Praj Industries Limited (PRAJIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Praj Industries Limited Q4 FY '22 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, Mr. Sonpal.

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anand Sonpal from Valorem Advisor. We represent the Investor Relations of Praj Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the fourth quarter and full year financial year ended 2022. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating with us in today's earnings call and hand it over to Ben for opening remarks. We firstly have with us Mr. Shishir Joshipura, CEO and Managing Director; Mr. Sachin Raole, Chief Financial Officer and Director of Resources. Now I request Mr. Joshipura, to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Anuj, and good day, everybody. I welcome you to Praj Industries earnings call for quarter 4 and FY '22, first off you had the opportunity to go through our results presentation for the quarter that ended 31st March '22. I hope you and families are keeping safe and healthy. Let me now briefly take you all through the quarterly business highlights and industry developments, following which Sachin will take you through the financials. The year has witnessed rising global awareness about energy security and low carbon intensity energy footprint across economies. Biofuels are finding increasing market traction across the globe. This is also evidenced in the speech of the Minister of Petroleum and Natural Gas Shri Hardeep Singh Puri during the World Economic Forum that was earlier this week, where he laid special emphasis on transiting to a different energy mix for the country for production and use of biofuel from alternative sources, as well as green hydrogen. As the world economy recovers from pandemic and geopolitical disturbances in Europe, we see a gradual return to normal [ CF ] opportunities in international markets. The big movement for biofuels and waste-to-energy across the world is creating a positive opportunity field for Praj. Capacity additions for production of ethanol in India at the back of the advancement of E20 target to '25, '26 continued this momentum. Currently, ethanol blending in Petrol in India has reached nearly a 10% mark, and we are certain that India will reach E20 target as planned. Cabinet has approved amendments to the national policy and Biofuels 2018 to advance India's ethanol blending target. The amendments approved include allowing more feedstock for production of biofuels, advancing ethanol blending target of 20% with petrol by 5 years to '25, '26 from 2030. The amendment also allows granting a permission for export of biofuels in certain specific cases. The year witnessed a very strong execution of the order book despite challenges posed by ever increasing commodity prices, coupled with challenges of supply chain disruptions and availability. We were able to leverage our strong project management capabilities and capacities efficiently as reflected in our improved asset turnover and return on capital employed. We managed to scale up the operations significantly without affecting the working capital cycle. Our Bio-Energy business continues its strong performance with a healthy order book, exceeding INR 900 crores in this quarter. And 2/3 of these orders are from ethanol based on starchy feedstock. I'm happy to share with you that nearly 30% of these orders are based on our new technology offerings. On the international front, we are beginning to see good momentum building for setting new capacities for ethanol production. With low carbon ethanol seen picking up in the United States and some other markets, our ability to customize the solutions for reducing carbon intensity in operation will put us in a strong position to address this emerging opportunity. We are strengthening our reach in international market by enhancing our presence in Europe, South America and North America. We have formed a focus on revenue budget business unit that will serve customers post commissioning of the plant through the life cycle. Offerings such as performance enhancers, carbon [indiscernible] capital solutions and O&M services will help customers address their productivity, environmental and performance problems. On the 2G front, execution of IOCL project has progressed up to 90% completion level. Plant will commence commissioning from quarter 2 of this year. The war situation has pushed back the development of 2G projects in Europe by at least 6 months. Even as we continue to engage with customers in Nordic region for deployment of LNG technology, the new dynamics of energy management are likely to shape the demand for biofuels in Europe favorably. On the CBG front, in a much awaited development, government has revised the CBG prices from INR 46 per kg to INR 54 and indexed it to price of CNG. This will certainly enhance the financial viability of the projects. I'm very pleased to confirm that we have successfully commissioned 2 projects based on pressmud the development [indiscernible] CBG project at Badaun continues, and we expect to commission this in quarter 2 of this year. The new pricing policy is expected to revive the interest from the industry wanting to set up CBG capacities. As for the Engineering and PHS business, we continue to see momentum by way of healthy order book and improving inquiry basket. On the CPES front, business has built a robust order book and a healthy prospect base. our strategy of working with select global customers in clean tech and green tech field, such as green hydrogen and waste-to-energy is showing very promising results. Modularization is fast gaining acceptance with global customers and is clearly emerging as growth engine for the business. Almost 1/3 of the overall order book in the quarter was for modules. To meet the increasing demand for CPES business, we're also adding capacity at our Kandla facility. On the brewery front, hospitality and tourism sectors are slowly picking up and beer consumption is reaching pre COVID levels. With this, many brewery players are now considering their plants to set up new greenfield projects and capacity enhancements. Many MNCs and local players are also looking to attract new product launches in flavored beer and nonalcoholic beer segments. Zero liquid discharge continues to enjoy traction in our markets of interest such as metals, chemicals fertilizers, et cetera. On the PHS business front, our strategy of focusing on complex injectable and vaccine manufacturers has found good traction and acceptance in the market. As Indian pharma industry turns it to global size capacity building biopharma space, we expect fermentation technologies to acquire center stage. Leveraging the parent organization's prowess in fermentation and PHS's deep understanding of sterile applications, we expect positive development on the business side. RCM program in Praj Matrix is progressing as per the time line and [indiscernible] . From the technology readiness point of view, 2 projects have satisfactorily crossed the bench scale development milestone. On the concerns front, continuously rising raw material prices coupled with supply chain uncertainties continue to post challenges and pressures on margins. The recent announcement, the government on the steel front may help reduce some of the volatility and uncertainties on the pricing front. However, several geopolitical factors will impact the pricing level of commodities and it remains to be seen if prices have stably returned to pre COVID levels in the near future. The resulting pressures on margins from the above situation caused for several actions at our end to create a counterbalance. Our dynamic costing model, coupled with strategic sourcing, digitalization of processes and [indiscernible] is expected to help us address these challenges. Overall, our business environment for our core businesses as also for offerings in clean tech and green tech base is developing favorably in the phenomena of energy transition being witnessed in several economies makes us believe that our business will continue to see positive traction across different business segments. I'm happy to share that during the global flagship industry event, the Advanced Bioeconomy logistic conference '22 at Washington, D.C. USA, our Founder Chairman, Dr. Pramod Chaudhury, was bestowed with a the coveted 2022 William C. Holmberg Award for lifetime achievement in the Advanced Bioeconomy. This is the first occasion when this award has come outside of United States and that too at a time when India is celebrating the diamond jubilee of independence. With this, I will now hand over to Sachin for his comments on the financial performance.

