Praj Industries Limited (PRAJIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 Earnings Conference Call of Praj Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandip Bhadkamkar from Praj Industries. Thank you, and over to you, sir.

Good day, everyone. We welcome you to this conference call organized to discuss Praj Industries' operating performance and financial results for Q1 FY '22, which were announced yesterday. I have with me Mr. Shishir Joshipura, CEO and MD; and Mr. Sachin Raole, CFO and Director, Finance and Commercial on this call. 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 our quarterly results presentation have also been posted on our corporate website. I would like to hand over the floor to Mr. Shishir Joshipura for his opening remarks.

Good morning, ladies and gentlemen. I welcome you to Praj Industries Earnings Call for Q1 FY '22. Trust all of you had the opportunity to go through our results presentation for the quarter ended 30th June 2021. It is once again a pleasure to connect with all of you. I hope that you and your families are keeping safe and healthy, and I do hope that most of you have already secured both doses of vaccine. Let me now briefly take you all through the quarterly business highlights and industry developments, following which Sachin will take you through the financials. At the outset, I would like to draw your attention to the important development concerning environment. The intergovernmental panel for climate change released 6th assessment report earlier this week. The report reveals that climate change strategy submitted by nations during Paris Summit are not adequate to contain global temperature raise within 2 degrees limit and that we have failed to even reach anywhere near our committed cuts on emissions. Life as usual scenario is foretelling a completely compromised future before the end of the century. The report precipitates urgency to decarbonize the environment by deploying technology in our daily lives that reduces the carbon intensity of our actions across all spectrums of human activity. The zero-carbon future demands an immediate action from all of us. We all know that biofuels have an important role to play in decarbonizing of transport sector. Let me now walk you through the business updates. On the bio-energy front, advancement of 20% EBP program to 2025 signals India's commitment to a long-term sustainable decarbonization agenda by driving transition to a renewable and cleaner energy source. In the ethanol supply year 2021, our national target is to improve ethanol blending to nearly 8.5%. This represents an increase by nearly 150 crore liters in ethanol volume over the last year. The sugar-rich states will exceed 10% blending in ESY 2021. State governments too have realized the potential of ethanol and have announced several measures to attract investments in setting up ethanol capacities. The path to EBP 20 clearly demands a 2.5x additional volume for blending over the next 4 to 5 years. This will call for creation of capacities for ethanol production based on current production capacity. This means we have to create additional capacity of 1,000 crore liter per year of ethanol. Several systemic changes in the ecosystem are in the offing. Entry of flex-fuel vehicles, E-100 vehicles differentiated blends at the pumps to name a few, all positive for driving demand for ethanol and a sustainable carbon-free future. Pilot project of E-100 ethanol dispensing station at 3 locations in city of Pune was recently launched for the production and distribution of ethanol. On the business front, the first quarter posed its own challenge in terms of a strong second wave of infection, undervaccinated population and availability of labor force. As the saying goes, when things get tough, the tough gets going. We have delivered positive and encouraging results in this period. This is a reflection of transformation of our promise to performance. On the operational front, adhering to all safety norms at our sites, factories and R&D facilities are -- which are now fully functional even as work from home becomes part of the norm for office-based employees. We continue to witness healthy traction in inquiries for the Bio-Energy, Pharma and Engineering segments during the quarter with the sole exception of Brewery segment. Our bio-energy business has delivered a strong performance with a healthy order book. We are seeing development of robust inquiries and leads across different feedstocks in the domestic market. Strong demand in the market can be gauged from the fact that this quarter alone saw ordering of about 135 crore liters of ethanol capacity, which is more than 90% of the order capacity in the whole of FY 2021. We also decided to be prudent in opportunity selection, given an exponential rise in number of inquiries, giving due consideration to complexity, completion time lines and cost to serve. Praj continues to maintain its strong leadership position with market share of more than 60%. On the international front, the business is now showing signs of recovery post the pandemic demand slump. We have started receiving orders from different geographies and more opportunities are under discussion. Americas market, specifically Canada is showing a lot of promise on the back of the positive ethanol blending policy development. Brazil is also showing sign of returning to normalcy over the next 6 months. The ethanol market is likely to pick up with the second half of FY '22, and with the help of our local partner, Dedini, we expect to make inroads into important Brazilian market. On the 2G front, execution of the first 3 plants in the country is on course, and we expect to start commissioning of the first plant in third quarter of the calendar year '22. On the CBG front, on the world -- on the occasion of the World Biofuel Day earlier this week, Honorable Chief Minister of UP inaugurated the CBG plant of M/s. Indian Potash Limited. The plant has -- the commission is now being scaled up. This is the first plant in the country that we process 200 tonnes per day of pressed mud to produce compressed biogas. This plant is part of nation's first of its kind integrated bio-energy complex, which when fully commissioned will produce ethanol, biogas, biofertilizers and other byproducts. As for engineering and PHS businesses, we are witnessing healthy trends in business opportunity development and expect this momentum to strengthen in the quarters ahead. On the Zero Liquid Discharge business, we