Praj Industries Limited (PRAJIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Praj Industries Limited Q4 and FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Nupur Jainkunia from Valorem Advisors. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Nupur Jainkunia from Valorem Advisors. 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 call for the fourth quarter and financial year-ended 2025. Before we begin, a quick cautionary statement. Some of the statements made in today's earnings conference 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 conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Shishir Joshipura, CEO and Managing Director; and Mr. Sachin Raole, CFO and Director of Resources. Without any further delay, I request Mr. Sachin Raole to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Nupur. Good day, everyone. I welcome you to Praj Industries earnings call for quarter 4 and financial year '25. Trust all of you had the opportunity to go through our results for the quarter ended 31st March '25. I would like to start today with 2 key developments. India has officially achieved 20% ethanol blending much ahead of the schedule. Praj is proud to have been a key catalyst in this historic shift towards energy, self-reliance and sustainability. In another significant development, Praj has partnered with Uhde Inventa-Fischer, a subsidiary of Thyssenkrupp, to offer end-to-end solution for PLA production. UIF is specialist in polymer technologies. The offering will cover all stages from feedstock conversion to polymer production. Praj will take care of feedstock to lactide through a fermentation route and UIF will be responsible for polymerization. Praj will also do the entire engineering and building up of the entire plant for PLA. Now coming to the business performance. Our results for the quarter are reflective of the developments taking place globally in the bioeconomy and energy transition space. This year has been a year of transition, shaped by several external factors such as changing face of energy policy across the globe, availability of liquidity, emergence of new sectors and increased focus on carbon abatement. We have mentioned in past that Praj business is string made up of represented by several business units. The business construct for the year is reflective of this fact as we saw significant contribution from CBG services and international business. On the domestic bioenergy business front, India has achieved its EBP 20 target way ahead of the schedule. This augurs very well for the future policy initiatives to expand the share of bioenergy in the overall energy mix of the country. We are fully geared up to serve any emerging needs from the enhanced blending mandates. Our technology team is focused on enhancing margins for our customers by developing core products and plant yield improvement solutions. We have commercialized technologies for production of distillers, corn oil, rice protein, high-protein DDGS et cetera, which are gaining increasing tractions from the existing ethanol producers. These core products will significantly alter the financial viability of bioenergy projects. These patented technologies will significantly differentiate Praj in the market and create unique sustainable competitive advantage. On the project execution front, we are still witnessing liquidity challenges for financial closure of projects. Funding agencies have become more stringent on the approval processes, which is leading to extension of average execution cycles by almost 12 months. On international bio-energy front, there is a strong buildup of inquiry pipeline, mainly from America, Brazil, Argentina and Paraguay. To cater to this potential, we have strengthened our presence in Americas by adding local resources. The much awaited 45Z draft notification has been issued and is likely to be enacted by October 2025. This will create significant pipeline for low-carbon ethanol opportunity in the market of America. During this quarter, we won a significant contract from a customer in Paraguay to set up an ethanol plant based on starchy feedstock. On CBG front, we have signed an agreement with an industry leader in South India to set up a CBG project of 36 tonnes per day capacity, the project to be one of the largest single location facilities in India. Earlier this month, we have signed term sheet with BTCL for developing 10 CBG projects under the joint venture. The next step is going to be regulatory approvals and formation of a formal JV. In parallel, we will be working on with the feedstock owners to develop the projects under this arrangement. We have started discussing biomethanol module addition with our CBG customers. Since it can significantly improve the viability of the CBG plants, we are witnessing increasing traction in this segment. We have healthy buildup of inquiries that are expected to translate into firm business as we move forward. Our services business has witnessed healthy growth in order book and revenue from both domestic as well as international markets. Our order book for financial year '25 has doubled as compared to the last year. There is increasing traction for solutions such as biogenic CO2 capture, fermentation process management and operations and maintenance services. Moving on to Engineering business. Praj GenX commenced operations at its Mangalore facility in March 2024. During the financial year '25, the Mangalore facility was audited and approved by 8 key customers. Three customers have already signed long-term framework agreement for supply of goods and services. For the financial year-ended 31st March '25, the reported profit before tax incorporates scale-up related expenditure totaling to almost INR 76 crores in the consolidated profit and loss account. With requisite client approvals now secured, GenX is geared up to contribute to group revenue and PBT from FY '25, '26. Our brewery business is witnessing some early momentum after long pause. After a period of 3 years, first greenfield plant has been announced, and we have received this order. On PHS front, we continue to grow in newly identified segments of high-capacity fermenters, complex injectables and blood plasma. Storage batteries, EVs, solar cells and semiconductors are new business avenues for Praj HiPurity, and we are seeing healthy buildup of inquiry pipeline from these segments. Overall, we see a positive development for all our business lines, and we continue to remain confident and committed to our long-term goal. On 20th March '25, a fire incident occurred at the office block of Praj Matrix, our R&D center in Pune. Fortunately, there were no casualties or injuries and the facility did not sustain any major damage. There has been no impact on any of our R&D operations. We are now in the process of refurbishment of fire impacted office block area, which is expected to be ready in 2 months' time. On the financial performance, the consolidated income from operations stood at INR 8 billion in quarter 4 of financial year '25 as compared to INR 10 billion in quarter 4 of FY '24. PBT for the quarter stood at INR 582.51 million as compared to INR 1 billion in the corresponding period of the last year. Profit after tax stood at INR 398.169 million in Q4 of FY '25 as compared to INR 9,19.36 million in Q4 of FY '24. There has been improvement in margin. And of course, the margin has to be considered after considering the cost of material and direct expenses by almost 2.3% over quarter 3 of FY '25. As I mentioned earlier, fire at office block at R&D center temporarily disrupted the activities at the R&D center for 2 weeks, and there is no financial loss since the facility is under insurance cover. For the year-ended March 31, 2025, income from operations stood at INR 32,280 million as against INR 34,662.78 million. PBT stood at INR 2,703 million in FY '25 as against INR 3,774 million in FY '24. PAT for '25 came in at INR 2,189 million as against INR 2,833 million in FY '24. Export revenue accounted for 24% for FY '25 as against 18% of FY '24. Of the total revenue, 70% is from bioenergy, 20% from engineering and 10% is from PHS business. The order intake during the quarter was INR 10,320 million with 61% from the domestic market. Of the total order intake, 70% came from bioenergy, 21% from engineering and balance 9% from PHS business. [Technical Difficulty]

Sorry to interrupt sir. Sorry to stop you. You're having disturbance from your line. Can I reconnect it?