Thank you, Shishir. The consolidated income from operations stood at INR 829.01 crore in Q4 FY '22 as compared to INR 567.10 crore in Q4 FY '21. PBT for the quarter stood at 78.05 crores as compared to 73.19 crores in the corresponding period of the last year. Profit after tax stood at 57.65 crores in Q4 FY '22 as compared to 52.01 crores in Q4 FY '21. For the full year ended March 31, '22, income from operations stood at 2,333.32 crores as against 1,304.67 crores in FY '21. PBT stood at INR 204.88 crores in FY '22 as against INR 113.11 crore in FY '21. PAT for '21 was 81 crores. And in FY '22, it is 150.25 crores. Margins for the quarter has seen a reduction of 5.5% on account of continuous increase in commodity prices and adverse sales mix, that is the higher domestic sales versus international. During the year, we have also executed first of its kind projects in a couple of new technology areas, which carried lower margins as compared to mature businesses. Export revenues accounted for 21% of FY '22 of the total revenue. 71% is from Bio-Energy, 20% from Engineering and 9% from PHS business. The order intake during the quarter was 1,101.5 crores with 84% from domestic market. Of the total order intake, 91% came from Bio-Energy, 6% from Engineering and balance 4% from PHS business. As compared to the last year, export order intake has seen 37% growth. There were 679 crores orders from the international market in the current year as compared to 495 crores in the last year. The order backlog as of March 2022 is at 2,878 crores, comprising of 86% of domestic and out of which 75% is from Bio-Energy, 20% from Engineering and balance 5% from PHS business. Cash in hand as of March 31st stood at INR 623 crores. As mentioned earlier, some of the projects at Matrix have reached a main scale and investment is being considered in the demo plant to take the product development program ahead under the RCM program. The Board of Directors proposed a final dividend of INR 4.20 per equity share. That is 210% of the face value of INR 2 per equity share for the financial year ended 31st of March '22, which is subject to the approval of shareholders at the forthcoming Annual General Meeting. This comprises our final dividend at the rate of 135% plus a special Amrit Mahostava dividend at the rate of 75% in collaboration of 75 years of independence. With this, I will conclude my remarks. Thank you all for joining, and we should now be happy to discuss any questions, comments or suggestions you may have.

[Operator Instructions] The first question is from the line of Gaurav Chopra from Union AMC.

Sir, my question was on the margins front. If you can sort of -- our order book is fairly strong at 2010 crores. And last quarter, we had talked about that the incremental orders, what we are sort of taking accounts for higher raw material prices. So qualitatively, if you can guide us whether we should be there at double-digit EBITDA margins in the fiscal '23, if not, why. If you can give us broad guidance on that front.

Okay, so the orders which we mentioned in the last quarter that they are coming at the higher -- considering the higher raw material prices, that's true. But they are not yet coming to the execution stage. They will start coming up maybe from quarter 2 once the initial phase of Engineering is all for those projects. Second thing, the increase which has happened subsequent to that also especially in the month of February and March, that was absolutely over and above what we have seen in the last 3 quarters or so. So that was the additional burden, which has come in the current quarter and to some extent on the orders which are under execution where the orders for the raw material was not placed. So that's the margin pressure, which we have seen. The ring which now commodity prices have started showing a little bit a downward trend. We expect that, yes, the pressure will start coming down, and we will see a reflection of that not necessarily in the first quarter. but we will be seeing maybe from the second quarter onwards.

So broadly, if you can think about fiscal '23 as a whole, is double-digit EBITDA margins, is it a stretch or it is possible with the current scenario?

Gaurav, I can not be able to give you the number per se, but we can see -- I mean, that's the endeavor of ours that we will see the improvement in the margins, and that's the efforts that we are going to put in. I would not be able to give you a direct answer to your question, whether it will be double digit or not double digit.

So secondly, the order intake, what we have in the quarter, we have seen a 15% decline in the high-priority segment. So this segment is not where we were talking a lot about getting incremental orders from the pharmaceutical side and everything. But it seems to be not picking up. Any particular reason? And is it expected to pick up going forward? Any color on that?

The PHS order book on its own is definitely increasing. In the overall, if you look at it in terms of percentage, it looks like it is lower because the overall volume is very big. Otherwise, they are having their own order book , rather this what quarter they are continuously maintaining their streak of more than 40 crores, 45 crores kind of an order booking every quarter. So for this order book actually is growing in relative terms because the Bio-Energy business is growing at a much faster pace. So on a relative term, it may look less, but PHS by itself is not de-growing. It is actually growing fast.

Am I looking at some long numbers. I thought that is a 15% decline on a Y-o-Y basis in terms of order intake.

No, no. If you are looking at the absolute total number, and naturally, the percentage-wise. It is late as Shishir mentioned that Bio-Energy number is off on a very high side. Within our mix, the number is looking smaller, but absolute within their business relative, they are their doing. Okay. If I can clarify it.

The next question is from the line of Lokesh Maru from Nippon India.

Congratulations on the fantastic numbers. I have a few questions. One is in continuation with what I had also asked last time on the macro front within the ethanol space. So that was like installed capacity in India has reached 850 crore liters, like you mentioned. And out of which 67% is sugar-based 33% is a green based? So we are right now blending somewhere around 10%, right? And given the push towards 20% blending, how much do you think would be the targeted capacity to achieve that 20%? Is it like 1,500 crores? Also, is it fair to assume that?

So Lokesh, just to answer this question. So we will need an operating -- a delivered number of about INR 1,400 crore liters to reach the 20% margin. 20% blending, sorry. And if you look at that, number, that means that installed capacity will have to be about INR 1,900 crores because this is a seasonal production number as well. So installed capacity will go to about 1,900 crore liters, and the delivered capacity out of this waste 1,400 crores or in that range. Because...

[indiscernible] have jumped from 850 to 1900.

So roughly about -- Yes, that is correct. So what's 1,400 that we said now we are talking of the need at the country level, then about 1,000 will come to the blending program and about 400, will go to other applications.

Somewhere around, is it fair to assume for all program that leaves us somewhere around 20,000 sales figures, additional installations to go forward in next 4 year period? So that would mean somewhere around 20,000 kpd of distillations in the next 4 years?

220,000 looks like, I don't know from where he came to that conclusion.

So that includes an assumption of 3.3 crores litres delivered.

Roughly correct.

So sir, at an industry level, how much revenue potential does that mean?

Well, this question has been asked many times we have tried to explain because it depends [indiscernible] and multiple factors. Number one, what the feedstock is, number two increase or the brown field, number three, if it's greenfield goal operated project for what is the scope of to see number out on this capacity becomes very, very difficult for us. It's not easy there's too many variables there for us to say, somebody can debottleneck an existing capacity in the feedstock. There are many dimensions we can small capacity production can go up. So it's a tough number for us to calculate to say, okay, this means so many crores of rupees of opportunity.

On the same, orders have also been very strong. So we are maintaining what kind of market share as per your calculation?

So we are maintaining our market share as we have indicated in the past, we don't see any reason for any market share change to happen in our business as of now. It's just that, as I'd mentioned last time, it is around 60%. And we had mentioned that we are seeing a shift of feedstock from more sugary-based feedstock to more starchy feedstock and that's also been borne out by our order book in the last quarter.

And sir, out of the 850 crores installed in India, does that mean like we have always been maintaining between 50% to 60% market share. Does that mean we have installed 50% to 60% of this 850 crore liters overall in India?

That is correct.

Sir, my last question, and I will go back to the queue. So last quarter have definitely been volatile like you had already mentioned. So just if you can throw some indicative gross margins for projects we would have signed this quarter to the date for April and May till date as in -- so we had somewhere around 37% gross margins for our last quarter. Anything -- any number that you can indicate for recent contracts that we have signed?

