Praj Industries Limited (PRAJIND) Earnings Call Transcript & Summary

We welcome you to this conference call organized to discuss Praj Industries' operating performance and financial results for Q1 FY '21, which were announced yesterday. On this call, I have with me Mr. Shishir Joshipura, CEO and MD; Mr. Sachin Raole, CFO and Director of Finance and Commercial; Mr. Atul Mulay, President, Bio-Energy business; and Dr. Pramod Kumbhar, CTO at Praj Matrix R&D center. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to our financial performance were e-mailed to you. These documents, along with quarterly results presentation have also been posted on our corporate website. I would now like to hand over the floor to Mr. Joshipura for his opening remarks.

Good afternoon, ladies and gentlemen. I welcome you to Praj Industries' Earnings Call for Q1 FY '21. Trust all of you had the opportunity to go through our results presentation for the quarter ended 30th June 2020. I hope that you and your family members are safe and healthy and stay that way. The quarter gone by was an unprecedented one, given the backdrop of COVID-19 pandemic and the resulting lockdown. The restrictions on movement of people and material caused significant operating constraints and disruptions across the domestic and international markets. We began the quarter in lockdown mode and the suspension of operations, particularly in April and a large part of May. The second half of the quarter saw progressive resumption and opening of operation across facilities and project sites. In these unprecedented times, our focus was to ensure safe and secure conditions for our people, customers and partners while safeguarding the business. Let me share a brief synopsis of what we have done to ensure business continuity during the quarter. We adopted a work-from-home model for all our employees, empowering them with necessary IT infrastructure. To ensure employee safety, we have deployed the highest standards of safety norms and protocols across all our plants, offices and sites. Operationally, our focus during the quarter was on cash, costs and, of course, customers. We have instituted optimal working capital measures to improve cash flows and conserve cash. We have undertaken concerted efforts towards cost management by rationalizing our fixed cost structures and overheads across all dimensions of expenditure. We are working even more closely with our customers to partner them or solving their challenges across entire spectrum of our solutions space. We are thankful to our customers, supply chain partners, employees and other stakeholders who are helping us navigate through these extraordinary times. Let me now take you through the highlights and the developments for the quarter. Praj has pioneered the Bio-Mobility platform that envisages use of renewable biological resources to produce carbon-neutral transportation fuels across all modes of mobility that is surface, air and marine. Bio-Mobility platform comprises of biofuels, both in liquid as well as gaseous form and are derived by processing feedstocks such as agri-residue, molasses, cane syrup, grains, oil seeds, et cetera. For production of ethanol, industry has options of sugary feedstock, the most popular one being sugarcane. Starchy feedstock, the grains, rice, maize, et cetera. And cellulosic feedstock, the agri-residues. In a significant move, the government signaled permission for excess grains to be used as feedstock for ethanol production. State governments have also realized the potential for enhancing the farmers' income and employment generation that this policy shift enables. Several state governments are now formulating their approach for attracting grain-based ethanol plant investment in their states. Domestic market witnessed increasing traction for B-heavy molasses and bio syrup to ethanol plants. This demand is spurred by expectations of good sugarcane crop and demand-supply imbalance in sugar sector. Due to increasing need of sanitization, there has been increased traction in pharma-grade alcohol demand across the world. Ethanol manufacturers around the world are keen to produce pharma-grade alcohol and are looking for efficient technology solutions. We are seeing increased traction in order inquiries and leads for this application across the globe. I'm very happy to share that we have received a contract for our single largest pharma-grade alcohol facility for a customer in the United States. On the 2G front, all the project execution is progressing on schedule, and we expect to commission the first plant by the end of next calendar year. We received the order for supply of critical equipment for the HPCL Bhatinda 2G biorefinery project as also order for supply of additional equipment for the BPCL project in Orissa. On the CBG front, Ministry of Chemicals and Fertilizers has issued a fertilizer control order for solid bio fertilizer, a byproduct of CBG plant. This will enable profitable disposal for the project promoters and remove one of the important bottlenecks in development of this business. RBI has recently included CBG project under the priority sector lending. The new definition of MSME augurs well for the investment in CBG projects. We won a press-mud based project for a strategically important customer with high potential for repeat orders during the quarter. We have commenced commissioning of our CBG demo plant based on rice straw as a feedstock at our Matrix facility. Praj and Automotive Research Association, ARAI of India, entered into an MoU to jointly address technologies to propagate the use of biofuels in a variety of applications, including use in internal combustion engines in the transportation sector. Yesterday, our Board has approved signing of a definitive Master Framework Agreement with Gevo, Inc. USA to collaborate on providing sustainable aviation fuel. Gevo and Praj will provide technology, plant and equipment and EPC services to customers to produce renewable isobutanol from 1G feedstock, namely cane juice, cane molasses, sugar syrup, et cetera, as well as 2G feedstock cellulosic biomass like straws, bagasse, et cetera. The renewable isobutanol will be aggregated and transferred to various refineries. Both parties will also provide technology, plant, equipment and EPC services to refineries for converting renewable isobutanol into SAF through the ASTM approved pathway of Alcohol-to-Jet, ATJ. Praj's strategy has always been to expand its business horizon, leveraging our innovative technology solutions in the bio-economy. Building on the success of Bio-Mobility, we are now foraying into the technology development for renewable chemicals and materials faced with Bio-Prism. We are developing technologies to produce bio-based RCM, which are sustainable alternatives to products made from the fossil resources. Praj's Bio-Prism portfolio comprises a variety of bio-industrial products, including bio-plastics as a priority along with cellulose-lignin refinery products and specialty products. In our RCM endeavors, we are working with leading companies across the globe and research institutions to explore different opportunities. This kind of development takes about a couple of years to see the path of commercialization. Let me share updates on our Engineering business. Our brewery business has been impacted very adversely by the pandemic situation with the industry leading to a freeze on CapEx for the current financial year. Understanding the special situation of our customers, we have developed solutions that will create a revenue stream as well as reduce operating cost for brewery significantly and these solutions will be almost life-saving for all the existing breweries that are in operation. On CPES front, we continue to establish strong relationships with select global technology and EPC players. This quarter, we received a very critical order from one of our key accounts who are seeking to develop India as an alternative to China. We are working with a U.S. based waste-to-energy technology player as well to develop modular design architecture and retaining for their plants. Our water and wastewater treatment business has been receiving healthy set of inquiries for the zero liquid discharge system. However, due to the current uncertainties, there have been delays in order finalization. On the PHS front, we are witnessing good traction in both domestic and international market for pharma inquiries. We are witnessing increasing interest from value chain of COVID vaccine manufacturers and API replacements. The push for localization for critical medicine within the geographical boundaries is also giving rise to traction in international business. While we are witnessing strong inquiry traction in certain segments of business, the current pandemic situation has slowed down the decision-making in others. Our ability to innovate at a very fast pace, centered on solution for customers' problem is helping us build positive traction in our business. With this, I will now hand over to Sachin for his comments on the financial performance.