Please do that.

Ladies and gentlemen, please be patient. We'll connect management back to the line. Ladies and gentlemen, thank you for patiently waiting. We have the management back with us. Over to you, sir.

May I know where the call got disturbed? Any idea?

Just last 2, 3 sentences, which you can say.

Okay. Maybe I will start from the export revenues because that's where I believe you called me up and said that there is a disturbance. Export revenues accounted for 24% for FY '25. Of the total revenue, 70% is from Bio-Energy, 20% from Engineering, and 10% from PHS business. The order intake during the quarter was INR 10,320 million, with 61% from domestic market. Of the total order intake, 70% came from Bioenergy, 21% from Engineering and balance 9% from PHS business. The order backlog as of March 2025 is at INR 42,930 million, comprising 63% of domestic order with 77% from Bioenergy and 18% from engineering and balance 5% from PHS business. Cash in hand as on 31st March 2025 is INR 6 billion. The Board of Directors proposed a final dividend of INR 6 per equity share at the rate of 300% of the face value of INR 2 per equity share for the financial year-ended 31st March '25, which is subject to the approval of shareholders at the forthcoming AGM. Some other developments in the Board meeting of yesterday. Considering the emerging growth horizon for company's business areas, the Board of Directors requested Dr. Pramod Chaudhari to accept the role of Executive Chairmanship for the next 5 years, which Dr. Chaudhari graciously consented to. Accordingly, Board has approved the appointment of Dr. Pramod Chaudhari as Founder Chairman and Group Mentor in the Executive Director category for a period of 5 years with effect from 1st of July 2025. Board has also approved the appointment of Mr. Parth Chaudhari, son of Dr. Pramod Chaudhari as Non-Executive, Non-Independent Director with effect from next AGM. With this, I will conclude my remarks. Thank you all for joining, and we would now be happy to discuss any questions, comments or suggestions you may have.

[Operator Instructions] First question from the line of Mohit Kumar from ICICI Securities.

My first question is on sir...

Sorry, I'm not able to able to hear you.

Can you hear now sir?

That is clear.

My question is sir can you please help us dissect other expenses?

I'm again losing you.

I'll try once second and I'll go back in the queue, sir. Can you please help us dissect other expenses? They are sequentially and Y-o-Y look much higher.

Okay. So when I mentioned about the improvement in the margin for the quarter of 2.3% is after considering the cost of material and the other expenses. Our other expenses has a major component of site expenses. which are meant for putting up our project at the customer site. In this quarter, the site activity was on a higher side, especially because we are now constructing the CBG plants, which has major component on the site activity as compared to the material which are involved in the normal equipment business. That's the reason this other expenditure, which you are seeing right now is on a higher side. As compared to that, cost of material is lower. And that's why this margin is looking in a very different way.

Understood, sir. My second question is on the -- what is the outlook on order inflow from ethanol, the domestic sector? Is it fair to assume that a substantial growth in the new order inflow will be contingent to government increasing the target? You are basically asking only for domestic ethanol business, right?

Yes, domestic only. Domestic, Okay. So as I mentioned in the opening remarks that EBP 20 program has almost reached to its finality. So technically, the capacity which is required is either already built up or already committed for EBP 20. But there are different avenues which are emerging after EBP 20 program, such as in the form of flexi fuel vehicles or the vehicles which can run only on the 100% ethanol or the blending with diesel, which is also going to come up in the near future. So all these developments are going to create demand for ethanol in the domestic segment. One more avenue, which will come up for demand for ethanol, is on the CBG side, which will start building up over a period of time and which will need ethanol as a feedstock. So there is a possibility of different avenues, which will come up for ethanol demand in the near future. Shishir, would you like to add?

To add to what Sachin said, there are 2, 3 other drivers that we see clearly emerging. One, the existing producers are now looking for solutions to enhance their operating margins. And therefore, 2 or 3 steps that Sachin also briefly mentioned in his speech. One, the co-product development that we are now offering to our customers for the same input that they're now already doing for production of ethanol, they will now be able to garner higher revenue because they will be able to develop a separate co-product. Now what is that co-product, whether it is rice protein, whether it is high protein DDG whether it is corn oil, whether it is CBG, it depends on the overall scheme and the location of the project. But so one big dimension will be this. The second is as the plants have started to operate and people have learned and stabilized their plants, it very clearly being a process plant gives opportunities for debottlenecking the plant and which leads to then an enhanced recovery of -- or enhanced output or you can also look at lowering the cost by improving the efficiency. There are different steps that one could take. That also we see now emerging, and we are regrouping that as a very special offering from our end to help our customers debottleneck their plants to either higher outputs or lower cost of operation. That's the second one. And the third opportunity that is likely to come, which Sachin mentioned about opportunity from SAF. One opportunity will be for setting up a SAF project. But for SAF projects to work, we need carbon intensity of the ethanol to be lowered. And that is another set of solutions that we will come up with, even in the domestic market, as we move forward, because that is the key requirement as we move forward for SAF to have a low-carbon-intensity ethanol. So different levers will come into play in the ethanol segment. Just plain Manila greenfield projects are not the only option. There will be other brownfield expansions, debottlenecking, all the other co-product development, et cetera, that I mentioned.

