLA.
Recent announcements were by the government and approval to the Bio E3 policy for fostering high-performance biomanufacturing is a very, very progressive step in this direction. The Bio E3 policy will give boost to innovation-driven R&D and manufacturing as also commercialization of technology. Our demo plant is an important global rate through as it opens a completely new dimension in form of renewable Chemicals & Materials segment.
Global economy is witnessing continued challenges arising from unstable geopolitical situations by relatively tight liquidity, uncertain and volatile energy prices and changing climate. While some of these events have created a short-term challenge, they have also enhanced the need for accelerating the push of sustainable and renewable energy.
Increasingly, governments are realizing and committing themselves to enhance the share of biofuels in their respective economies.
Coming to business performance, along with Bioenergy segment that continues to develop positively, our business is growing in multiple dimensions. With healthy order and inquiry inflows from bioenergy, energy transition, services and engineering verticals from both domestic and international markets in the first half of the year. With 7 positive developments in the ecosystem, the market -- in the market, it augers well for continued growth journey as we move forward.
On the domestic bioenergy business front, in a much awaited development, the government lifted restrictions on use of cane juice, cane syrup and B-heavy molasses for ethanol production. This has not yet resulted in any significant movement in the market. Sugar plants are expecting a long-term visibility for the policy to take further investment decisions for setting up small-based plant -- small plants based on these feedstocks. The ethanol producers are also awaiting price revisions for ethanol.
The grain-based distilleries are now allowed to purchase up to 2.3 million metric tons of rice from FCI, excluding for small production. However, the indicative grain price is very high, posing a big challenge on project viability. Several are now opting for maize or corn as feedstock of choice.
And government has also highlighted its additional focus on enhancing feedstock availability by increasing corn production in the country. Capacity built up in this quarter was completely dominated by starchy feedstock with 100% share of our order book being from starchy feedstocks for this segment. The target of 20% ethanol blending with petrol on track. The food ministry has [ approached Praneeti Ayo ] to prepare a road map for 25% blending. This is an encouraging development, which can further drive ethanol demand and translate into a significant business opportunity for us.
On international bioenergy front, we are witnessing strong inflow of inquiries from Brazil, Argentina and Paraguay for corn ethanol. There are many positive developments from the policy point of view. Brazil has legislated Fuel of the Future law that will increase the default blending to 30%, up from 27% currently.
This is expected to create a demand for an additional 4 billion liters of ethanol. And we expect starchy feedstock to have a majority share of this additional demand given the feedstock dynamics in the country.
Argentina, Panama and Paraguay are discussing increased blending mandates, which will result in business opportunity for us. Africa has announced ethanol for clean cooking initiatives that will likely drive ethanol capacity creation in Africa.
The world awaits the outcome of the U.S. election where the market is awaiting clarity on 45Z of the Inflation Reduction Act. We are witnessing increased traction on SAF-related projects on ATJ [ per se ] and expect positive developments in low-carbon ethanol demand as well as these as we move forward.
India is now the official headquarter of the Global Biofuel Alliance, and we expect significant activities to get underway during COP29 event in Baku scheduled early next month. Praj is invited to be part of this event as a leading technology partner. Praj is also invited by Brazil government to be a part of a dialogue sponsored by them at COP29.
These developments are indicative of Raj's growing technology products on the global front. Our continuous endeavor to help enhance value for our customers and help them win is leading to increased focus on core product creation from existing feedstocks. With a view to help starchy feedstock-based projects, we have commissioned the demo plants for production of corn oil at one of our customer's installation.
Corn oil is 1 of the byproducts at the corn-based ethanol plants. This plant can produce 4 tonnes per day of on oil. It is mainly used as a feed for biodiesel and has applications in the paint and poultry industry. Corn oil module will help enhance financial viability of all corn-based ethanol plants.
A couple of years ago, we have spoken about a string of first approach for Praj's growth states, enhancing the service business portfolio, which offers solutions across a broad spectrum was one such approaches. Our services business is now seeing a healthy growth in order book and revenue, from both domestic as well as international markets.
Biogenics CO2 capture, fermentation process management, operation and maintenance services are increasingly finding higher interest with a healthy inquiry pipeline. Our order book for H1 of FY '25 is 40% higher than our order book for the entire last year for this segment. On 2G front, IOCL plant recommissioning progress is as per plan. We are working closely with the IOCL team to ensure ramping up of the plant capacity in gradual manner.
On the CBG front, the developments are gradual and in positive direction. Several elements of the ecosystem are aligning for driving future growth in this industry. We have achieved our first order for plant, exclusively based on napier grass as also our first interest order for biogas desulfurization possession from [ Philippines ]. The inquiry pipeline is developing positively, and we expect it to translate into from business in the second half of FY '25.
Moving on to Engineering business. On the energy transition and climate action front, the process of Mangalore facility approval by our clients and building up the team is going as planned. We have already received the approvals from 4 of the leading global EPC companies.
As the process of approval and then discussing new orders itself is long, we have not seen any major outlooking for Praj Genx, though the inquiries are building up meaningfully. Our dialogue with leading solution providers in the ETCA space for modularized solutions has progressed well, and we expect them to lead to a positive results in the near future.
The current expenditure is for building the infrastructure and the revenue is expected to follow in due course. Our Zero Liquid Discharge business is also gaining momentum with increasing acceptance of our modularized solution. First of our modularized [ Delhi ] plant was installed in a record time of less than a week. Please compare this to a typical time taken at site, which is of the order of 6 months.
Our PHS business is witnessing a very healthy buildup of project pipeline which we expect will translate into orders as we move through the second half of the year. Overall, we see a positive development for all our business lines.
With this, I will now hand over to Sachin for his comments on the financial performance. Thank you.
Thank you, Shishir. Good day, everyone. Let me take you through the financial highlights for the quarter and half year ended September 30 '24. The consolidated income from operations stood at INR 8.16 billion in Q2 FY '21. as compared to INR 8.82 billion in Q2 of FY '24. EBITDA stood at INR 744 million in quarter 2 of FY '25 as compared to INR 848 million in quarter 2 of last year.