Thank you, Shishir. I will now take you through some of the actions undertaken in the financial performance for Q1 FY '21, following which we will open the forum for your questions and suggestions. Revenue from operations for the quarter stood at INR 129.55 crore as against INR 211.60 crore in Q1 FY '20. EBITDA was negative at INR 13.17 crore compared to INR 8.11 crore in Q1 FY '20. PAT was INR 10.50 crore negative against the INR 8.77 crore profit for Q1 of FY '20. During the quarter, export revenues has accounted for 26% of the total revenues, Bio-Energy accounted for 59%, 16% from Engineering and 25% from PHS business. The order intake for the quarter was at INR 310 crores with 41% from export market. Of the total order intake, 70% came from Bio-Energy, 17% from Engineering and balance 13% from PHS business. The order backlog as of June 30, 2020, stood at INR 1,263 crore. During this quarter, we focused on working capital management aggressively. Our focused approach helped us in faster collection of receivables, controlling the stock levels and maintaining the healthy payment cycles for our creditors. The effort put in by us resulted in improved cash and cash equivalent position to INR 274 crores as of June 30, 2020, as compared to INR 226 crore of March 31. Before I conclude, I would like to clarify one of the issue raised by some of you regarding the promoter's shareholding in the company. Over a period of last 5 years, because of the ESOP exercise by employees, the overall capital base has moved from INR 17.74 crore shares to 18.31 crore shares. This has resulted into percentage-wise relative dilution of promoter's shareholding from 33.98% to 32.92%. Their holding in number of shares has remained unchanged at 6.03 crore shares. I now conclude my remarks, and I would like to thank you all for joining us on this call. We would now be happy to discuss any questions, comments or suggestions you may have. Thank you.