are on course with execution of IOCL project in Dumad, Gujarat. With rising awareness about minimizing water footprints coupled with stringent statutory norms for effluent treatment, we are receiving increasing number of inquiries for our ZLD Solutions. On the CPES front, our strategy of [ F15 ] focus is beginning to pay dividends. I'm pleased to share that we are building an isobutanol to sustainable aviation fuel module for the demo plant of our partner, Gevo, for the U.S.A. market. Gevo has already announced setting up a very large-scale commercial plant in United States, and we are in discussion with them to offer our scaling up services for the same. We are currently working with U.S.A.'s customers to build modular system for one of the largest hydrogen plants in the world. We continue to focus on strengthening our relationship with clean tech and green tech companies for delivering modular plant solutions. On the brewery front, although there has been some improvement -- marginal improvement on the demand side, outlook continues to be weak as the market will still take some time to reach to pre-COVID levels of demand cycles. Across the PHS business, we delivered strong performance in the entire complex injectables and vaccine space. We are partnering with leading Indian pharma companies for fermentation-based solutions. This quarter, we won a significant order from one of the multinationals in United States for their molecular [ cell technology ] plant coming up in India. Overall, there is robust inquiry pipeline that is resulting in sustained momentum in order wins, and our order book is continually building, positively providing sustainability and visibility to our business. As we look ahead, we are seeing thrust coming in both from domestic and international markets. Increasing vaccination coverage, improving economic indicators and supportive macros such as good monsoons and better agri indicators will provide further fillip to the recovery. We have geared up to meet challenge of increased volume and customer expectations. We are investing in modernization of our shop floors, increasing resources for engineering and technology development and enhancing site support infrastructure and while increasing our vendor base. Having said this, the business environment is not devoid of any challenges. Continuously rising commodity prices are a matter of great concern as it impacts overall business performance. International travel restrictions, combined with uncertainties in supply chain and resource availability will pose a strong test for the business. I'm extremely pleased and proud to share that our Chairman, Dr. Pramod Chaudhari has been inducted on the Advisory Board of the Europe headquarter World BioEconomy Forum. This is the first time India has take over such position, signaling our rising prowess in global bioeconomy. Before I end, I'm delighted to share that AsiaOne Magazine has announced that Praj Industries Limited as World's Greatest Brand for 2021. And Dr. Pramod Chaudhari is conferred as the Global Indian of the Year 2021. We remain confident that our customer-centric approach, combined with our technological prowess and robust execution capabilities will help us further capitalize growth opportunities. With this, I 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 386.26 crores in Q1 FY '22 as compared to INR 129.55 crores in Q1 FY '21. PBT for the quarter stood at INR 29.8 crores as compared to loss of INR 14.52 crores in the corresponding period of the last year. And profit after tax stood at INR 22.2 crores in Q1 FY '22 as compared to loss of INR 10.5 crores in Q1 of FY '21. Export revenues accounted for 25% of Q1 FY '22. Of the total revenue, 72% is from Bio-Energy, 17% is from engineering, and 12% is from PHS business. The order intake during the quarter was INR 661 crores with 75% from domestic market. Of the total order intake, 77.5% came from Bio-Energy, 12% came from engineering and balance 10.6% from PHS business. The order backlog as of 30th June 2021 is at INR 2,023 crores, comprising of 83% of domestic orders. Cash in hand as on June 21 is INR 525 crores. Yesterday in the AGM, members of the company have approved the dividend of INR 2.16 per share. Some comments on the components of the profit and loss account. The contribution margin shows a drop of 7.6% as compared to Q1 of FY '20. The revenue has a mix of sale of equipment and project activities. The expenses related to project activities are forming part of other expenses. And in comparison to Q1 FY '20, there is a saving of 10%. The unprecedented increase in the commodity prices has impacted the contribution margin to the extent of 2% of the revenue. As regard to employee costs, as compared to Q1 of FY '21, absolute employee cost has gone up by INR 8 crores. The reason being last year, there was salary reduction in the first 3 quarters, and in quarter 4 of FY '21, salary was restored and provision for various variable pay for all employees was provided. The impact of entire year's variable pay was taken in Q4 of last year. In Q1 FY '22, we have provided for variable fees for the current year and the impact of salary revision is not there as the cycle for salary revision is July to June. Major component of other expenses is the cost related to project sites. And during this quarter, there was heightened activity on the projects, and that's the reason for increase in absolute terms in other expenses. Before I conclude, I would like to clarify one of the issues regarding the promoter shareholding in the company. We noticed that on some social platform, it has been repeatedly mentioned that promoters have decreased their shareholding in June quarter. Let me clarify. As a part of talent management program, the company has robust ESOP [ system. ] Over a period of last 5 years, because of the ESOP exercised by the employees, the overall capital base has moved from 17.74 crore shares to 18.35 crore shares. This has resulted into percentage-wise relative reduction of promoter shareholding from 33.98% to 32.86%. Their shareholding in number of shares has remained unchanged at 6.03 crore shares, and the promoters have not diluted their shareholding. Let me repeat that promoters holding is unchanged, and they have not reduced their holding in the company. I now conclude my remarks, and I would like to thank you all for joining us on this call. If you have any questions or comments or suggestions, please, you can forward that to us. Thank you very much.

