Praj Industries Limited (PRAJIND) Earnings Call Transcript & Summary

I welcome you to this conference call organized to discuss Praj Industries operating performance and financial results of Q4 and FY '21, which were announced yesterday. On this call, I have with me Mr. Shishir Joshipura, CEO and Managing Director; and Mr. Sachin Raole, CFO and Director, Finance and Commercial. 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 certain risks and uncertainties. Documents relating to our financial performance were e-mailed to you. These documents, along with quarterly 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 day, ladies and gentlemen. I welcome you to Praj Industries earnings call for Q4 and FY '21, plus all of you had the opportunity to go through our results presentation for the quarter and year ended 31st March 2021. It is once again a pleasure to connect with all of you. I hope all of you are doing well and staying safe during these unprecedented times. I'm sure you are all observing the prescribed guidelines by health care authorities and keep yourself safe. I also hope most of you are in the process of securing vaccines, if not already vaccinated, which is a very essential measure that will help us win fight against the COVID-19 virus. Let me now briefly take you through the results and overview of the external environment. I will take you through the quarterly business highlights, industry developments, following which Sachin will take you through the financials. The external business environment continued developing positively for most part of the quarter, even as we brace ourselves for the impact of the second wave of pandemic towards the end of the quarter. We have learned to work and live in partially lockdown environment, and there is a broader sense that the economic impact due to restrictions and lockdowns could be moderate compared to impact of the first wave last year. Different state governments have announced lockdown measures in varying degree and tougher restrictions on mobility. In complete compliance with the directives, we have temporarily closed operations at our corporate office in Pune. Our employees continue to serve our customers working from home. However, our manufacturing plants, R&D activities and sites have continued to function with all due precautions in accordance with the directives from the local authorities. We are better prepared this time compared to last year with significant reduction in a number of unknowns and a much better aligned processes and workflows. As an organization, we are significantly healthier with much higher visibility on demand cycle, operation, et cetera. A normal monsoon forecast for 2021 along with timely harvesting of rabi crops could further entail a healthy agricultural season, given remunerative crop prices and healthy water reservoir levels, thus boding well for the overall economy. Coming to the bioenergy front, in the domestic markets, the center's efforts on expanding the country's ethanol blending program through supportive regulations and measures continues to drive the demand for ethanol to higher levels, giving boost to capacity expansion in the center. The current blending level for ethanol in India has crossed 7.4% in the first 5 months of the ethanol supply year 2021. This is the highest ever recorded ethanol blending level at an all-India basis. Since 2014, we have witnessed the government progressively building upon the country's EPB program, registering an almost 4x jump in ethanol blending levels in the last 8 years. The government has recently announced advancing of EBP 20 targets by 5 years from 2030 to 2025. This is expected to create a demand of additional 10 billion liters of ethanol per annum. In a move to encourage ethanol production, the government further expanded the permissible feedstock by adding starchy feedstocks to the list in the form of supply base. A robust and remunerative ethanol pricing model, along with the interest subvention scheme is building a good momentum in creation of ethanol production capacity across the country. To further boost the production of ethanol, states are taking proactive steps aligned to Government of India's National Biofuel Policy 2018, in case of Bihar and Chhattisgarh have introduced state-specific ethanol production policy to attract investment in the center. The recent move to allow the direct sale of ethanol as a fuel for compatible automobiles is further expected to support this demand. Like petrol and diesel, it is now allowed to sell E100 directly to compatible vehicles. Praj is also thinking on advancing the sustainable transportation and reflect it in our bio-mobility platform is very much aligned with this thought process. This policy will further add to building up the opportunities for the city capacity expansion and extended fuel users across the nation. The basic change that is being brought about the expansion of feedstock away from only molasses feed to expand the sugar-based feedstock itself plus the starchy feedstocks from some of different grains and the cellulosic biomass, all these 3 put together are likely to change fundamentally the industry's structure, which was either too dependent on a single feedstock base and a few location-based output to multiple feedstock around the year across the country production level, and this is likely to change the industry sector substantially as we move forward. On the CBG front, in the domestic market, we are seeing policy traction developing. There has been now a notification that has earmarked that CBG produce can now be mixed directly into the CGD networks. And I think that's a very big positive step forward for the evacuation of the gas, and we expect that this and further measures will help to build the overall ecosystem for CBG, which will help develop this business over the midterm. The RED II Directive rollout in Europe that we've been talking about, it is now around the corner and later this summer in Europe, they will be rolled out, and this is expected to drive creation of cellulosic ethanol capacity over the next decade. World Economic Forum constituted an initiative called Clean Skies for Tomorrow, of which Praj is also one of the member. And we submitted this recommended report to the government for advancing the development of sustainable aviation fuel in India. We expect sustainable aviation to become an important part of biofuel base in the country over 5 years or so. Let me now take you through the highlights and the developments for the quarter. Overall, we believe we have delivered an encouraging and robust performance. The growth in Q4 was built on top of a momentum that we saw in the last quarter, led by the Biology and Engineering businesses. We have also seen robust order booking this quarter and ended the quarter with a closing order backlog of INR 1,748 crores as on March 31, 2021, setting the stage for the promising FY '22. Our bioenergy business returned a strong performance reflected in increased business wins. We are seeing development of robust inquiries and leads across different feedstocks in the domestic market. Praj's technology was selected to set up India's largest capacity syrup-based ethanol plant from Godavari Biorefineries in Karnataka. As part of this project, Praj will expand the existing ethanol manufacturing to 600 KLPD using sugarcane syrup. When commissioned, this will become India's largest capacity syrup-based ethanol plant. The expansion will maintain zero liquid discharged norms by deploying Praj's patented SHIFT technology, developed in our state-of-the-art R&D facility at Praj Matrix. The SHIFT technology is maximizing value for customers by minimizing water and energy footprint. Over the last 1 year, the domestic market saw a contracted capacity addition for setting up of 100 crores liters per annum of ethanol. So we contracted for setting up 100 crore liter of ethanol capacity. And Praj is at the forefront of building this capacity as we move forward. On the international front, with talent force by the pandemic impeded development dialogue in several economies and the travel restrictions led to an extended time line for market building activities, the impact of COVID and travel restrictions does have hampered some of these activities as we move through the year. As the COVID crisis begins to taper down, we are now experiencing restart of the first dialogue on capacity buildup and expansion in international markets. We also expect that in the back of the U.S. returning to [Audio Gap] some programs will come to the forefront and will present a new business opportunity for us. On the 2G front, execution of the first 3 plants in the country is on course. Equipment installation has started at the IOCL Panipat project. The mechanical completion of this site is expected in second quarter of calendar year '22. We expect to commission this plant in third quarter of the calendar year '22. In Europe, Enfinity, our latest offering along with SEKAB in finding -- is finding good traction in forest residue to ethanol space, especially Nordic regions and inquiries are progressing very constructively on this front. On the CBG front, we bagged the prestigious breakthrough order from HPCL during the quarter for setting up the CBG project at Badaun in Uttar Pradesh. Praj is offering its state-of-the-art RenGas process to produce CBG from rice straw using proprietary microbes. The project has a capacity to process 35,000 metric tons of rice straw as feedstock and can generate over 5,000 metric tons of CBG annually. In addition, the project will also generate 23,000 metric tons of high-quality solid biomanure and over 35,000 metric tons of liquid biomanure for ferti-irrigation. The project has a potential to save over 15,000 metric tons of CO2 emissions per year. We have received a contract for setting up a CBG project for distillery spent wash in Western India with a capacity to produce 10 metric tons of gas per day. Praj is very proud to have that project for CBG development from 3 independent and highest potential feedstocks, namely pressmud, rice straw and distillery spent wash. Through these projects, we are contributing towards the SATAT initiatives with an objective to promote CBG as a clean, sustainable and affordable fuel. As I speak with you, we have also commenced the final stages of the commissioning of India's first 200 TPD pressmud compressed biogas base CBG project at our customer plant based in Uttar Pradesh. The ecosystem for the CBG is continuing to develop, and we do hope that over a period of time the system will develop and become a robust system just the way ethanol system is over a period of time. As for Engineering and PHS business, they have started to witness healthy trend in their chosen market segments, and we expect that momentum to strengthen as we move ahead through the year. The zero liquid discharge water business, the IOCL project execution has commenced, and we also bagged some key orders during the quarter. And what was very heartening for us is that many of these contracts are repeat orders from our marquee customers, which actually goes to prove that our solutions are finding increasing acceptance with the customers. On the CPES front, with the global technology and EPC player, we expect from several of these accounts. The brewery business, the domestic market has continued to be in status quo with no new capacity being put bar 1 brownfield expansion, which we are building. We expect domestic demand to return based on the development on the pandemic front. We are beginning to see an increased activity in Africa and expect that our efforts will stay a way for a constructive development in new financial year for brewery business in African market. On the PHS front, we are witnessing increased activity level in entire complex injectable and vaccine space. These are the 2 states where we had positioned our solution very strongly over a period of time. We are now partnering in supplying of critical equipment to several leading players in the COVID vaccine development program. We also see an encouraging development on inquiries from the international front, laying the platform for a strong growth of this business. On the operations front, our continued and steep rise in input commodity costs coupled with issues arising out of a pandemic-related migration does post challenge in smooth and trouble-free execution, but our teams are focused on ensuring that we iron out those wrinkles as we move ahead. We are carefully monitoring business environment for any demand-side corrections owing to the pandemic situation, although we see no signs of that as of now. We will continue to take all measures to identify risks and their mitigation, ensuring continuity of operations, safety of our people and continue to do our bit in fight to defeat the pandemic. On the whole, our research, innovation, focus-led, customer-centric strategy, coupled with very progressive and sustainability-focused policy environment has helped build a strong platform for driving company's future growth. Before we close, I would like to share, in line with our dividend payout strategy, the Board of Directors has recommended a final dividend of INR 2.16 per share for FY '21. With this, I will now hand over to Sachin for his comments on the financial performance. Thank you.

