- 3 years ago
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00:00 Thanks so much for tuning in to this conversation.
00:04 I'm your host, Neeraj Shah.
00:06 And my guest today is Mr. Shishir Joshipura of Raj Industries.
00:09 It's been a while.
00:10 I've had a chance to speak to him.
00:12 And there's so much happening in this pocket
00:15 that it's lovely to get his thoughts on all that's
00:18 happening within the various pockets
00:20 that they are present in.
00:21 And thereby, also get a sense of what
00:24 Raj will be doing over the course of the medium term.
00:27 Mr. Joshipura, great having you.
00:28 Thanks for taking the time out.
00:30 Thank you.
00:31 Good morning.
00:31 And lovely to be here back with you.
00:34 Thank you so much, sir.
00:37 OK.
00:37 Can I just start off with how do you
00:42 foresee the kind of growth that could come
00:46 into some of the segments?
00:47 Because at times, it befuddles me
00:49 as to which of the segments would grow better,
00:51 simply because while Ethanol is anyways doing well,
00:53 there is a lot of announcements about what's happening with CVG.
00:56 And as I see in your last three quarters,
01:00 the non-Ethanol business as well.
01:03 And it's also starting to show some promise.
01:08 Well, Neeraj, you actually said it.
01:09 So fundamentally, as we have talked in the past as well,
01:12 the whole phenomenon of energy transition
01:15 that is taking place across the world, where economies
01:18 and the corporates are moving from high carbon intensity
01:22 energy to low carbon to no carbon,
01:25 no carbon, no green hydrogen, green ammonia, that space.
01:28 And this transition has basically
01:30 created a very large canvas of opportunities for us.
01:34 And apart from, as you said, the non-Ethanol business,
01:38 the biofuel opportunity for Ethanol
01:41 in itself is a large opportunity.
01:44 And to that, there have been different solutions
01:46 that have emerged.
01:47 One big segment, of course, is the emergence
01:50 of sustainable aviation fuel as a very clear mid-term kind
01:55 of time frame.
01:55 That's a very, very clear scope where a lot of progress
01:59 is expected across the globe.
02:02 Then the transition of green hydrogen, green ammonia,
02:05 waste to energy, these projects are also
02:07 taking some very, very concrete shape now.
02:10 And that is giving a big push to our energy transition-related
02:13 business, which is housed in our engineering business entity.
02:16 So on both fronts, the energy transition phenomenon
02:22 leading to our engineering business
02:23 growing especially at the back of the no carbon fuel growth.
02:27 And on the shift to no carbon for not only surface mobility,
02:32 but also now very clearly air mobility, as we call it,
02:37 these two are creating very, very significant opportunities
02:41 for us as we go forward.
02:44 I saw in the announcements in the quarter
02:47 as well that your orders from the global side
02:52 have inched up.
02:54 In the US, you received orders not just from, I believe,
02:59 the energy segment, but otherwise.
03:00 And please correct me if I'm wrong.
03:02 Can you talk a bit about that piece?
03:05 And how do you foresee the local versus the global mix
03:11 at a point of time when everybody else talks to me
03:14 about the world is seemingly slowing down
03:17 and India is actually on a high growth path, relatively?
03:22 So I think very, very, very well put by you.
03:25 So what we are witnessing, as I mentioned to you,
03:28 that the energy transition is a global phenomenon.
03:31 It is not restricted to India alone.
03:33 And probably we are contributing to India's economic growth
03:36 because we are based here and we are serving those segments
03:38 outside India.
03:40 So there are, I think, very clear opportunities
03:44 in that space globally.
03:45 And we have a unique position that we've built for ourselves
03:50 for all, as I say, all the hard work that we've put in,
03:54 all the bits, the foundation stones that we have put together
03:57 for over the last four decades or so.
04:00 So what is helping us now is what we've built over the past,
04:04 but it's now really allowing us to leverage
04:06 in a very unique way for this whole energy transition
04:09 phenomenon.
04:10 So you are correct.
04:11 India, again, I will come back.
04:12 And as we see, we have seen a big wave coming through
04:15 on the ethnol side when the government gave this path
04:18 breaking UB20 program.