That's something that I'll have to disappoint you because we will not be able to give that number out.

The next question is from the line of Amish Kanani from JM Financial.

Congrats on a reasonably good performance on the top line. So my question is, one, I understand you don't want to give guide on the quantum of margins, both and maybe gross margin or EBITDA margin. But sir, for an understanding of where we are headed, if you can give us some sense of what will be your ideal target when things normalizes in terms of we have now on a quarterly basis, our gross margins have been moving from 40% to 37%. And also EBITDA margin in that context, we have been able to do on an annual basis a reasonable job, and it's dipped, but it has dipped not as much as gross margin. So the question, sir, is at a steady-state basis, is it possible to give us some sense of where we would like to and our operation has increased in terms of operating leverage kicking in. So you can give us some sense of where we would like to stabilize either say, our gross margin or an EBITDA margin, say, 6 or 9 months down the line or maybe on annual basis. That will be helpful. So that's question number one. In that context, sir, I saw employee costs have not increased as much and because of which at least our EBITDA margins have been supported. So if you can give us some sense there because we understand in that space, maybe there could be some inflation there as well. So if you can give us some sense there.

Okay, so Amish, to your question that way is very, very idealistic that if this situation is ideal then what will happen. So let me just try to figure this out. We have always maintained that our gross margin should have been better than what we have reported for a reason. Of course, we have seen the dip in because of the raw material prices of the commodity prices behaving in which way they behave. To some extent, I have already said that over a period of next 2 quarters, so we'll see some kind of a normalcy returning to the commodity prices and helping us on the gross margin. Another aspect, which we have always maintained that the volume is going to give us some kind of a leverage and, to some extent, you have also answered that question when we said that employee cost has not gone up in tandem with the top line growth which we have seen. So 2 aspects are going to play according to us. One, the commodity prices coming to some kind of a normalcy; second, the way in which we have seen the leverage is going to kick in is going to give us benefit on the EBITDA margin. What that EBITDA margin will be in the absolute term, unfortunately, from a guidance point of view, we have a practice of not giving those kind of numbers. So I will not be able to spill out the number, but we will be able to see in a normalized scenario of very different kind of an EBITDA margin. Definitely, let me tell you, yes, it will be in double digit.

And sir, in terms of order book pipeline, we have done a wonderful job in getting new orders. And you did mention there was some disappointment at least on the international side on the Europe side. So if you can give us some sense of how is the outlook on the order book pipeline and/or actual accretion because last 2 quarters have been a decent run rate of 900 crores to 1,000 crores. Our old run rate was more like 500 crores to 700 crores. So annually and/or some sense of pipeline, if you can give us some sense.

Yes. So Amish, so let me start the same. So the year -- in the whole year, we had a 37% growth in the international business. And I mean I can share with you that -- maybe we are fortunate in India, we have not seen some of the economies and impact of pandemic on those. When you go to some of these players, they took much longer than I said in the past as well that different economies have a different challenge to overcome because of the way the pandemic impacted everybody globally. So some markets have opened later. Some have opened earlier. We are among the earlier parts, but maybe there are lots of parts of the world where markets have opened later, that's number one. Number two -- and they are opening now, which is important. Number two, as I mentioned in my opening remarks, we are seeing a movement for compete on the biofuel side. A lot of economies are clearly making strategies to make biofuels or low carbon intensity of operation for their economies as a priority. And biofuels have a very important role to play there, which is what you will see unfold as we go forward. This is the second part. Third is the war in Europe has definitely put a bit of, what I would call a shift of time line because of this war that broke out on the front. It obviously meant that the risk profile of the funding, et cetera, changed. So it is our estimate that this has pushed the projects on the advanced biofuels by at least 6 months from a funding -- they maybe they'll recover in the time to come, but right now, we see a clear 6-month shift that is happening on that front as well. Not that the projects have gone away or anything like that. It's just that the whole process gets delayed because the risk profile analysis of that completely changes. From that perspective, I think we are looking at different dimensions here in terms of what's happening in the international book. On the other hand, as I was mentioning, we are seeing a revival of economy. So Brazil is beginning to open up, we are going to commission our first plant there by end of this year. That will change a lot of dimensions for us. I was talking about United States where focus will shift to reducing operations to the low carbon intensity. So many of these positives will start building up investment as we travel through the year. And I'm very sure that the international business is -- we are just beginning to see the return of the international business. So in a year when there was difficult times ahead, we were able to show a 37% growth in our order book. I'm sure that we will look at even more positive times. There's a big focus coming on theme tech, green tech, green hydrogen. So all of these are positive drivers for our business in the international market.

And sir, in terms of pipeline, domestic pipeline last year this time versus this time, is it gone up significantly? It looks similar in terms of mature assuming that your market share remains the same. How do you see our pipeline at this point in time? Or was this last year?

Continues to be robust. Absolutely no reason to be alarmed on that front. In fact, it continues to build positively from where it was. And I think we will continue to see a traction.

[Operator Instructions] We have the next question from the line of Jai Shah from Capital BMS.

Congratulations for a good set of numbers, sir. Sir, I just had a broader question on what are the developments if you can share in the RCM division? And also if you can put some light on what exactly is happening in the country or even globally in terms of using hydrogen as a fuel, like where as a company is Praj playing a role in helping to get hydrogen into mainstream?

Okay, so the whole -- so there are -- you'll see this hydrogen being mentioned with some color prefixes, gray hydrogen and the blue hydrogen and then there is green hydrogen and things like that. So the color indicates the source of hydrogen actually, what's happening to it, right? So the push is for green hydrogen globally. And so there are 2 things. One is the refineries themselves are big consumers of hydrogen. And they need large quantities of hydrogen. And in order to meet their demand, the currently favored and tested technology is about electrolyzers using water and metals as a combination so that you can -- and use a renewable source of energy for power generation like solar or wind and that allows you to create green hydrogen. When these projects are put up, it also has, what I would call as a need for the whole plant to be set up where you can make this process happen. So we call it the steam Tech and the Green Tech space. Where our CPES business has a very major role to play because they are aligning themselves with several leaders in the world in this business. And as engineering and manufacturing partner for these projects because they need a large amount of modernized plants, et cetera. So that's 1 part of the business. The second part is the green hydrogen will also have a dimension [indiscernible] around produced from biomass resource, and that's still work under development. Three, right now, we don't see what I would call as a need for -- not a need, but an ecosystem in place for hydrogen to be used as a transportation fee not yet. It is still under experimental stages. But on the industrial side of the use, obviously, there are clearly established processes where hydrogen is being used. So that is still a work in progress as far as the utility is concerned in form of as a transportation fuel for hydrogen. I hope that I answered your question. Was there another part of the question before this?

Yes, sir. Is there any new development that's happening in the RCM division, sir?

RCM, yes. So I think Sachin mentioned in his remarks that -- we have 2 important programs that have now passed the bench scale development, and they will go to Paris scale now. And that is something that we will do this year. We'll talk about it when the time comes to commercialization it's progressing as we had planned. It's not reached the commercialized yet, but when it reaches, you will hear about it.