Thank you, Shishir. The consolidated income from operations stood at INR 567.1 crore in Q4 FY '21 as compared to INR 296.29 crores in Q4 FY '20. PBT for the quarter stood at INR 73.19 crores as compared to INR 31.67 crores in the corresponding period last year. Profit after tax stood at INR 52.01 crores in Q4 FY '21 as compared to INR 24.86 crores in Q4 FY '20. For the full year ended March 31, '21, consolidated income from operations stood at INR 1,304.67 crores as against INR 1,102.37 crore in FY '20. PBT stood at INR 113.11 crores as against INR 83.13 crores in FY '20. And PAT for FY '21 came in at INR 81.07 crores as against INR 70.43 crores in FY '20. The contribution margin for the quarter has shown drop of 2.3% as compared to the last quarter. This is mainly because of the sales mix for this quarter, mainly the high turnover from domestic business, which is almost 72% as compared to the 69%, and some impact of increase in the input costs. Similarly, contribution margin for the year has also seen some kind of an impact as compared to the last year. The reason being in the last year, we executed a high number of service export orders as compared to the current year. Effective tax rate for the year stood at rupees stood at 28.33% as compared to 16% of the last year. This year, we are coming in normal tax regime as compared to the last years where we were in the MAT regime. Additionally, the increase in the rate is because of recognition of deferred tax liability on account of certain SEZ benefits, which will not be accruing in the next year. Looking at the complete utilization of MAT credit now, and some benefits of R&D spend and SEZ sales, which are going to be -- going in the [Technical Difficulty] taper down, our effective tax rate is affected to be in the range of 26% to 28%. Export revenues accounted for 28% for Q4 FY '21. And of the total revenue, 70% is from bioenergy, 22% is from engineering and 8% is from PHS business. The order intake during the quarter was INR 650 crores with 84% from domestic market. Of the total order intake, 84% came from bioenergy, 8% from engineering and balance 8% from PHS business. The order backlog stands at INR 1,748 crores at the end of March '21, comprising of 85% of domestic orders. Cash in hand as on 31st of March stood at INR 476 crores. With this, I will conclude my remarks. Thank you all for joining. We would now be happy to discuss any questions, comments or suggestions you may have. Thank you.

[Operator Instructions] The first question is from [Technical Difficulty]

Congratulations for posting a wonderful set of numbers. Sir, I have 2 questions. First one is with regards to you mentioned about the CBG plant in the North India being now operational. And you had mentioned in the previous call that North India was supposed to start in April and the Southern India plant was supposed to start somewhere around June. And based on the working, how the plant is working, what is the customer response, how the entire ecosystem is developing, you see further inquiries coming in. So with regard to the first plant, which has now been operational, if you could share some feedback as per how the plant is functioning? What is the customer response? And does it give you an indication now that probably more and more inquiries, which could get converted now into orders coming in much sooner than what probably you would have expected earlier? That is question number one, with regards to CBG. And secondly, with regards to sir, the commodity costs, which have gone up, and they continue to move up in the last 3, 4 months also further. And so how could this impact? We have not had any impact probably in March, though, our gross margins have come down. But do you see this impact thing going ahead in, say, next 2, 3 quarters to come? If you could share something on that.

Hello, Shishir, are you there?

Can you hear me?

Yes. Now, I can hear you, yes.

Manoj, as I was mentioning, the IPL commissioning has started. And early days for me to comment yet on its impact in the market, et cetera, we are expecting, but I think we have to give some time. People would also like to see performance for a brief period of time before you know one concludes. But right now, as far as technology is concerned, we are moving in the right direction. And we expect that we will soon be able to establish the full performance because it takes -- it gradually builds up over a period of time, that is how the nature of the gas plant is. So it is on track and developing well. We have also learned lots of lessons on around what needs to be done on the ecosystem. We've been working very closely with the oil marketing companies, with the city -- gas distribution companies, with the customer, with the logistics providers. And it's been a great input that we have -- and learning that we have received, and we will be able -- and I must say that everybody has been responding very constructively and positively. And as the things go forward, probably this is too early for me to comment on whether we're starting to see a flow of encouragement based on this particular plant. So that's early days for that. But over a period of time, we do expect that things would happen. And the ecosystem development and improvements will help some of the other customers to also witness and make up their mind. Moving on to the commodity question that you got, yes, the steel price hike is uniformly impacting everybody. So there are 2 dimensions to it. On the new jobs when we go and bid, we can definitely factor that in at that moment in time as to what the price is, although they have been really rising at a more rapid rate than one would expect for different factors. On our existing jobs, it is going to create some impact, no question, because as we execute and if during the execution stage itself, the costs go up, then they will have some impact. But we have -- our team is very focused, very alert, and we are taking measures to see how we can mitigate the cost of raw material rise because there's also a lot other costs that we have to manage. So finding a balance between the 2 is a challenge. But yes, it does pose a challenge as we move forward.

The next question is from the line of Bhalchandra Shinde from Max Life Insurance.

Sir, in our order book regarding bioenergy, if you can specify what will be our execution cycle? And ethanol plant related, how much orders will be there?

So Bhalchandra, the execution cycle has not changed. It is exactly same what it used to be. And because there's no change that has taken place in terms of any of the factors that would impact the execution cycle, so it remains unaltered between 9 to 12 months, of course, depending on the customer's readiness as well. So it will continue to be in that direction. Sachin, do you want to give out the number on bioenergy versus engineering mix?

Sure. I can give that number. Are you interested in understanding the closing numbers, the breakup of INR 748 crores? So I can tell you the number will be around INR 1,000-plus crores in the bioenergy segment, around INR 500 crores will be in the engineering segment and INR 115 crores in PHS.

Sure. And sir, isn't it took installer ethanol plant, it requires in the range of around 12 to 18 months, then I would like to know, means like how the execution cycle is in between 9 to 12 months?

No, no. So I think Bhalchandra the question is from whose perspective. So if I'm the promoter of the project, what you're saying is right because I need to go for an environmental clearance before I start out to order out my plant. So it does take within 6 to 9 months to get those regulatory approvals inked, sometimes it can be as long as 12 months. And -- but I'm talking about orders on hand. Once I have the order, then the ECs already exist, okay? So from our perspective, it will be 9 to 12 months. But you are correct, that if somebody is putting up a project, maybe they will take a longer cycle, no question.

And sir, just on the historical part and right now, if we see from 2016 till now, actually capacity-wise, mostly ethanol capacity has quadrupled, I think from 2016, but our sales were not increasing. But now actually, again, the capacity addition is there, and we are seeing a jump in order book. What exactly there is a change than historical in current?