04:20 We are now also looking at, I would say,
04:25 very similar kind of a shift taking place
04:28 as we start to add CBG to our energy portfolio.
04:31 And you've seen in the past few weeks
04:33 there have been announcements from very significant
04:36 large corporates about their paying attention to it
04:39 and adding that to their portfolio.
04:40 And obviously, we believe that we'll
04:44 have a significant role to play there, even our work
04:46 that we have done with the ethnol side.
04:48 So India--
04:49 I was going to--
04:50 [INTERPOSING VOICES]
04:52 Sorry.
04:53 So India continues to transit and add to its pie
04:56 in terms of cleaner fuels.
04:58 I think that's a great thing to happen.
05:00 In many ways, we are actually showing the world the way
05:03 to do it.
05:03 I know many times, many of these movements
05:06 happen in the developed world.
05:08 But I believe that this is one area where
05:11 a developing country is showing the path of how it can be done.
05:14 Very interesting.
05:15 OK.
05:16 Well, but one of the--
05:18 in some sense, a global leading form in a developing country
05:21 showing that.
05:21 So it shouldn't come as a surprise.
05:24 The question that I have, Mr. Joshipura, now on CBG,
05:26 because you touched upon that point,
05:28 and I'll pick up each individual point.
05:31 Now, you mentioned about receiving a large order
05:33 or an order from a large conglomerate.
05:36 IOCs, I believe, announced plans for 13--
05:43 CBG initiatives.
05:44 And I'm presuming that by virtue of the partnerships
05:46 that you have with IOC, you would probably
05:48 stand to gain there as well.
05:50 Yesterday, I saw an announcement that Ahmedabad Municipal
05:52 Corporation has given Adani Total Gas
05:54 a contract for 500 tons per day of bio-CBG maintenance
06:01 for 20 years.
06:02 So as you mentioned, a lot of other large conglomerates
06:05 are getting into the fray.
06:06 How would the numbers for Praj could look like in this piece?
06:12 Because I remember 12 months ago,
06:13 you had mentioned that the CBG program started with fanfare,
06:16 then hit a bit of a pause.
06:17 Now it seems to have started again.
06:19 How confident are you of the continuity?
06:21 And how can it show in the numbers?
06:24 Yeah, so the way I look at it is like this.
06:27 I think there is--
06:29 the current change that is taking place is not just talks.
06:34 And I say this because we see clear action
06:37 on the ground in terms of our dialogue
06:39 with these interested and very large conglomerates,
06:43 the way they are going about it, the way we are building
06:46 the pipeline with them.
06:48 So I think there is a clear bias for action.
06:51 And to me, that's a very, very important shift
06:54 that this is now a clear bias for action.
06:56 These projects are not being put up just
06:58 to show that we've got a project under the CSR project
07:02 or anything like that.
07:03 These are now clear commercial proposals.
07:06 And I think that's the big shift that has taken place,
07:08 that these are now clear commercial propositions.
07:10 They have a long-term view and commitment
07:13 to make this sector grow.
07:15 And we are not seeing it only from an isolated one or two,
07:18 but some real big corporate houses that are now
07:22 beginning to show--
07:25 they show buy-in to the story of biofuels.
07:29 And they are beginning to promote that.
07:31 I think that's the big shift that has taken place.
07:33 And that's how we are very, very confident
07:35 that this sector will start to grow from here onward.
07:38 [INAUDIBLE]
07:40 How can it show in terms of numbers, Mr. Joshipura?
07:42 The reason I ask is because--
07:44 and I'll ask this for the combined piece too.
07:47 But at some point of time in the interaction,
07:50 I was thinking of yesterday when I was preparing for this,
07:52 I was thinking of asking you whether growth
07:54 can come in a J-curve effect or will it be steady.
07:57 And I saw that the last two years,
07:59 it's actually been a J-curve effect growth for you.
08:01 You've grown at a breakneck pace from FY '21 to '23.
08:05 So I'm just trying to piece all of this together,
08:07 but the opportunities are large.
08:09 But you're sitting on a hefty base.
08:11 How can CBG, for example, contribute
08:13 to Praja's overall consolidated growth in terms of numbers?