[Operator Instructions] The first question is from the line of [ Prathamesh Sawant ] from Axis Securities.

Sir, my question is regarding execution, sir. Sir, on the CBG business, Ministry of Petroleum and Natural Gas has initiated the SATAT initiative. So they have signed like 1,500 MOUs and which are worth like INR 30,000 crores. So assuming at least 30% of these things coming to Praj, which is a very conservative assumption given our technological progress, so that accounts for roughly INR 9,000 crores of business for the next 3 to 4 years. And clubbing it with the INR 8,000 crores to INR 9,000 crores of the ethanol business over the next 3 to 4 years, I want to understand how is our company ready to handle this kind of a monumental demand. As in what kind of capacities do we have to handle this kind of demand in the near future of like 3 to 4 years? So are we doing any CapEx or planning an employee increase or something like that?

So [ Prathamesh, ] that's a great question, and thank you for that. So yes, SATAT is a very, very ambitious program, first of its kind in the world. And the first requirement, as you know, that India is not a gas-based economy. We are a liquid fuel-based economy. And there is a very conscious effort to improve the share of gas in our overall energy mix at the country level. SATAT initiative is part of that program. Now here, what -- therefore, what needs to happen is that we need to understand that the whole ecosystem, and that will start from feedstock all the way to distribution and metering and monitoring of gas and in between production will have to be established as a model first. And once the model is established and tested, then one can start replicating that model. You would have probably noticed that yesterday -- on the World Biofuel Day on 10th, the UP's -- Honorable Chief of Uttar Pradesh actually inaugurated the first pressed mud to CBG plant, which has been set up by us at Indian Potash Limited in Muzaffarnagar. The plant has been commissioned by us, and it is under scaling up status just now. As I speak with you, so we -- so there has to be a gas dispensing station that gets organized around it. The vehicles have to be there. So the whole ecosystem is gradually developing. And this was also used as a test case to understand where all there could be possible hindrances and how we can overcome them in the overall ecosystem. I think the lessons that have been learnt in [indiscernible] and many of them have been implemented already will help to define the future ecosystem component development in rest of the country. We're also building another plant in south of India, which will get commissioned somewhere in October and then one more in February for Hindustan Petroleum, which is based on rice straw. So now we would have -- and then towards the end of the year, we'll also commission one more plant near Pune, which will be based on spent wash. So pressed mud, spent wash and rice straw are the 3 key feedstocks on which we expect 90% of this potential that you mentioned to be established. We have led the market by actually establishing the first plant starting production there and helping establish the ecosystem. As we moved through the year, we will see strengthening of this ecosystem. And as we go forward, we would be in a position to move the market to its natural potential as I would put it. In terms of preparedness at our end, we have, as you rightly put it, we have an absolute state-of-the-art technology, which is significantly better than anything else that is available in the market. And we expect that, that will help us make deeper inroads into the share of business as business starts to unfold. So we are very positive and as things stand now, as the whole ecosystem starts to develop, we're -- and you've seen some policies around that as well that CBG networks are now being asked to blend the gas inside their pipeline systems, the [ LOI ] system of the 3 OMCs. The OMCs themselves taking lead in setting up the plant. So these are initial steps for a very nascent and new system, which is nowhere in the world, but I'm very sure that as we go through the next 24 months, we'll start to see a very different market open up for CBG and we are very well prepared for it.