So I think there are 2 or 3 factors that we need to take into consideration here. One is that there is a definitive program for improving the ethanol blend in the country, so -- and a clear realization that the demand has been now flattened out. The oil companies have come out with a tender of 5 years, right? They have already told what the demand is likely to be for the 5 years. But they've already -- before the E20 was announced, even before that, they had given out a very significant visibility to what is the requirement going to be. And the capacity is short of that. So obviously, then capacities will be built based on the demand/supply gap. That is number one. Number two, and I think that's an important parameter is also to understand that if we go to E20, then we are looking at a very different kind of a cycle because, as you would know that today, most of ethanol is produced in the 3 states of Uttar Pradesh, Maharashtra and Karnataka. But with the change in the policy on the grain side, by including the starchy feedstock, if we can put a broader name to this, so there is sugary feedstock, which is all the sugar companies as the natural owners. And we'll continue to build capacities based on that because of the dynamics that happens in the sugar business. On the other hand, the starchy feedstock actually distributes the production of ethanol across the country in every state because grain and starchy feedstocks are available across through the FCI godowns in the country. If that is what is happening, then the ethanol capacities will come up in different parts of the country, which will lead to an overall improvement in the blending ratios because today, a lot of logistics distances and management has to be done to move ethanol from 3 states to multiple states. That is the next one. Then the third dimension that will come into place. So we look at what's happening with sugary part, we'll look at what's happening at the production capacity expansion. And the third dimension that we walk you is the industry structure itself is undergoing a change. If you look at it from the perspective of -- let's just take 24 months ago, almost entire production of ethanol in the country was based on sugary feedstock, so sugar means the natural ones and they'll continue to do so. The dynamics on the sugar side, they change, the export subsidies going away, surplus sugar production, very good agriculture crop, so -- and the freeing up of the feedstock. So if you look at all of these -- apart from all the financial measures that got announced, then that is driving a good dynamic in the -- on the sugar segments to set up capacities based on syrup molasses being moved away from molasses. And what that means is more and more sugar is now getting diverted to the production of ethanol. It is also a very high value accretive activity for the sugar mills. So that's one dimension. The starchy feedstock, on the other hand, will bring in a whole host new set of promoters, if I can use that word, for the project. You can imagine -- we have inquiries from developers of large solar capacities because for them, it is a model by which you create a commodity, which is electricity, now it's another commodity called ethanol based on our policy that is -- or the directives that are available in the system, ecosystem. So we will see a completely new set of players also emerge. It could be OMCs, it could be developers, it could be renewable energy focused developers, renewable energy focused funds. So this could be a very different set of people who will walk in because the starchy feedstocks actually opens up the whole economy through a very different set of dynamics. And that's what is going to happen in India. But not only in India, we are seeing this movement across the world in several economies and where we are expecting, of course, United States walking back into the Paris agreement is a big, big push -- positive push in the direction. We are seeing a lot of activity emerging out of Canada, where they have announced a very ambitious ethanol blending program. So we see constructive developments taking place in different economies on this side and many governments taking up to the idea that maybe this is a good solution for us to address our energy needs. Sorry, a bit of a long-winded answer, but I hope that answered your question.

And sir, just a last question. In last year, we had a closing order book of around INR 1,000 crores, and we ended FY '21 at around INR 1,300 crores. Right now, we have around INR 1,700 crores. Can we expect sales of around INR 2,000 crores by FY '22 and/or how much can be the sales target on your end?

Well, all I would say is this, I have no idea what the equation in your Excel sheet forecast is, but we can put it together and it will spoil some part. So yes, we'll have to see. There are factors to be, as I was mentioning, there are -- we are assuming that the business environment will remain largely unimpacted with this second COVID wave, which is what the indications currently are, but we have to still wait and see. Our focus, as I mentioned, is to increase the throughput of our systems and execute the plants very, very effectively and very -- at a fast pace. Also in a very major change that we will witness as we move forward from here is as I was mentioning is that while the sugary feedstock based plants are seasonal in nature, so there is some seasonality in the execution cycle. The grain-based plant or the starchy feedstock-based plants, they do not have such a seasonal build into their requirements. So we will see a very different dynamic play out as we move forward, all favorable.

So actually I was...

Sorry to interrupt you, Mr. Shinde. May I request you to rejoin the queue, sir, for follow-up questions as there are many others waiting for the turn as well.

Sure.

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

Congratulations for strong performance. First question is basically for -- how is this progress of around more than 400 projects, which are there for interest subvention? Are we seeing the traction with this tripartite agreement? Or still they are facing some financial funding issues?

So Vikram, thank you so much. I think as I was mentioning, the industry structure is undergoing a fundamental change. And it's no longer just a sugar-based ethanol production story. We are going to see a lot more starchy feedstock based capacities that come in, in these 400 projects that you view it, too. We are seeing -- the way we will see it is that first our inquiry levels have to start going up, and that is definitely happening. Our order book has to start building with different feedstocks that definitely happened. And for us, the good news is that for us, the starchy feedstock is a story that we have built outside India for many years. So we have tremendous experience into building of these plants and their performance. So we expect that experience will come to good help for us, for our customers to now start building world-class plants in India based on starchy feedstock as well. So we are seeing very positive development. Our inquiry levels have more than doubled on the starchy feedstock side, probably more than quadrupled as well. So we are expecting a good and constructive traction on the starch.

Okay. And second question about increasing the landscape under the bio-mobility, particularly opportunities in aviation fuel, or methanol as fuel for coastal shipping or inland waterways. Typically, who will put up this kind of capacity? Or existing the ethanol players can -- with some modification to the equipment can supply that? If you can highlight that? And how our tie-up with Gevo is playing out for global market for aviation fuel?

Great question, Vikram. So on the sustainable aviation fuel side, our technology that we are working with Gevo for, which we have codeveloped with them, with a specific focus on the India market, and since we understood the dynamics here, it is an alcohol to jet fuel route, as it is called ATJ, alcohol-to-jet. So our effort is that tomorrow, if markets were to start expanding for the sustainable aviation fuel, and as we know, that there is no electric alternative there on that front, right? You can't have an electricity powered aircraft flying around. So for them to overcome the climate change problem and greener gas emission issue, they will have to shift to -- the industry will have to shift to sustainable fuels. And there, the alcohol-to-jet route will play a very big role because in India, as we have meant -- as I've mentioned about the report as well, Clean Skies for Tomorrow. The route of alcohol-to-jet actually utilizes the current infrastructure that we have so strongly in place with our sugar mills, the ethanol production plants that are set up with them the grain-based plants that we come up, all of them will become the feeder plants. So it will be a different molecule of alcohol that will be produced in these plants, and it's a 2-stage process, and then the refineries will refine that alcohol to the aviation fuel stage. So 2-stage process, but very, very aligned to what our current infrastructure is. And we are developing this technology with a view that our existing customers should be able to accommodate with minimal modifications and start producing the required alcohol variant as and when the opportunity opens up.

The next question is from the line of Viraj Mehta from PMS Investments.

Congratulations on the excellence set of results. Firstly, if you can help me with the -- I mean, quantify it by target market size correctly and how it will evolve in the coming years, and if you can break that up from between sugar and starchy feedstock?

Sorry, is your question, what is going to be the sugary feedstock-based ethanol production versus starch, is that the question?

Yes. I wanted to understand, I mean, what is the current target market size and how will it evolve in the coming years, if you can break that up between feedstock?

All right. So as I said, if we have to meet the EBP 20 target by 2025, we have to add 1,000 crores liter of capacity into the system. Nearly 60% and thereabout -- sorry, you can say, 60% to 2/3 in that range will come from starchy feedstocks and 1/3 will come from sugary feedstocks, this additional capacity.

Sure. So what is the current payback period for the customer based on starchy feedstock?

Sorry, I couldn't get the question.

What is the current payback for a customer starting this starchy feedstock production?

Well, there are factors, for example, the land cost, the proximity to the market, the cost of capital to an organization, which is different from different people. The capacity itself of the plant; if you put up a larger capacity plant, obviously, it is more effective payback period. So it varies. It could vary for -- in some cases, it could be 3 years, it could be 5 years of that order, depends on different factors, yes.

Okay. Lastly, on capital allocation front, I mean how do you foresee the excess capital considering we are having strong free cash and idle cash on the balance sheet?

Sorry, could you please repeat the question? I couldn't catch it.

Yes. How do you perceive excess capital on the balance sheet considering we are having strong free cash and idle cash on the balance sheet?

So I think, first of all, we are very happy that we are in a situation that we have cash on balance sheet, and we are not looking at raising any debt of any kind, number one. Number two, as I was mentioning, as we move forward, a lot of development will take place. On the bio-mobility platform itself, I think one of the previous questions was around what happens to biomethanol, what happens to sustainable aviation fuels. And a lot more that we already laid out to the platform for. So we have to see what kind of investments we will need to put on the technology side to be able to be ready for driving the change, for making it happen and being at the forefront of it, which has been our legacy so far. So I think we have to have a judicious understanding of what kind of expenses we need over what period of time, and we will take the correct call on that with respect to that, so -- and the cash we have on balance sheet.

And, Viraj, if I may add, I'm Sachin here. The projects are also under execution. So we have to execute all the order book of INR 1,800 crores, which we are sitting on. And actually, on the basis of payment terms, we had received the advances against those. So naturally, it will go -- some portion will go for working capital also for that matter. So what Shishir mentioned is on the investment on the capital side. But second thing which we'd like to also keep on investing into working capital, which we'll be requiring for the execution of these projects.