Similarly, profit after tax stood at INR 538 million in quarter 2 of FY '25 as compared to INR 623 million in quarter 2 of FY '24. For H1 FY '25, income from operations was INR 15.15 billion as against INR 16.19 billion in H1 FY '24. PBT before exceptional items stood at INR 1.53 billion in H1 FY '25 as against INR 1.62 billion in FY '24.
PBT after exceptional items stood at INR 1.81 billion. PAT of INR 1.38 billion in H1 FY '25 as against INR 1.21 billion in H1 FY '24. Though the order book is healthy, in bioenergy segment, lower pace of execution has impacted the top line in this quarter.
Improved contribution margin is on account of softening of raw material prices and favorable sales mix. Export revenue accounted for 27% of Q2 FY '25. Of the total revenue, 68% is from bioenergy, 24% from engineering and 8% is from PHS business. The order intake during the quarter was INR 9.21 billion, with 94% from the domestic market. Of the total order intake, 88% came from bioenergy, 6% from engineering and balance 6% from PHS business. The order backlog as of September '24 is at INR 41.5 billion, comprising of 72% of domestic orders.
Let me now explain some of the variances in the numbers. Increasing the employee cost is because of addition of resources in our subsidiary called Praj Genx and services business and normal annual increments.
Mark-to-market of forward contracts resulted in a loss in H1 FY '25 against the profit for H1 FY '24. Higher finance costs and depreciation, amortization cost is on account of investment in new facility at Mangalore for Praj Genx. Cash in hand as of 30th September '24, is INR 7.51 billion. I now conclude my remarks, and I would like to thank you all for joining us on this call. We will now be happy to discuss any questions, comments or suggestions you may have.
[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities.
Yes.
Sorry to interrupt, could you come a bit closer to your handset.
Is it better now?
Yes, sir.
My first question is on the P&L and the balance sheet items. Can you please help us with the CapEx, the CapEx at Genx, which you have capitalized in the first half, and the MTM losses you have booked in the -- in Q2 FY '25?
Yes. So let me just give an answer for your second question related to MTM loss on ForEx. In the last year, H1 '24, we were having the ForEx gain versus in this quarter, we're having ForEx loss. It is mainly the mark-to-market of the forward contracts. And it is not the cash losses, which we have booked. It is the situation of when you are doing mark-to-market of forward contracts as on the reporting date. The forward contracts have shown because of the adverse movement of euro specifically, not even euro and -- even dollar, it is mainly on account of euro movement, which has happened in the last week of September.
Let me just clarify, actually, this is only a book loss. It is not a cash loss, one. And two, the movement of euro has actually reversed again in the first week of October. But for the date of 30th September, it has resulted into loss on our book.
Your first question was related to the CapEx which we have done on the past Genx. Yes, the facility which we are building up in Mangalore, the facility is actually taken on a lease as per the accounting standard, Ind AS. We have to consider -- the entire lease rentals, which are getting paid out on this facility has to be capitalized and to be provided in the form of depreciation and interest.
The line item on the depreciation and interest is on account of that. If you look at for last 6 months, our depreciation was in the range of what INR 20 crores, INR 18 crores. But if you look at for this year, it is -- for the half year, it has translated into INR 40 crores, almost INR 22 crore increase on top of that depreciation, which is mainly coming up because of this Gen facility, which we have put up.
Is it possible to quantify the MTM losses you have booked in Q2 FY '25? Is it possible? Is it possible to quantify the higher...
Hello. Are you able to hear us?
Yes. Yes. Am I audible?
Yes, sir, we can hear you.
Is it possible to quantify the MTM losses in the Q2.
[Technical Difficulty]
Sorry to interrupt, sir. I believe the management is unable to hear us.
Hello?
We can hear you. Your line has been reconnected.
I think I quite didn't get the MTM last year you booked in Q2. Is it possible to quantify that number or not?
Could you just go a little slow and a little loud, please, the line is not clear. Sorry for that.
Yes. No, no, issue sir. My question was, is it possible to quantify the MTM losses in Q2?
Yes. We got total concern on these MTM losses was INR 10 crores.
INR 10 crores. My last question is good to see improvement in Q-o-Q order inflow in ethanol business in domestic. But engineering order has declined sequentially. I think you alluded to the fact that Genx is getting ready.
We're not able to hear your question and sorry for that. We are not able to hear you well. Operator, could you please look into this, we are not able to hear Mohit well..
Sorry to interrupt, sir. Moving on to the next question. The next question is from the line of Amit Anwani.
Sorry. I said we cannot hear Mohit. Can you please intervene for me.
Can you hear me, sir?
We can.
Please call back Mr. Mohit. He had a question, which we could not hear. So please call him back and see if we can put him back in the queue. Okay, we can go ahead with the next question.
As the current participant is not answering, we'll move to the next question. The next question is from the line of Aditya Mongia from Kotak Securities.
I wanted to get your clarity on first things first -- see there is still some that gives some...
Aditya, can you please be a little louder? You wanted clarity on what.
Is it any better now?
Can't hear you, sorry.
Very low.
Mr. Aditya, could you come a bit close to your handset?
Okay. I'll try to speak louder. Is this better?
No. We can't hear.
Sir, could you speak again?
Sorry. I think this should be better now, sorry for that.
Yes. It is good.
So I'll go ahead with my question. The question that I had was more on this -- a recent judgment has been passed, which gives powers to the states to kind of put taxes on top of industrial alcohol. I wanted to clarify whether there is clarity, whether the blending ethanol also is involved inside the judgment or not?
No, that is specifically as it gets to industrial alcohol and it's more a question that relates to who has the authority between the state and the center and has no impact at all.
Right. So ethanol for blending is not classified as industrial alcohol, right? Is that what you are also trying to say.
Differently taken, yes.
That's good to get clarity on. The second thing I wanted to get a sense from you is on a 1H basis, how much has been the Y-o-Y movement in your ordering from 1G ethanol? And how to think through this number over the next 12 months or so?
Sorry, what's the question you said? Movement on what?