The next question is from the line of Prathamesh Sawant from Axis Securities.

Congratulations for a great set of numbers. So my question is regarding the recent announcement of government regarding the capping of the sugar exports. So do you see any impact of this news on your company per se?

Yes, so what is actually being said is don't produce sugar for export and this is fundamentally the message according to me and divert the sugar to production of biofuels for ethanol in this case. So a lot more sugar is now available as feedstock. So I think that's a key question because at some stage in time, we'll also be asking question around what's the feedstock availability, but this becomes -- this makes available a large quantity of sugary feedstock for conversion to ethanol. And I think that's a very positive move because we clearly see that is sign from the government to the industry that they need to move their product mix in favor of ethanol, which is also good for the industry, by the way, because if you see the results of any of these sugar companies as they have been announcing for a much lower portion as a percentage of revenue. The contribution to the bottom line is much higher, proportionately higher from ethanol to their businesses. So I'm sure they are also happy customers in this.

Okay. And sir, so is it -- can it be interpreted the other way, whether the company -- the government wants it for protection, as in the idea for this announcement was protection of food protection for the domestic consumers. So later, do you see any peer of food versus fuel debate coming ahead from this again?

No, because if you look at sugar, we already have access to the production. So it's not that it is deficient and therefore, it needs to be met. It's already access. After what being exported, there is still excess sugar labs. So we are in a very different situation as far sugar production is concerned. I clearly see -- I mean, I'm not here to contest what government is thinking of -- what I'm saying is what's the likely implication of this action. I'm sure they have their own reasons to announce what they announced. But we read this as this kind of an impact coming off as a very positive impact for us.

Okay, sir. And to my second question is regarding the CBG front. Any development on it, given that now you are going to go with some government body to talk against the government decision that they had withdrawn for the subsidy any development on that? And given that the CBG prices have been revised, what's the kind of IRR? And are you seeing any new interest from CBG front?

Yes. So this is a very positive development. That now the CBG prices have been revised and that they're indexed to the CNG prices now, which is very positive development. I still believe that there's a lot of scope for improvement of viability of CBG projects because of the simple fact that my logic is why should a low carbon, higher efficiency, higher caloric value sell for a price less than if what I would call, high carbon, low caloric value counterpart? There is no logic. And from that perspective, I think CBG has a lot more scope available for price adjustment of course. But having said that, -- there is no change as far as subsidies are concerned, but the move right now to index it to CNG prices itself is very positive. We are already beginning to see some inquiries now emerging where people are saying, okay, we want to consider this favorably.

And sir, lastly, is there any seasonality when in our order book, as in like Q4 will have -- usually have a larger order book? So can the large order book, new orders this quarter, can you explain with that? Or is it just that we are having higher inquiries in general and the overall business is booming in general?

I would not necessarily put quarter 4 to be a high quarter. There is some seasonality in our business, but that's not the way we see it. In fact, with the -- and I use the word with great caution. The democratization of the feedstocks that has taken place on the small production actually has evened out this seasonality, which earlier was pretty sugar season based, which, of course, is a seasonal cost. But with starchy feedstock coming in, there is no seasonality. So which is actually a good thing. So much less seasonality dimension, although it is still there to some extent, but not to a great extent.

So we can expect this kind of a new order book growth in the coming quarters also? Hopefully.

As they say in India [Foreign Language]

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

Sir, on the CBG front, our -- how many -- I mean plants so far, we have installed and how we were expecting, say, success of new order or based on the plant which we have set up. So how those are running? And if you can give some color? And second question on -- in your initial remarks, you said that we are working on the supply, I mean, after a plant set up in maintenance, as well as carbon capture. So on more specific on carbon capture, so what kind of, I mean technology are we using -- is it or in-house or outsource carbon capture technology?

I had mentioned that we are starting a focus. We've been very focused on the capital side of our customers' businesses. But we realized -- and we did have a business unit or an offering in the market, which is on the revenue side, but we are now considering that as a focused business unit to start off -- to keep solutions offering to customers as they start operating that plant. So that could come in form of performance enhancer. You know that the fermentation process actually releases a lot of biogenic CO2. So we are also offering customer solutions to capture this CO2 using our technology. So because that is biogenic intent is a clean -- and then there are applications on food grade and medical grade and all the industrial grade. So those can be further modified. So we do have our own technology for that purpose. So that is how we are doing this. On the CBG front that you asked the question, yes, we have commissioned 2 plants completely. They are fully running. Gas is being sold and retail outlets of respective OMCs that have got tied up there. We will be commissioning the rice straw plant in about 3 months plan. I think that's a big event as well because there is no other plant like that, what we will be commissioning, so that will happen, so that's the third one. And very important building from there. As I said, we had 4 plants under commissioning. The fourth one is also going to coming next quarter. So we will have on press smart on rice straw as well as on industrial grade all 3 big sources of organic waste covered, which will be then producing the gas from these sources. We are expecting that at the back of this new, as I already answered in the previous question, the back of the current new pricing norms, we are expecting increased what I would call as interest from the customers, including from few sugar mills to say how they will go about in setting up the new CBG capacity. So -- but there's a lot of scope. As I mentioned earlier, that CBG actually should be a prized fuel and not a [indiscernible] fuel, but I think we are moving in the right direction. And over a period of time and we shall overcome the efforts as well.

On any further update or new, I mean, implementers and order on this jet fuel?

So as you know that, the world is beginning to see signing of the aviation fuel contracts, especially by some of the global airlines for some initial volumes. That is the first step that is required for production of sustainable aviation fuel. It is just beginning to build as a momentum, and maybe when we speak in next quarter, we'll have something more concrete to talk about. The technology is there. The need is there. I think we need to move to a -- and I think now we are going through the contracting phase for the airlines to buy with OMCs, and probably the next would be then the technology and the investments around it that will happen. That's the way we see the development happening.

One is on the international outlook, I mean, for this Bio-Energy. And second, on the brewery side.

Second, on the?

Breweries.

Yes, yes, so what was the question?

So outlook on -- because I mean Breweries are -- we were seeing -- I mean last few years relatively growth is slow space. So how now this 1 again post COVID world the breweries' business looks like?

We are beginning to see some -- as I was mentioning in my remarks as well that with this -- this summer, especially, we know some of our customers are actually facing a problem of shortage of supplies. So that's a good sign. So I think the beer consumption is beginning to pick up, pick back up, which is good. They are also diversifying to some of the other products like nonalcoholic beer, 0 alcohol beer and things like that, which is also -- more flavored beers. So we'll see this market taking positive track as we move forward during the year. Right now, the capacities that were there that were being put to use have all come to play, but I'm sure that looking at the current market response, they will start to look at planning capacity additions either from a green or brownfield and we will see that traction build up on the brewery side. The international business, again, as I said earlier as well, several countries, not only India, but several countries have realized the importance of actions that they need to do as economies to reduce the climate change impact on their respective economies and therefore, the CO2 come back. And biofuels will have a very, very important role to play. We are seeing some good programs building in traction. We have augmented our resources in Europe, in North America and South America to actually go and address these emerging needs and I'm sure that we will see a positive inflection develop on that as well.