[Operator Instructions] The next question is from the line of Achal Lohade from JM Financial.

My question was in terms of the capacity, what is the capacity today, total distillery capacity in India? And how much of that is based on grain and sugar, respectively, please?

Are you asking what's the current installed capacity based on different feedstocks, is that the question?

Yes, sir. Yes, sir.

We can probably send you that information because I need to give you an exact number on those. So because this depends on the feedstock that the companies have opted for, et cetera. So we can -- but most of the capacity today on the ethanol side of the equation is sugary feedstock, most of the capacity in India today is sugary feedstock, but there was no policy around starchy-based ethanol production -- starch-based feedstock and ethanol production thereof. So whatever production that we see today of sort of 350 crores liter, 400 crores liter, that is coming out of sugary feedstock only. And today, the grain capacity that exists in the country is mostly used for portable and other high use alcohol and ethanol production.

Understood. And the second question in terms of -- sorry.

But now it is changing.

Certainly. And in terms of the capacity, those 400-plus applications, which the government approved for the interest subvention, what kind of capacity do you see getting actually added, given the issues they're facing, whether it is land or environmental clearance or the funding, what kind of capacity addition do you foresee in the next, let's say, 3 years or so, sir? And how much of that would be sugar -- sugary feedstock?

Let me put it like this. So if you look at the year that went by, year ending March '21, our -- if you bill the capacity in the country, it's like nearly 100 crore liters to the country's cities, okay. 100 crore liters of capacity will be directed from different feedstocks. Now on the other hand, if we have to meet the EBP 20 program in 2025, we have to be at 100 crores liters, okay, that's the second view point for you. We are going to add 100 crore liters of that, maybe our competition adds -- they are -- we are 2/3 of the market, so they'll add 40-odd crore liters of their plants as well. So if we have to add another nearly eightfold, ninefold more -- eightfold more capacity to this, and I said that most -- we expect as we move forward, 2/3 of the capacity will be built around starchy feedstocks and 1/3 will be built around sugary feedstocks. And by the time we reach '23 when we would have -- as I was mentioning earlier, we would have also proven on the ground the cellulosic ethanol, for which we are building these 3 plants, so cellulosic feedstock-based ethanol. And I think that is when we will also start to take that notice because that's a very, very different proposition because that solves -- and I was mentioning the like 2 programs in Europe, which is actually focused on cellulosic feedstock. So we will have to look at these different dimensions of how they play out. In India, only in India, we expect a lot more capacity to get built up based on starchy feedstocks and not -- and a little less on sugary feedstock as we move forward. Already sugar is a very, very big base.

Fair point, sir. If I could ask 1 more, just a clarification. In terms of the blending, there is slight confusion in general. In terms of the existing vehicles, how much can they take without any equipment issues? Or with certain replacements, how much can they take exist?

Pardon me, I will have a slightly long answer to this question, but so understand this, so I was attending a talk from the Brazilian authorities. And as we know that they are the leaders in this field in the world. They have demonstrated that they have gone up to 27% blend with no change, okay? With no change in the vehicle, they have still gone to 27%. That's what they have achieved. I'm saying, on the other hand, if you look at what is required to be achieved, there are 2 dimensions to this, okay? One is when I blend -- if I know, as I am the automobile manufacturer, and if I know that the fuel is going to be E20, for example. If I know that fuel is going to be E20, I can then tune my engine at E20. What does E20 mean? E20 allows me to go to much higher compression ratios without the problem of knocking because there's this great oxidation agent with a high-octane number called ethanol present in the mix, which lays in with the whole mixture of ethanol octane number. But if I don't have that information, then I have designed my vehicle for E0, if I can use that word, okay? That is for the normal petrol, with a lower compression ratios because I know that if I go for high compression ratio, it will knock, then I will not be able to operate my vehicle. So it's also a matter of striking, of having a uniform availability of fuel across the country, designing a vehicle to that so that we can directly leverage the whole potential of the fuel that is available. In absence of that, you will have a vehicle, which is designed for a fuel, which will work for nearly same fuel, but we may have some -- may not be able to scale up to the best possible performance level, which may be better than what it is currently. So that's one dimension. Second is, I think, up to E15, at least for sure, there is no change that may be required in most of the vehicles. And I'm saying this based on my knowledge of my past job that, that may not be required. Beyond E15, E20, there will be some changes in the gasket structure that may be required, but no fundamental change that may be called for unless you redesign the vehicle to take advantage of this higher octane number, et cetera.

The next question is from the line of Bhagyesh Kagalkar from HDFC Mutual Fund.

Yes, 2 questions. One is on the RCM opportunity. Can you throw more light, it is in the launch? And secondly, on the CBG front, see, now, blending of ethanol gained lot of traction. On the CBG front, what is the inflection point, now that we have set up first CBG plant as the government starts talking of big numbers on CBG plants allover India?

So Bhagyesh, great questions, as usual. RCM, I think we need to understand it, this is at different stages. So the first part of RCM is the core product that will come out of our cellulosic ethanol system, the 2G plants that we are commissioning. And now we have developed 2 very, very -- and some more are in the pipeline, 2 very strong core products that could be of great use for the country and for the industry. You know that we currently import. For example, we have developed a coal product called bitumen. Bitumen is completely imported today in India. But now we have developed a process that can take the lignin and valorize it to produce bitumen. And it is currently under testing. So when that happens, that becomes a very good source for country to substitute an imported product, okay? There's another one called lignosulfonate, that also we have developed. Today also, we are importing entire quantity of lignosulfonate. Lignosulfonate is a the material that is used for concrete mixing. When you build, you've seen concrete from cement. This is the element that actually holds the moisture and the cement together, so that allows the bonding to take place between water and cement in the different elements. So 2 examples I gave you, which we'll start to launch. So there's a core product cycle of RCM that will go out in the field and that will help our customers, who are already existing as well as the new ones. Then there is a whole range of products that come out because we have been looking at microbial activity. We have been looking at our ability to look at different molecules and there are products in the pipeline that will come to start to roll out and there are a suite of them that will come out. And then, of course, there's a third one, the big frontier, which is what happens in the bioplastics and upward stages. So different stages of development right now for different products, and we will keep talking about them at the appropriate time. That's on RCM. On CBG inflection point, I think, as I said, that we had to commission the first plant and run it successfully to understand the whole ecosystem, this part of technology, but more than technology, I think, also how the rest of the elements of the ecosystem work. The CGD system, the oil marketing companies, the retailing at the pumps, the vehicle population changeover, how people will switch over from diesel to gas because there's a substantial price difference in the pump between the diesel and the gas and so on. So there are different perspectives that will have to be built in. I think what's happening currently is, A, it is moving in the right direction. It is still early days to say we'll start to develop into the INR 175,000 crore opportunity that the government is eventually planned for. But I'm sure that this is a very important first step in the direction for us to demonstrate that it works. It works and these are the financials and that's how it works. And I'm sure that, that is something that we will know during this quarter, okay. And from there, we will build. So early days of CBG, yet very promising outlook based on what has been announced so far at very umbrella level. But I think we'll have to connect the ground relative to that and then see how it develops.

The next question is from the line of Sujit Jain from ASK Investment Managers.

Congratulations for an excellent set of numbers. Shishirji, I had 2 quick questions. CBG opportunity you just spelled out, what incentives would be needed to democratize it outside the oil and gas refineries and marketing players? And in terms of risk, what happens when crude oil prices go down? If ethanol pricing is linked to crude, does that change the economy across cycles? Will the players -- will they be able to make money? And what are your thoughts about terminal value of fossil fuel vehicles because government at the same time is pushing EVs as well?