Movement on 1G ethanol and the related ordering for the first half of this fiscal. And how to think through this over the next 12 to 18 months?
Compared to -- and you want it in relation to what?
Yes, essentially, the Y-o-Y growth trends is what I'm trying to focus of the past and the future?
So September '24 to September -- June to September or you want September or you on September? Just trying to understand so we answer right -- in the right way. Hello. Can you hear us.
Yes, sir. Mr. Aditya, please go ahead with your question.
No, we can't hear Aditya at all.
As there is no response from Mr. Aditya we'll move on to the next question. The next question is from the line of Mohit Kumar from ICICI Securities.
As there is no response from the participant, we'll move on to the next question. The next question is from the line of Amit Anwani from PL Capital.
Am I audible?
Yes, please.
First question, sir, you highlighted on the international opportunities in Paraguay, Africa, Brazil. Wanted to understand are we looking for starchy plants only in this area -- in this geography.
And second, I wanted to understand if you could substantiate on the pipeline, whether value or volume in these geographies, which we are looking? And how is the competition, any competing company globally where we are competing and we have advantage to get orders in these geographies, yes.
Okay. So thank you for the question. Yes. So these opportunities are not necessarily all of them are starchy. I think Africa can be a mix between the 2 for starchy and [ sugary ]. The operation in Latin America currently is based on starchy feedstock. Two, because of the way the whole business has evolved in that part of the world, the starchy feedstock has a clear play for people and companies experience on handling starchy stock, obviously Praj has got tons of it.
So we are able to create a very clear value proposition in those markets around starchy [indiscernible] as you are aware. We have already commissioned the plant. We are engineering for 3 more. And I'm sure that as we go forward, we'll probably hear about further developments in these markets as well.
The second thing that is happening is that governments in these markets are pushing for higher blending percentages. As I mentioned, Brazil has passed a law, which now makes it mandatory for -- just like we have E20, they will now -- up from E27. 27 to 30 for them is almost 4 billion liters of annual production. Most of it is likely to come from states or not all of it. And that puts us in a good position because our starchy feedstock solutions are finding good traction in these markets.
Sir, any addressable -- so are we expecting 5, 7 plants together from these geographies? Anything on what are the expectations?
As I mentioned, we are already engineering 3 projects. And as we go through the time line of the next 6 months, you will hear more about it.
Right. And on service, if I heard it, you said H1 is 40% higher than full of last year.
That is correct.
So any sense what was the absolute number for H1? And going forward, what are the expectations with respect to service revenue contribution? And second, from where exactly this is coming, are we focusing -- have started focusing in this area now? Or is there any opportunity which has gathered pace and we have started getting good volumes in service?
So Amit, we just don't give the segmental kind of a number. But let me tell you the services business that we talk about has 2 elements. One on the performance enhancers, which go for our ethanol business and the [ coined in ]. We have seen the traction happening on both the sides.
And performance enhancers, if I may say that, it has component of domestic and international board. And the uptick which we are seeing is actually happening in all the segments. Going forward, your question is related to what is going to happen in future.
We see that this momentum for services business is going to continue. Rather, other businesses will also start contributing to the Services business, especially now as the CBG is coming to a maturity level in [ the sense ] the plants are coming up for finality, the O&M is starting. Our performance enhancers for price is also going to be a part of this entire services basket.
So going forward, we see that the momentum for services business to continue. Additionally, we are also seeing a big move happening globally on capture of biogenic CO2. There's a CO2 that gets released in the fermentation process. And we expect that this could become a significant product line as we move forward. We already have a few installations that we built, but they were far and few in between, but we now see a very consolidated movement happening. So as we move through the time line, we will see this develop also as a part of our services business opportunity.
Sir, lastly, on gross margins. This quarter and last quarter, we did I think 50% last quarter. This quarter, we did 47%. And I'm ruling services business might have better gross margin. And then ETCA is coming in. So would you like to answer on sustainability of gross margin at this level? Or it will settle down to some lower sustainable level. Any thoughts on gross margins post ETCA revenue also coming in next year?
I think the quarter 2 margins should keep on continue on a sustainable basis. Of course, on a quarter-on-quarter basis, you'll see some kind of a variation happening for the reason to what extent we are executing the engineering services order, which are not the Services business segment, which we are mentioning.
And second one is the sales mix, mainly on the domestic and international. So to some extent, there will be some variation. But yes, the range is going to be more or less same, what is getting reported in this quarter.
The next question is from the line of Deepesh Agarwal from UTI AMC.
Am I audible?
Yes.
Yes. Sir, my first question is on CBG. Was there any order inflow for CBG in the first half?
Was there any?
Was there any order inflow for CBG in the first half?
As I mentioned that we have signed the deal already in the book. There's a first, a project based entirely on napier grass. So we are building projects where napier grass is 1 of the feedstocks. But now this is exclusively a new graph. There is some development, which is still premature to talk about.
But there the market is -- there are companies in the market or interested developers in the market who are thinking in terms of growing their own feedstock and then put up the CBG project and napier grass is likely to be what I would call as a feedstock of choice. So this is a very important one. We get a project to build where the promoter has his own feedstock growing area and connected to a data plant.
So -- and this is the likely model. We think that this could become a decent model as we move forward. We're to see how these things develop. And that is why I mentioned that, that's an important breakthrough for us.
Okay. And sir, how has been the progress on the execution of the [ CBG ] plants, which we took last year, the 5 CBG plant.
So they are progressing well, and actually start to see them come off -- on the noticeable level of -- in sales and invoicing as we go through the second half of the year.
Sure. Sir, if I look at your order inflow during the quarter, I think exports been quite weak. While last quarter, they were quite strong. But if I look on a trend basis, your exports this quarter has been quite weak. Any comments? Is it something happened during this quarter in the export market?
Yes. No. I mean it's just a time line issue. These are very large contracts, especially engineering dominated as well as bioenergy. And both of them is that the timing issue. We just couldn't manage to close them out during the quarter. But as I was mentioning, the pipeline is extremely strong. Our dialogues are very strong.