[Operator Instructions] The next question is from the line of [indiscernible] from Masters Capital.

My first question is, today, most of our business comes from Bio-Energy [indiscernible] business. So maybe after 4, 5 years, when you have this potential of 20% GMV, what is your next cash flow opportunity? I mean is it your international business? Or is there any progress in them being and what will be our future for 5 years.

Sonasish, that's a great question. And yes, E20 program will run its course and come to an end in 2025. However, that is not the end of it for -- and let me just give you 2 or 3 points. Number one, Brazil, which is the leader in this business and in this whole sphere, and they have a default blending of 27% and not 20%. That is number one. So why should we not have 27%. That's my question. Second is, currently, we are only blending this at petrol level, maybe -- and we are working on a program, as I said in the past on diesel blending as well. So that's the second one. Third, we have heard about Honorable Minister speaking about the fact that India needs to have flexible vehicles and the flexible vehicles come into play, when you can run it on 100% ethanol as well. So there's the third rule that will come into play. So there are many applications. The communication towers that run today on diesel gensets, they need not run on that, they can go to methanol gensets. So there are many of these applications that will start to develop as we go. The key driver is that the focus needs to shift to low carbon intensity operations. And I think that's what all the corporates are now beginning to think about because this is a very, very important step forward. So that is what we'll drive. That's number one. Number two, as I was mentioning, we are seeing very good traction building in the international business in several economies around reducing the low carbon intensity -- carbon intensity in their operations. And amongst many other solutions, biofuels have an important role to play. Quality as a regulation on the ground is just that the war has pushed things by 6 months. So we will have to see how this -- how we progress forward on this. But as I see it, and then ethanol becomes a basic building block for sustainable aviation fuel, it degrades in the form of isobutanol. So there are many other [indiscernible] that we talked about in RCM -- so -- so ethanol will become like a basic brick. So, actually, if you go 1 step before ethanol gas form is the sugar that we separate out from the different feedstocks. And that's where things will start to diversify from that stage today, diversifies to ethanol. I think tomorrow, we'll see it diversified to a different set of chemicals. We'll see it diversified to aviation fuels and then so on. So a very, very vast field is expected to open up at the back of the world need agreement and determination to move to a low carbon future.

The next question is from the line of Sagar Kapadia from Anvil Share & Stock broking.

Congratulations, sir, for such a good set of numbers. Sir, I would like to know that what is our operating utilization levels? Because earlier, 3 years back, you had told our capacity utilization was 60%. So currently, with thus revenue, I think we would have reached from 90%, 95%. So what is that? And what will be your CapEx plans going ahead, sir?

Great question, Sagar. So what we did over the last 2 to 3 years is that we actually sit down -- we sat down and we said, how are we going to execute, and that is what I was saying in the beginning of my remarks as well that we had a very strong focus on execution because we have a strong order book, and we need to deliver to our customers on time. So we have debottlenecked several of our capacities. We have deployed different strategies. And they have all worked out well for us not to actually go and commit uses to large capital expense. And without that itself, we have been able to expand our capacities. We have debottlenecked some of our operations, we have developed a very, very strong supplier base which is helping us to our vendor base that is helping us and this vendor base is now located closer to our customers. So we are looking at it from a very different perspective, how do I in a manner speaking, we are thinking differently to say, how do I make sure that my footprint of CO2 is least, is minimized. So there are many, many dimensions on which we are working, which is helping us to overcome this problem. So as I see it, we don't see -- our capacity build also has to happen on the Engineering side of operations because that's also a critical people that we need. And that is something that we have consciously built over a period of time, but we have also used digitized in big way. We are completely digitalizing our operations now. so that our speed of throughput time decreases in our speed of execution increases, productivity goes up. So we are working on several levers, standardization and another lever to ensure that our execution pipeline is well built and is well taken -- I'm not losing an iota of sleep over our capability to execute. And if you can see from the last quarter itself, if you see what we have delivered in the last quarter of this year, any multiple 4x, we are ready in a very, what I would call a safe harbor.

Yes. Sir, any plans for further CapEx? We might be at 90%, 95% currently. Am I wrong?

Don't worry about the capacity so much. As I said that we have debottlenecked completely. So we will be in a position to -- and the 2 things that I was mentioning a thinking to the answer that I gave earlier. So the seasonality of the business has come down, that allows us to more evenly spread out earlier. If you see our previous year's results, our first quarter will be very small and then we start gradually increasing. Now the 4 quarters are more or less similar levels to notice, but more or less similar level and that's what we expect. I'm not saying it will be same. It will be growing still, but not with such right disparity between the first and the fourth quarter. So that's helping us to use our assets very well. So we have -- as Sachin was telling me some numbers, which around our asset utilization, he said some growth from 4% to 8%, so the asset turnover is now from 4% to 8%. So you can imagine how much [indiscernible].

The next question is from the line of Vipul Sanghvi from Systematix.

My question was around -- in the earlier question, one of the gentleman said that total 20,000 kiloliters per day of distillation would be required to reach the 20% blending target. So sir, what kind of capacity expansion announcements you will see that have already been made? And do you see a situation where we will overshoot this capacity expansion target itself? So I'm just trying to understand what is going to be the supply side of this opportunity.

Right now Vipul, we don't have enough capacity. I mean the country can consume much more than what's being talked about. I think 2 things have to happen. And let me -- at some stage in time and maybe by end of next year, and I think that deal already commenced between the government and the automotive industries to see how the vehicles as we go forward, will get sort of aligned to the need for this high blending ratios. But what I'm given to understand is that we will have default ethane across the country starting October of this year. So if that is the case that it becomes the basic platform on which to build this particular volume. In terms of building further volumes, I think -- very clearly, the path is clear. We see a robust inquiry as I said earlier as well. Our robust pipeline of inquiries. There are lots of companies. The freeing of the feedstock is actually inviting a lot more companies to come and step in because earlier this sugary feedstock was controlled by the sugar companies that they would obviously be setting up their own capacity. But now many other corporates and companies are stepping forward. There are pharma companies, they are entrepreneurs, individual entrepreneurs, there are commodity manufacturers, there many guys who are stepping into manufacture of ethanol now because the feedstock are plenty, so we continue to see a very positive traction on that.

And sir, you don't see a challenge as far as the availability of the feedstocks for some of these stand-alone distilleries. Do you think...

No, so 2 things. One is, we're talking about this ban on sugar exports for some time. So that itself will create what I would call as a need for -- or a new feedstock of sorts. It's not new. It's already existing, but an additional quantity of feedstock for ethanol production. On the starch side, also, we don't have a problem. And as I mentioned that when we commission within 6 months' time, you'll hear it we'll commission the first business development product in the world based on rice straw, once that is -- that goes on stream, that will open up further feedstocks. So feedstock, which should not be seen as a value for us, at least not in foreseeable future.

The next question is from the line of Lokesh Maru from Nippon India AMC.

My question is more on CBG. So we have the technology in place. We have the pricing in place. What I believe I heard was a challenge actually aggregating the straws aggregating the stubble getting it to the plant in locations, right? So if India is eyeing an opportunity of somewhere around 5,000 CBG plants across the country, there has to be some agri organized player organized way, which is transported. So then your outlook or overview, insight on how it was in some [indiscernible] that is enemies one of the biggest opportunities for us [indiscernible].