Okay. But sir, do we have like the capacity to handle like 400 to 500 projects in like a span of 3 to 4 years?

Yes, that is not a problem for us. We will make sure that we build our capacities and capabilities both in line with the market as it unfolds.

Okay. And sir, my second question is regarding our margin profile across these 3 business verticals as in Bio-Energy, engineering and HiPurity?

So generally, we don't give the margins for the businesses independently.

The next question is from the line of Ankit Gupta from Alchemy Capital.

Sir, my question is regarding the gross margin. You explained that there was a product mix change as higher equipment and projects. Can you just explain this part a bit more. And secondly, I also want to know that most of our projects are fixed price in nature? Or are there the clauses of passing on the raw material inflation?

Okay. So let me take your second question first. Most of our contracts are fixed price contracts. So there is no technically a passing on mechanism in the contracts. But what we are doing right now to take care of the pressure which is coming up because of the commodity prices, we are narrowing the window from the inquiry cycle to the order finalization cycle, which is anyway getting narrowed down in any case, and we are keeping the prices open for a very specific period of time, with a provision for the escalation, if there is any delay in the order finalization. So the first level of movement in the raw material prices is getting covered in that process. So we are taking care of by managing the inquiry cycle to the order booking cycle. Post order booking, we are taking measures based on the requirement of the raw material, some advanced procurement program, the different mechanism of aggregation of the raw material. So we are working on multiple fronts to see to it that the impact of the increasing raw material prices gets reduced on our margin. To give an explanation to your first question, the revenue what is getting reported as per the SEBI format, it has the revenue component of all. I mean, in the sense, the equipments which we are supplying, the project activity which we are doing. But in the cost of material, you only see the cost of raw material, which is getting captured and the project-related activity cost is getting captured in the other expenses, which is basically site expenses, labor cost and all. So if you combine this together and look at the price, which will be the right way of looking at it, then there will be an impact of almost 1.5% to 2% kind of an impact on our gross margin. And which is mainly coming up in this first quarter on account of raw material prices, which have moved completely against us. And mainly on the carryforward order book which we are having of the earlier orders maybe of last September order book or the December order book.

Got it. So sir, for the current order book of around INR 2,000 crores, how much will be these legacy orders, which will have some impact in the future also.

See, we started this year with what INR 1,748 crores of order book. So it will have some component of last year's earlier quarter's order book, which might be sitting in this, but we have tried to take care of the movement of prices till at least December at this point of time.

Okay. Okay. Sir, last question from my end. Sir, our order inflow was around INR 60 crores, which is very good in this quarter. Can you give some color in like out of which field how much are the orders, which areas, some understanding to just understand what are the order intake.

So basically, you're asking the order intake in the form of bio-energy and engineering kind of a thing?

Yes, yes, yes.

Yes. Around INR 500 crores is from the Bio-Energy, INR 100 crores is from the engineering business, and INR 61 crores is from the HiPurity business.

And sir, out of Bio-Energy, can you give us detail of grain-based and sugar-based plants?

I would like to get back to you. Maybe you can write me and I will answer that question maybe because right now I'm not having that handy information.

[Operator Instructions] The next question is from the line of Amish Kanani from JM Financial.

Sir, congrats on a very good quarter. [indiscernible] was very, very strong in Pune. Sir, the question is as we prepare for a 2G technology, my question is, we are leader in 2G versus 1G. So if you can give us some sense of as a leader, how are -- what are we doing to convert the market from 1G to 2G, if at all? And what are the premiums that a customer has to pay to buy a 2G technology versus 1G, and whether there is a traction given the premium and what are the kind of IRRs that a customer is making when he is choosing your 2G technology.

Okay. So Amish, let me start by saying that we are leaders in both, 1G and 2G, and not in only 2G.

Yes. Sorry, sir. The idea was the competition is less in 2G, sorry, that was the reference.