08:16 Any indications, if not exact numbers?
08:18 Let's put it like this.
08:21 So let us say the government's plan
08:23 is to put up 5,000 CBG projects over the next five years.
08:28 And I'm saying that's the goal for the country.
08:31 Now, whether that happens in five years, or seven years,
08:34 or eight years, time will tell.
08:37 We know even if 100 projects are put in a year,
08:40 let's put it like this.
08:42 We are looking at 10,000 crores of investment
08:45 going off the order of 10,000 crores
08:47 if 100 projects come on ground.
08:50 Now, that's a significant, significant number
08:52 to be added as a sector at the start of its journey.
08:57 So 100 projects will lead to 10,000 crore capital
09:00 outlay that will need to be put.
09:01 And of course, then there will be services, et cetera,
09:04 that will get associated with it.
09:05 So we are looking at a market which is very new,
09:09 but is, as you probably said, for a J-shaped growth itself
09:14 as a segment.
09:15 We have done the hard mile, if I say that.
09:21 And we still have to do a lot more.
09:22 But we've done some hard miles behind us
09:26 in terms of our ability to experience and knowledge
09:29 that we can bring to table for our customers.
09:30 Remember that this is a very, very new segment.
09:34 Not many countries in the world, in fact, hardly any,
09:37 who have done work at this scale with this kind of variety
09:41 of feedstocks that India is attempting to do.
09:43 And that is why technology has a very, very important role
09:46 to play.
09:47 We are engaged in a very different kind of a dialogue
09:50 with our customers to help solve the problems that they have.
09:53 They've sort of got that, OK, I've
09:55 got this feedstock for three months in a year
09:57 and another for six months and so on.
09:59 And how do we go about creating a solution for them?
10:02 Because one key thing about CPG is that you
10:07 can't make it and store it.
10:09 You have to consume it literally when it is produced,
10:12 more or less.
10:14 And unless you put it into a pipeline, like what
10:17 you want there.
10:18 So from that perspective, I think
10:20 it's very important that the whole ecosystem gears itself
10:25 up for that.
10:26 We are not a gas economy as a country.
10:29 I believe that we will be in a position
10:31 to achieve a very, very good position because
10:34 of outstanding support that we have on the policy side,
10:37 the lead that several of the large conglomerates have taken,
10:41 and the fact that this makes sense,
10:44 that this makes commercial sense.
10:47 Mr. Joshi, I saw you just dwelling
10:49 on this for one more minute.
10:51 About a year and a half ago, you had told me
10:52 that CPG is a large opportunity which not too many people are
10:55 thinking of.
10:56 Now you're telling me that you're
10:58 discounting the actual intent of the government by nearly 98%,
11:04 and still telling me that it will be
11:06 a very lucrative opportunity.
11:08 I believe, heart and heart, you would believe
11:10 that it won't be so low.
11:11 The actual execution, if it doesn't reach 5,000 CPG plants,
11:15 would actually not be as low as 100.
11:16 It would be slightly more, right?
11:18 No, what I'm saying is that it will reach 5,000 one time.
11:22 I have no doubt.
11:23 See that.
11:26 What I'm saying is that today, we
11:28 are starting literally at a zero level, more or less.
11:31 So from here onwards, to scale it up,
11:33 the whole ecosystem has to scale it up,
11:36 the CGT network, the pipeline network of distribution.
11:39 You think like this, there are not enough vehicles on the road
11:42 to consume gas.
11:42 So that has to start growing as a population.
11:45 I got it.
11:46 The industry has to be able to see big.
11:48 So I'm saying, even if we start out at 100 times a year,
11:52 and that's a significant number to start in year one.
11:56 Just I want to put some numbers for you
11:57 so you get some idea of what I'm saying.
11:59 If you look at a country like United States of America,
12:03 which has been a very mature ethanol
12:05 market for a long period of time,
12:07 they have 200 plants of ethanol across the country.
12:10 That's all they have.
12:12 So when I say we start out with 100 units in a country
12:16 like India, yeah, it's a significant number to start
12:19 with.
12:20 We will travel to 5,000.
