PRAJ INDUSTRIES results analysis

Praj Industries is a global Indian company that offers innovative solutions to significantly add value in bio-ethanol, bio-diesel and brewery plants and related wastewater treatment systems.

The company’s net profit rose 11.41% to Rs 30.18 crore. Its total income rose 18% at Rs 205.70 crore in Q2 September 2008 on a YoY. Despite having provided Rs.12.07 crore for forex losses, the company managed to show an increase net profit, which is indeed commendable. Its current equity is Rs 36.69 crore, with a face value of Rs.2 per share.

A year ago, when crude was ruling around $100 per barrel and the Govt was serious about making another 10% blending of ethanol compulsory from October 08’, the future prospects of the stock had looked very good. The fortunes of this company are closely linked with the increasing acceptance of ethanol-blended petrol and bio-fuels. Now with crude ruling below $40 per barrel and ethanol blending also postponed indefinitely, the going looks uphill for the company. But being a net exporter, the fall in the rupee vis-à-vis the US dollar would go in favour of the company.

The company remains big on ethanol blending and bio fuels. It is setting up its first plant in Louisiana, based on sugarcane juice and if this biofuel gets accepted, Praj would have the whole of North America as a market. In EU, it has a JV - BioCnergy Europa B. V., with Aker Solutions. It has also got orders from European sugar majors such as British Sugar, Suedzucker and Danisco. Its JV in Brazil is expected to help tap opportunities there too but this may take a longer while as not much progress has been made on this JV.

The only enticing aspect of the stock right now remains its shareholders – Rakesh Jhunjhunwala holds 8.48% stake, Tata Capital 7.32%, Vinod Khosla 6.15% and JM Financial which held 5.25% stake in first quarter has reduced its stake to 3.82%.
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