Very clearly, the supply chain will have to be established for feeding of the right straw, which currently gets burnt on the field standing to collect them, aggregate them and supply it to the nearby CBG plant. But I am strong -- and there are platforms that have now emerged which are facilitating buying and selling of biomass on those platforms. They are making the producer and the customer meet on the platform that we were talking about. So there are already platforms in place. There are policies from certain state governments, we are beginning to establish any equivalent of mechanism or aggregation of biomass and supplies. I think as the market starts to develop, we'll definitely see -- there's already a sort of aggregation in place because there are lots of biomarkers, power plants and steam boilers and the industries are using it. So there is some sort of aggregation that is already available. So I'm sure that those experiences would be used and handy too when we expand it to a much bigger scale. So that is something that will happen. Also, on some feedstock, like for example, pressmud from sugar mills or the gas in sugar mills that the supply chains are already established in local. So in that sense, there is no problem. So it is all aligning in the right direction is what I would say.

So like you said, if the gas and pressmud are also feedstock. So as the ecosystem evolves, things -- supply side is addressed over a period of time, so do you think sugar players themselves are going to be first adopters of CBG [indiscernible]? They have their own -- so they have this input, the feedstock for the incubation plants. How are you seeing their reaction when you go to them? What are their reactions on you putting up a plant like this which might utilize the waste they produce?

Lokesh, I think I was listening to a lot of the commentaries of one of the leading customers of ours. And they did say that over a period of time, they see themselves transforming to a multi-product, energy product company and not just nearly a sugar production company. And I think that probably tells you the way the thinking is actually evolving and emerging within the sugar mill segment, so I think very clearly, as we move forward and all we see the sustainable aviation fuel, whether it is RCM, whether it's the iteration of ethanol. So we will see a lot more, what I would call as focus coming in on -- from nearly a single product, I'm sure sugar industry has done well to transit sense from some sugar to sugar plus power, to sugar plus ethanol seeing the next step would be CBG. And then there'll be another next step. So there'll be many, many things that will help them to actually transit because they will have to become a multi -- they are realizing the opportunity of a multiproduct. The technology will help them. They can -- they have the -- they are the natural owners of some of these things. So we will see -- I personally believe that we will enter an era of very positive and conservative development in this segment.

Sir, my last question is on unit economics, so on [indiscernible] plant, revenue plant. Like you have installed 2 already and 2 are under pipeline. So what kind of sales or revenues are you looking at this transition already?

Lokesh, there's some disturbance in the line, like a wind noise. I couldn't hear your question well.

Yes, I think so from unit economics point of view, what kind of realization or revenue per plant, like you already installed 2, 2 are under the pipeline. So what kind of revenues are you looking at, so each plant like?

Lokesh, this is completely based on the capacity of a plant and on the scope, which we will be undertaking and feedstock. And naturally, the feedstock because if the feedstock is different, project costs will be differing as compared to the feedstock. So it will range somewhere between depending on the scope, which we will be taking can range between 30 crores and it can go up to 100 crores, 120 crores, depending on the capacity and the feedstock. So the range is very wide because of the scope and the capacity of the plant and the feedstock. So there are 3 parameters.

Sure, sir. So that indicatively that gives us a similar opportunity like the order book that we're seeing currently, even this CBG looks quite equivalent. Is that fair to assume?

Yes, CBG definitely, as Shishir was saying, has a very bright promise in that sense. Only thing the entire ecosystem is still in the phase of getting established. We believe that the range in which the work is going on, on the ground. We will see a development happening in that front, albeit slow in the first couple of quarters, but we'll see it picking up in this kind of in this segment going forward.

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

Firstly, sir, as you have told earlier also that our country deciding for a hybrid model of fuel would be more than going for totally EV part. So in your consultation with the ministries and all, what is the thought process currently? Where are we in terms of this blending part giving more trust to hybrid model for automobile so that the ecosystem there also continued? They were not destroying -- if they go into the EV part, then the complete section of ancillaries goes out of market as been explained. So how conducive do you think this hybrid model could be acceptable and thereby giving us, as a company, an opportunity to supply this biofuel and supporting biofuel in different comps. And on the aviation fuel part that the personable advising what kind of testing flying hours have been done currently? And what kind of feedback they have.

On the [indiscernible] front, let me just first take that question of your , the last part of your question, state of questions. We had already mentioned that the testing is already done on the asset, which is produced by the Indian army rather airforce and the testing certificate is issued by them stating that it is fit for flying the aircraft. So that testing phase has already been done. Just to give a clarification on the asset front. The other part of your question related to future of biofuel and what will happen in the light of EV coming up...

So there -- the way to think about it is like this. So I think this is still an evolving phase for what will be the future of mobility. So is the future of mobility going to be electric? Is it going to be based on engines -- or is there a third technology, which will become the hybrid that we're talking about in terms of -- so high carbon fuel, low carbon fuel and no carbon fuel. That's the transition that we see hydrogen with no carbon fuel. Now there are some other challenges. Although everybody is -- right now, we're all excited about hydrogen because hydrogen poses its own challenges in terms of we need very high-pressure storage and that increased the weight of the vehicle and things like that. The whole setup that is required to dispense hydrogen it doesn't exist today. The vehicles that use hydrogen don't exist today. So they are a very different set of challenges to be over. And to overcome all these, there's already an existing fuel fleet of acres on the road, which are not fit for existing fitting hydrogen. So a whole host of issues that need to be overcome on the hydrogen side. The thinking right now is that maybe for long distance haul, long haul travel, especially commercial vehicles, buses these kind of things, one could look at a dispensation from a point of purchase. But maybe for cars, et cetera, there will be a technology that will come through, which would be brought onboard generation of hydrogen using ethanol in a fuel cell and then drive through fuel cell to electric motor. So -- it's a vast subject, and it is still unfolding. We'll have to see how the technology goes, but that's still 10 years away into the future.

And sir, congratulations also for this celebrating 75 years of independence of a very unique concept in terms of sharing this delight with your investors. So only one of its kind, sir, we haven't had any corporate coming up with any special dividend on celebrating the independence of 75 years of Amrit Mahostava, unique idea sir sharing the pure investor. Sir, in the cash flow part, sir, you have mentioned about investment in debentures and bonds to the tune of 25.41 crores. So what are the ads on it and when and where are these funds invested? In triple AAA it was, in private, in government, where is it?

Okay. So the nomenclature is debenture bonds and for that because that's a standard nomenclature. As a policy, investment policy, we don't invest into corporate bonds at all. So all the investment happens only in the fixed deposit or the mutual fund or the bonds issued by the banks. So these are the only 3 segments here where our investment goes and we ensure that our investment is only in AAA rated company. So we might accept the lower return but not on the quality of a paper.