[Operator Instructions] We take the first question from the line of Saket Kapoor from Kapoor & Company.

Firstly, regarding the brewery segment, you were telling some solutions being provided that will be released for them. Sir, if you could allude to the point, sir, what exactly have we done?

So considering the condition of the brewery industry where we recognized that their focus for the next 3 quarters is going to be on absolutely reducing their operating costs on one hand and finding ways and means of improving their revenues from the existing set of operations, our team has worked on solutions that help them achieve that. So one of the solutions addresses reduction of energy footprint in the highest energy consuming section of the plant by over 50% and that creates a very definitive savings for them on the operating cost, which is obviously a key requirement for them. We have also developed another technology that helps them to coproduce from an existing brewery, another product line, that would help them to recognize additional revenues compared to what they do today from the same set of operations. Both of these put together, we believe, will help them to address the current challenge that they are facing as an industry.

The first point is clear, sir, that the power consumption you told. And the second point was another line, I didn't get that point, sir.

It's a co-product that we will develop out of the stream from spent grains, yes, from spent grains. This is a co-product development stream that we will generate for them, which will help them recognize additional revenue.

Okay. And sir, who are our key clients in this segment? Already we are doing business with them. So can you...

As you probably know, we have nearly 75% plus market share in this business over a period of time. So that literally covers the entire market segment, all the big guys, UB, Heineken, Millers, you name the companies, and we are supplying to them. So all of them are our customer base, AB InBev, Coors everybody.

Sir, there were constraints about lockdown, and it's really tough for an engineering concern like us to take note of what the hazards are and continue with our work. So as the lifting of the lockdown being and the more testing going on and the cases being getting -- if there's an incremental increase in the cases we reported every day, so what is now our strategy? The number of sites where we are working, what is the status exactly post June, sir? How is business environment for July and since now we in the midst of August -- in the middle of August?

Correct. So there's a very definitive change because I think the focus has also come on making sure that the livelihood is also safeguarded, not only the lives. So we have taken extraordinary measures at all our sites, our factories, our offices to ensure that we follow the norms that are prescribed by the medical community to ensure that people stay safe in terms of distancing, masking, testing, all the sanitization. We have taken detailed measures and implemented them across all locations. That's one step that we have taken. The second is, of course, to start opening and that is what has happened. Our Kandla factory is now fully functional at 100%. Two of our other factories are not yet at 100%. They are at about 70% because as you know that in this particular case, the way the pandemic is spreading, it also creates some localized zones and containment zones, for some of our customers, for example, have factories that are brought under containment zone for a period of time. So this is a shifting zone as we have all witnessed. In terms of our own operation and establishing supply chain, I can easily confirm that our Kandla work is 100%. Our supply chains are more or less back to normal and our -- both factories, other 2 factories are ramping up and they are at about 70%, and we are gradually ramping them up to their full capacity. Our R&D center is already working at full capacity.

So sir, what kind of normalcy are we expecting for this quarter, sir? I mean the way we do business, the environment has definitely changed a lot, taking into the precautions that are needed, what percentage of utilization levels? Or if you could sum up all the amount of work executable -- which is executable over a period of, now, say, 9 months, whatever are left for this financial year, where are currently we in terms of that?