Yes, it's different. There competition is different kind. Also, 2G, it's not that we expect our 1G customers to convert to 2G. It is not like -- it is a very different feedstock that we use for second generation ethanol. And the second generation ethanol is increasingly going to find more and more space, especially at the back of if you would recall my comments that I made the beginning of my initial opening remarks where I said that we have to do something for the climate change, continuing as usual is not an option. And that fundamentally means that we have to keep moving towards low carbon intensity, low GHG footprint technologies, and that's where 2G scores above 1G. That's one area where 2G definitely scores above 1G because of the fact that it uses agriculture residue as a feedstock, right? So from that perspective, 2G is going to find a lot more favor. 2G, we are also going to see a traction build up, and that's where we have 2 platforms, one for the agriculture residues and second is for the first residues part of it because there are parts in the world, which are not agrarian economies, but which are very rich in forest. So we have both the technology platforms available, which we will take forward in time to come. And we are working very closely. There are regulation-related issues. There are regulatory environment changes that are required. Europe is an example. For example, we clearly see a move happening towards moving to second generation ethanol as we move forward in the future, the 3 plants that we're commissioning in India already. And also because people are -- because this is so new, globally, this is a new thing. And therefore, there's a lot of attention that the world is focusing on saying let us see one plant commissioned at commercial scale, and then probably we'll start to think of scaling up. So a different set of challenges to overcome in 2G, but we are working continuously at it in terms of enhancing the viability of the 2G technology, development of coproducts, which could further add value to the customer, both in terms of improving the project viability, but also in terms of improving return on the capital that they employ. We have tied up with a company called Sekab in Sweden to address and actually develop the technology that they had initially developed and develop it to commercial level for the forest residue part of the market. So a whole host of actions right now underway, which we believe will help us to establish 2G as we move into midterm future.

Sure sir. And sir, second question is, we have seen significant improvement in the ranking in the last 4 to 6 quarters in general, Biofuels Digest, this quarter we have AsiaOne Magazine, we have World BioEconomy Forum, which is facilitating and acting as promoter on the advisory board. The question, sir, is what all that we have done in last say, maybe 1.5, 2 years, which is resulting in this kind of accolades. Is it coming mainly from the new technology initiatives that we are just doing which is at an R&D pilot stage? Or it's something different? In the sense how much of that is macro top-down India's initiative that we are taking at a global stage versus how much is Praj, which, of course, would have been the major contribution in terms of reaching this stage? And is it resulting in a significant pipeline of inquiries on the export market?

So Amish, first and foremost, it's not an outcome of 2 years of work. I can very, very easily tell you that this is a work of lots of people, a vision that has endured test of time, the resilience of the company over the last 37 years. We have been -- we have sort of got baked in the sun, if I can use that word, over different periods of time and come to this stage. The vision that -- and the commitment and the passion of the founders, the real commitment of people, the focus on technology development, I think lot of these elements -- nothing of this happens in 2 years, nothing. This is -- this takes decades to build, okay? And I think that's what is now -- and of course one fine day it does have to come out and show itself on the world stage, and that's probably what you're are seeing now. There's also much more heightened what I would call as awareness today in the world about the need to use cleaner form of energy, where ethanol has a very big role to play where Praj's prowess is absolutely undisputed. All the work that we've been doing over the years and decades is what is now coming to fruition. Of course, our foray into the second generation technology, the 3 plants that we've build, by the way, from my understanding, today, Praj is the only company that is building 3 plants for second generation technology for somebody else. A lot of our competition is building plant for themselves. But we are doing it for somebody else, and that's a huge plus in our favor because others have trusted us to build the plant for them. So look at second-generation technology, look at the whole metrics, our R&D setup that we have and the kind of technology development work, which happens in the day in and day out and over the last 10 years, 12 years on that. So I think it's an amalgamation of several, several factors that are leading to this kind of thing. And of course, the world is also now much more conscious about the green energy. And we have been saying that for a long time. So you say something for a long time and now somebody is waking up and saying, "Oh, you've been saying this for a long time. So maybe we needed to wake up earlier kind of a situation." So that is what is leading to this. And what is really helping us and people have recognized that some of the solutions that we've put up in the field are absolutely best-in-class. We compete with the best in the world. And in fact, in several markets, we are as good as anybody in the world, maybe benchmark also in some areas. Nearly 8% of the world ethanol production happens from our technology. So I think all of this has happened over a period of time, and that is what is, getting recognized. Also the fact that Dr. Chaudhari, who's our founder, has really, really put his entire being into making this into a cause and not only a business. And I think that is where things have started to change because when he speaks, he speaks from immense amount of knowledge, understanding and vision, and that not many people can do that. And I think that all is coming to get recognized now.

