Praj Industries: Annual report 2007-08: My Summary

Couple of days back I got the annual report of praj industries by post. I hold very few shares of praj industries. But am very optimistic of the field (in general) in which praj works and its products. I plan to add more shares of praj in future. I expect the stock markets to remain range bound for few more months giving me some breating space to invest in smaller chunks :)

Here is a short summary of the annual report of Praj (I am NOT going to go into the numbers. I am going to write about what they have implemented in 2007-08 and what are their plans for future. whats the fun in dissecting the quaterly numbers. It is a mere indication of past performance which has no direct impact on future potential. It is a mere indication). Alright from the annual report I see the following:

Subsidiaries
Praj has the following subsidiearies which perform the respective roles as explained below:
(1) Praj Schneider Inc:
This is a wholely owned subsidiary of praj industries. This will focus on Canada and South central American. It is a customer touch point in the northen americas.
This is a preexisting subsidiary

(2) Biocnergy Europa B.V.
Praj and aker solution have formed a joint venture called BioCnergy. This will basically cover the European market. It recently won a large contract from Vivergo Fuels to build a plant to generate 120 Million Litres per day. This plant uses praj's technology as the basis.
praj has lot of hope from this plant in uropian market.
This is a new subsidiary added in 2007-08.

(3) Praj Jaragua Bioenergia S.A.
This is a JV between Praj and Group garcia. This jv is for the brazilian market. Brazil is the bastion for biofuels. This is a sugarcane based ethenol manufacturing jv.
This is a new subsidiary added in 2007-08.

Other subsidiaries are: Praj Far east co. ltd, bangkok for south east asian markets. Yaan esites limited.


Shaping the future:
(1)Matrix-the innovation center:
With a commitment of close to 70 crore rupees. This new R&D center for biofuels has been established. Outside US and europe this is the largest R&D center for biofuels. This Plant focuses on manufacture of ethenol from Cellulosic.
Matric innovation centre has applied for 3 patents. one for cellulosic ethenol and 2 for high-energy ethenol blends.

Focus is also on bio-chemicals and bio-lubricants and research is on for this.

(2) Sweet Shorgam:
A fully integrated plant (from farm-to-fuel) is being installed for Tata Chemicals. This plant uses sweet shorgam as the basis for fuel. Research in the area of sweet chorgam has been going on for about 5 years now. The process of generating ethenol from Sweet shorgam has already been patented by Praj. This is a big advantage as it has exclusive rights on a specific process thereby it can leverage the patent's potential to market its manufacturing plants.

Praj is also focussing on non-edible oil seeds like jatropha, Karanja, Safflower, pongemia. It is also looking at 2nd generation oil bearing organisms like algae for biodiesel.

Geographies
(1) Asia:
Govt would be making 10% blending mandatory. So there would be interest in ethenol in our country in the near future. Some states have abolished taxes. Many sugar companies would want to setup ethenol plants. So india is a good business opportunity for praj.

(2) Africa:
Africa has vast landbank. Praj has 3 plants running in africa. 2 in nigeria and 1 in kenya.
With the on ground experience praj is exploring more possibilities.

(3) Europe:
Obtained contract from british sugar's wissington plant . Suedzucker's Belgium plant. an Anklam plant in Danisco. Above 3 companies are the top 3 sugar manufacturing companies in europe.
BioCnergy (subsidiary of praj) will help drive the growth.

(4) North America:
3 projects under execution in US. Praj has hopes from the Sugarcane based plant in Luciana. US is a tough market because of lack of sugarcane and dependence on corn.

(5) South, Central America and Caribbeans:
There is thrust in developing more plants in these areas. Colombia is Praj's key reference and they have also won orders in Central America to build ethenol plants.

(6) Brazil;
A key proponent of bioethenol. They also focus on biodiesel. Brazil has mandated 2% mixing of biodiesel by 2009 and upto 5% by 2012. so brazil will be an opportunity for praj to showcase its biodiesel.


Conclusion:
As warren Buffet's principle says: invest in companies whose business is understandable and who are focused on one thing (like gilette in which buffet had sizble investment). Praj is focused in biofuels and they are good at it. Past performance has been good and future looks good. Even assuming 30% growth year on year, it is a good company to invest.

For more information I suggest the following link on Praj's Website:
http://www.praj.net/v2/index.php?option=com_content&task=view&id=294&Itemid=81