So as you rightly said, it is important that we are able to ramp up safely and that is our topmost priority. And we are very, very focused and are staying in terms of a dynamic response because situation may demand a very different response 15 days from now than it does today because of the way the whole study shows. Till the time vaccine is found, that's going to be true for everybody in the globe, not only for us. And that we need to be staying very alert and agile in our responses to situations that may arise and that's what we are doing. And as I was mentioning to you, we are ramping up our facilities gradually and when I say gradually, it is because of the restrictions that get imposed on travel of people, on their ability to reach workplace, the supply chain being able to supply everything on time as if times were normal. So the -- so those are the factors on the factory operations. And on the other hand, as I was mentioning, we created a business continuity plan that allowed us to very quickly move. In fact, in 24 hours, we were able to move all our employees to work from home. And I think that was significant reflection of the way we run and plan our operations that in 24 hours, we are able to move almost entire population of our employees to work from home. So many of our employees are even today working from home and they are contributing. As you probably witnessed, this quarter also saw a very improved order booking performance from us and that is because we are still continuing to be in very, very close touch with our customers. In the new order of things, because everybody is equally impacted, travels are restricted for everybody. So customers are also very comfortable speaking to us because we are able to fulfill their needs working remotely and connecting remotely with them. And all of that is combining to help a good moment -- build us to the current momentum level where we are.

[Operator Instructions] The next question is from the line of Vikram Suryavanshi from PhillipCapital.

Congratulation for good numbers in challenging times. Sir, we have seen good growth in HiPurity. So was there any bunch of products or how do we see outlook going ahead? Anyway, pharma is doing good. So will that translate sustainable growth for us also? So if you can comment on that.

You're right. So there -- as I was mentioning earlier also, there are the customer segments who want us to move faster than we can because they have a demand on their side to fulfill customers who want to put up pharma-grade alcohol facilities. Almost all our customers on the pharmaceutical side, especially for the PHS business, some of our ZLD customers are also pushing us, though not all, some of those for whom we are already constructing the plant because they would like to make sure that they -- there is -- because there is no relaxation on deadlines, et cetera, that they have to be ready to fulfill their production norms. So it's different strokes for different folks of sorts. So different demand from customers. There are -- we know in domestic market right now, there's a great interest, as I was mentioning earlier, to see how in the coming season the B-heavy molasses and the syrup and bio syrup become the feedstocks of choice. So a lot of action that is happening around that as well. There's a whole host of activity that is happening with the grain-based alcohol opportunity. So we see a very high level of activity building up and that according to me augurs well as we move into the future. And we only -- like all of us, we are all hoping that things stay -- things come gradually under control on the pandemic side and we are able to return back to the working that we all need to do.

Okay. And sir, biogas side, I think government has done a remarkable job in terms of long-term pricing and then now fertilizer control act or byproduct also will get good traction in terms of project designing. So are we seeing or by when we can see the traction in this biogas order? Or have we received some orders even in this quarter?

So Vikram, as you rightly said, I think some very progressive announcements on the CBG policy front, there were 3 big issues, as I saw it. One was on the pricing, which has been resolved. The other one was around environmental clearances to under what category these projects will fall, and there was some, what I would call as, exchange of information between the Central Pollution Control Board and several State Pollution Control Boards. Of course, we will also call to provide information. And so now we have been able to win for our first project in UP, a green certification -- a Green Zone Certification from the environment clearance perspective. And I think that's a very, very positive development because that can become a precedence now for setting up of the balance project. So that's been a very constructive development in that field. The latest announcement around RBI signal to include CBG projects in the priority sector lending will also then make it possible for banks to fund these projects. So I think some very constructive developments are happening and it only augurs well for the business. And we are also seeing an improving interest from several of our customers.

Okay. And last question, sir. Now our association with Gevo or many other partners we are now as we are evolving with most other products also, how will be the financial arrangement? Will it be like royalty or any other kind of -- if you can give some more light on the kind of arrangements we'll have, which will have financial impact for us?