All right. So let me start. So first and foremost, I think what's important is on the CBG side, as I was mentioning, the retailing of the energy and the automotive and in the country today is managed by all marketing companies. And now we have a new set of players, especially in terms of the city gas distribution companies. And there's a big push, as you know, to set up the city gas distribution network. And I think that's a huge plus for CBG businesses there. In the recent policy announcement, the government has said that this gas will be blended into the CGD network and then the APM pricing network mechanism will take place of pricing at the end-user end. So very clearly, a push saying, no, we have to go sustainable. See, we are not a country that is levying a carbon tax for anything like that. But these are the policies through which you can actually ensure that the right kind of energy sources are put to use from a carbon perspective as such. Moving from ethanol to crude, in India, it has been clearly felt out so far that the pricing of ethanol is not connected to the crude oil price, for 2 reasons, I think. One is this is very farm community connected prices. Because what do we have in abundance? We have an abundance and who is the larger stakeholder for us is the farmer and the agriculture producer. And we are not a country which has been gifted crude oil reserves that you dig a hole and you find crude oil. That's not the case for us. So obviously, our environment and the policy, our environment on the entire mechanism that is rolling out will have to get anchored itself around the agriculture dimension of the thing. And over a period of time, world over, crude oil is not going to be, over a period of time, it's not going -- it's not a long-term fuel that everybody is backing because of the associated problems of GHG emission, et cetera. So, so far, as it remains connected to the agriculture benefits and then the farmer and feedstocks pricing thereon, I don't see a problem for ethanol in India at all. I think there's been more than enough indication and support and actual rollout in that direction. In terms of the vehicles, I think what we have to understand is that -- I'm very happy that you asked this question. So we mentioned about a platform called bio-mobility. What does it mean? What bio-mobility platform says is that we should create sustainable fuels that will reduce the carbon footprint and will be sustainable in long-term for the automotive vehicles. Now if you look at biofuels, what is actually happening with biofuels is we are using excess the infrastructure. We still use an ICE engine. And I think it's a huge point that we need to take note of as a country. ICE engine -- I am just speaking of a typical car, an ICE engine-based car has 17,000 parts. An electric car has 700. So remember 700 versus 17,000. The 17,000 parts are made across various different automotive value chain, these are all part makers who make them. Today, we employ nearly 10 million people, who are based -- who are dependent on these parts being made. When you're bringing biofuel, all of them stay in the supply chain, without exception. But you bring an electric vehicle, most of them will vanish, one big blow. So we don't want job destruction. We want job creation. We want the job protection, and we want value addition. So ICE engines stay, you use the current infrastructure for distribution and retailing, so not -- no big investment in that dimension. And most important, as I said, we don't change the user habit at all. I and you, as users, don't even notice this, right? We just go to the same petrol pump, we still fill it up, and we will drive our vehicles. So it's not changing the user habit at all. And that's a big plus in favor of biofuels. On the other hand, will there be electric vehicles? Sure, there will be electric vehicles, and they'll coexist. I was just reading a news today. If you take China out of the equation, the world, the total number of electric vehicles sold in the world, last year was about 5 million or so; China is another half, so equal 10 million. If you compare it to the total vehicle production in the world, it's still -- a very miniscule number. It's raising fast because starting from 0. But this is -- so it will coexist. It will come into the play. It will have its own market. But for India, I think we need to ask different set of questions. We cannot do what Sweden or Finland can do. Our economic balancing and compulsions are very different.

And 1 quick question is on technology. Is it all built in-house? Any royalty payments, and for future technology as well?

Sorry, I didn't understand your question.

The technology is developed so far, were they all in-house or there were some royalty payments, tie-ups, et cetera? And in the future as well, the technologies that you're talking about, which will get developed, any tie-ups, basically in terms of what is the impact on the P&L?

So let me answer the thing. First of all, we are extremely proud of the fact that we have our own R&D. We have a state-of-the-art R&D center, which is absolutely world-class, and so recognized in the industry segments globally as well. And we have invested our time, effort, money, sweat, blood, tears, everything, our passion, our commitment into developing our own technologies, and that is what we've been rolling out in the marketplace. We also realize that as we go forward and more of interaction starts to play -- takes place between different platforms, like biology and chemistry, IT services and biology and so on, we cannot say that we know it all. So we'll have to collaborate. And I think that's a good way to grow for any organization that we bring our center table, somebody else is trying to come and both put together becomes 1 plus 1 becomes 11. So that kind of collaboration. We already have quite a few, Gevo, SEKAB, DVO, and we'll bring them to table as and when that is required. And of course, if people bring their own technology, they will be -- there will be, what I would call, commensurate remuneration for all of them. None of them is going to be such that they will impact our P&L or anything like that. To the contract, by combining 2 technologies and bringing it forward to a better level, we'll actually be able to do better.

The next question is from the line of Raj Rishi, an individual investor.

I just wanted to find out, like if you're talking about this opportunity being so big in ethanol and later on in CBG also, don't you think that a lot more players will come? So what's the moat, which like Praj would have? Can you just comment on that?

So Raj, I think what's most important is we have a track record. We have developed technology and invested into it for. So if somebody wants to come and become Praj today, they either have to go back like 20, 25 years into the time line and start developing from where we were and do everything along the way. We have customer relationships in 75 countries across the world, which are very deeply rooted. Not easy to upscale. There will be competition, as you said. It's opportunistic. There's a lot of echo, operator.

Sir, your voice is getting cut.

Yes. Actually. your audio is breaking as well, sir. [Operator Instructions]

Okay. So sorry, this completely broke my chain of thought. I am so sorry. So, Rishi, could you please tell me the question that you asked? It completely broke my thoughts.

Can you hear me? Yes, so basically, the question was, if the opportunity is so big both in the...

Yes, sorry, sorry. Yes, correct, yes. So if the opportunity is so big, and as I was saying that, surely competition can walk-in. But what we have invested in technology development, what we have invested into our customer relationship and most important, what is our track record, that's not something that people would be able to copy overnight. At the same time, I always believe that the opportunity is big and some competition coming is always good because that actually proves that the market is really expanding. It is attracting players. It is -- there are more people than one -- than us who are also seeing the same story that we are seeing. So I think from those perspectives, it's a good thing to happen. Competition also drives innovation, so that's a good thing to happen. But having said that, I think for anybody to come anywhere near what we are today, they will have to have an equal pedigree at the back end to be able to command equal, I would say, share of respect in the market. So no different [Technical Difficulty], we are very, very proud of what we have developed over a period of time. Not easy to copy.

Can I ask my second question?

Yes, Raj.

So I had heard an interview of yours some maybe months ago, in which you had talked about this incremental 1,000 crore liter, which would be required for this 20% blending in the next 4, 5 years, of which like you thought -- you said the outlay would require around INR 100,000 crore for which Praj, the addressable opportunity would be around INR 14,000 crores. So do you expect that kind of order book for the next 4, 5 years? And if so, like when do you see the run rate improving to some -- to those kind of levels? If you can...

So Raj, we have begun to see -- those numbers are valid. We have begun to see the traction being built. I was mentioning in an earlier [Technical Difficulty] doubling the level of inquiry itself already. We have built -- we are currently contracted to build 100 crore liters capacity in the country. So it will start to -- and our numbers are reflective of that. So as the capacity starts to get built, now if it gets [Technical Difficulty], but if we have built 6, then we have to divide by 6. So we'll have to see how that number plays out. But definitely, we are very, very confident that on the ethanol side of story, we are looking at a very -- at a really finite period -- definitive period of time where capacity build will take place, and we will have a very major role to play because we are the leaders in the business.

As you said, around INR 14,000 crores for you as per present estimate of yours?

As I said, whether that INR 14,000 crores plays out in 4 years or 6 years, that time will tell. So I will not be able to look into crystal ball over that period. But yes, as those numbers are valid, and we expect that if the current momentum continues, we'll start to see conversions of those numbers happening.

The next question is from the line of Bharat Sheth from Quest Investment.

Congratulations, Shishir bhai and Sachin on excellent performance. And I believe the traction, which we were expecting has started, I mean, from this quarter end. Now Shishir bhai, I have a question on the domestic side, on the CBG, where in CBG, we have -- I mean, OMC is one of the largest key player in the whole ecosystem. And we have with this RenGas process we have got an order from HPCL. So if you can elaborate where -- there are also a lot of byproducts. So how do we perceive the -- and this order and how do really benefit us in over a period of time? And sir, that second thing on the engineering, which was a small piece of the business so far has now started contributing and where we have taken a lot of action in the past. And third, in your opening remarks stated on the RED II policy. So if you can elaborate a little more on that?

Sorry, Bharat bhai, I didn't get the third question.

See, in your opening remarks, you stated on this RED II policy in the Europe? So...

Yes. Yes. Yes. Okay. So Bharat bhai, on the CBG supply chain ecosystem developing, I think, it's very, very important. And it will have to be demonstrated over time. OMCs will remain a very important player in the whole chain because at the retail end of the supply chain, they are the ones who -- the actual vehicle users will connect with I and you. But CBG is also finding a very big traction now with the CGD network as they are built over a period of time. The city gas distribution systems will -- I am having a lot of disturbance operator.

[Operator Instructions] Mr. Joshipura, you may go ahead, sir.

