India is at a critical crossroads in the search for renewable energy. The nation is fighting for greener options in light of the growing need for electricity. While solar and green hydrogen wind power have long been the talk of the town, Compressed Biogas (CBG) is a newcomer to the race.

In the commercial, industrial, and automotive sectors, CBG is a competitively priced, environmentally friendly, and renewable motor fuel that can replace CNG. It is produced by processing waste and biomass sources, including sewage treatment plant waste, animal dung, sugarcane press mud, municipal solid waste, and agricultural residue.

The Global Biofuels Alliance (GBA), an organisation led by India, has united to promote the use of biofuels, especially in the transportation sector, and to co-develop and expedite technological advancements in production processes.

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Argentina, Canada, Italy, and South Africa became members in addition to the original three members—India, the United States, and Brazil. The International Energy Agency projects that the output of biofuels will increase globally by 2030, which is a critical step towards reaching net-zero emissions by 2050.

Nearer to home, the Indian government is actively pushing the ethanol blending target through legislative reforms. The revised target is 20% gasoline-to-ethanol blending by 2025, rather than the 2030 target. It’s noteworthy that the nation reached its 10% milestone far earlier than expected.

The largest ethanol producer in India, TruAlt Bioenergy, and GAIL, the state-run pipeline company, have previously announced projects together. And there will be more that come after pretty shortly.

With this little-known smallcap firm, Praj Industries, investors have a great opportunity to ride the decade’s investing megatrend as ethanol blending and use as a sustainable fuel source gain popularity. 

All these tailwinds made the share of the company deliver a multi-bagger return. From the COVID low, the company has given a return of 769 per cent. Over one year, the stock delivered a return of 33.34 per cent.

But the company had a correction of about 30 per cent recently and potentially presented an investing opportunity. So, let’s delve into the article to understand the business and what this correction means for an investor.

Corporate Overview Of Praj Industries

Established in 1983, Praj Industries (Praj) is a prominent player in the Indian ethanol industry, ranking in the top ten worldwide providers of ethanol facilities utilising feedstock derived from sugars and cellulose.

It began as a supplier to ethanol plants and then expanded to offer high-purity water, essential process equipment, breweries, bioenergy, and industrial wastewater treatment solutions to the chemical, pharmaceutical, and oil and gas industries.

With its global headquarters situated in Pune, India, Praj has expanded its reach to over 100 countries and over 1000 references worldwide.

With a plethora of new projects, Praj hopes to become a significant player in the energy, environmental, and agricultural processing sectors by offering creative, integrated solutions that include machinery, plants, and goods that improve people’s quality of life.

Praj’s cutting-edge research and development facility, Matrix, supports the solutions the company provides. In India’s bio-energy market, Praj holds a 60–70% market share and is the sole major participant.

Business Segments Of Praj Industries

Praj Industries offers a wide range of products and services, including breweries, high-purity water systems, critical process equipment and skids, zero liquid discharge systems, and bioenergy solutions. Three business segments provide Praj with its revenue:

Bioenergy business

One name to be aware of in the global biofuel technology solutions is Praj. Beginning in India in the early 1980s, Praj’s ethanol technology is used in many different countries across the globe.

The bio-energy business unit provides the global ethanol industry with a full range of solutions. This company, which generated 74% of consolidated revenue in FY23, is involved in the design, engineering, fabrication, and commissioning of ethanol plants.

HiPurity Systems

Praj HiPurity Systems provides end-to-end solutions to the biopharmaceutical, biotech, cosmetics, healthcare, and food and beverage industries for sterile process water generation, water for injection, storage and distribution systems, CIP/SIP, core process systems, and so on.

These solutions are used in the manufacturing of a wide range of pharmaceuticals, including liquid orals, parentrals, APIs, ointments/emulsions, and oncology formulations. Each solution is supported by technical expertise from Praj Matrix- R&D Centre, the biopharma powerhouse. It contributed for 7% of FY23’s total revenue.

Engineering business

The engineering business accounted for 19% of FY23 consolidated revenue. This segment is divided into three sections: i) water and waste water treatment (which operates in industrial waste water systems), ii) critical process equipment and skids (which provides high-end equipment and systems for use in the oil and gas, petrochemical, fertiliser, and chemicals industries), and iii) brewery plants and equipment.

Financials Of Praj Industries

Revenue (in ₹crore)3,528.042,343.271,304.671,102.37
Net Profit (in ₹crore)239.82150.2481.0670.44

In the fiscal year 2023, Praj Industries saw a substantial increase in revenue, surging by 51% to reach ₹3,528.04 crore as opposed to ₹2,343.27 crore in FY2022. Analyzing a span of four years, encompassing FY2020 to FY2023, the company displayed a  Compound Annual Growth Rate (CAGR) of 47.37% in revenue.

Simultaneously, there was a noteworthy upturn in net profit, experiencing a 60% increase from ₹150.24 crore in FY2022 to ₹239.82 crore in FY2023. Over the cumulative four-year period from FY2020 to FY2023, the net profit showcased 50.44% CAGR.

In FY23, Praj Industries maintained favourable financial metrics with a Return on Equity (ROE) of 24.06% and Return on Capital Employed (ROCE) of 30.97%.

Recent Correction Presents Investing Opportunity ?

From the high of ₹644.60 at the start of December last year, the stock has corrected almost 30 percent over the last four months. The explanation for this stock performance occurred when the Indian government took a proactive action to secure enough sugar supply and price stability by prohibiting all sugar mills and distilleries from using sugarcane juice to manufacture ethanol.

The supply chain dynamics in the sugar sector were changed as the government ordered a ban on use of sugar syrup for ethanol production in the 2023-24 supply year with immediate effect. Later the government revised the order that allowed use of both sugar syrup and B-heavy molasses but with a cap for diversion of up to 1.7 million metric tons of sugar for ethanol production. 

The government followed it up by announcing an incentive of Rs 6.87 per litre for encouraging ethanol production from C Heavy molasses. In order to promote other feedstock, the government has made an upward revision in price by Rs 5.79 per litre to Rs 71.86 per litre for ethanol produced from maize.

Due to these sudden policy changes, the company witnessed a very unusual quarter with no order finalizations for the sugar-based ethanol plants. However, the company strongly believes that this is a temporary situation. Praj has already created ways to address the feedstock dilemma for sugar customers.

The company is collaborating with customers to convert their existing single feedstock plants to multi-feedstock, and it believes that these solutions will help recover the potential next year. Though the sugary feedstock based enquiries couldn’t result into orders, Praj Industries witnessed steady flow starchy feedstock based enquiries getting converted into orders.

The company also demonstrated a healthy order book, indicating revenue visibility. During the quarter, order intake was Rs. 10.3 billion, with 86% coming from the domestic market. Of the overall order intake, 81% came from Bio-Energy, 12% from Engineering, and the remaining 7% from PHS Business.

The order backlog as of September 2023 stands at Rs. 39.5 billion, with domestic orders accounting for 75% of the total. Cash on hand as of September 30, 2023 is Rs. 6.4 billion.


Praj Industries appears well-positioned to capitalize on the growing demand for renewable energy solutions, with a strong order book, healthy financials, and a leadership position in the bioenergy market. While recent government policy changes caused a temporary setback, the company’s ability to adapt and its focus on diversifying feedstock sources bode well for future growth.

What are your thoughts on Praj Industries’ prospects in the evolving bioenergy landscape? Do you see it maintaining its momentum and delivering long-term value for investors?

Written by Nalin Suriya 

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