After creating an image of a molasses converter for alcohol companies, Praj is now being viewed as an important player in alternative fuel resource business, the potential for which is huge especially in view of rising crude oil prices.
Analysts believe that crude prices are likely to see spikes between $80 to $100 bbl, and rising cost of production would not see prices fall below the $50 bbl level. This is above the economic viability price of $30 bbl for global ethanol manufacturers, which also means that there will be an increased use of ethanol and other bio-fuels in blending with petro-products. Estimates in the US say that the market for ethanol would be around 15 billion gallons by 2017. In India, too, the government has mandated oil companies to blend around 10% of their petrol with ethanol by 2008. While the oil companies have not complied yet, they would start to do it soon. This will also spur demand ethanol plants, especially from sugar companies. Praj Industries plants use multiple inputs for getting ethanol and other bio-fuels.
It has presence in South Asia and Europe, where it partners Aker Kaeverner, and has orders worth Rs 825 crore on hand. The company has shown steady performance for the first quarter and the share price too has tripled over the year. The management believes that covering their rupee positions and the fact that they import 30% of their raw materials would tide over their overseas earnings, which is about 60% of total revenues. In the long run, the bio-fuel opportunity is expected to stay.
Contributed by Akash Joshi