The Hindu Business Line : Rising global demand for ethanol fuels interest in Praj Ind

The company reportedly has an order book position equivalent to 8-9 months of sales. Thus, the stock, which had come off from its levels of around Rs 214 as on September 1, is slowly retracing its losses.

Praj has proprietary knowledge and capability in executing brewery and distillery projects. It has been catering to 70 per cent of the business segment in the domestic market.

According to analyst Mr Sonal Shrivastava of Karvy Stock Broking, the company is looking to expand its presence in the global markets.

"Most of the European countries and Japan do not have ethanol capacities and would be sourcing the same from developing countries. These factors are expected to increase global consumption for ethanol. In view of the rising demand for ethanol and new projects being set up in the overseas market, the company is targeting the growing overseas markets.

"We expect the company should be able to address approximately 10 per cent of the incremental capital expenditures being made in the sector. This implies that the company has the potential of servicing ethanol projects worth Rs 70 crore - Rs 80 crore annually. During fiscal 2004, international orders were 40 per cent of total orders booked.

"We expect that in fiscal 2005 overseas orders could constitute almost 50-55 per cent of its total revenues. Apart from the ethanol segment there is also potential for a non-ethanol market worth Rs 800 crore , which the company can tap leveraging its engineering capabilities," reasoned Mr Shrivastava.

In the domestic market, ethanol has also emerged as a second line of revenue for the sugar companies and most of them, that were earlier selling molasses (by-product of sugar manufacturing) to breweries are implementing ethanol-processing plants to benefit from the rising ethanol demand. Analysts maintain that Praj would be able to generate revenues, to the tune of Rs 62 crore - Rs 65 crore from the domestic markets in the financial year 2005.

Additionally, Praj gives consultancy services to breweries, which is a high margin business. Any decline in steel prices is expected to further benefit the company, having a positive impact on its margins.

The stock closed at Rs 202.70, up 3.66 per cent, with around 83,626 shares traded on the BSE. On the NSE, the stock ended at Rs 202.35, up 3.45 per cent, with around 1.26 lakh shares traded.

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