We have our next question from the line of Nirav Vasa from Ak Investment Managers.

Sir, my question pertains to diesel blending. Any idea by what time can we expect initial orders or some backing from the government for the same? Can we expect in this financial year?

So the diesel blending program, as you would probably appreciate, has to obviously meet the tech requirements first, and that is the testing that is currently underway. We have passed all but one stages of testing and the final stage of testing is now currently underway where joint study is being undertaken by ARI, BPCL, Praj and Cummins. And we are -- because it is -- and this has to be extended time test because we have to test it from the perspective, not only from mileage and combustion and power, but also from environmental perspectives of what happens with respect to what I would call as emissions. The fuel specification standard that needs to get specified as to what needs to -- because we can't sell anything as fuel in India unless it gets so notified by the government. So these steps will then get recommended to the government saying now this is possible. And based on that, a new standard will get defined. So it's difficult for us to put a time line that will it happen this year in month of September or in the month of August, but this is definitely progressing as a joint program, and we are sure that we will see a very positive traction on this during the year. Government has taken steps to actually initiate this program notification, but obviously, all these steps have to be gone through environmental norms to be met, the power norms to be met, fuel to be specified, certified recommendations to be made. So it's going through the steps.

Sir, my other question is pertaining to the petrol blending from 20% to 30%. So according to your assessment, the journey from 20% to 30% would require significant contribution from second-generation ethanol or that is something that can be managed using molasses maize and some other agri feedstock?

I think as we move forward, 2 or 3 things will likely shape the new capacity creation for ethanol. One, of course, as you rightly said, if the blending percentage changes, that itself will drive the demand. Second, we'll have to map it against availability of feedstock and also availability of feedstock regionally. I mean something I will not -- that is of no use in South, but then you end up transporting ethanol, which is not the purpose. And what is likely to happen is that there's also a big push now from government to use starchy feedstocks, especially corn because that seems to be a very amenable crop for us to use. We are working on a program of intercropping right now, which is at a very advanced stage. So different feedstocks will emerge, definitely, yes. In what form at what moment in time is a matter of the locality, the geography, the current availability, the capacity availability, technology availability, et cetera, et cetera. So we are very confident that as we move forward, we will see an emergence of newer feedstock as well, Agri will also be one of them.

My final question is...

Sorry to interrupt, sir. May we please request you to rejoin the queue as there are several participants waiting for their turn. [Operator Instructions] We have our next question from the line of Deepesh Agarwal from UTI AMC.

My first question is what would be the impact of the possible tariffs on U.S., both on your existing business as well as the potential business on SAP and Praj GenX?

Yes. Sorry, your voice was a little bit getting disturbed. But if I understood your question, you're asking about U.S. tariff scenario, right?

Yes.

Yes. So currently, the equipment which are getting exported to U.S. for both of our businesses, that is ethanol business and the critical equipment business, they carry duty between 5% to 7%. The announcement for tariff is of 26%. Of course, for the next 90 days, it is reduced to 10%. And of course, there will be some discussions and negotiations, which will be happening to reach to a stage of final tariff rate, which we currently unfortunately don't know. As per our agreement with our customers, naturally, these duties are not on our head. The customer is supposed to take care of that. But if you look at the competition which India has in U.S. market from other markets like Taiwan and Korea and China, their duties are going to be far, far different than what duty structure is going to be for India is our current understanding. We'll have to wait and watch till we see the complete picture how the tariff scenario is going to emerge over a period of next whatever balance 70 days or 80 days.

So our current understanding is that compared to the countries that we compete with, especially for our engineering business in that market, we are more favorably placed as far as duties are concerned. However, the impact of the duty itself on the project is something that remains to be seen. And of course, as we know that this is a dynamic scenario. So what's the final number that it settles to is something that will determine how things move forward.

What would be share of U.S. in our revenue?

Only U.S., if you look at currently, it is miniscule in that sense on the -- because even though the customers are based out of U.S., the projects where the -- our critical equipments are going, they're even going to Europe market also. Canada and Europe both, yes. So in the U.S., currently, it might be 3% to 4% kind of a revenue, which might be forming a part of our current number.

For projects located in United States. Ordering may be happening out of United States, but projects getting located in United States is a very low number.

Understood. The other comment is on the CBG side. If you can help us how now this year the scenario would be because you have tied up with all the OMC. It seems like the largest oil and gas company in the private is also setting up a large CBG plant. So what is your expectation with respect to the CBG ordering now? And how confident are you in terms of Praj being -- getting a disproportionate share being #1 or #2 in that segment?