Sure sir. So sir, that any numbers in terms of export pipeline of inquiry is it changed? Or will it change some flavor of sense there?

Yes. So as I was mentioning that we have seen -- so the markets that we serve, especially South America, Southeast Asia, Africa, Africa, not to the same extent as other 2, have taken a slightly longer time than say India has to emerge from the shadows and impacts of the pandemic. So we are beginning to see that now. I was mentioning that we expect that Brazil to be normalized over the next 6 months. We are seeing Canada moving with the policy of a blending program. Europe moving in the policy direction to notify second generation ethanol over the next 10 years. So there are several -- different regions have different policies that are being brought about. And I think those are critical to driving growth in those markets, and we are very much tuned to those developments. We are very close -- our yield is very close to the ground in terms of what is required to be done and we are taking those steps. So overall, plus that is on the ethanol side of the business. There are other businesses ours also, which are very focused on export. I have mentioned CPES business where we're building the plant for Gevo. That is almost entirely export-focused. And they are also building inroads with companies that are wanting to put up these clean tech, green tech plants, but don't have the wherewithal. So they have the wherewithal to design and engineer it and manufacture it for them. So they are doing that. So there are -- our PHS business is going to serve markets where there's a new found, shall I say, consciousness across the world on local production for critical drugs. So I think that is what is leading to capacity formation in several markets, which hitherto was not very effective, but are becoming effective. So different drivers for different businesses. But we are very sure that as we move forward through time, we will see a healthy development on the export side of the business as well.

The next question is from the line of Naveen Shah from Value Quest.

Levin, here. Congratulations, sir, firstly, for a good set of performance during this tough quarter. Sir, my question pertains to order book. So like what you said in your opening remarks as well that this first quarter, we have seen around like 140 crores to 150 crore liters of capacities which have been announced. Now if you look at the kind of order inflow that we have received, it is much lower than the kind of actual CapEx that is announced. So where is the disconnect, if you can help in explaining that?

Well, no, there is no disconnect. First of all, 145 crores is the number for the entire year last year; 134 crore is the number for this quarter. So just clarifying the numbers. Now the capacity can come in different ways, right? Somebody can define a greenfield project, and you can also define a brownfield project, and both will have different levels of investments per liter of ethanol capacity that gets added, right? Also within the setup, what is it that is considered in the cost. For some, maybe land cost gets a very -- what I would call as a definitive dimensions to add to the cost, whereas if it's leased, it's a different cup of tea. So the capital cost of the project construct can be very different. In terms of market share, as I mentioned, we continue to be at about 60% and thereabout. So there is no change on that. Although we have decided to be prudent in anticipating and accepting orders where we do take in consideration the complexity, the cost to serve, our ability to confirm the time line that customers may want. So different dimensions that go into decision making, but otherwise, there is no change at all.

Okay. Because, sir, when I do a rough calculation that goes at around INR 1,400 crores, INR 1,500 crores worth of opportunity of the target size for us from these orders is what the target market should be. Whereas we have received orders worth of INR 500 crores during this quarter.

Yes, but we don't necessarily do the whole thing for customers, right? I mean there are very few customers who say, "I've got a piece of land, please do everything." That kind of exercise doesn't exist. So when an existing company is expanding, they already have the wherewithal. They understand what is required to be done. It could be common wall expansion. There are different dimensions. So they may not go ahead and order everything on go. They'd say, no, I know what cooling tower to buy. You don't have to buy for me, right? And there are some new customers who do not have -- who are putting it for the first time, would probably expect more from us, those who are putting it on a repetitive basis, they probably have a lot more enough. So the scope of work that gets awarded gets changed. Also this is depending on brownfield versus greenfield. There are many dimensions that come into play. So there is no -- I don't think we can read it directly saying, [Foreign Language] is not the plant itself, it is something else.

Got it. Got it. Okay. But sir, is there any -- so during this quarter because of the second wave, have we seen some spillover or postponement that may happen in the quarters going forward? Or that's not the case for order booking?

Sorry, what's your question? Could you just please repeat it for me?

Sir, so I was just asking that whether due to this second wave of COVID, which hit during this quarter, will we see some spillover of orders in the next quarter per se?