And a very small point, sir, -- but we belong to the capital goods industry. And so CapEx is the word that is familiar to our growth. We may be in 1 of the verticals, but it is all the ecosystem that gets charged up when the view start evolving, correct me there. So what is the pulse on ground currently in terms of the disruption because of these commodity prices, these are on 1 hand and the supply chain disruptions and the semiconductor issues, the various parts of the story -- but how do management like Praj and others who are totally having the ears on ground, taking into account the CapEx taxes that this country is currently moving into? Where are we entered whether the third, the government has given for the CapEx cycle. Has it started gaining momentum? Or has it received some roles because of these external factors your thought process on this?

So frankly, it's a mixed bag. In the sense, of course, our order book shows that the CapEx is formation is taking place at least in our segment. Our growing order book is a testimony to that. And the policy environment that has enabled that is also very, very visible. So that's the positive part. But as you're rightly saying, some markets. So for them, pandemic had a different recovery rate for different economies. The European war has created a different set of dimensions for a set of economies, but though not all. The high inflation may take some toll in a couple of other economies where -- so I don't think there's a common the applicable factor all across, but each of them will have to find their own ways and means -- but what is very important is that in all this, I think 1 good thing that has happened is literally the entire global leadership across different -- cutting across different political spectrums, geographical spectrums, nationalities, has a common agreement that we cannot continue in our future with this high carbon intensity energy future. That doesn't exist for anybody. Everybody says, yes, we should move to what lever? Electric vehicles, solar power generation, wind power generation, biofuels, hydrogen, those are solution forms. But definitely, all major economies in the -- or even small economies are committed to make that happen. And I think that's the positive part, as I see it, and that will drive the investment in our business. Some other businesses, which are run of the mill or normal kind of CapEx they may have a different perspective on this, but this is how I see it.

Yes. And we heard that our execution actually will also gain traction going forward. That is as you have answered earlier that would not be a truncated one.

Yes.

The next question is from the line of Akshay Kothari from Envision Capital.

So I wanted to know regarding the tax benefits. So are we enjoying any tax benefit in the deduction in the form of [indiscernible]?

So right now, from this year, we have shifted to the new tax regime where we are going to pay tax at the rate of 22% effective tax rate will be somewhere around 25%. So technically, under new tax regime, there are no benefits which are available.

Okay, okay. And sir, there was a notification in February around for biomass and briquettes and power plants were mandated to use 5% of their total input as biomass, briquettes . So does it impact us in a positive way or...

Sorry, could you repeat your question, please?

There was a recent notification wherein the biomass and briquettes, the agricultural waste, it is converted into briquettes and then it is given to power plants. So they were told to source around 5% of their total input as a mandatory provision. So it was a government notification. So are we positively impacted by it or we are not into it?

We have nothing to do with that.

The next question is from the line of Ravi Naredi from Naredi Investment.

Blending target by '25, '26 to 20%, given by government, please give detailed answer where we stand and whether is it possible -- and do we have sufficient raw material like sugarcane, mag and rise to produce the same and basic infrastructure of PP is all the storage of ethanol capacity is available with these companies. That is my question.

So Ravi, thank you for your question. I would say in a short answer, yes, we are very confident that we will reach the target of 20% in '25, '26. The current pace of capacity formation is indicating that we will be able to achieve the target. That's number one. Number two, the infrastructure of where we sit is a great question, already exist, the all marketing companies have actually made plans for making sure that across India, this kind of facility is been available. And I would just point out to a very small fact that since this is a blending program, the volume will go to replace an existing crude oil volume crude oil-based petrol volume, right? So in overall volume terms, it's not going to increase any net volume, except that we have to keep providing further growth in the economy. And I'm sure that all marketing companies are already -- we have been -- we have developed with them and we understand that they have a very clear road map of how they will do this and how they will go about doing this. The road map for blending has been very detailed in detail worked out at the highest think tank level in the government in the country, [ VBIO ], the Ministry of Petrol and Natural Gas, the producers, the technology suppliers, all of us have been involved in a band of to make sure that this becomes a very, very successful program. And I have I've been participating in the industry association and I've been participating in that in different capacities from CIA, et cetera, and I can only share with you that as a country, we are doing a very good job of ensuring that we don't fall short of this time.

The next question is from the line of Haresh Hindocha from SVS Securities.

Congratulations on a good set of numbers. Sir, can you explain to me in detail about CBG I mean, last year, it was a very big buzz that the 5,000 project will come up in the future. And can you just also quantify what was the incentive and now with this revised price -- is there more beneficial to set up a project or not? And can you just explain the number of inquiries we have received after this announcement?

So 5,000 was the overall program that the government announced under the -- we would like to see 5,000 projects being set up. So that's the goal at the country level. And they announced the policy, the policy -- so we have -- as I was mentioning to you, we have built some -- we are building 4 projects, 2 of them are commissioned and handed over. There are other 2 which are in different stages of construction. There are some others also being built by some of our other friends on the technology side. So it's an ecosystem in making, as I would call it. So we are nowhere near 5,000 plants right now, nowhere near that. But this new announcement on the policy, because in between the subsidy was withdrawn, the price was still at old levels. So the projects are not viable. But I think with the new price level, it will start to move in the viable direction. I still believe there's a lot of scope for improvement in the pricing front on the CBG side. And we will see that traction built up. And we are also seeing just about beginning to see the interest coming back in terms of people saying, hey, we want to evaluate whether with this new structure of pricing as it like it makes more sense. And I'm sure it does make sense for them to go ahead and start considering the project. So we will see the other part that I was talking about the transition of the sugar sector from just being a sugar producer to a multiproduct complexes will also help this transition. So all in all, moving in the right direction, still not there. And I had mentioned that in my call about 6 months ago that we are still about 18 months ago from this opportunity actually taking place, taking shape in a good way. And I still believe that that's the timeline that you had to look forward.

We move to the next question from the line of Nisarg [indiscernible] from Native Capital.

Sir, my question is that we've obviously done amazing on the order book from around 600 crores, 700 crores a couple of quarters back to 1,100 crores. My question is that how sustainable this is -- do you think we've reached some kind of a peak for maybe a couple of quarters where the order book is concerned? Or do you see no growth even from this number?

So as I was mentioning that we have to see how the different external factors play out. I mean, in terms of the opportunity they start to open up. Broadly speaking, we believe that there will be a new -- we have not found the new platter or anything like that. This will continue to build in momentum in India of E20, let us say, the policy change is to be '27 or flexible vehicles are sort of introduced the diesel bending program goes up, then that will further give fill up to capacity build program. So we'll have to see how. Because the biofuels world over are impacted by the policy directions that governments provide. And so that's the key factor. And so that's one, two, already in several markets, as I was mentioning, the focus to shift to a low carbon intensity energy mix is going to play out in a constructive fashion. So -- there are indicators that we have not reached any platter yet, and we will continue to build the momentum for here.

Right. Actually, my question is more near term. So if you look at it today, sugar is only 1/3 now and 2/3, I think, has shifted to grain-based if that is correct. So on the grain-based side, is it fair to say that on the sugar side, our order intake will keep reducing? On the grain side, what kind of industries are you seeing putting up capacity really for this ethanol production in the next few quarters?

