Praj Industries

With a humble beginning as a supplier of ethanol plants, today Praj Industries is a globally leading company with a bouquet of sustainable solutions for bio-energy, high-purity water, critical process equipment, breweries and industrial wastewater treatment. Headquartered in Pune, the company has spread its presence across the globe in more than 100 countries 

Praj Industries Limited is a global leader in providing innovative solutions across diverse sectors including bio-fuels, bio-materials, energy transition, critical process equipment, high-purity water systems, brewery and beverages, and zero liquid discharge systems. As a pioneering force in India’s bio-economy, Praj Industries spearheads initiatives such as bio-mobility and bio-prism, which focus on the development of sustainable, bio-based products. With over 1,000 references in more than 100 countries across six continents, Praj Industries boasts a prestigious client list that includes Castilla, AB Sugar, Aemetis, Mayaguez, Super Green, Triveni and Bajaj Hindustan. 

Remarkably, over 40 per cent of Praj Industries’ business comes from repeat customers, underscoring the company’s commitment to quality and customer satisfaction. Domestically, Praj Industries is an undisputed market leader in ethanol plant installation and equipment, as well as in the breweries installation segment. Globally, the company commands a 10 per cent market share in ethanol production. Praj Industries’ manufacturing capabilities are supported by four state-of-theart facilities located in Maharashtra, Gujarat and Karnataka. 

Financials 
FY24

For the full fiscal year FY24, Praj Industries reported consolidated annual revenue of ₹3,466 crore. This figure reflects a slight decline of approximately 1.76 per cent from ₹3,528 crore in FY23. Despite this minor setback, the company’s overall financial health remained strong, with significant growth in profitability and a solid order backlog. Its operating profit margins came in at 11 per cent compared to 9 per cent in the previous year. Praj Industries achieved a notable profit after tax (PAT), which rose to `283 crore, up 18.2 per cent from ₹240 crore in FY23. This increase in profit margin was achieved by two factors: an increased revenue mix from the export business and a reduction in commodity prices. Praj Industries operates mainly in three segments: 

According to the company’s fiscal FY24 revenue distribution, 74 per cent of the income was derived from the bio-energy sector, 18 per cent from engineering, and 8 per cent from high-purity segments. 

 

Q1FY25

In Q1FY25, Praj Industries reported consolidated revenue of `699 crore, which represents a decline from ₹737 crore in Q1 FY24. The profit after tax (PAT) for the quarter stood at `84 crore, reflecting a decrease compared to the previous year. The performance indicates the company’s ongoing adjustments to changing business dynamics, as noted by CEO Shishir Joshipura. Despite the revenue decline, the management remains optimistic about future growth, particularly in emerging segments such as compressed biogas (CBG) and sustainable aviation fuel (SAF), which are expected to drive performance in the upcoming quarters. The company continues to focus on expanding its international business and diversifying its offerings to adapt to market demands. 

In Q1FY25, Praj Industries’ consolidated revenue was composed of 72 per cent from the bio-energy segment, 20 per cent from engineering, and 8 per cent from the hi-purity segment. The engineering and hi-purity segments demonstrated strong year-on-year growth, with increases of 42 per cent and 7.9 per cent, respectively. However, the bio-energy segment experienced a revenue decline of 14.2 per cent, dropping from ₹587 crore in Q1FY24 to ₹504 crore in Q1FY25. 

Geographically, 77 per cent of the total revenue for the quarter book is derived from the export business, underscoring the company’s growing international presence. 

Recent Developments 

Praj Industries inaugurated a pioneering alcohol to jet (ATJ) based sustainable aviation fuel (SAF) demonstration facility and a catalytic laboratory at their Pune research and development centre on January 20, 2024. This catalytic laboratory is designed to integrate bioprocesses with catalysis, opening new avenues for developing SAF, bio-butadiene and bio-hydrogen. It is a crucial step in utilising fermentation-based products and molecules to create innovative derivatives. 

Additionally, Praj Industries achieved a significant milestone by producing its first batch of 90 per cent lactic acid at its state-ofthe-art bio-polymers demonstration plant in Jejuri near Pune. This product is a critical building block for bio-plastics, demonstrating Praj Industries’ commitment to advancing sustainable materials. Recently, it also established a Centre of Excellence and Innovation (CoEI) in collaboration with the Vasantdada Sugar Institute. This initiative focuses on integrating farm-to-fuel models with alternative feedstock development, reinforcing Praj Industries’ leadership in the bio-energy sector and its dedication to sustainable innovation. 

Growth Triggers 

Current and Future Revenue Contributions

Exports presently account for approximately 23 per cent of the company’s revenue. Praj Industries aims to increase this share to about 50 per cent by 2030, leveraging robust opportunities in energy transition and climate action (ETCA) and the growing demand for low-carbon ethanol in the US and Europe. 

Sustainable Aviation Fuel (SAF) Demand

To meet the nation’s 1 per cent SAF blending requirement, a total of 14 crore litres of SAF will be needed, equating to an annual demand of around 28 crore litres of ethanol. The Indian government has set a target for international flights to achieve 1 per cent SAF blending by 2027, progressing to 2 per cent by 2028. 

Pharmaceutical Sector Transformation

The pharmaceutical sector is undergoing a transformation with fermentation processes making drug manufacturing more cost-effective. Praj Industries plans to capitalise on this trend by supplying fermenters, evolving from being just a high-purity water supplier to becoming a comprehensive systems supplier for the pharmaceutical sector. Additionally, the company sees a significant opportunity in supplying ultra-pure water for the semiconductor industry within its hi-purity business segment. 

Renewable Chemical Materials (RCM)

Praj Industries is currently providing large-scale samples to clients, with revenue from renewable chemical materials (RCM) expected to begin flowing in from FY27. The bioplastics sector, which currently accounts for approximately 0.4 per cent of the total plastic consumption, presents a substantial growth opportunity. 

Diversification Efforts

Praj Industries has diversified its portfolio to include water and wastewater management, critical process equipment, bionutrients and hi-purity systems. This strategic move aims to reduce the company’s dependence on its core business of ethanol-based products. 

Valuation

The company consistently generates substantial cash flow from operations, reflecting its strong financial health. Its return on equity (ROE) and return on capital employed (ROCE) are notably high at 23.3 per cent and 29.3 per cent, respectively. Currently, the stock trades at a price-to-earnings (PE) ratio of 45.4 times and a moderate price | earnings to growth (PEG) ratio of 1.28. Compared to other capital goods companies, Praj Industries’ valuation appears relatively attractive. 

Conclusion

Praj Industries is strategically poised for significant growth, supported by its expansion into key markets and its efforts to increase export revenue. The company is set to benefit from the increasing demand in ethanol blending, sustainable aviation fuel and innovations in the pharmaceutical sector. 

Its diversified portfolio, including renewable chemical materials and bio-plastics, enhances its growth potential. With strong financial performance, a debt-free balance-sheet and an appealing valuation, Praj Industries is well-positioned for continued success. We recommend buying the stock.