So it depends on the nature of agreement and licensing in terms of who will license at what moment in time. In Gevo's case, as we have mentioned, given some of their internal requirements, they will license -- the licensing part of the technology will stay with them. But the execution part of technology will stay with us. So we will have to approach the customers to arrive at, what I would call as, an arrangement -- acceptable arrangement with the customers to see as to how the licensing part of part licensing is with them, part licensing with us. So how will they get paid, how will we get paid. These are some of the commercial agreements that we'll have to do with our customers. Per se, our working with them does not involve us paying any royalty to them.

The next question is from the line of Sandip Sabharwal from asksandipsabharwal.com.

My question was more on the order booking pipeline. You have done a very strong order booking in the first quarter in a very tough period. So is all that because of some orders in the pipeline, which got just finalized? Or is the pipeline actually looking strong?

So Sandip, as I was mentioning, there are some very positive drivers in the market, for example, pharma-grade alcohol or the pharma sector itself to whom PHS is serving. We are seeing the CBG as we begin to see it now moving forward. So there are segments of our business which are witnessing strong traction on the inquiry inflow and customer interest. On the other hand, there are also, as I was mentioning to earlier, there's a brewery segment, which has a different set of challenges to overcome. And we are finding innovation as a lever to actually make sure that we don't -- we create a different path for ourselves and help our customers overcome their problems as well. So overall, I would say that the traction is on the positive side.

Next question is from the line of V.P. Rajesh from Banyan Capital.

So my first question was regarding the order book. As you were describing the opportunities, I was just wondering could it be that because of [Technical Difficulty] much lower in this quarter, the order book [Technical Difficulty] higher.

Rajesh, we are losing you in between. I couldn't hear the question.

Sir, your audio is not very clear.

Okay. Is it better now?

Yes.

Yes, you may go ahead.

Yes. Sorry. What I was asking is that in your order book, there is a significant growth. So I was just wondering if one of the drivers was that because you were not able to execute during the quarter, therefore, the ending quarter order book is higher. Is that a fair assumption or am I mistaken in that?

No. So if you look at our order inflow for the quarter, and I think that's the first indicator that I will use. It is higher than the previous quarter, but also much higher than the same quarter last year. So that is the major reason that has built our order book to where it is today. Yes, you are absolutely correct, and you're not completely off the mark in saying that because we were not able to execute orders for 6 weeks, we were obviously carrying some additional order into this quarter. That you are correct, but we actually asked this question to ourselves and we did the math and we found that even when we -- so we are roughly carrying 40% higher order book in compared to same time last year on the 1st of July. And if I had adjusted it for that period of time and we said we were similar to last year's performance on the sales side, then it looks like to be something like a 30% additional order book. So it is a constructive order book, not only because 6 weeks were lost in lockdown.

Sir, I'm so sorry to interrupt again. We are unable to hear your question, sir.

Hello, is it better now?

Yes, Rajesh.

Okay, sorry about this. So my second question is out of this order book, how much of is going into the pharma sector, whether it is in the HiPurity or whether it is in the other business? If you can just give some color on that?

So when you say pharma sector, you actually mean pharma companies?

That's right. So the clients are pharma companies, whatever you are doing for them, either on the water side or on the CPE side or anything else?

So let me put it like this, and I hope I'm catching the spirit of the question here. So if we look at our order book for pharma-grade alcohol plus what we are supplying to other product lines to pharma companies, if I put them together, then that's roughly about 1/3 of the order book.

Okay. That's very helpful. And lastly, this SAF, by the way, congratulations on signing that agreement. My question is, what is the near-term opportunity you see for this collaboration, sort of the market opportunity, the size basically?