Yes. So that's a very good question. I think what we are witnessing is right now a statement of intention from many of the OMCs and other PSUs that they would like to be participating in the journey of CBG. Our participation with them obviously comes with a very different purpose. One, when an OMC is involved, the offtake of the gas, which has been one of the major issues for the industry gets addressed. The CGD networks that are now being built are also across the cities. And as you probably know that from next year January, it is a mandatory blend that is required to be done in the grid, 5%. So that becomes the next driver for it. The third thing is the technology itself. I'm very happy to share with you. In fact, this happened just last week. We have done a record commissioning from start to final output at the guaranteed level with DCM in 60 days. So that's a project that we have commissioned at a record pace. So that clearly establishes us as a leader in the business of CBG. No other company can come anywhere near this record. We have also, as Sachin was mentioning, we are building a very single -- large capacity, single location project, which is also, in a manner speaking, a repeat contract from a customer who has already experienced one of our plants. So that goes to show that there is an increasing confidence in the ability of technology to develop. The next development, which is very, very significant, especially from CBG's perspective, is the development of bio-bitumen technology at Praj. As you are aware, we had mentioned in the last call that a road built using bio-bitumen from our technology is now inaugurated as stretch of National Highway by Honorable Mr. Shri Gadkari near Nagpur. And beyond that, that becomes a very, very important co-product for CBG production, which helps to address several challenges that the CBG industry faces. We have worked closely with CRRI to get the product specified and that is -- it is currently under the process because the byproduct of bio-bitumen actually happens out of waste stream processing. So it enhances the value significantly for CBG projects as well. So as we move forward, we believe that after the initial dust is settled and people have understood what technologies work and what don't and where is the value addition that is happening, Praj will be in a position to be the market leader as we should be given our technological products.

Sure. And last question, if we look at last 2 years...

Mr. Deepesh, may we request you to rejoin the queue. We have our next question from the line of Aditya Mongia from Kotak Securities.

I hope I'm audible to all.

Yes, Aditya.

I'll go ahead with my questions. The first question that I had was more on this next year and how you see it from an order inflow perspective. As in the ponderable here are EBP 20 having been achieved already. And the ponderable over here are the ETCA orders that you may end up achieving. And the other ponderable here is the CBG pipeline as you see through it. I would want to focus on both the bioenergy and the ETCA segment separately. Trying to gauge from you, how do you see through from a Y-o-Y perspective, things happen from an inflow perspective in FY'26? That will be my first question.

Okay. So we were talking about FY'25 as a year of transition. Looking at what is happening on the EBP20 program, rather we started working on what should be the scenario beyond EBP 20 program and what can be the contributor to our order book starting, let's say, from '26, '27 and going up to 2030. That's the planning which we are doing for the last 2- 3 years. What Shishir was talking about the products which are coming out of for the commercialization, the value adds, which you mentioned for the ethanol plants is the one which is going to contribute in a big way. EBP 20, we'll like to also see how ABP20 is going to move to EBP 25 or 30, where there are some talks which are going on from the decision-making point of view at the government level. So there will be one more lever which will be available for taking EBP demand from 20 to 30. There are multiple avenues which are possible within the existing plants, which, again, Shishir was earlier mentioning that what kind of value add which we can do for our customers that will be another stream of ordering which can happen under the ethanol business for us. I think there is more than enough opportunities which are available in that market or in that segment, technology-wise or from the solutions point of view, we are completely ready to offer that. So that's on the ethanol side. CBG scenario is still evolving. Again, CBG is not going to remain only CBG. As Shishir was making a mention, there will be an addition of our offering to that in the form of bio bitumen which actually differentiates our offering as compared to anyone in the market and takes us into a very different league because it enhances the financial liability for the projects which are having a waste in the form of a lignin. So that's the business segment which will emerge. But of course, there are other factors which still needs to get settled down. Market still needs to have more developers to come on the board. Some kind of an ecosystem from the offtake still has to get completely streamlined. So I will have some cautious kind of an approach to CBG, but of course, it is going to be one of the big contributor in the next year in our Bio-Energy segment. In the Engineering side, if I may shift my gear to the Engineering business now, as I mentioned earlier, already 8 customers have verified or audited our facility of Mangalore. Unfortunately, my Kandla facility is so blocked that I cannot take any more order in Kandla because it is blocked for next 18 months. So I can't take any new orders in Kandla. I would like to take orders only in Mangalore. And that's why we were preparing ourselves in the form of infrastructure, resources, installing our new equipment and plant, and getting them tested. As I mentioned, 8 customers have already inspected, audited and approved this facility. We have also advanced that to signing 3 long-term, almost 8-year-long-term framework agreement with them. What does that mean? These are not the orders. These are the agreements which actually sets the guideline for placement of orders from my customers. So it becomes a little easier for them to directly place PO on us. And every time we don't have to go through the entire process of commercial discussion on these orders. So we have advanced with 3 customers on that by signing these long-term agreements with them. I think the Engineering business is definitely going to start contributing from the order booking in next year. As we were earlier mentioning about how this facility is coming up, we had mentioned that first 2 quarters, we will see the buildup of order coming up in this facility. Some activities have already started. One of the projects for which we will be getting supply order in the near future, engineering activities have already started in this year. So we see the engineering business is also going to contribute in a big way in the entire landscape of our order booking. I can't give you a number, unfortunately, but I very clearly see that there are possibilities of all these businesses to contribute in a big way. I missed out 2 or 3 other elements which are going to contribute to our order booking. One segment is on the services side. We are expanding our services business since last 3 years. It is taking a good shape. As I mentioned earlier, this year's order book is almost 2x of the last year. And now we are again looking at a rapid growth coming up in that segment on the services side. Another one is the internationalization, and internationalization is happening across. It is happening in Bioenergy segment also. And let me also make a mention of PHS business because initially, they were having some kind of sporadic kind of orders from international side. But since last 2 years, we are seeing a continuous flow of international orders coming in PHS too. So services business, internationalization is what is going to contribute for the order booking of our next year. As I said, I only can't give you a number because that's what we generally don't talk about from the guidance point of view, but I can give you a direction the range which order booking is going to look like.

Understood. This helps. And the second question I had was on margins. Now your margins consolidated at the 10% levels at this point of time. I am just trying to get a sense of margin trend. Few imponderables. [Technical Difficulty].

Sorry to interrupt, Aditya, we are not getting you. Your voice is quite breaking in between. But Aditya, if I've understood your question, you want to understand how the margin is looking like for this quarter and going forward. Am I right? Aditya has dropped. Okay. Maybe in the meantime, we can take another caller, and maybe Aditya can come up in a call.