Yes. So Bharat bhai, so CBG chain on the supply side, OMCs will have a big growth to play. On the retail side, the CGD network coming into play. I think we will see -- and that's what I was mentioning earlier as well that the ecosystem development is critical for any product to reach its end consumers or targeted consumers. And I think we are learning that, that is something that will happen. The push is in the right direction. But then it will take some time to build, but this will definitely be moving in the direction. On the engineering part of business, as you mentioned, yes, we have been talking about it, that the zero liquid discharge business of ours, Praj HiPurity Systems, these are the businesses that are really beginning to gain traction now because there's also an equally big concern now. The regulations are there, the corporates are more aware, they are more conscious about not letting out any effluent liquid out of their operations. And I think all of that, if we look at it from those perspectives, I think it's very, very important part of many process plants, the large industry to set up zero liquid discharge systems. And I think that is where we have a significant role to play. We are also beginning to see a good traction building up, as I was mentioning about Praj HiPurity System business, where we have been focusing on complex injectables as a space to own our offering over a period of time. And with the advent of the capacities in the country, and we are part of many of those efforts now, we are seeing a good traction build on complex injectable space and vaccine space in our play there in as well. So good times going forward for PHS as well. Moving to RED II. Brewery currently, not much can be said. We have a dominant position in the business. But right now, the business itself is not moving because of the -- it is a pandemic-impacted industry. So as and when it comes back, surely, we will have the role to play there as well. And there, we are also focusing right now, as I was mentioning, on the Africa as a market because that's where we see some capacity build taking place, and we are beginning to see a traction build there as well. So overall, CPES business, as I mentioned, we have been investing into our relationship with some leading organizations in the world and some of the big players in respective industrial segments. And we are expecting the story to turn as we move forward in the future period. On the RED II policy, as I had mentioned, we expect -- because of the pandemic, it got delays, the rollout got delayed. But it is now expected that in this summer, we will see the rollout taking of the RED II policy. What it fundamentally says is that moving forward, all the future blending will be focused on cellulosic ethanol or second-generation ethanol. So obviously, a lot of capacities will have to come up. We are already in dialogue with a few organizations there who are thinking slightly ahead of the curve and who are talking about setting up capacities. So as and when the development takes concrete shape, we will definitely brief you, but that's a big opportunity, and we expect that over the next 10 to 12 years, almost 30 to 40 plants will come up of different capacities to address that opportunity in the European market space.

Sorry, Shishir bhai to disturb you, but I mean, my question was this order from OMC itself based on this rice straw base, this thing, and where there are a lot of other byproducts are also. So how do we really see this order, I mean, over a longer-term playing out for us? What exactly it can, I mean, demonstrate for Praj?

So Bharat bhai, 2 things. There are 2 basic feedstocks for, as we know today, and there will be more as we move forward. But as we know today, one is the pressmud that comes out of the sugar mills; and the second is the rice straw, in a big way. There are other agriculture wastes as well and other wastes, but I think these are 2 big ones that we see. Others will also start to add to the queue. It was important for somebody to set up a rice straw based plant. It's not there anywhere in the world. So somebody has to put up a plant. It was a competitive bid that we bid for. There were other companies that were competing, and we won the contract because at that time we were able to showcase a much higher performance on rice straw. We'll have to build that. It is under construction -- not construction, it is under execution right now. But sometime in the first quarter of the next calendar year, we will see that plant come to commissioning. And then it will be a clearly demonstrated proof of what can happen out of rice straw. If that happens, already, there's a big movement right now out of state of Punjab, where Punjab Energy Development Authority is already awarded several contracts and tenders and licenses for rice straw-based gas production. So we do see a good traction buildup over the year on that one. And I think one must -- because the feedstock is abundant, which is a good part. And that, to me, is the typical dimension. Hello? Can you hear me?

Yes, yes.

Sushir, we can hear you.

Yes.

Okay. So I think what's important is to say focused on the opportunity, make sure that we have the right installations and references, and we work with the leaders in the field. And we are working with several other different kind of players. There are ESG funds. There are development -- renewable development companies. There are individual entrepreneurs. There are very, very different dynamics of the customers, who are going to put up the CBG plants, different dynamics of people who will eventually sell the CBG because that obviously is a very different ballgame, the CBG networks and the oil marketing companies, retail outlets and things like that. So that is why I said that there's an ecosystem under development. That's not the case for ethanol, right? The ecosystem already exists in a very, very defined way, but that's a very old industry as well. So we expect that as the ecosystem starts to take roots, this opportunity will also start to take shape in a good way.

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

I just wanted to understand that, I don't know whether you forgot this earlier, sort of similar size plant, let's say, a 100 KLPD capacity plant, with feedstock of sugary, starch or...

Sorry to interpret you, Sandip. Your audio is not very clear, sir.

Yes, I just wanted to understand that for a similar sized plant, let's say, a 100 KLPD plant, with feedstock of either sugary or starchy based feedstock or cellulosic. A similar size plant, what could be the cost differentials in them? Like what would be the benchmark? I don't know whether you covered it earlier or not.

You mean to say, how much did it cost to set up a 100 KLPD sugary versus starchy feed plant, is that the question?

Yes, sugary, starchy or the second generation cellulosic base?

So let me first tell you, so on sugary-based feedstock because it is captive feedstock, the dynamics are little different. And as opposed to starchy because starchy is not a captive feedstock or any more stock for people. It's not a captive feedstock. So different dynamics there in terms of handling, et cetera. So -- and cellulosic, of course, is as well. Also, the capacities are different. So for example, if you look at sugary base, now the capacities are going up because of the sales tax, et cetera coming into play. But there are plans at 60, 100 KLPD kind of capacities. But we don't expect ethanol and starch combination to be at that level. We expect that the more plants, there will always be a small capacity plant build because of different considerations there. For example, now, many sugar companies are also saying that, "Can I have a bolt-on model for using starchy feedstock in the non-sugar season, nonseasonal period? I'll use -- I'll run the plant at the seasonal part, and then in the nonseasonal part, do I?" So they're also -- then they can decide either to turn down the capacity or can build the same capacity bolt-on on the grain plant as well. So they use some of the infrastructure that exists for the sugary plant as well. So there are different combinations. I will not be in a position to give you a number thing. You know what, 100 KLPD is X for sugar and Y for starch. That may not be the right way to look at it because there are various different considerations to this dynamic.

But can we say that for a starch-based plant, the costing will be higher than for a sugary one?

That is correct. That is generally speaking correct.

And when do you think your first of the second-generation plant will start producing?

I had mentioned that, that we are completing this in second quarter of the next calendar year. And by third quarter of next calendar year, it will be commissioned.

The next question is from the line of Gautam Rathi from CWC Advisors.

So I just wanted to understand, if we look at your revenue overall, and as we understand your revenue, it mainly has 2 components. One is basically the CapEx part, which the customer does. And then there is some, which is basically the revenue recurring item, which is basically, say, the AMCs as well as the consumables, which we sell to them, right? So if you can just give us some color, what would be the mix in the CapEx and the consumable part? Like if I take your revenue of this quarter of say INR 600 crores, what would be the mix? And if you can give us some examples as to what kind of consumables are these, in what processes these go? How is it -- or what was the AMC revenue share in case of a CBG plant? So if you can just give us some brief understanding, that would be great.

Gautam, could you just elaborate your second question again? The first one, I understood. Second one?

On the second part, if you can just help us understand what would be the -- see, so if you get a CBG project over INR 35 crores or INR 40 crores, what do you think would be the future AMC probability for that? What we would get, right? Say maybe INR 1 core worth AMC contract just for maintaining those plants, so if you can just help us understand.

Okay. So on the first part, so I don't probably have the -- I understood it, but your question is saying what business -- what part of that business is addressing customers' revenue side of expense as opposed to CapEx side, if I understand your question correctly.

Yes. Yes, perfect.

Yes. So if you -- at a very broad level, today, the revenue side of business for us today is off -- start off maybe 5% to 6% of our sales. It's not a large number.

Okay. Fair.

7% and thereabout.

It's the near-about number, yes.

Yes, it's about that number. We are understanding that maybe there is a very different way of focusing on this business and increase this business. That's what we -- that's one of our plan steps as to how do we do that because we realized that it -- if it is positioned differently, it helps tremendously really to our customers, and I think from there, we should be able to move it forward. In terms of the INR 35 crores plant that -- or any CBG plan that we'll put up, what are the future AMC revenues? I think it depends. I'm sorry to use the word depends, but what the feedstock is, so different feedstocks may have different potential. But typically, each of these plants can represent to us a potential -- revenue potential of -- depending, maybe INR 1 crore, INR 2 crores, INR 2.5 crores in that range, per plant per year.

Okay. Okay. And also, can you just help us understand, so there is this bio-syrup technology, right? So we understand in that technology also, you also add some consumables, which you give it to your customer, right? Is it correct?

Yes.

And is it a very large component because you have to store this setup for a longer time, right? Because these are generated over 3, 4 months and you have to store it for the whole year or, say, 9 months. So is it a large component, this consumable?