12:22 I have no doubt about that.
12:24 And what I'm telling you is that this
12:26 is a big runway being created.
12:29 This is not a one year opportunity.
12:31 This is a long five, seven years kind of a play, even more.
12:36 And then it will start to develop as we move along,
12:40 as the whole ecosystem also start to develop.
12:43 But you reckon it could be meaningful for Praj.
12:46 It is not a string of pearls contribution.
12:49 It could be meaningfully large for Praj at some point in time.
12:52 It is meaningfully large.
12:54 It is meaningfully large.
12:57 OK.
12:58 Thank you.
12:58 Needed to know that.
12:59 OK.
13:00 Just a word on ethanol, because that seems
13:02 to be going at a great pace.
13:04 Have you noticed any changes in either execution, intent,
13:08 or anything else which could actually be even higher
13:10 than before?
13:11 What's your recent-- what are your recent usings on this?
13:14 And how does it benefit Praj, by the way?
13:16 Well, so let me tell you two things.
13:18 One is, I was in Goa just about six, eight weeks ago.
13:24 And there was a very interesting--
13:28 under the G20 program, we had a very, very interesting
13:31 conference and conference of minds
13:33 of about 19 governments and industry.
13:36 And the clear message was, we want
13:40 to grow biofuels to its potential across the world.
13:44 And I think that's the significant message that
13:46 came out of that meeting.
13:48 And what was very heartening for me
13:50 was a clear desire on the part of the countries
13:54 like America, India, Brazil, who have sort of shown
13:58 the way on how it can be done, to include
14:01 those countries which have the potential
14:03 but have not realized the potential or the promise
14:05 that biofuel holds for them.
14:07 And I think that's a significant addition to the whole canvas,
14:12 because that means that you are now not only taking
14:16 the application deep, but you're also taking it wide.
14:20 And I think these two factors combined,
14:23 along with the technical advances
14:24 that we were talking to Brazil delegation,
14:26 and they said, we are now testing for E30.
14:29 Now, that means that same vehicle fleet will run it
14:31 in 30% blending.
14:33 We are at about 11% as a country.
14:37 And our target is go to 20 in 2025.
14:41 And then we will be in a position
14:42 to go forward from there on.
14:45 So that's one clear phenomenon.
14:48 The second part on ethanol story that will develop
14:51 is because alcohol to jet pathway,
14:53 it is called when you produce sustainable irrigation
14:55 fuel for aircrafts, uses ethanol as a feedstock.
15:01 And that becomes a very significant change,
15:03 because so far we've seen ethanol in its end use,
15:06 but we now also see this as an intermediary
15:09 to convert to another molecule.
15:11 And that's a significant change.
15:12 So I think those two will ride.
15:15 There are other implications as well.
15:16 We were talking about blending in diesel, et cetera,
15:18 which of course will come into being.
15:20 I think what's very important is a clear commitment
15:24 at the policy level, and this is the path we want to take.
15:27 That is significant.
15:30 Sure.
15:31 By when do any of these take shape and form, Mr. Joshepra?
15:35 I mean, we've heard of ethanol in irrigation fuel
15:38 for a while now.
15:39 When do you think it could possibly become a reality?
15:44 So 420 plus countries are signatory to the Corsi agreement,
15:51 which comes into being on 1st of January, 2027, which
15:54 says from that day onwards, all airlines
15:57 are mandated to blend sustainable aviation fuel
16:01 in their aircrafts as they fly.
16:03 So it's not too far out.
16:04 If we have to have it on 1st of January, 2027,
16:07 we have a very limited period of time
16:09 to plan, execute, create capacity,
16:13 but there is no right now.
16:15 So we will see a lot of action that will happen.
16:19 OK.
16:20 On the high purity side, you seem
16:22 to have done some pretty smart numbers there and work there.
16:27 Give us a lowdown.
16:28 It's been a while that we've spoken about that side.
16:31 Yeah, very interesting development there as well.
16:33 As you know, that business we started out
16:36 as a pure, high purity water plate.
16:40 We added part of the process systems designs for that.
16:44 But we also foresaw, and therefore we
16:46 started to work with some of our customers.