We have our next question from the line of Tushar from Kamaya Wealth Management.

Just wanted to know if corn is the long-term solution for the ethanol and the companies want to increase their margin, it seems a natural transition for the value addition in the existing plant. Like, there are players like Globus and BCL working on that on the corn project. Just wanted to know, sir, in terms of opportunity, what sort of opportunity in number terms you are seeing that? And sir, what percentage would be that for any, just an average capacity cost and that value addition would be what percentage?

So if I understood your question correctly, very clearly, the focus is on adding higher value to existing customers. And obviously, that's highly value accretive for both them and us. That also makes sure that we are able to bring all our technology progress to our projects. As markets mature, as technologies mature, as customers' operations mature, they then start to look for some of these solutions. We are seeing this across the different markets in the world. The different, depending on at which point of curve they are, they are moving differently, but all of them are looking for solutions in a broad category of how do I enhance the value of my own operations. And that is where I think a very significant role is played by the fact that we have steadfastly focused on technology development as an area. And that is why you heard us talk about bio bitumen distillates, or oil, high-protein DDGS. We have talked about low carbon ethanol, reducing energy intensity, improving yield. These are all solutions of technological kind that allow one to realize higher value and deliver higher value growth. So I think that's the key lever as we move forward. Could you just repeat the second part of your question? You were a little breaking up, so I couldn't catch that part.

Basically, I just want to understand the market size of that value addition with the existing clients looking for. And second, what would be that percentage… [Technical Difficulty].

The next question is from the line of Shailesh Kanani from Centrum Broking.

Sir, one clarification was needed on the margin front, where in our PBT, we have mentioned about GenX facility expenses cost impact of around INR 50 crores plus interest and depreciation of INR 37 crores, INR 15 crores. So that total is INR 102 crores. So are we indicating that this is directly impacting the PBT of around nearly INR 100 crores. Is that understanding right, without corresponding revenue?

Yes, Shailesh, your calculation or math is right. But there were some orders which were getting executed in GenX, which has also given a contribution. So almost INR 20 crores contribution will be there. So if you look at, and in the notes to our results also, we have mentioned a number of INR 76 crores or INR 77 crores as the hit to our PBT in the consolidated accounts, which is net of contribution which we have got for the orders getting executed or got executed in FY '25 for Praj GenX. So if you look at it minus INR 20 crores, and this is on a stand-alone GenX basis and INR 6 crores, INR 7 crores intercompany adjustment, which brings down that number to INR 76 crores. So INR 76 crores or INR 77 crores is the number which we have mentioned in our notes to accounts.

Okay. And so does it mean that if we have a full year revenue of GenX, this would be getting absorbed and there is no repeat or in case we are building up a team, so the cost is already in the P&L. So executing the future orders, this would not enhance, right? I understand material and other costs would increase, but this is part in the P&L. So it would not enhance, right?

Your understanding, Shailesh, is absolutely right that moment we start executing the orders, all the fixed costs will start getting absorbed and yes, to the extent of losses which we have mentioned from the GenX business for setting up rather this is -- I will not use the word expense, it's our investment, but getting through P&L. This expense will not -- or rather will get absorbed because of the orders which will get executed there. So it will not have an impact on the consolidated profit and loss account of PBT of the company.

Thanks a lot. And second clarification I wanted is that we have also mentioned about a large CBG order of around 36 PBT. Has it been included in the order inflow?

Currently, yes, in the current quarter order book, it is sitting there.

Okay. And one indication I wanted to know on the international side. In last 2 years, in terms of execution, has there been -- see, we have not put any orders for GenX, that is what I understand for the Mangalore facility at least. But in terms of order book and revenue, the ratio has deviated. So has the orders which we have back in last 18, 24 months are of longer duration or they are taking time for execution? Any color you can provide on that? You're saying for the international bid, right?

Right, right. So our international order has both the segments sitting there, which is engineering and the Bioenergy. Engineering orders in they are of a larger value, naturally, their delivery cycle is a little longish. So it can go up to 18 months. The orders can actually go even up to 24 months. So the cycle is very, very different as compared to the ethanol business under the engineering side because the -- as you know that under critical equipment business and GenX business, we are having equipment and modules both. When you are building up modules, the time requirement is pretty huge because all the equipment are supposedly to get loaded on those modules and then those modules need to be dispatched to the client. So the cycle is a little longer. So your observation is right.

Okay. And just one more thing on GenX. There has been some delay, as you have mentioned in the opening remarks as well in earlier times as well. any monitorable for us to expect momentum in the second half or anything which you can give more color? And closing it, also I would like to take this opportunity and thank Joshipura sir. I believe this will be your last call. So thanks a lot, sir, for over the years for all the help, the guidance, the learning what we have got from your side. Thanks a lot for that as well sir.

Thank you, Shailesh. Learning in mutual, your questions are also pushing us to think differently. So thank you so much.

Thanks for the kind words, sir.

All of you, all your colleagues, all of you have been -- I was wanting to do this thank you speech a little later. But since you said, I am really, really thankful to you guys because unless you ask questions, it doesn't -- it shows 2 things: one that you care and the second that you're asking us to think differently. And when more minds work together, obviously, we are able to think from different dimensions. So thank you very much for being there for us for all these years. And I'm sure that as Praj moves forward, you guys will continue to ask same set of -- same penetrative set of questions so that Ashish and Sachin and everyone will be in a position to benefit from your wisdom and take the company forward. Thank you so much for everything.

The next question is from the line of Sagar Dhawan from Valuequest Investments.

Yes. Thanks for the opportunity. Just wanted to understand basically in the current order book that we have, what could be the broader mix of the domestic ethanol orders in that -- which could be in the nature of slow moving given the current scenario domestically?