So we aren't -- what I would have said, we aren't worried. At the end of 9 months, we expect it to be back to normal.
Sure. And sir, lastly of late, there has been a lot of articles suggesting government may look at diesel blending while timing. We may not be able to come in. But any thoughts where are we in terms of technology for diesel blending?
Yes. So there is -- as you probably estimate that we don't have to discover -- the molecule is already there, and the alcohol molecule is already there. Now we just need to see how the engines behave and what their emissions are and the other dimension is on vehicle performance.
So there is a structured program that is currently underway. And I think we will be able to talk about it. We are right now bond by some clauses in the agreement, but we will be able to talk about it once the tests are done. It is progressing positively is only comment that I can make at this stage.
The next question is from the line of Sani Vishe from Axis Securities.
I think my first question is on slide lines. So we can see the order book impact for bioenergy has been really very strong this quarter. But on the other side, engineering has been, I think, 1 of the weakest quarters in maybe last 2 years. So what are your expectations for the next 2 quarters? Do you see engineering orders improving and we see the biology momentum to continue?
So as I was mentioning in the earlier question, it's been just a timing issue for a few contracts on engineering. There are very strong dialogues that are underway. We expect things to be normal within the second half. So on the engineering side of business, absolutely no concern there at all.
We are also expecting bioenergy to continue to grow. And both in domestic and international markets, we expect very strong performances to come. One of the big movements that we'll start to see as we move forward is the development of the SAF market, which is something that we haven't talked about much yet. But probably as we go forward through the second half of the year, we'll start talking about it.
And it clearly has 2 elements. There's an engineering business there. There's a technology business there, and we will see how -- on the low carbon ethanol side. So we'll see how both of them combine together. And that's why that gives us the confidence to speak that as we see our inquiry pipeline, our dialogue with customers, our interaction, we are very, very confident that second half of the year will sort of iron out these creases that have developed temporarily for this quarter.
And just 1 small question. So on the MTM losses, so if I understand correctly, it would be in inverse proportion to EBITDA, right? Because you would be hedging some of your exposure. So does it mean that going ahead, if the MTM losses come down or if there is a gain, then the EBITDA will be on slightly lower side?
So if you look at from the MTN point of view, it gets evened out over a period of time. And the impact of NTM on EBITDA, I don't think should be significant one. Because this is the element which is coming up every quarter for us. Sometimes it is positive, sometimes it's negative. Yes, this quarter, it is negative by INR 7 crores, not necessarily it will continue in that way. But your point is whether it will have an EBITDA impact, I don't think it will have a significant impact on my EBITDA.
The next question is from the line of Nirav Vasa from ASK Portfolio Managers.
Sir, my question is pertaining to the proposed ethanol blending in diesel. So if I look at the petrol and diesel consumption statistics, and diesel consumption almost around 2.5 to 2.7x the petrol consumption in India.
So if the diesel blending has to be done in India, and based on your assessment, is there enough feedstock in India to feed this kind of massive demand? Because as I understand, we are around -- the petrol blending is around 14%, 15%, which we intend to increase to 20% in a couple of years. So there is an organic demand coming from the petrol side and the demand boost if it comes from diesel is going to be magnonimous.
So wanted to understand your thoughts on the ecosystem as a whole. And what kind of CapEx can happen industry-wide if this starts.
So yes, I think a great question. From the perspective of feedstock, I think as you know, there are 3 broad categories in a -- category of feedstocks. Sugary feedstock on which, as we mentioned earlier in my opening remarks as well that new policy now permits juice and molasses B-conversion and syrup conversion directly to ethanol, that's a boost. That's number one.
Government is focusing very strongly on maize, which is starchy feedstocks. That's another boost release, which releases rice. There's another boost. What's more important is that there's a completely untouched area of cellulosic feedstocks, which is not even, I would say, we have not even started to export it yet.
So -- and that is why comment on IOCL commissioning is very important that as we go through the second half of the year, we will see that project commission and demonstrate that it is possible to use cellulosic feedstocks and convert them to ethanol, and that could become a further big boost.
So from the perspective of feedstock, I think right now, we are pretty okay, that's number one. Number two, we are also working, as an organization, we're working from the leading institutes in the country, to see what can be done. Because I think we have to understand that this is not only about ethanol production, it is also about welding up the agri community, and finding an overall sustainable solution.
We are working very closely with VSI to create an intercropping model that will allow us to get the benefit of not only having a healthy feedstock pipeline, but it will also help us address in time to come, and we'll talk about it maybe a little down the line. The carbon intensity questions on the feedstock because if it's an intercropping model, then you get huge advantages on -- on the carbon side of the equation, and that is something that will become very, very mandatory for SAF. Even for other fuels.
So currently, I don't see a problem for feedstock availability. As you are aware, the DFPD has already recommended to [ Nithi ] that we can very easily go to E25 in the country without any concerns about feedstocks. So let's put to rest any concern that we may have on feedstock at least in the visible term.
Sir, but as a part of developing the entire ecosystem to even -- as we are talking of integrating diesel -- as we are talking of integrating ethanol in the diesel ecosystem as well. So my understanding is that the agri waste or the cellulosic waste, which was there, that has to be there in the -- that is needed at much larger quantities.
But today, as we talked, there is already an alternative use of this bio -- for this agri base, which is there at local level. So if the -- so if all of a sudden there is a huge demand boost then the prices of these agri waste can also boost up and that can impact the -- that can impact the -- what I can say, overall project reliability as well. So any thoughts are you able to see on it, ease of availability of biostock? And what kind of CapEx according to you, can that happen -- can it lead to, assuming it happens?
So I think great question. You're right that, a, there is whole post, and this is now running into millions of tonnes of estimate on the biomass or the cellulosic waste that is not being put to any use in the country right now. Farmers just torch it. So that's -- so from the perspective of availability, I think we are not even scratching the surface today.
So there is -- it's easily possible for me to meet almost up to 20% of the country's demand of energy through cellular waste or processing. So I'm not worried about that part. What is of importance is that we establish the correct supply chain for this and that needs to get organized.