Yes. As I said, we expect to continue to -- for this momentum to be continued for quite some time now, and right through the year. And so we do not foresee a slowing down of order book at all. The COVID related impacts are there in terms of, a, we do hope that sooner than later, the interest to travel gets restored because that is limiting our ability to reach out to our customers, not severely, but definitely hampered. In terms of execution, yes, it does poses challenge, supply chain may get disrupted, et cetera. And this time, we all know that the second wave was very strong and much closer to most of us. So from those perspectives, I think, yes, it does have an impact. But in this order book, we don't foresee a problem at all.

Okay. Got it. And sir, my second question is on the margin front. So firstly, I would just like to congratulate that even in these tough times, we have been able to do good margins. Now if you see, going forward, like what Sachin sir also explaining that. The way to look at the margins is that even taking into account the other expenses portion. So currently, we are at around 19% or 20%. Where do we see this number for full year? And maybe going forward, any ballpark indication where this number should be?

I would love to give the answer to this question. But generally, we don't give any forecast. I can only tell you that our endeavor is going to keep on improving on the margins, and take the advantage of leverage, which is available on the basis of volume growth which is happening. Yes, despite the challenges which were mentioned by Shishir earlier, our endeavor is naturally going to keep on improving our margins. That's what I can tell you.

Okay. Sir, and on this, so if you see this other expenses as a percentage of sales, and definitely, we have come down much lower than where we were historically. So is this improvement going to continue with the increased sales that we may have in the following quarters?

So it has a component of both cost. Let me clarify. One is the fixed cost and another one is variable. For example, our traveling is sitting in other expenses. Now the domestic traveling has already started to a great extent, but naturally, international travel is not at all factored there. So going forward, as Shishir was mentioning in H2, we will see movement happening in international side also, then some of the expenses will start getting triggered, but not necessarily all. So we will definitely -- and that's what I was mentioning about the leveraging, which is possible where on the some kind of a curtail kind of expenses, we will be in a position to have higher turnover.

Understood. Understood.

And we have always maintained that our resources, we have to build anticipating the growth in our business, and that's in the strategy of the company because there is no one like us in India, and therefore, we can't just go and poach some resources from somewhere. We have to develop and retain our resources over a period of time or of different business cycles. And I think that strategy of that we have continuously kept these resources engaged gainfully as well as developed them is coming handy now because now as the volume starts to go up, we'll be able to leverage what we've built already. So I think that also should help you to understand the context of Sachin's answer.

The next question is from the line of [ Saket Kapoor ] from [ Kapoor & Co. ]

Sir, firstly, sir, what are the key risks to our execution to the business we are catering to. What are the key risks that are there? And what steps are we taking for mitigating that risk?

Yes. [ Saket, ] that's a great question. Very clearly, we have to ensure that -- and since you asked questions around execution, and I'm taking that execution means the orders that we already have in hand. If we look at the cycle from orders that we're already in, very clearly, a, is the management of resources in a very efficient manner, right? So we may have to induct some resources. We have to train resources. We have to automate our processes. We have to look at our capacities within our own boundaries, create them outside or inside, decide that decision. So I think those are the set of decisions that we have to take. And therefore, any risk that get associated with any of those actions is very clearly visible and that is something that we have to mitigate. The supply chain disruptions on account of an unforeseen event, say, for example, touchwood, I don't think that should happen, but touchwood, there's a third wave. It could -- we don't -- we cannot predict right now what kind of disruption will happen. We can anticipate and then build ourselves to say, all right, I will ride out a 1 or 2-month disruption, and I'll prepare myself, whether it's on the raw material side, whether it's on the vendor side. So we're doing several steps. We are diversifying our vendor base. We are sticking closer to our customers. We have tied up some long-term contracts. I think Sachin mentioned about aggregation of buying as against project-based buying, using modern tools of reverse auction, e-bidding, new vendor enlistment. So there are different steps that we are taking on the supply chain side to make it more robust and less risky, if I can use that word, okay. So that's one dimension. Fortunately, we do not foresee a risk at all on the side of cash because we are a well-managed company from the -- so our balance sheet is very healthy, and we do not have a problem on the cash side. On the people side, I'm very happy to share with you that we launched a very focused program to vaccinate all our people, including all blue collar workers that walk into our factories and R&D center every day. And I'm very happy to share with you that today 91% of our population is vaccinated. So -- and I'm sure that other men will also come in. They are not there for different reasons, but they will all walk in as well. So very focused program on vaccination. So we are taking every possible step to ensure that, a, our work is not disrupted. If there is a disruption, we are prepared for it and it is kept to a minimum and look at every single element in its entirety and define the mitigation measures there. Having said, there are things that I can't control. For example, if there's -- and we were just talking earlier about it. The runaway rise in commodity costs, that's a risk that is external to us. We can only define a response to that, but we can't control the risk itself because that will happen on its own, right? So commodity price rise is one dimension. Right now, even the availability of steel is becoming an issue. But we have managed that through long-term contracts and association that we have with our suppliers. But there's a problem, the steel supply that used to be in 6 weeks is now gone to almost 4 months. So we are looking at an extended cycle of availability from -- on components. So we have to take care of that. Availability of labor at site has become a problem because if -- because of the pandemic-related migration that took place, there is an imbalance in the workforce at site. How do we manage that? For that also we have empaneled a whole host of new vendors and contractors with whom we are working now. We are training them to address the issues at site. So on site, within our premises, outside our premises, our supply chain, our delivery chain, we are looking at every single dimension to define a risk plan and find a mitigation plan as well.