To be very frank with you, we are not calling them slow moving. Only we are saying that the execution cycle is getting elongated for them. There is no -- unfortunately, I'm not having a number right now in my hand to give you, but they are not non-moving. They are slow moving for a reason because we are also following very strict regime for recognition of revenue that if a client is ready with everything, then only we start working with them. And that's what is taking some time. And that's what we mentioned earlier also that the execution delays are on that account. As I said, unfortunately, I'm not having a ready number. Maybe we can provide you subsequently.

Sure, sir. Understood. And the other second part of the question was, let's say, the current order book on bioenergy, which we are having about INR 3,300 crores given in the presentation. What could be the execution cycle for that, which you're looking at for that?

It should be somewhere between 12 months to 15 months.

Okay. Sure. Got it. And sir, the other question that I had was on the Engineering segment. So we are seeing -- if I look at it on a full year basis, FY '25 to basically take care of the quarterly fluctuation, the order intake on engineering side has been -- actually has gone down by about 17% in the full year '25 compared to last year. So anything specific to call out there?

Actually, no. As I said, we are not in a position to take order in our Kandla because that facility is completely chock-a-block for next 18 months. So we are supposed to get all these orders now happening in the GenX and that's the readiness of GenX, which we are waiting for. So that's the only thing because we had to regret a couple of orders from the Kandla because our GenX facility was not completely ready.

We have our next question from the line of Trilok from AMBIT Capital.

The first question is on flex fuel. So could you please share some insights regarding what is the development in this flex fuel segment? And what are the actions that the government is taking to successfully implement this?

Could you just repeat your question? You were a little breaking up, so I couldn't hear it very well.

Am I audible now?

Yes, please. Thank you.

So I want to just get some sense on the development of the flex fuel policy and when do we see some sort of light on that aspect? Also, could you just give us some sense on what kind of order book can we expect for the company in subsequent years? That will be helpful.

So I mean, we -- our role as an organization that is closely associated with development of biofuel technologies. Our role is to make sure that we are developing technologies that can use differently available feedstocks across the country for conversion to ethanol and ethanol becomes available. So that's the role that we play. Of course, as an important part of the overall industry ecosystem, we do provide our inputs to the requisite bodies to industry bodies, to the government panels when we are even invited. We also talk with automotive manufacturers bodies and things like that. So our role is to provide inputs and say what is possible and how it could be made available because the moment flex fuel vehicles come, obviously, the demand for ethanol will shoot up. And obviously, then there needs to be a road map available for making ethanol available. So I think that's the role that we are playing. For me to predict a date on which date the flexible policy will be announced is not within the domain of either my knowledge or authority. So that will be very difficult.

Okay. Could you just talk about the order book expectations for the financial year '26? I know you guys don't get into any numbers or growth percentage, but it will be helpful for us to understand what kind of growth should be sort of thinking about in the subsequent year?

Yes. Sachin mentioned in his speech that we have also mentioned that in the past that Praj's business is a string of pearls, and we are beginning to see different pearls now beginning to shine. We are not dependent only on one business segment. So our services business, the CBG business, our push and thirst for international, you probably noticed that in the quarter that went by, we were 39% of our order book came from international business. And that is a stated strategy of the company where we have stated that we want to move to an eventual situation of 50%-50% between domestic and international, even as we grow our sales 3x. So of course, both segments will grow, but we expect international to grow at a faster pace compared to domestic. So that will be a clear dimension. These other businesses that I spoke to you about earlier, our mentions are about higher value enhancement, co-product development solutions. So we have the -- Engineering solution, the whole GenX picture that we discussed. We actually have multiple are fully ready. In some of the areas where like GenX facility was getting ready, but now we are ready. The co-product development has picked up high speed. We are now ready to commercialize bio bitumen distress corn oil is already commercialized. Rice protein, we are ready to commercialize. So there are different solutions, different co-product solutions for which we are ready with commercial solutions. So as we move through the year, I think all of these levers will start to play out, and we will see a healthy development of the order book. We see no reason that would lead us to believe that one part of a segment, sort of not having a visible opportunity will lead to any deficiencies in our performance. I think we will continue to build from here onwards very, very strongly. There will be other levers that will take in over a period of time. Sachin briefly mentioned about diesel blending program. I mentioned about SAF. So there will be these opportunities that will come and emerge as we go around and travel through the year.

We have our next question from the line of Vikram Suryavanshi from PhillipCapital.

I think most of the questions answered. So, just on bioplastic with our demo plant being ready, and now with this JV, when we can start showcasing this for the orders? And how would be the opportunity in the international market?

So Vikram, we are already jointly pitching in for the order booking now with the prospective customers. This being a completely different segment. But of course, there is a good amount of interest in the bioplastics in the market. So there is a definitive interest which is emerging. We are meeting the prospective customers and presenting our case to them jointly with TK. And we will see some action happening. I can't give you a time line. I can't predict a time line right now for you when the order booking is actually going to happen. But yes, the set of customers are interested in visiting our demo plant, understanding how it is happening, and dialogues are going on.

And Vikram, just to add to what Sachin said, the most very important factor is that this is now a domestically developed technology. So we expect that we'll be very, very cost-competitive compared to any other technology, number one. Number 2, the availability of technology in global market also is pretty restricted. And our model of making it available to anyone who wants it is a significant departure from most of the current technology players' strategy. I think these 2 things, coupled with the fact that there is a local very rich and experienced company that is backing up this technology. And now with this joint venture that we have signed with one of the world leaders, will actually make the full end-to-end solution available to customers. So these are the 3 key drivers that I believe will help move this forward. Maybe this is a little early days, but I'm sure in forward in time, we'll be able to speak more specifically, but there's already a lot of interest from a lot of customers.