I think that's 1 area where we definitely need to work, that as we need to organize ourselves as an industry. When I say ourselves, I'm talking about the country, and we create a supply chain mechanism that allows this agriculture waste to reach from farm to factories. And I think that's a very important step that needs to be taken forward.
But that's not the only one. I think there is also a very important biomass, which is likely to be increasingly more available and that's bagasse with the sugar mills. As a renewable power equation in the country settles to dimension, which is dominated by solar and wind, we expect a lot more bagasse to become freely available, and that could become an excellent feastock, 2G feedstock for production of ethanol. And we do expect that as we move through, let us say, next calendar year, we'll be able to see some constructive development of that dimension as well.
Sir, bagasse is already used by the existing sugar companies for the coagent, right?
Yes. But they have -- as you know, sugar mills has done for 4 months. Nine months in a year. So -- and the excess quantity of bagasse, that's increasingly projected to be made available. And then we have to find a good use of it. And we believe that on 2 counts. One, availability of feedstock, all the supply chain issues is already solved. Bagasse is a very good feedstock for 2G as well.
And more important, it will also help meet the lower carbon intensity targets that we will have as we move in the future. So it's a feedstock that ticks on multiple boxes. So we expect that, that could become, one. Two on the rice straw, I think, as I mentioned to you, we have not even begin to organize our entire value chain -- supply chain in a very, very constructive manner.
The initial efforts right now underway. And as I see it, it's moving forward very constructively. There are platforms that are getting created. There is growing awareness, think, oh, this is possible as a business. So farmers today burn it. From there, they'll start to get the value for it. So I think that's a big travel. And I'm sure that we will see emergence of cellulosic feedstock supply chain also emerge as we move forward.
Got it. My final question, sir, like in FY '24, our diesel consumption was almost INR 8,950 crore liters. So assuming if I want to add 1% ethanol into it, my incremental demand for ethanol can be almost INR 89 crores to INR 90 crore liters. So if INR 90 crore liters of ethanol has to be additionally fed into the system, what kind of CapEx would it need?
I need my calculator for that. Because I don't know the feedstock, so there's not already a rock-steady answer for you. But we will get back to you on that 1. Yes.
Broadly, any number can you give like, say, for 1 crore liter of ethanol, what can be approximate CapEx? And what can be -- what can be the Praj scope of work in that?
Nirav, if you look at it from a ballpark number point of view, and let's assume 100 crores to be added as a capacity for ethanol, and if we are looking at 100 KLPD kind of a plant, standard size of plant, of codesigned the standard size has gone up now. When we are looking at, at least 30 to 35 plants to come up, every plant will cost depending on the feedstock, maybe INR 100 crores, INR 225 crores.
So what, we are looking at, at least INR 3,000 crores to INR 4,000 crores kind of an investment. If you are looking at only the process plant to be taken care of by Praj, maybe 40% to 50% of that. So around INR 1,800 crores to INR 2,000 crores of.
Every percentage increases in blend. Yes.
[Operator Instructions] The next question is from the line of Shailesh Kanani from Centrum Broking.
Is my voice audible, sir?
Yes, Shailesh.
Sir, in your opening remarks, you said after the cap removal on feedstock, the traction on the ground was not very strong. But still in the quarter, we have seen a good momentum on the bioenergy front in terms of order inflow. So -- and you touched upon CBG as one napier grass order received in CBG. So whatever molecule has kind of picked up the order flow -- has helped the order inflow for bioenergy in this quarter?
So Shailesh, what I was mentioning was that the sugary feedstock-based release that happened, the restrictions on use of Syrup, juice and Molasses-B went away. However, obviously, you will know this is too close to the season.
So maybe for the next year, people will start thinking about putting capacity based on these feedstocks. So this year was just too short a time for anyone to do anything. So those who have the plants will be able to operate them, but those who don't have the new plant cannot build in such short time. So maybe if we start building now, it'll probably be ready for next season.
In terms of order intake, as I mentioned, 100% of our order book is on starchy feedstocks. So Maize has become a big focus for everyone, all the elements in the value chain, and I think that's what we are seeing as well. We see a big push forward on maize.
Okay. And sir, second question with respect to our napier glass CBG plant. Vis-a-vis, can you throw some light about the [ IRR ] that project would generate vis-a-vis other feedstocks like [ karishma ] or rice straw. Any numbers or anything you can help on with respect to yields of that feedstock. And also possibility of napier grass per se.
As I was mentioning, napier grass is a very interesting crop actually. You can take 5 crops in a year very interesting. You can take, yes, 5 crops a year, if you can manage your plantation well. Very -- direct from field to factory kind of a feedstock, very potent. Easy to -- not too many -- there are some complexities with it, but technology can very easily address them.
So that's not a problem. So napier grass is a good feedstock to have. As I've mentioned, we have just seen initial trends where people are saying, "Okay, I will grow my own napier grass and I'll put up the fig." So that's the first project that came along, that's the 1 that we are building, where everybody will be able to grow and then take it or some will grow and some will supply. So that, time will tell how the whole ecosystem develops.
But it's a good feedstock to have. It has very -- is very remunerative for the agriculture, for the agri ecosystem. And if we can think of a plant located in the middle of napier grass plantation, then that is a very good 1 to have because then all the nutrients that come back from the process in terms of liquid and solid biofertilizers can all go back to the same field. So it becomes very, very -- a completely close loop. So no water required, the water that comes goes back, the nutrients just come and go back, the soil remains rich and fertile time.
So there are my dimensions on the agri side, which are very positive. And we expect that maybe this -- looks like from the dialogue that we are having that this could be a model that could develop further.
And just a follow-up on that. Is this the same private conglomerate which you gave us the 5 CBG orders, napier grass?
No, different. There, we are doing a -- those projects have napier grass as the feedstock, but that's not exclusive on napier grass. This 1 is different.
So can you throw some light? I mean say, is it private or a government company, can we show some light on the client side?
Private sector, entirely private.
Okay. Sir, can I squeeze in 1 more question?