So I think there is -- I'm very happy that you asked me question and as you speak with me, I have a very happy announcement to make on this call. So first of all, as you know, sustainable aviation fuel is a requirement for the all airline industry, all aviation industry, let me put like that's not necessarily only airlines. The aviation industry to meet its GSG norms. But there are some other factors also that's working in terms of energy security, et cetera. So we had actually submitted a sample to Indian Air Force for testing on their engine base. So I'm very happy to share with you that only late last night, we have received an approval from Indian Air Force that, yes, this fuel is fit for use into the Indian Air Force fleet as well. That's a very, very significant development because our collaborator Gevo had already tested this on, what's popularly called as, Western Fleet, which is the aircraft that get made in United States or Europe or Western Europe versus the Eastern Fleet, which is more around Russian and those kind of technologies. But with Indian Air Force testing and certifying, it is now tested for both fleets. So this is a very positive development so far in this business.

We take the next question from the line of Haresh Hindocha from SVS Securities.

Sir, just one more detail on the single largest pharma-grade alcohol facility. What is the size? Or is this the first order of -- in U.S.? And a couple of details about it.

So it is not the first order for us in U.S. We have built several plants in the United States. But as I was mentioning that the pandemic has given a new found rise to the requirement of pharma-grade alcohol. So if you earlier looked at the alcohol market, we were looking at fuel ethanol, which was one largest segment followed by potable alcohol, which is a drinking part of it. And then third, there was a small section of industrial alcohol. But now pharma_grade alcohol has walked in as a very third largest segment, in my opinion, in our understanding. So this is creating a big demand. So that's first positive development in the market. Catching on that, one of the leading producers of ethanol in the United States wanted to set up this facility at the Wisconsin plant to produce pharma-grade alcohol. And Praj has a technology which is absolutely unparalleled on in terms of its efficiency and its output characteristic. So different markets in the world have different requirements, for -- different specifications for pharma-grade alcohol. United States happens to be the toughest. And this is where we -- our technology won head over heels over everybody else and we are building this facility for them now. This -- the current capacity, the plant that we are building is 50 kilo tonnes per annum. So that's roughly...

So what must be the project -- our part of the project cost in that particular order, roughly?

It's roughly about INR 50 crores contract for us.

And what is the execution time?

As I was mentioning that people who are putting up pharma-grade alcohol, they want everything yesterday.

I know, I know. The big boom in pharma sector, yes, that's why I'm asking you.

A big push in demand. And so we are contracted to supply this plant towards end of this year, calendar year.

And what is the situation in India in the pharma industry? I mean are we getting the same response from the Indian domestic, I mean, domestic pharma sector?

So the Indian pharma-grade alcohol specifications are different.

No, then also, what is the response in that sector, I mean, domestic sector?

So 2 things. I have -- probably I can mention here that if you were to talk to my friends in the ethanol producer, the sugar company that are producing ethanol today, they will tell you that this boom in sanitizer application has actually helped them to realize better margins in their businesses because they are able to diverse part of their production for production of hand sanitizers, et cetera. So as I was mentioning, there are some different requirements in each market for different applications. But in the toughest market in the world, which is United States, our technology has stood clearly differentiated compared to our competition that is helping.

Great. Great. Great. Good, good, good. Sir, and the -- what is the order? I mean out of the total order, the export order is of 18%. So after this U.S. toughest -- according to the toughest grade of alcohol they are manufacturing, are you getting the inquiry for the same alcohol in other parts of the world like, say, Europe?

Yes. So as I was mentioning, I think I must clarify this. I had mentioned that in my opening remarks as well that there is a big push for, what I call as, localization of capacity. And this localization is within boundaries of a country. And we are seeing that there is an increased awareness, even requirement from several countries to set up pharma-grade alcohol facilities within their geographical boundaries. They do not want to be dependent upon imports. Yes, people are happy to import other forms of alcohol, but not this. So I think that's something that we are seeing good traction. In fact, across the parts of the world, whether it's Southeast Asia, whether it is Africa, whether it's Europe, whether it's Americas, we are seeing -- including Middle East, we are seeing a demand for producing pharma-grade alcohol from locally. Yes. We are seeing a good traction there, yes.