16:49 And I always believe that it all starts from our customers
16:52 all the time.
16:53 The fact that there's going to be a lot more
16:57 bio-based manufacturing in pharmaceutical segment,
17:00 and that creates a demand for fermentation as a technology.
17:05 And fermentation is definitely something
17:06 that can't understand extremely well on the industrial side.
17:10 So that knowledge that exists with us
17:13 on the fermentation side, we are able to leverage that,
17:16 bring it to PHS, high purity, and then
17:20 take it to our customers.
17:21 So that is a significant addition
17:23 that we have had to our portfolio in that business.
17:27 And that is how we begin to see a little different color there.
17:30 Yeah, and you reckon that orders on the international side
17:33 as well could pick up?
17:35 Did I read it correctly, or am I mistaking here
17:37 that you got some pretty strong order flow from the US
17:41 in particular on the HBS segment, if I'm not wrong?
17:45 Or was it some other segment?
17:47 No, so the United States story is a little different,
17:50 because the United States is likely to be
17:52 the first large market in the world that
17:55 will add significant SAS capacity,
17:58 such as Sustainable Aviation Fuel Capacity,
18:00 to its under the IRA program.
18:02 And a significant portion, the first half of the capacity,
18:07 roughly first half, so it's about 3 billion gallons by 2030.
18:12 About half of that will come through what
18:14 is called a [INAUDIBLE] which is you use edible oils and use
18:17 cooking oil, et cetera, and feedstock.
18:20 The problem is that that's all you
18:21 can do from that feedstock, because there's not much of it.
18:24 But the rest of it, and from there onwards,
18:27 we will start looking at APJ, Alcohol-to-Jet Pathway.
18:30 And that creates a unique opportunity for us
18:32 in the United States for low-carbon ethanol clay.
18:35 And because the current ethanol is formed the way it exists,
18:40 it's not fit for conversion to SAF.
18:44 We need to make it a low-carbon ethanol,
18:46 and that is a technology that we have.
18:49 And that's the dialogue that we are having with several current
18:52 US producers right now to help them go down that path
18:57 and convert to low-carbon ethanol.
18:59 So that's what will happen.
19:01 And we believe that that transition
19:04 of low-carbon ethanol economy will start taking place
19:08 beginning next year.
19:09 And that's when we see a significant play for us
19:12 in the United States on that dimension.
19:14 The other dimension, as I already mentioned
19:16 at the beginning of our talk, is about energy transition,
19:19 where a huge opportunity is being created
19:22 around green hydrogen, green [INAUDIBLE] space.
19:26 OK, I stand corrected.
19:28 Excuse me for that.
19:30 Nevertheless, OK, my final question, Mr. Joshipura,
19:34 and I refer back to what I mentioned somewhere
19:37 in the interview that you actually had,
19:39 and quite deceptively to my mind,
19:41 a very strong growth registered FY21 to '23.
19:48 I mean, the category must be extremely high.
19:50 Now, the base is high, of course,
19:52 but the number of segments out there are wide open.
19:56 Would you reckon that you could hit
19:58 or you could be in a patch of consolidation
20:01 in terms of execution of numbers, purely numbers,
20:04 over the course of the next 12 to 18 months
20:06 before the next strong growth path begins?
20:09 Or is it that's not necessary, despite the base?
20:15 So let me put it like this.
20:17 So we put another dimension to our growth as well.
20:20 And that is we said that as we start to grow,
20:23 we need to grow healthy.
20:25 Because sometimes very rapid growth
20:27 can lead to weaknesses in the corporate performance,
20:32 which initially go under the base and then they become.
20:34 So we are very strongly focused on ensuring
20:38 our strong ROC continues, our strong S/O continues,
20:42 profitability improves, and we grow the top line.
20:46 So it's not just chasing a top line at all.
20:49 And therefore, we are trying to have a strategy which
20:52 allows us to do that.
20:53 Now, when we do this, obviously, are we
20:58 going to compromise on our growth?
20:59 Answer is no.
21:00 We are going to grow.
21:01 We are going to grow at a defined space
21:05 because our area, as you rightly put,
21:07 are very rapidly expanding.