So the storage that is required is to ensure that the syrup does not degrade, okay? And we have to ensure that then we take it because during the season, nothing will happen. The post-season, as you rightly said, after 5 months of sugar season are over, and if I'm trying to produce ethanol in the 11th month of the sugar season, then how does the syrup behave. And I think in order to ensure that this whole feedstock is unadulterated, it's still at its good quality, it is still able to produce the feedstock in a good sense of way. So it depends on what capacity of you put up, and there are many dimensions to which part of the country we are putting it up, how many months of sugar season that is there. And I think the first plant that we are demonstrating at a commercial scale is currently -- they finished the syrup storage, so the bio-syrup making. And now they will start to use it over a period of time. So we'll have some more information as we move forward through the year on that one. And then probably I'll be able to share that with you.

Okay. Fair enough. Fair enough. Just if I can have 1 follow-up question on this. So how are you looking at this part of the revenue, which is basically the more on the OpEx side, over the next 3, 5 years or maybe 10 years? How do you look at it? So are you planning to scale this up? And are there some efforts being taken on this front?

So I think what we are seeing now with this increased activity and the role of microbes or microbiology into this whole value chain, a lot of opportunities will open up for us, and we are cognizant of that. And I think we are -- we have decided that we will start to work on creating a very focused business around, if I can use, the service side or revenue side of customers' model. There are 3 levers that we want to use. One is, of course, entire, these microbiology-led additives, performance enhancers and that dimension into the business. So second is going to be the O&M services that we'll provide to our customers. And the third is, we have launched a very ambitious program for digitalization, where we will be able to bring a remote performance monitoring and announcement system to our customers, where we'll be able to look at different dimensions of plant performance and go on a proactive fashion to customers and say, we can intervene -- we can stop this failure from happening or we can give -- bottleneck this or we can stop this cost from leaking from this point and so on. So there will be a whole host of services that will emanate out of this. So these three will combine and take it forward as a very focused business vertical as we move forward during the time frame that you mentioned.

The next question is from the line of Saket Kapoor from Kapoor & Company.

Sir, as you told that the way forward would be the starchy-based ethanol rather than the sugary-based. So how are these existing, sir, portable alcohol players, your prospective clients? And what kind of rectifications are applicable in case in their plant, so that they can simultaneously produce or they can ship to ethanol direct instead of the ENA trajectory since it attracts a lot of state levies? So how does this math hold, sir, understanding?

No. I think the portable ethanol -- alcohol is a very different segment. ENA segment is very different. There is a definitive market out there; right now, a bit subdued because of the lockdowns and things like that. But otherwise, very definitive market out there. So there will be people, who will keep on serving this segment. And I think -- so there's a definitive market and there's a definitive demand. So I'm sure they'll find the price point. It's pretty aggressive right now. So that's number one. I think number two, which is equally important, is the ethanol production out of starchy feedstock, and that's a different cup of tea. So I don't know whether an ENA producer would like to stop producing ENA and go to ethanol production, but there are a lot of projects that are coming up where people are asking for both, saying, "Okay, I want also ENA as well as ethanol and that our technology permits." Depending on where they are...

My question was that only. The existing potable alcohol players, having the feasibility, can easily go for the same because they have the feedstock ready and the experience with them. So that is a good proposition for them.

Yes. So as I said, it depends on their contracts with the -- because as we can surmise, the end users or their customers, what kind of contracts they have with them, what capacities they have to serve. So -- but if they want, they can add a section to the plant, which will allow them to produce ethanol. They can also -- when they set up a new plant capacity also, you can think in those having both possibilities and the flexibility...

Okay. Because the procurement is assured by the OMCs. I'm just talking about the EBP to '23 which you were elaborating to. So the procurement is there, and since you have told that geographically, only the 3 parts -- there are only 3 states contributing maximum amount of the starchy part -- sugary part. So any portable alcohol player having the grounds can come up with a starchy capacity? That could be a good feasibility for them.

Yes. What you're saying is valid. So they obviously -- their experience of handling the whole starchy feedstock and the management of thereof, and so they understand it. I think you're very correct. As an engineer speaks, technically, the plants for ethanol and the ENA are slightly different at some stage onwards. There's commonality, and then there's some stage they'd differ. But you're right, the experience is coming very handy. So they can all be the future ethanol producers as well. And that's what I was alluding to that the industry structure will change. Today, ethanol process is dominated by sugar companies. As we move forward, the industry structure is set to change. It will know -- there'll be another new players that will come in, especially in the starchy side of the feedstock. The developers, the ESG funds, the renewable energy development companies, many, many other OMCs, the ENA producers. So there are very different set of customers who will come into the play. And it's no longer the only sugar producers who will be producing ethanol.

Yes. Sir, last point on this order booking part, sir, INR 1,770 crores is the order book as on the event date. So sir, taking into account the execution cycle, the second half generally looks the bulky one in our engineering, as an organization, and the first half is slightly more sober. So sir, is this the same trend line depending upon the execution, which you are going to do for the first half? Or this time, the skewing up will look rather taping off than which was for the last year? Just to have an understanding on that, sir.

No, no, great question, Saket. So we have -- actually, we don't want that -- the steep curve that we have to climb every time. That's not a good idea because then we don't end up -- then we end up using our resources inefficiently. But this time, we are -- our focus is to even it out as much as we can. I'm not saying that we will even it out completely, that's not possible. But -- because also, we are in a growing demand arena. But yes, it will be much more smoother than it has been in the past, if I can use that word.

Right, sir. And order addition for the last quarter, sir? If you could quantify just for the January, February, March quarter, how much has been the net order addition, out of the total order book?

For the last quarter, total order intake was INR 650 crores.

INR 650 crores, and we have an execution of INR 560 crores.

INR 550 crores, yes. That's right, you're right.

The next question is from the line of Faisal Hawa from HG Hawa & Company. We will move to the next question, which is from the line of Kedar from Fortress Group.

So my first question is in terms of the overall ecosystem and in particular about the feedstock availability for either CBG or ethanol, so is the feedstock available continuously? And is there any issue in procuring the feedstock? And what is the cost of the feedstock for either CBG and ethanol projects? So that would be my first question.

So for ethanol, the feedstock supply chain is very well established. So the sugar mills, you continue to get the sugarcane and there onwards. And now as we are mentioning the from ethanol -- if I just look at from an ethanol perspective, the feedstock definitions have changed, what used to be only a molasses C, where all the sugar is expected and then what is left was given for ethanol production. Now lots and lots of sugar companies are also opting for making the juice and then taking it directly to ethanol production without sugar production in between. So different companies have different strategies depending on their market and their understanding of their product mix requirement. So that's one change that is happening, but we are seeing a lot more syrup-based capacities that are coming up for ethanol as opposed to only molasses C-based. Molasses B already, a lot of capacity has moved to that. So different feedstocks there. So for them -- and the pricing is decided based on what is the FRP for -- or MSP for sugarcane and their onwards the whole block thing. On the grain side, government has already specified the grain prices -- FCI godowns, and there's a corresponding ethanol price. If you don't buy from there and buy in open market, then there's a different pricing. So different strokes, different feedstocks, different sources, different ethanol price points.

Okay. And my second question would be in the HPCL project and Godavari Biorefineries project, value of them -- could you please share the contract value in rupee terms? And also on the HPCL project that can produce about 5,000 tonnes of CBG by processing 35,000 metric ton of feedstock, so that is about 15% gas yield. And I also read that IOCL has set up a CBG plant in the south, in Tamil Nadu. So that can produce 15 tonnes of CBG from 290 tonnes of feedstock per day. So that is about 5% of gas yield. So is it true, or is it right to say that your technology, that is RenGas technology, can produce maybe double of what the other technology can? Or am I wrong in my calculation?

So rather than making a bold statement, I think we are double to everybody else. We are saying, yes, the number that you gave does show that. And we are very confident of what we will produce, which is from our understanding really a benchmark yield because nobody -- no one is anywhere near. There are other technologies, which are slightly better than the ones that you mentioned. But overall, our process is very, very efficient. And that is what I was mentioning in my earlier answer to one of the questions that once they get established at a commercial scale on the ground, then probably it will completely change the dynamics of this space. We have to wait for that. Right now, we are able to demonstrate this. We are able to claim this. We are able to guarantee this. But people sometimes also want to see it, right? So the key part. Also, we are running a demonstration plant here in our R&D, which is a reasonable size, where we will be able to showcase to customers. But right now, of course, there are a lot of restrictions on travel, et cetera. So people are not willing to travel. But other than that, yes, we are very confident that our technology is absolutely, and by a long margin, best-in-class yield.