Can you just give details of the HPCL Bhatinda 2G biorefinery project? What is the size? And what is the execution period? Because it's a PSU, I don't know when they -- where it starts and what is the time frame. So can you have just a ballpark number? Because I know you must be getting this order after maybe 1.5, 2 years of all the formalities. So can you just -- just what is the execution period? And whether that project has been started or not?

Yes. So as you probably know, we are building under Government of India plan. We are building 4 advanced biofuel refineries in the country. That is what we got the contract for. So one is for IOCL in Panipat. The other one is for BPCL in Orissa. And the third one was for HPCL. But our original site that was awarded to us was a place called Badaun in UP. And the fourth one is for MRPL in South. You are already aware of the first 2 projects that have taken off IOCL and BPCL that are progressing. HPCL was third. But at that time, HPCL wanted to build the first project in Bhatinda and second one in Badaun. So for Bhatinda, they had selected another technology partner. However, for certain developments on the other end where HPCL felt that no, it is better for them to utilize our technology because it was proven where other guys were still trying.

Great. Congratulations for that.

They switched the license from Badaun to Bhatinda for us and that -- and they have actually moved extremely fast. Yes, they moved very, very fast. So from the time they took the decision to now, this has been like a 3-month, 4-month development. We've been dialoguing with them for some time, but it's almost like 4 -- last 4, 5 months development that has resulted into this, and they are now going full stream ahead.

And what you -- the good news what you have shared for that aviation, now what is the next step, I mean, you have got approval from the Air Force?

Sorry, please go ahead. Go ahead.

Yes, is oil refineries are going to put a plan for that? Or what is -- can you just say a ballpark number?

No. So the way this sustainable aviation fuel business works is that, first and foremost, you need an approval from the user that, yes, I approve that this fuel is available, I can use in my fleet. If you don't have that, there is no further business. So this was a very important step for us to win this approval. Okay? So that's what we have done now. First approval has come to us, and we have won this from Indian Air Force. In terms of commercial fleets, Gevo has already tested this on airlines, United Airlines, on Lufthansa. Okay? They have an agreement with Delta. So those aircrafts are more -- there are only 2 makers in the world, right, more or less. So if you're a Boeing plane or an Airbus, so there, I need not prove again. But in the Defense sector, there's different cup of tea. So that is the first step. Then you go and dialogue with -- of course, we'll have to dialogue with on multiple fronts about there is an initiative called Clean Skies for Tomorrow that has been launched with the help of World Economy Forum in India, which is trying to build the platform for saying what India should do as a country to address this need for clean skies. How we can create a higher independence out of producing our own sustainable aviation fuel rather than depend on imported crude and then refine it. So there are several dimensions that get involved into this. As a model, what we are proposing is that our sugar mill can actually produce another molecule called IBA, bio-isobutanol, which is what today, they produce ethanol. They can also produce isobutanol. And then 3 or 4 of these isobutanol producers will supply IBA to refinery and that refinery will use the process to convert that IBA to sustainable aviation fuel. That's the model. Yes. So it has many advantages. It distributes the risk. It distributes -- it does not concentrate at one place. So risks are minimized. It involves farmers. It has many, many positives to its dimension. So we are going to work on that now.

Okay. Great, sir. Sir, any thoughts on buyback? Now as you have postponed now, I mean, canceled, does the buyback still in your thought or it's just canceled?

Yes. So it was called off at that time because when we thought about it and then when the whole situation unraveled on the pandemic, I think our Board took a very courageous, but an absolutely correct decision to preserve the cash of the company. And I think -- because at that time, it was completely unknown what will happen. Subsequently, we have been able to align ourselves, all our efforts extra as Sachin was mentioning, and we've actually improved our cash position. But the fact is that we are still in uncertain times. Isn't it? Because of that, the number of cases are much more than they were on 15th of April. So from that perspective, the problem has not gone away. It is very much here. It's just that we are now more familiar with it. So I don't think we are living in a mindset which says there is no more problem, everything is -- life is back to normal. Life is not back to normal. But at least we understand what we need to do. At least we are better prepared than we were, say, when this whole thing started, that perspective. Thank you.