Understood. And for GenX, I think since we start order booking now, majority of revenue will start particularly in second half of '26. So is that understanding right?

So some revenue is happening, but meaningful revenue will start happening only in the H2 because the orders for execution will start coming up at that point of time. Currently, there will be engineering, which we'll like to keep on doing based on the order booking, which we'll have.

Wishing you all the success for Joshipura sir.

Thank you Vikram. It's been a pleasure.

We have our next question from the line of Amit Anwani from PL Capital.

First question, in the opening remarks, you highlighted about a 45Z notification now being implemented from October '25. And in the past, we have been highlighting about the USF opportunity. So with this, what are the expectations of order wins in U.S. SAF in FY '26 and FY '27? Any color you would like to give after this development?

45Z relates to lowering the carbon intensity of ethanol, okay? And as we said that we expect that since the draft notification is now issued, considering normal cycle timelines, it should be notified towards the end of second quarter. That's where we are today. As and when that happens, it will create a definitive opportunity for us because there are already existing projects in the United States where the carbon scores lowering will present a very significant opportunity, and financially also very, which would become eventually the feedstock for SAF. For SAF projects to come, this is the first step that is required to move forward. 1 or 2 projects that will come up in the meanwhile, we will see that they will say, "Okay, we already have secure access to low-carbon ethanol," or they'll have their own low-carbon ethanol production facility. So that remains to be seen as to what is the actual model deployed by the early project proponents that we will have to see. In terms of the other notifications for SAF, we need to see in terms of -- because there's also another development where the CCUS projects, which were dependent on pipelines, are facing a little bit of a rough weather because pipelines are not getting approval. So, how will that be overcome? So multiple levers will have to come into play for us to see, but we remain confident that with this advent of 45Z, it will definitely create a good window of opportunity for us.

Right. Second part, you won orders in Paraguay, and earlier you won orders in Brazil. So, any pipeline there or any other international market for 1G, maize-based sugar starch where we are seeing order wins in FY '20?

It is a very high focus area for us. Paraguay, Argentina, Brazil, Guatemala, these countries, both in Central America and South America, are witnessing what I would call as a clear movement for governments to specify either higher mandates or new mandates for ethanol blending in their energy mix. So that's a very, very positive step forward. Most of these plants, though not all, are likely to be starch-based. And we are very, very confident that with our strong footprint there, we will be in a position to move forward. Sachin already mentioned, there are 2 projects for which the engineering orders are already under the way. So once they are finished, they will model in that market. So then they'll switch over to the equipment ordering situation. So we'll look at that as well. Sure.

Lastly, on GenX, since we are looking for order wins in Q1, Q2, any development which has happened, what kind of quantum we can expect with respect to order inflow or revenue, which you might be factoring in for FY '23 for Jan?

There are dialogues that are currently underway. Orders are in finalization stage, in handshake stage. And we will let you know the numbers once they are done. I can't let the number out before orders are finalized. You will appreciate that.

And wish you all the best, Joshipura sir, it is always a pleasure to interact with you, and I wish you very best.

Thank you, Amit. Thank you very much. Pleasure is entirely mine.

We have our next question from the line of Raman from Sequent Investments.

Can you hear me?

Yes.

Sir, I have 2 questions. First, we have currently an order book of INR 4,293 crores. So what is the execution time line with respect to this?

So, as I earlier mentioned, that execution cycle for most of the orders is in the range of 12 to 15 months, I'm telling you the average. A couple of orders which are there from the critical equipment and modularization side, those might be in a zone of 18 months. But majority of the orders are in the zone of 12 to 15 months kind of an average period.

Okay, sir. And the second question, sir, it's with respect to compressed biogas. In the earlier call, you mentioned that the entire industry was facing an economic and operational challenges. And now that the pricing mechanism has been changed. I mean, it's linked to 80% of CNG prices, I guess, that's the new pricing mechanism. So now I want to understand the outlook, current outlook, and the future outlook. Is the entire industry still facing challenges, or now the operational concerns have been sorted out?

So this is a very new nascent, and emerging industry in the world this exists. So there are still nuances that need to get ironed out. Yes, you're right that on the pricing front, there seems to be a decent solution that has been provided. And there's always a presentation made by the industry to government saying no, they need a higher percentage of the pump price. So that's under discussion. Having said that, I think there are other issues that need resolutions around what to do with salt fertilizer, liquid fertilizer. They have now been notified, which is the first positive step, so they at least now can legally sell those products in the market. So that's the second portion. Third is, as I mentioned that from January of next year, there's a mandatory blending obligation on the CGD companies. So that will also create demand and push for rapid infrastructure development, also development of plants in and around those networks because they'll be looking for CPT as a source. So that's another one. So there are several positive elements. Offtake side, still some more resolutions are required, but I'm sure as we go through the year, we'll see those happen.

Okay, sir. Sir, a follow-up question. Sir, on the revenue front with respect to Q4, both bio energy and engineering have seen a significant dip like bioenergy has decreased by 15% on a year-on-year basis and engineering has decreased by 30%. Sir, can I know why was there this significant decline in the revenue?

So as we said, that the execution cycle has stretched from the normal cycles of 9 to 12 months, they stretch to 12, 15 months. And we are very cautious about some of the domestic projects progressing forward in view of the tighter liquidity norms, tighter money disbursement norms that the financing organizations are now putting the banks, et cetera, are putting on our customers. So we have the order book, A; B, we could not voice them for the fact that they were not fully prepared to accept and pay for them. So that stretch the project cycles. Third, there is also during the year, and I'm being very open here, during the year, there's also a bit of a, I would say, order intake time mismatch for us, especially for our exports jobs where the thing started about 6 months late. So because the orders came in, but they came in a little late, so we could not go ahead and create the invoicing, which normally would have happened. So, if you would recall, our first quarter was not a very high order booking quarter. So that also impacted our ability to do the same thing during the last quarter of the year.