Sorry to interrupt sir, please rejoin the queue for further questions.
Sorry, I'm not controlling the time.
The next question is from the line of Sagar Dhawan from ValueQuest.
Sir, are you able to hear me clearly.
Yes, Sagar.
Just on the execution side during the quarter, I just wanted to get a bit more color on the execution. So we a decline on the execution on a Y-o-Y basis. So just wanted to get some color on the domestic bioenergy side. Can you talk about what is sort of aiding the execution over here by basically in terms of the feedstock, sugar versus starchy, where does the problem lie actually in terms of execution?
Yes. So Sagar, if you really think about it, no, just a year back, the ban came, right, on the feedstock, one on rice and then on Sugar feedstock. So the projects that are in pipeline at that time, which should have actually come for execution now in first 2 quarters did not go through, right? Because -- and that's why I said that it got notified a bit too late in the year.
Even if I start constructing some projects now, I won't be able to catch the season because it will take 4 or 5 months, 6 months to move forward, by the time the season will be over. So I think some recasting of the plan has to be done for those kind of contracts, which are -- which I would say our -- ready to execute, but had stopped.
So now they will start again, the bankers have to take a view, et cetera, et cetera. So those will move forward.
In terms of execution of starchy feedstocks plant, I think they are in general moving fairly okay. There are some issues around bank funding, et cetera. But nothing -- no sort of clarification required on the policy side of the ecosystem side of the dialogue.
Understood. So basically, can you provide the mix of your order book in terms of sugar versus starchy, domestic bioenergy.
I said that 100% of the order book is starchy. [ None ] of those order were finalized in the quarter, none. Not only for us, the market didn't finalize anything.
That's on the intake. Actually, I wanted to get a sense on the current order book -- order backlog. What is the mix on the order backlog, sugarbeet vs starch.
Even in the order book, if you will see the sugary feedstock will be a miniscule number right now, maybe 1. Because last 3, 4 quarters, we are running, except for 1 order that I know personally, we don't have a sugary feedstock-based order. Most of them are starchy feedstocks based.
Understood, sir. Understood. So my second question was on the SAF opportunity. Last quarter, we had announced an order for a greenfield SaaS plant in the U.S. Just trying to understand what percentage of the CapEx do we cater to from this particular order of that customer on the CapEx side to get a sense of the addressable opportunity for us?
Sorry, could you just repeat your question? I couldn't catch what you want to know.
Yes, sure. So basically, on the SAF side, in the U.S., we have received an order from U.S. in the last quarter for ATJ pathway SAF plant. So just wanted to understand what percentage of CapEx is Praj able to address in the overall CapEx of the greenfield staff plant?
Almost -- it depends on the scope of course. What we can address what we can -- there's other dimensions as well, but between 40% to 50%.
Okay. Okay. And just to clarify, there are 2 parts to it. Basically, the ethanol plant and the isobutanol conversion to SAF. So does Praj address both these or only the first step, which is making the ethanol from that?
So Sagar that's not the way. An ATJ plant, alcohol to jet plant, Currently, all alcohol-to-jet projects that are being announced are around ethanol to jet. So alcohol is for the ethanol in these projects. So they are only setting up these alcohol, they buy -- in most of the cases, these customers are saying we will buy ethanol from the market, okay, number one.
Then, number two, if they set up their own, then, of course, what feedstock, what [indiscernible] questions will come into play. So there are projects which are also contemplating to set up their own ethanol plants. There are projects, they're saying, "I already have a small plant. Now I want to forward integrate into SAF." And then for those cases, the carbon intensity becomes the question. So they have to see what solutions are required by them to address, whether in terms of process integration, whether in terms of process optimization. How do you go about reducing the carbon intensity, carbon sequestration, about oral score.
Because SAF, a, if it is in America, in the United States, then we need to go to a score, which is 50% below the existing number for the SAF. And that means that the ethanol has to be at a score of about 35, 30 in that range. So how -- and by way, is the current ethanol production is at a number of about 68. So we go from 68 to 38, that's the first step.
And then you integrate that into the SAP project. So there are multiple loops that need to get answered depending on where the developer is today, an existing ethanol producer, he want to put up new ethanol or he just want to put up SAF project and buy ethanol so there are different dimensions for that.
Just a follow up on the ATJ side or the APG plant setup, what is the addressable opportunity in the U.S. that you see over here?
Sorry what is the addressable opportunity in the U.S.
In the United States for ATJ plant, ATJ setup.
For a given 1 ATJ plant or all the ATJ plant?
For all the ATJ project, for all in the U.S., overall opportunity.
Okay. So I need my calculator again. This is actually pretty large. So let me tell you. So United States has said that they will -- the target is to put 3 billion-gallon capacity for SAF, okay? Roughly, just putting for ease of calculation now. 2 billion, 1.6 to 2 billion will come through the Haifa route. And after that, everything is likely to come through, at least in the near future, likely to come through the ATJ route. So let us take up to 2030, it's 1 billion gallons of ethanol to be produced, right.
Is that a fair [indiscernible] -- sorry 1 billion gallons of SAF. So that means it will need 2 billion gallons of ethanol, okay? So 1 billion gallons of SAF equals 2 billion gallons of ethanol, okay?
Now if I look at a project size of typically 100 million gallons per year of ethanol, which will result into 50 million gallons per year of SAF. So 50 million gallons into a billion, that's 20 plants, right? So 20 projects have to come up between now and 2030 to address -- and I'm not talking only the SAF opportunity, the ATG part of it. Each of this is a $400 million potential for us.
But again, there are many dimensions to this. There are technology, who is the technology supplier, who is the EPC, what's our risk appetite, what kind of guarantees we can provide. So there's multiple dimensions, but from a market perspective, this is a very attractive opportunity that will unfold as we move forward.
[Operator Instructions] The next question is from the line of [ Shyam Maheshwari ] from Ata Birla Mutual Fund.
Am I audible, sir?
Yes, you're.
Perfect. Sir, just wanted to inquire on the status of the Mangalore facility. So have you already started churning revenues out of that. Or is it still under approval stage what is the ramp up going to be like, if you could just touch base on that.
