Eco-friendly fuels brighten the future

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: Chemcel Biotech Limited is all set to launch their initial public offering, with the issue opening on September 9, 2008. While the company is quite unheard of in a majority of the country, this Vijayawada-based company has been making steady strides in Andhra Pradesh, where they have established a good base for themselves. Looking to raise Rs 24.64 crore, by offering 15.4 lakh equity shares at the rate of Rs 16 per share, the company that essentially deals in pesticides is now diversifying into the area of bio-fuels, which in all likelihood will be the way of the future.

Chemcel is raising money mainly to set up a bio-diesel manufacturing unit at Kondapalli near Vijayawada, Andhra Pradesh. Meeting with the additional working capital required by their agrochemical and bio fertiliser division on account of increased operations, repaying the short-term loan taken from the Union Bank of India to start off the bio diesel plant and meeting working capital requirements will also be taken care of by the current issue proceeds. The bio-diesel manufacturing unit is going to cost Rs 10.95 crore, out of which over Rs 1 crore has already been invested in the same. The additional working capital requirement amounts to Rs 9.45 crore and the short-term loan to be paid back amounts to a total of Rs 3.86 crore.

Business and industry overview

Bio-diesel is a biodegradable, clean-burning diesel fuel made of natural, renewable sources such as vegetable oils, used vegetable oils (yellow grease) and animal fats. It can act as a diesel substitute, with very little or no engine modifications for up to a 20% blend and only minor modifications for a blend greater then 20%. The major commodity that Chemcel will be using to produce this bio-diesel will be Jatropha Curcas (Ratanjyot), which is easily grown in any soil and weather conditions. A subsidiary of Chemcel, M/s Jetro Petro Biotech Private Limited for procurement of raw material including jatropha seeds, pongamia, neem, palm oil seeds, cotton seeds has already tied up with farmers in various parts of Andhra Pradesh. With Europe, the Indian government, railways, and other private diesel producing companies vying for bio-diesel, the demand is more than taken care of. Especially with increasing crude oil prices, environmental concerns and rising awareness, the global outlook towards bio fuels is very positive at the moment and will only strengthen in the conceivable future.