Praj Industries aims to grow non-core business fivefold in two years

Pune-based engineering firm Praj Industries is looking to increase the share of its non-ethanol businesses in its topline from the current 5% to 25% in two years, said executive chairman Pramod Chaudhari.

The company last fiscal decided to diversify into newer areas like water & wastewater management, customised equipment for oil & gas and other industries, and bio-nutrients to derisk its operations in the ethanol business. Praj is engaged in manufacturing and installing equipment for production of ethanol.

Chaudhari said the firm is betting big on its non-ethanol businesses, which include three new verticals and breweries, to drive its growth. “Water & wastewater management will be the highest-growing amongst these. The market in India is set to double from Rs7,000 crore in 4-5 years,” said Chaudhari, not divulging Praj’s overall topline target for 2013.

He said that Praj will initially focus on industrial water contracts and then move to engineering, procurement & construction (EPC) projects for municipal corporations.

The company is ramping up its research & development and headcount for its water foray.

Praj is also setting up a plant each for customised equipment and bio-nutrients with a total spend of Rs50 crore.

Talking of its core business, Chaudhari said the worst is over for the company. Though Praj’s net profit plummeted over 53.12% to Rs13.66 crore on a 0.59% rise in net sales to Rs148.22 crore in the three months ended December from a year ago, the topline improved 30% compared to the second quarter. In the last 12 months, the Praj scrip has dropped 16.36% to close at `79.50 (down 4% from the previous closing) on Tuesday compared to 13% rise in the Sensex to 18969.45.

Chaudhari, quoting the British Petroleum Energy Outlook 2030, said the demand for bio-ethanol is set to jump from 103 billion litres annually now to 350 billion litres in 20 years.

He said the company has also got another shot in the arm with the US government making it mandatory for vehicles bought since 2001 to consume petrol with a 15% ethanol blend. Earlier, it was only for vehicles bought post-2007.

At the end of the third quarter, Praj’s order backlog was Rs700 crore, with fresh order inflows of Rs250 crore and execution of Rs150 crore.