So we started this generics facility in the month of February, March of last year. We are actually executing 1 order right now. The execution right now definitely on a lower side because we have spent last 6 months in getting the customer abroad. We got almost 4 approvals already from the customer, but getting it converted into orders is going to take time.
One of the orders which we have already received and executing in generic facilities is from the earlier customer who had approved this facility in the month of September, October of the last year. So that execution is going on. So revenue contribution at this point of time from generics is very, very miniscule. It's not meaningful in the H1 of this year, the numbers which we are seeing currently.
But yes that facility is already capitalized. The cost of that has already started kicking in, and that's what I was referring earlier in our opening remarks that the depreciation mentor that is getting factored in this H1 number, but not the corresponding revenue which we are believing that based on the order booking, which should happen now. The revenue will start kicking in, mainly in a meaningful way, maybe from quarterfold to some extent, but from the next year definitely.
Understood. Understood. And considering there is a sufficient headroom in order to grow our engineering set of business. And while I understand this quarter, there were some slippages in terms of our order inflow. But before that, for the past 3 or 4 quarters, we have been averaging around INR 200 crores to INR 250 crores kind of in the engineering segment.
With this additional facility, with these approvals now in place, should inflows now start meaningfully -- start showing an uptick even from this 200, 250 numbers? Is that what you expect going ahead?
That's right. That's what we are saying that the order booking in meaningful will start getting built up for the engineering going forward.
So second half onwards definitely.
The next question is from the line of Ankita Shah from Elara Capital.
This is Ankita here, sir, on the India Bioenergy segment...
Ankita, could you speak a little bit louder, please?
Sir, am I audible now?
Yes, a little better.
Yes. sir, on the India bioenergy segment that now we have some clarity in the feedstock. What is the kind of ordering which is pending for achieving a 20% blending? And incremental how much can come if we extend this blending to 25%. So what could be the opportunity of capacity that can be developed to achieve that target.
So the [ 3 ] billion liters will be the capacity, addition that is required to meet this 3.5 billion.
Sorry, sir. Come again?
Roughly 3 billion to 3.5 billion liters annual capacity will be required to be built to make this additional 5%.
This is annual for the next 5 years?
Well, we'll have to see of the capacity has to get adjusted as we move forward to the increase of basic energy consumption in the economy. But I'm saying today, if I have to meet it, then there's the numbers.
Sir, this is the total number? Or is this annual?
Additional. Additional number.
Incremental. Okay. And sir, this includes the pending pipeline to achieve that 20% lending also. That is also included in this?
Yes, 20% is different. I'm just saying if 5% has to get added from 20%, then that is the number.
Yes. Got it. Got it. And sir, how much was the R&D spend for the first half of the year?
So R&D spend has 2 elements, Ankita. One is on the CapEx side, another 1 is on the OpEx side. On the OpEx side, we might have spent almost INR 15 crores in the first half. And on the CapEx side, we have just capitalized 1 of the assets that is this [ electric ] asset plant, almost around INR 50 crores, INR 55 crores kind of a number.
The second half, we will see some more spend happening on the CapEx side because this multipurpose facility is going to get a couple of more product line getting attached to that. So there will be some CapEx happening on that. But on an average, the OpEx for every year is somewhere around INR 20 crores to INR 25 crores to INR 28 crores kind of a number.
Okay. And CapEx would be how much for the full year?
By the end of this year, we should have CapEx of almost -- on the R&D side itself, around INR 65 crores to INR 70 crores.
The next question is from the line of Vikram Vilas Suryavanshi from PhilipCapital. Sir, I request you to come a bit close to your handset and speak?
I just wanted to -- now we have now started demo facility for PLA, how that business model will evolve for us. And what are the different [indiscernible] we tried for PLA?
So Vikram, the strategy that we built, the first product that we are able to demonstrate out of that is PLA. There will be multiple products. It's a biopolymer facility, so it will be able to demonstrate multiple for clients as we move forward. That's number one.
Number two, we just commissioned so give us a bit of a time to actually be able to answer your question in full integrity. We have just commissioned, we have demonstrated, we know the process works. There are lots of customers both from India and abroad who have shown interest. Some have visited as well. So it's developing very positively, but probably it's too early for me to answer anything specifically.
But broadly speaking, multiproduct facility, commissioned now, multiple customer interest, both from India and abroad and a few visits have taken place. That's the update I can give you today.
Okay. And just to extension of that, along with PLA, are there also opportunities for us to like -- bioplastics, which is PAT or [ PAK ] or any other verticals within plastic apart from PLA where we can expand or our focus will be primarily to capitalize PLA first.
Yes, Vikram, as I mentioned, this is not a PLA facility. This is a biopolymer facility. So we will be able to demonstrate multiple molecules. PHA, PSP, they're all lined up. Actually, our R&D guys are pushing such in to approve their expenses so that they can start demonstrating other molecules. So that's a dialogue that we will have, of course, in consideration with our Board and Chairman and then we'll move forward.
Mr. Vikram, does that answer your question?
Yes.
So we move on to the next question. The next question is from the line of Sai Siddhartha Pasupleti from Kotak Securities.
Am I audible now?
Yes, Manish. Sorry, yes, Sai, sorry.
So I just wanted to ask about there's this recent IPO listing company coming in the Bioenergy space and this particular company is kind of saying that it has a 30% market share in the ethanol capacities that have been deployed so far in the last 3 years. And if I kind of break through into that BRHP, they don't have a mention of any R&D expense assets anywhere.
So in a space like this, is there any imminent risk that is there for Praj wherein it has a 60%-plus market -- kind of a market share in the ethanol capacities that have been deployed so far?
So Sai, I would not comment on what others are saying. That's not fair for me. However, what I would say is this, we are not limited to domestic market. We are a business, which is globally present. As we have already shared with you, our effort is to actually diversify our offerings across the geographies, across the molecules as well and not get limited to only ethanol.
So for us, R&D has a very, very different meaning and purpose. Each organization can have their own philosophy for doing their business model in a particular fashion. And good luck to everybody based on their business model.