The next question is from the line of [ Ritika Agarwal ] from Quest Investment.

Sir, my first question is in the current order book, how much of order is pending from the 2G? And what is the total order that you expect to receive from the 2G segment in the FY '21, '22?

The outstanding order book from 2G is around INR 340 crores out of the INR 1,263 crores number. And balance order, if you look at, we have already received 3 critical equipment order from 3 companies. One critical equipment order is pending. And whatever we will be bidding for other equipments in other projects. So I just can't put a number right now, but that's the scope which is still available for us.

Sure, sir. Sir, so in the current quarter, have we received any 2G orders?

Yes, we have received 2 orders. One, the critical equipment order and another one also for the other equipments.

And if you could quantify out of the INR 310 crore order intake in the current quarter, how much is from 2G?

INR 135 crores.

INR 135 crores, sure sir. Sir, second question is on, is there any update on the Europe 2G segment that we were eyeing on?

Yes, [ Ritika ]. So the REDII implementation has got a little delayed on account of this pandemic, which has happened globally across the world. So what we are seeing now is, so there's almost a 6, 9 months' delay that is set in the process of rolling out REDII. And therefore, what seems to be happening in Europe is people are saying, but in order to meet the target over the next 2 years at least, because there -- these projects take time to build, so what we're expecting is that over the next 2 years, some 1G capacity may also get built, which otherwise would not have got built in Europe. And the dialogue on 2G plants has resumed post the first quarter, and we are seeing increasing interest from a few customers there. As you are aware, we had announced our -- working with a company, SEKAB in Sweden. And SEKAB has developed a technology for treatment of softwood and conversion to -- so we will work -- they have given us an agreement, and now we have entered in an agreement with them that we will improve their technology and help them commercialize it for addressing forest residue and softwood conversions to ethanol. So that's another step that will happen in Nordic countries. So I'm sure that in the coming quarters, you'll hear more about it.

Sure sir. Sir last question, if I may ask. Sir, you were mentioning about the pharma-based ethanol traction seeing. Sir, could you explain more on that in terms of domestic, how are we seeing that traction and also internationally?

Sure, [ Ritika ]. So as we all know, sanitizers are now integral part of our lives, for all of us globally, not only for us. But in addition to that, I think in natural hand sanitizers, there's also a lot of space, sanitization, good sanitization. The whole host of applications that are opening up because I think we are now understanding the importance of sanitization in our lives. And therefore, we see globally a demand for pharma-grade alcohol, which is a basic ingredient increasing for that reason. Having said that and as I was mentioning, that's one factor. The second is, I think, also when this pandemic happened, there were -- because of no movements of goods, so even if one country wanted some particular goods, they would not receive it because there was no way to transport them across borders, right? So I think there's a growing realization that this is a necessary good for saving lives. And therefore, several economies are actually showing interest to set up their own local facilities for the purpose of pharma-grade alcohol construction within their own -- or production within their own boundaries. So there's a second driver that is happening. And of course, with the demand increasing, the margins are also higher. So it is also commercially attractive proposal. So we are seeing an all across increase in interest across the world from different boundaries and geographies from different continents about the capacity for pharma-grade alcohol. Even in India, you have probably heard many, many of our customers who are producing ethanol has switched to the need of the hour and they have very quickly established lines for making of sanitizers using their current ethanol production facility, diverting part of their production for this purpose. And that's the trend. And as I was earlier mentioning that the specification for pharma-grade alcohol are different in different countries. And that is what -- there's nothing right or wrong about it. It's just that there are different standards. So depending on that, there's a market demand that is coming up for us.

The next question is from the line of V.P. Rajesh from Banyan Capital.

Just wanted to know your net cash position at the end of June quarter?

It's INR 274 crores.

So that's the net cash on the balance sheet?

That's right. That's right. We don't have any debt in any case. So it's a net cash position.

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for their closing comments.

I would like to thank everyone for your time. In case you have any more questions, feel free to write us at [email protected]. Thanks again for your time, and have a nice day.

Thank you.