Right, sir. Sir, when you say that 8% of the global market share of ethanol business is from Praj. So who are the other players globally, sir, which -- whom we can benchmark and understand the valuation part, sir?

So what I said was that 8% of the global ethanol production is today done using Praj's technology. That's the word that I used, okay? Of course, in each market, there are competition for us. If we go to United States, there is competition there. If we go to Europe, there's different set of companies. Even go to Southeast Asia, there's different set of companies. When we go to South America, there's a different set of companies, because each market has evolved to its own model of doing business. Brazil is very different, for example, than North America. It is very different from Southeast Asia. But at the same time, we have also established ourselves into those markets over a period of time. We have created references, which are absolutely global class. There are countries in which we have 100% share of business. For example, every single plant is built by, for example, Colombia. So we have used our own position, our own strategic steps to ensure that we are able to stand and compete. And please appreciate the fact that today, and when I say this, the only market that excludes from this where we have no idea about is, is China because we don't know much about that market. We know that there are 2 state government-owned companies, state-owned corporations, which actually do most of the production there. But that's a different story. But other than that, Brazil, we are about to enter, as I was mentioning earlier as well. So there are different steps for different markets. We compete with absolutely global class companies, and we've been against them, and we are able to stand on our own feet because of the fact that we have our own technology, our own R&D, our own prowess, our own experience with which we can go to customers and present. So that's what is helping us.

Sir, last point I have is regarding you spoke about 90% of what the annual requirement was for the ethanol plants have come up in the first quarter. So where are the geographies? And who are the key players, sir, who are interested in setting up these facilities, sir? If you could give some basic understanding where are these capacities coming up? And there must be the alcohols -- liquor players that are now coming up with grains as you have earlier told that maximum 2/3 would be from -- will be grain-based only.

So as I was mentioning, the grain movement, we expect to start now, actually, more or less. I mean, there are some orders from the grain that also we have received, but more or less the grain movement is beginning now. The money -- lot of capacity that I talked about is still being built around sugar, yes. So -- and there are some big names in sugar who are our customers now, who are expanding their capacities both at greenfield level and brownfield level.

Sir, can you give the breakup for this 90%, which you spoke, the 1,200 liters, if I'm -- correct me. If you could give us that...

No, what I said was that if you take the last financial year, in the whole financial year, 145 crore liters worth of capacity was contracted for, okay? Now in 1 quarter of this year, 90% of that got contracted additionally, so about 133 crores that got contracted for in the first quarter of this year. A lot of it is about -- is based on sugary feedstock, some grain as well, but we expect the grain movement to pick up as we move forward.

Sir, can you give the breakup of 133 crores, the sugar belt, how much is from the Northern part and whether southwest sugar companies have also participated. If you could give some color...

Very roughly 60% -- 60%, 65% on sugar and the balance on grain.

And -- but further granular from the sugar part, how much is North India and other part of the country?

So I don't have that -- I mean we have that information inside us. But right now, I don't have in front of me, so I'll send it to you separately if you write to us.

All the best, sir. We hope for a new landscape altogether for the company, sir, going forward.

Thank you, Saketji. Thank you.

Next question is from the line of Sandip from asksandipsabharwal.com.