21:10 Some of these, as I told you, are on a three-year horizon.
21:13 Some of these are on a one-year horizon.
21:15 So overall, I think we are looking
21:18 at a decent period ahead of the corporate.
21:21 We are not thinking in terms of saying, hey, we'll be growing.
21:25 So that's not the question for us.
21:27 The question for us is, how we position ourselves
21:31 so that when the future starts to unfold as we see it,
21:34 we are best positioned to export it to the maximum advantage
21:38 for our stakeholders.
21:40 That's the strategy that we are laying out.
21:42 And I'm very clear that what we are focusing on
21:47 will yield quality results, as it's running past.
21:52 OK.
21:52 No, I don't know.
21:53 Maybe because Q1, relative to the base, was splattish.
21:58 That's why when I was looking at the estimates,
22:01 you have very strong growth in the last two years.
22:03 People are pencilling in just about starting
22:05 double-digit growths for FY24 and '25.
22:08 And hence my question that maybe it
22:09 could be consolidation before the next up move.
22:13 So maybe there's a quarter like that.
22:15 Because as I said, the business is simply
22:17 shifting its nature.
22:18 Export, energy transition, these
22:20 are little longish cycle time projects.
22:23 So the nature of the business is also changing a little bit.
22:26 It's no longer just doing large domestic-based,
22:29 customer-based, which are quicker in turnaround time,
22:32 et cetera.
22:32 That's not the case now.
22:34 So from that perspective, yes, the customer profile
22:37 is changing.
22:38 The market profile for us is changing.
22:41 It's changing in the healthier direction,
22:43 and that's the good news.
22:44 But obviously, it extends the time that I like.
22:47 But nothing else.
22:49 Got it.
22:49 Before we wrap up, last one minute, very quickly.
22:52 I usually do this.
22:53 I ask you about a remarkable thing that
22:55 happened within Praj or in the biofuel space,
22:58 or something that really stood out for you in the last three
23:02 to four months in your company.
23:04 Anything that stood out?
23:06 Yes, the aha moment, as you call it.
23:08 So many things, actually.
23:12 But two significant things that I want to mention to you.
23:14 One was on 19th of May when we flew the AirAsia aircraft
23:19 airbus from Pune to Delhi from a sustainable aviation fuel
23:25 that we made from a sugar cane that was just
23:27 going 50 kilometers outside our R&D center.
23:30 We took the sugar cane and calibrated that
23:32 to a sustainable aviation fuel.
23:33 So that, I think, was--
23:35 and the fact that it was so warmly received
23:40 by Honorable Mr. Puri and all the policymakers,
23:45 our partners, Indian Oil, AirAsia,
23:48 I think you should have seen the way everything
23:51 came together for the cause.
23:53 It was an amazing feeling to be in Delhi
23:55 to receive this aircraft along with Mr. Puri
23:57 and feel proud about the fact that we made a sustainable
24:01 aviation fuel from a good domestic feedstock
24:04 and showcase that is possible to do so.
24:06 So that was one big moment.
24:08 The second one-- and I mention this because, as I mentioned,
24:12 there was a deliberation in Goa under G20
24:16 on the biofuel pathway.
24:19 And India was showcasing to the world
24:22 its prowess in this field, the kind of work
24:25 that we have done under the new national biofuel policy
24:32 and how that has yielded results for us.
24:34 And we were the private sector company
24:37 that was showcased as a world leader in this technology that
24:41 could also help other countries transform.
24:45 And frankly speaking, we were not
24:47 allowed to put our logo anywhere on our display.
24:52 And a very proud moment for me because even
24:55 though there was no logo, we were showcasing ourselves
24:58 as India to the world.
25:00 And that's where we were participating.
25:02 So for me, those were the good moments for the last.
25:07 Certainly aha moments.
25:09 Congratulations on those.
25:11 We'd love to recount the 19th May event in person
25:14 when we meet Mr. Joshi Burawan.
25:15 Thanks for your time today.
25:17 Thank you, Neil.
25:17 Lovely speaking to you as always.
25:19 Thank you so much.
25:20 Likewise, sir.
25:20 And viewers, thanks for tuning into this conversation.
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