Okay. And sir, could you share the contract value for the HPCL and Godavari projects in terms of rupees?

No, we are not at liberty to do that.

The next question is from the line of Agam Shah, an individual Investor.

Congratulations on a good set of numbers. Most of my questions are answered.

The next question is from the line of Nimis Sheth from GT Advisory.

Congratulations for an excellent quarter. My question is also on the CBG. You could not share the value of the contract. Could you give us an idea what revenue such a project can generate, just a ballpark number, for the person who puts up such a project? 5,000 tonnes of gas and the subsequent bio-fertilizers, approximate?

Approximate. I don't have a calculation in front of me. So that -- it's about INR 46 to INR 47 a kilo is the gas price, okay? You will -- what our revenue gets about -- 30% of the revenue will come from byproducts, so that you can add to that. That's a lot of money...

Sorry, how much is -- will come from byproducts?

30% of the gas revenue.

30%, okay, understood.

The next question is from the line of Rohan Advant from Multi-Act.

Sir, my question was on CBG, a very basic question and please pardon my ignorance. Sir, when we talk about CBG, can the existing distribution that we can use for CBG? And in terms of end users, be it automobiles, be it CNG, or be it industrial use of gas, can our CBG be used for all those end users, whose you know cars need to be modified. So how is this ecosystem on a downstream business? I understand the upstream sort of feedback -- feedstock-led issues. But on a distribution basis, how is this ecosystem current?

Yes, Rohan, so all CNG can -- CBG can go and substitute entire CNG. So there's one-to-one substitution, no problem at all. The second is CBG is a more efficient form of CNG. So in whichever application you're using CNG, if you use CBG, you're likely to get about 10% higher efficiencies compared to what you get with CNG. So that's the second part. The third, when we were talking to OMCs, they made us understand that it takes about 6 to 12 months for an ecosystem to develop around it. But once the gas starts to become available, people start to convert their vehicles because it is very cheap. You pay nearly INR 90 -- INR 80, INR 90 for diesel at the pump. This is at INR 55, INR 56, in that range. So there's a clear distinction between the rate that we pay for diesel versus gas. So that pushes a lot of people. And then the conversion kits come up. They are limited by the use and availability -- sorry not use, but availability of the gas. And which the CBG is coming to different locations, very localized, I think a lot more churn is expected, and the speed expected in conversions as well.

Okay. So an existing CNG car, can be replaced with CBG?

Yes, you should, actually it's more efficient. It's much more efficient than CNG. You get more milage, which is critical to every Indian user, right? [Foreign Language]. It gives 10% more.

Sir, and just lastly, when you signed up the opportunity over the next 5 years or whatever time space to get to 20% blending with the INR 14,000 crore, if that's the market size, then we'll get a market share of that or is that the price we're charging?

Sorry, could you please repeat? I couldn't hear the question clearly.

Yes. When you sized up the opportunity as INR 14,000 crores, that gives a potential revenue that 20% blending will create, in that, the market potential and Praj will get a market share of that or is that an opportunity that Praj can come at...

No, no. This is the size of the market that we can address.

The next question is from the line of Levin Shah from Value Quest Investment Advisors.

Yes. Congratulations on a wonderful set of numbers. My first question is on this order booking what we have seen, so like you have been alluding to this in past few quarters that inquiry levels have gone up substantially, and they were, in fact, double versus what we had previously. And if you look at our order book during this quarter, that is reflecting the same in the numbers now. So we have received around INR 550 crores of order from bio-energy versus like INR 200 crores or INR 250 crores quarterly run rate that we were doing. So do we feel that this number, I mean, that inquiry translating into order book has already started happening from this quarter and going forward, this trend should continue?

Yes, that is our expectation. Because if all of these pictures are true that we have to have 20% blending by '25, that means INR 1,000 crore liters, that means 400 plants sanctioned the government, free up of stocks -- feedstocks and, therefore, so many inquiries and people are ready to put up the capacity because the demand is definitely there. Yes, it's true.

Okay, okay. Sir, my second question is on margins again. So like we all know that commodity inflation is something, which is impacting everybody. And also, at the same time, if you look at our business mix, our exports share as a percentage of total is going down. So do we see that margins overall will remain at the same level? Or is there any scope for improvement from here on?

So Levin, as you rightly said, it's a mix bag. What happens to -- how fast -- I mean, it's not that we are sinking export market. It's that that domestic is definitely seeing a big boom. That's number one. Number two, as we go to the starchy feedstocks, we expect that our margins will get better in domestic market as we're going, okay, compared to sugary feedstock. So that's the second one. Third is, what happens to the mix of -- at what -- different movement of time, size of project, capacity of the project, there are different dimensions, and, of course, the commodity prices -- so no company can be left untouched if there's a steep price hike, right? And to some extent that over a period of time, we will be able to absorb and manage it and pass it on to our customers. But there could be a brief period of few contracts where we will not be able to do that. So maybe short-term commodity prices, we will not be able to pass on to our customers; in long-term, definitely, yes.

Okay. Sir, and last question is on this, so Godavari orders that we have received. We have announced that order in the month of April. So that is not part of our existing order book as of March, right?

No, it is, it is.

Okay. We have announced that in the month of April. So I thought that would...

No, no, the order was for the March itself. Announcement came in the April first week.

Okay. So that is already reflecting in our current order?

That's right.

Yes.

The next question is from the line of Rajesh Kothari from AlfAccurate Advisors.

I have 2 questions. First is, you mentioned that total current ethanol capacity in the country is about 350 crore liters. And also you mentioned somewhere that you have added 100 crore liter, and let's assume competitor about 45 crore liters, so that comes to 145 crore litter. So are we trying to say that 1 year back, the total ethanol capacity in the country was only 200 crore liter?

No, no, no. What I said was, the current capacity that we are able to supply is off the order of 350 crore liters, 350 crore, 400 crore liter, off the order. Currently, the supply is already there. So it's being produced in the country. And what I said was that on -- if I look at my order book, what orders I booked in the last financial year, and I convert all of that to capacity on the ground, that will add 100 crore liter capacity on the ground. And if you look at market share dynamics, and I'm saying, "Okay, if we got 100 crore liters, our competition, all of them put together it would be, what, 40 crore liters. So country has contracted for setting up -- adding capacity of 140 crore liters on ground to the existing capacity. What we need to add is 1,000 crore liters. So that's the numbers.

What is -- the current installed capacity is 350 crores liters, am I right?

Yes, roughly, correct.

So 350 crore liters you are saying is existing capacity, plus 140 crore liters already ordered during last 12 months or so, and total was...

And another 1,000 crore liters needs to get added. Not total, another 1,000 crore, delta capacity.

Another 1,000 crore, is it? Okay. So basically -- got it. And second question is for 1 crore liter, what is the typical opportunity size for us?

Sorry, I couldn't get your question.

I mean, for 1 crore liter capacity, what is the typical size of order for us, if 1 crore liter is the capacity?

No, that is difficult for me to answer, reason being I don't know the -- it depends on what's the stream. So is it molasses C, is it B, is it syrup, is it grain? Different capacities with different feedstock, plus brownfield versus greenfield, debottlenecking, there are many factors that go to decide the capacity per liter. So that would be a difficult number for me to give out for you.

Okay. But putting in reverse 1,000 crores leads to...

Yes. But what we've said is 1,000 crore liter is about INR 14,000 crore opportunity for the company to address.

Understood. Sir, my second question is this -- the engineering business, pardon again for my ignorance, this business is -- so you have a bio-energy. And so the ethanol thing what you are right now talking about, that goes into bio-energy, am I right?

Sorry, come again?

This opportunity of INR 14,000 crores what we are talking about, I know it's INR 120 crore whatever last year what we have booked, that segment goes into which segment, bio-energy or engineering?

That's the bio-energy.

Bio-energy. Okay. Understood. Understood. So how do you see the scope of the engineering segment over the next 2, 3 years?

That's what I was mentioning in my earlier answer that we are looking at a progressive growth there as well, the zero liquid discharge systems, very -- we are very positive and optimistic about the fact that, that is something that will get built up. Our Praj HiPurity System, which is serving this whole vaccination and complex injectable chains in the pharmaceutical space, that is looking at a decent growth territory. We are looking at our CPES business, which serves customers, large engineering and technology companies outside India, they are on a decent path. So those are the engineering businesses. Except brewery, which currently we say, that because of the situation in the country, we don't expect new capacities to be built, at least not in the foreseeable future. So that's the one that will take a little time to build up. Otherwise, all of them are all on a decent track.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

Thanks, everyone, for your time today. In case you have any more questions, you can write us at [email protected]. Once again, thanks a lot for your participation.