Expect recovery in international ethanol market soon: Praj

Praj Industries reported weak Q2 numbers with total income falling 1.8 percent to Rs 205.8 crore as against Rs 209.6 crore year-on-year (YoY). Profit, too, fell 38.8 percent to Rs 3 crore. Speaking to CNBC-TV18, Gajanan Nabar, CEO & MD of the company said some delays in the order book are reflecting in the numbers. However, there are bright spots ahead with economic activities picking up. The ethanol domestic scenario looks robust, but international orders continue to be subdued for the company. Nabar expects some recovery in the international ethanol order book in coming quarters. Below is the verbatim transcript of Gajanan Nabar's interview to Reema Tendulkar and Prashant Nair on CNBC-TV18.Reema: First if you could tell us what was the reason for this decline in revenues that we have seen? Your margins to have come off a bit from 3.5 percent to 3 percent, take us through the headwinds you faced and do they persist?A: I think the overall economic and investment climate remains what it is and we are just about the same of revenues as last fiscal, so in terms of revenue we are holding on. Obviously, the mix is between international and domestic, it’s more towards domestic, incrementally very much toward domestic and that is obviously determining the profile of variable margin and thereby the overall profitability.But I would say that there are lot of bright spots on the horizon that we still see. I think moment of second generation biofuels is one of them. Also, the order book of Praj HiPurity Systems is another one, but I think what you see right now is also there are some delays in order book and that’s reflecting in our numbers currently.Reema: Those delays in order book when do you start expect them to flow through into the company’s pipeline and revenues and what you are guiding for the second of the year?A: I think some sector we are seeing the economic activities picking up. The Indian ethanol scenario despite all round investment climate not being very favourable still remains good and robust and we only see some delays in our international order book which obviously in the last couple of quarters have been little subdued, but now I think hopefully probably we are the situation where it would bottom out and in the next couple of quarters we should start seeing some recovery in our international ethanol as well as other businesses order book. I think couple of quarters then hopefully we should see the recovery coming back.Prashant: Could you tell us how these specific user industries are doing be it beverages, be it industrial, pharma, the perfume sector for example, which segments are you seeing demand coming in from and which are rather slow?A: I think the best macro is for our Praj HiPurity business which is very, very focussed on pharma and biotech and we obviously have not seen in the last 2-3 years the macros changing. They always remain good and they are stable to getting better. We see some great amount of traction which is happening as part of the global change from little more towards biopharma and that is what also reflecting in obviously lot of big names in India are going after biopharma and that is good for our business.Oil and gas everybody knows that USD 50-40 oil the capital activity was subdued, but what always happens is from upstream oil and gas it would now start moving towards downstream oil and gas that’s what we are seeing happening. We see it very early to say, but we have seen some green shots in terms of investment cycle kicking in towards petroleum products and also refining especially in India as well, there are some good news there.Ethanol obviously runs on a different league altogether it’s more driven by the mandates which is currently very, very good in India for blending programme to go from 5-10 percent and that probably also would help us going forward. It is a mixed bag, but you clearly see some bright spot in some industries.Prashant: From ethanol perspective are you getting some orders from oil marketing companies here in India, what should we expect?A: The oil marketing companies are very committed to the blending programme and the Ministry of Petroleum and Natural Gas (MOPNG) is firmly behind it and that’s where they are also driving the 2G the second generation biofuel agenda, which obviously we are probably one of the very, very only companies in this technology space in India, so we have the home grown India developed technology which we hope that would find very, very commercial use going forward in the next few quarters.