We believe that R&D is the way forward because there are different molecules, different feedstocks, different geographies, different operating practices, different codes and standards. So that's how we approach that business.
And that's -- we continue to believe that we need to continue to invest into these so that we are able to provide the full justice to what is possible. In our opinion, we are trying to solve a much bigger problem that the community is facing, and that's the view that we have.
Next question is from the line of Manish Goyal from Thinqwise Wealth Managers.
Yes. I have a couple of questions. First on the -- on corn oil as a byproduct, which can be blended with diesel -- as a biodiesel, sorry. Just wanted to get a perspective like -- because I believe in the current season, nearly 50% of the ethanol offered was based on the maize as a feedstock.
So in that context, when we have already so much installed capacity. Then to have a byproduct, how much of the production one can get as a byproduct, which can get blended with diesel? Just want to get a perspective like if you probably have 100 tonnes of corn being used, how much ethanol can be produced. And how much of con-oil can be produced? And what is the additional CapEx for -- bolt-on CapEx required for implementing this.
So Manish, this -- as I was mentioning, the challenge going forward for multiple reasons. For the uses of ethanol, there is going to be how we may maximize the value of their operation, right? And we believe that 1 way in which they can maximize the value is by focusing on coproducts that could be extracted as they process the feedstock without compromising the end product.
In the sense that if I have put a 100 KLPD or 200 -- so let's say 100 for the arguments sake, 100 KLPD corn to ethanol plant. I must get under KLPDs first as the first requirement. I must get the PBT that I want 300 tonnes per day or whatever that I get out of this -- without any -- 300 kilotonnes per day without any compromise whatsoever.
Those are 2 established streams, I need them. Then I get the second composite too. You can go and get corn oil as well. So the idea of a coproduct is that it does not compromise what is already existing, but it only allows you to expect more from the other streams that come out of the project, right?
Sorry, sir, I missed the second part. You said 100 KLPD of ethanol production as first parity. Second was what?
The second is the BDGS, which comes out as a byproduct today. I cannot tell -- so if I -- I have to protect that revenue as well for the customer because we are looking at enhancing the value for them because we are [indiscernible]. So after protecting these 2, what can I do with a balanced raw material that is available without changing the feedstock quantity and input, and without compromising these 2 outputs, what can I do to enhance the value.
And that is the coproduct development strategy and corn oil is one product, really many more to come as we move forward, but the corn is one of them.
No, sir, that is what I was trying to understand that if you.
Byproduct of biodiesel by itself.
Yes. So I'm just trying to understand if you put 100 KLPD plant, when able to get whatever required production of ethanol and BDGS, then how much of the corn oil production can we get out. Just trying to get a perspective that because you already have facilities in place and then if it gets leveraged for biodiesel then organically.
Yes, Manish, for reasons of competitive advantages, I'm not willing to give you the exact numbers on this 1 at this call, yes.
And second -- my second question was...
Sorry, sir, please rejoin the queue for further questions. The next question is from the line of Faisal Hawa from H.G Hawa and Co.
Sir, how is the maize opportunity looking? Because Maize is also something which is published in a large quantity, and it is not utilized as much for consumption. And do you feel that a lot of people like Gujrat Ambuja Exports or somebody would also come into production for the same.
And secondly, sir, are you now also looking at very large ticket orders as a policy to really raise the turnover much faster rather than keeping on taking on all kinds of ticket sizes orders.
So Faisal, to answer the second question first, I think what's important is to get the right scale because if you have the right scale, then obviously, the right economies of scale which the producers want. Because the guy, the person or the entity that is putting at the project would want to have returns on capital that they employ. So that -- so there's a minimum size that any project lenders do.
So -- and those sizes are going up as we go forward. That's what is happening world over as well. So no surprises there that capacities of the plants are moving up. Because, obviously, as the cost goes up, as inflation goes up, people are trying to leverage maximum to the extent they can -- to leverage their fixed cost to the port expense. So that's one dimension. What was the first question?
My first question was about the maize opportunity. This could be a very large 1 because India produces a lot of maize, which is -- and not all is consumed by the population.
Sir, are you saying -- is the question on maize's opportunity? Is that what you're saying?
A lot of plants will come up for conversion of maize to ethanol or maize to biofuels? Do you concur with that kind of a statement?
Of course, we -- as I mentioned, 100% of our outlook this quarter is based on starchy feedstock, maize is predominantly starchy feedstocks.
Okay. And we do stand by our statement of doubling revenue in 3 years from today?
Sorry, we stand by statement of what.
Of doubling revenue in 3 years from today?
Yes.
Next question is from the line of [ Shaisha Hoo ] whose an individual investor.
Can you hear me?
Yes, we can hear you.
So my question on the starch metrics. I believe that we were developing biodegradable plastic. So what are the changes on that, sir?
As I was mentioning, we have commissioned this multipurpose biopolymer facility for demonstration. It's the first molecule that we have demonstrated is lactic acid with lactide and PLA. And this facility will also be able to demonstrate many other molecules as time goes forward. So we already -- and I was mentioning earlier that this has generated a lot of interest. We are seeing interest in both international and domestic future project components.
Very early days. We just only have 3 weeks since this -- we have demonstrated and dedicate it to the country. So please give us some time, but very positive interest that developing in that technology.
Yes. So 1 last question about the high priority water. I think we have got 1 customer for the semiconductor industry last year. So any further development on that?
So the job that we executed was actually for a battery and an intermediate system, so that we've executed. The further developments we will come as the industry develops. Because these are, as you can see, these are extremely large-sized projects. And we are trying to understand that what is the play for us.
Is there a play for Indian technology -- Indian companies to play in that? Or is everything imported, we are trying to have the dialogue with several customers who have announced the projects for setting up semiconductor facility.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management from Praj Industries for closing comments.
So thank you, everyone, for your time today. In case you have any more questions, feel free to write us at info@praj.net. We wish you and your family members a very Happy Diwali and see you in the next quarter. Thank you.
Thank you. On behalf of Praj Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.