Even on the sugar side, as we mentioned earlier, because of this sugar export ban and ensure a lot more capacity will become available for ethanol production. So sugar mills will also come back to the fray. That is number one. Number two is -- in terms of the people, as I said, there are pharma companies, there are other commodity companies. There are energy companies, there are funds it's a very different set of people who are now setting up start with ethanol because the feedstock is really available. So that is the key driver. This 1/3, 2/3 what you were saying it all the new capacity that is now coming in and will come on the starch because obviously, the -- there are no limitations on the feedstock there. But with this announcement on the sugar ban, we actually see sugar also coming back in a big way to participate in capacity formation compared to -- it has slowed down a little bit. So it's a relative time. It's not that sugar stopped. It's just that, that was picking up on a lower base. So from that perspective, obviously, they are building -- more capacity is being built around on the feedstock.

We now move to the next question from the line of Karthi keyan from Suyash Advisors.

One question on the government thinking on feedstock availability. In your conversations, has there been any reference to genetically modified corn, or say, on or any of these other sources of feedstock? -- to create a parallel supply situation so that you don't have this food vs fuel kind of complexity.

Yes, so I think this is a great question. And currently, when that question doesn't exist in India versus fuel because we're looking at a few drops demanding and excessive grains and the -- but there are markets where the concept of energy crops is very much present. And diversifying the feedstock is a very important step in the policy of any country's biofuel policy. And I think that's what government is actually intending to say when they released the recent cabinet approval on what needs to be happening. So we will see much more broad basing of the free stock. Today, it is attracted to a few. We -- in about 2 years ago, it was only 1 feedstock. It moved to 3 and then now it has moved to many. So we will see change. We also see lines located in terms of the straws and the graph is also working once this plant is commissioned that I was talking about. So we will see a new kind of regime in which different feedstocks, very wide variety of restock will probably start talking as feedstock. And depending on the local factors, they could be chosen one over another. So I don't -- we don't foresee a problem on the feedstock side right now.

That's correct. I was only asking because the challenge is related to volatility maybe somewhat reduced if you have a dedicated supply stores versus you create a parallel sugarcane kind of a situation that's the point I was trying to understand.

So there are countries that have gone for energy crops. I'm sure at some moment in time, we will see that happen as well.

We'll move to the next question from the line of Krishna from Nivesh.

Hello, sir, my question is on the ethanol demand side, E20. So currently, only all the vehicles are capable for E10 as per our understanding. And for E20, the new vehicles sold only would be capable for the E20 issue. So how do you see the demand side of ethanol play. So would it be that the projections are better too high towards the demand side?

It's a little long-winded answer for Krishna. right now, I'll try and keep it brief in interest of time. So if you use the current vehicles, it's higher than E10, then, you don't get all the benefit that you should get out of using ethanol. With newly designed vehicle on E20 will get. There are some changes required in the fuel line components, especially the gaskets and those are easy changes to be made. Those are not -- but you may not get full benefit into an existing vehicle that you would get into an E20 designed vehicle, if I can put it that way. So there will be some I would loss of performance, if I can not percent a vehicle, but what you could have got. So it's more an opportunity lost kind of a situation. And other tan that, I don't see a problem.

Automobile industry, if you look at Maruti has already declared that their vehicle E20 kind of a theme from...

So that 50% of the market already complies the supply.

Sorry, the demand side is also picking up or getting geared up for the availability of duty in the next 3, 4 years.

And we are a country of engineers. So you are aware that there are so many vehicles that got converted to gas external to their factories. There were originally petrol cars that got converted to gas. So we will -- we are a country of engineers, and I'm sure that if there are minor adjustments requiring the existing vehicles that will happen.

I would request please e-mail your questions. The next question is from the line of Prathamesh Sawant from Axis Securities.

Just to understand -- wanted to understand 2 things. So 1 is what's the update on the IOCL JV that you had announced last quarter? And second question is on -- to understand the per unit economics, so let's say someone has starting a 100 klpd ethanol plant. So what will be its cost and an average payback period or something like that, IRR expects?

On the IOCL front, the MOU, I think you're referring to the MOU which we signed with IOCL. So there are different proposals under which -- under this MOU, which we are right now discussing to figure it out what makes sense to finalize as the first project to come up with. So it is still under the what I can say on a drawing board. At the opportune time, we will definitely get back to you people and tell you what is the development on that front. But right now, it is on a drawing board. So what is the second question? Okay. So typically, a base -- there are many factors that will go to build this plant. But I don't -- maybe 100 kpd plant with cost and upwards of 125 crores, 150 crores. And we can look at a higher healthy 2-digit IRRs.

And sir, for the CBG plant also, what is the...

CBG, I think Sachin mentioned to you that it's a wide range, 30 crores to 120 crores, depending on the feedstock and format, et cetera, what's the cost. Again, 2 digits IRR, reasonably healthy 2-digits IRR.

The next question is from the line of Faisal Hawa from HG Hawa & Company.

Sir, going forward, what is our R&D spend totally? And what area are we concentrating on doing the research and development?

Yes, so we are in the process of creating a robust program. And apart from continuing with what we already have because, R&D is not something that we can commit only for a year. We'll have to have a little long-term view on this. So the program that we initiated, I think Sachin also mentioned, 2 of them have now reached from banks to Palace. So we are just developing the feasibility part. And we will take appropriate step at that. So our R&D spend will continue on the same lines. In fact, onto a much announced -- into a much more enhanced way compared to what it has been so far. We'll talk about it when we are ready to talk about it.

Percentage of total revenue.

So as I said, we will continue at the same pace that we have continued so far. But in addition also, we see an acceleration because of this new development that Sachin described in his opening remarks. We will come back to the exact number, but that's where we see it going down.

We'll move to the next question from the line of Raj Mohan,Individual Investor.

Congratulations on a great set of numbers. First on diesel, specifically, any update on the progress in R&D on diesel with it. Looking at it from a 3-year perspective, we think we would have a marketable proposition for blending 5%? And then the second question, though we are exploring on the CBG side, any impact on this astronomical increase in global natural gas prices on us?

So, Mohan, two things. One is a new policy announcement that government has done on CBG pricing, they have linked it to the CNG price. So that is a good progress according to me because now that at least indexes to some basis and not just fixes for a long-term program. So that's a good thing. I think that has happened is it's now indexed to CNG. I strongly believe that it sold the other way around right now, CNGs hire and CBG is lower, it should be the way around in my opinion because of what this sector that it is much more environmentally friendly, et cetera. So that we will see. So that's the second separate question. On the diesel lending part, it's a program that needs to be developed testing, et cetera, and it's a whole protocol to be followed, and we are -- we are working with ARAI to actually make that into a reality. There are several, what I would call it elements of this program that need to be approved or programmed into and also then action. So it is not a very simple program because we're talking of a very big change. But I'm sure that what the current progress that we have is reasonably satisfactory, and we'll get there.

Due to time constraints, that would be the last question. I now hand the conference over to management from Praj Industries Limited for closing comments.

So thank you, everyone, for your time today. It was pleasure connecting with you all. If you have any more questions, feel free to write us at [email protected]. Thanks again for your time, and have a nice day.

Thank you.

Thank you very much. On behalf of Praj Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.