So last follow-up question. So can we expect there will be a spillover in terms of revenue in the next year because of the majority of the orders which were supposed to be closed in this year will be closed in the coming year?

Yes, that's what we had said that the order book is there and the order booking is happening as per the strict norm of the patch that order has to be there, agreement has to get signed, the advance needs to be paid. So there is a commitment from customer that they want to go ahead with the project. Yes, there is a delay. Delays only in execution side. So naturally, this order book is going to get executed. Instead of getting executed over a period of 9 to 12 months, it is going to get executed over a period of 12 to 15 months. So yes, there is a spillover which can happen of the order book which we are holding right now.

We have our next question from the line of Manish Goyal from ThinqWise Wealth Managers.

I have a couple of questions. Sir, first on the overall margins, probably there are 3 or 4 perspectives. One is on what kind of revenue booking would be required to achieve breakeven at GenX plant? Would it be, say, considering you probably have an impact of INR 80 crores, would it be revenues of INR 400 crores to INR 450 crores required and do you expect that we achieve the breakeven in entire FY '26 or it will be probably back ended and on a quarterly revenue run rate? So this was first part. And second was on the margins related as probably do we see a very good improvement going forward considering you would have a better revenue mix with higher services revenue and higher international revenue considering higher order book from the international markets? And third angle to this is also that with CBG plant revenue mix improving where probably we see a higher outsourced work, can it probably offset some of these margins? That was my first part of the question, sir. And I have a couple of more. So please provide an opportunity for that.

Manish, in the first part itself, you have asked 3 questions, but I will try to answer. Your question was related to BEP breakeven point for GenX. More or less, your calculations are right. The breakeven point for GenX will be somewhere in the range of INR 400 crores, INR 450 crores. That's right. Your second part of the same question was whether this is going to get executed in an equal manner on a quarterly basis? Answer is no. As we mentioned that the modularization and equipment orders are a little longish from the execution point of view. The execution period is going to be a little longish. Revenue might get of course, it is based on the percentage of completion method basis. But initially, some engineering component will come through and then the work on equipment and modularization will start. So there will be some kind of a lumpiness in the revenue getting booked for GenX. We had already mentioned that we are not expecting huge revenue booking to happen in the first half of the next year. It will start happening from quarter 3 onwards. So you'll see some kind of a lumpiness from the revenue point of view. But your point is right, breakeven point will be somewhere around INR 400 crores to INR 450 crores. Your second question was related to margin improvement. Your point is right. Because of the services element and the internationalization, there will be a possibility of improvement of margin. We are not baking right now so much on that and giving you a very different picture. We always mentioned that our first target is to reach on a sustainable basis to a double-digit EBITDA margin. That is what we are trying to do right now. The moment the other components will start playing in, which are going to contribute higher on the margin side, yes, they can be margin accretive going forward. Your third question was related to CBG. Sorry, I missed it out now.

No. So basically the revenue composition of CBG probably may include higher outsourced work. So can it probably impact your overall margins? Or you believe that we can achieve double-digit margin in the CBG?

So CBG has some component of outsourcing, of course, but it also has the site activity, which I had mentioned earlier in my remarks. That site activity is on a higher side as compared to the bought-out components or the third-party component. But yes, that component will definitely be there. So there will be 3 parts to it: one portion, which we are supposed to do in the form of equipment, second one will be outsourced and third one will be site activity. And in the CBG business, site activity will be a little more as compared to the first 2.

Okay, sir. And sir, on the depreciation part, probably 3 observations from the cash flow statement that probably your principal payment on leases has remained steady at INR 32 crores. So where I'm coming from is that your depreciation has increased from INR 44 crores to INR 86 crores. So if the lease payment outgo is steady at INR 32 crores, does it imply that incremental depreciation is on plant and machinery from GenX? That was first. Second, there is a bad debt provision of nearly INR 25 crores versus INR 23 crores. So is it also reflecting in our P&L? And how do we see it going forward? And third question is on increase in working capital, which is quite significant considering contracts work in progress has increased from INR 700-odd crores to more than INR 1,000 crores, so what should we read into it?

I hope this is the last installment of your question.

Sure, sure.

Cash flow lease, your observation is right, but I can't explain you the accounting standard on a call. Based on the accounting standard, the treatment of the actual rentals getting paid out and the capitalization of lease assets and getting depreciated in the profit and loss account is a little different. That's why you will not see. I mean, my lease rentals were, I mean, if I talk from the cash flow point of view, the lease rentals were a little bit in a staggered manner, but the asset gets capitalized in one number. I mean, the entire cash flow gets capitalized as one number and gets depreciated over a period of lease period, especially this is happening for my GenX facility. And that's the reason why you're seeing that number the way which you are seeing. Yes, you are right, apart from GenX facility, we do have plant and equipment, which got what I can say, be capitalized in the GenX facility. Those are also on a lease basis. That's the reason those lease rentals has also started kicking in now. So that's on the lease. Second one observation of yours is on a bad debt provision. Let me clarify, this is a provision for doubtful debt. There are no bad debts. Surprisingly, rather, we have not actually written off anything as a bad debt in the current year. everything is on the provisioning side for doubtful debts because we have beefed up our policy from the provisioning side and changed a little bit and made it more little aggressive on the provisioning side. That's the reason why you are seeing increase in the provision for doubtful debt. Sorry, I again missed your third question.

This would be the last question for today. And I now hand the conference over to the management for closing comments.

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

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