3 July 2013
C
orner
O
ffice
Interaction with the CEO
the
Building scalability
Emerging businesses
Internationalization
Second Gen Ethanol
We met the senior management of Praj Industries Ltd (PRJ), including Mr Pramod
Chaudhari, Executive Chairman and Mr Gajanan Nabar, CEO and Managing Director.
Following are the key takeaways:
Focus areas are building scalability and improving operational cash flows.
In FY14, emerging business segments are likely to contribute 30% of revenue (v/s
8% in FY13). Attempt will be to reach company-wide average margins, supported
by increasing project size and scale economics.
Successful commercialization of the second generation plant to be an important
game changer. Construction should commence in FY14 (Capex INR1.4b).
Praj Industries
Mr Pramod Chaudhari
Executive Chairman
Mr Chaudhari did his engineering
from Indian Institute of Technology,
Bombay (IIT). He has attended the
Advanced Management Programme
at Harvard Business School in 1995.
Mr Chaudhari has been profiled in a
recently published book called
'Thought Leaders' by a leading Indian
author, which focuses on visionary
entrepreneurs.
Improved contribution of emerging businesses on an increased revenue base:
During FY13, ethanol business contributed 82% of revenue and is expected to
decline to 70% in FY14 (with emerging businesses contributing 30%). Emerging
businesses comprise of 1) water and waste water treatment systems, 2) critical/
hygienic process equipments, 3) distillery bio consumables/bio chemicals/
industrial bio based products & processes/livestock, health & nutrients. The
key focus areas are mainly industrial projects and not government tenders,
where project awards are largely on L1 basis.
Internationalization of Brewery business:
PRJ is scaling up the brewery
business to an international level, from the concentration in India (contributed
11% of PRJ's revenue). In FY13, company signed a contract with Myanmar
(INR650m) and also is in negotiations for an African order. This can again be an
important growth driver. Contribution from overseas business in FY14 is
expected to increase to 55% of revenues as against 45% in FY13.
Second generation ethanol plant - an important game changer:
PRJ's demo
plant for second generation technology, for which pilot testing was done in
2008-11 would commence construction in FY14 at the cost of INR1.35b.
Management believes that post the initial capex, there will be no capital drain;
also based on the expectations of commercialization, the payback period is
likely to be attractive. With this product, PRJ also expects to get a strong
foothold in key ethanol market, where its presence in first generation products
has been restricted. Eventually, the target is a 50:50 business mix from first &
second generation plants in growing pie of ethanol business.
Praj Industries: Financial and valuation summary
Bloomberg
PRJ IN
CMP (INR)
39
Equity Shares (m)
177
52-Week Range (INR)
65/34
1,6,12 Rel. Perf. (%) -19/-46/-51
M.Cap. (INR b)
7
M.Cap. (USD b)
0.1
Year
End
3/10A
3/11A
3/12A
3/13A
Net Sales PAT*
(INR m) (INR m)
6,023
5,529
8,804
7,265
1,139
535
658
662
EPS*
(INR)
6.2
2.9
3.6
3.7
EPS*
Gr. (%)
(12.7)
(53.2)
23.9
4.2
P/E
(X)
6.4
13.6
11.0
10.5
P/BV
(X)
1.4
1.3
1.3
1.2
Mr Gajanan Nabar
CEO and Managing Director
Mr Gajanan Nabar has over 24 years
of multi-functional management
experience. Prior to joining Praj, he
was the Managing Director of Praxair
India Private Ltd. He holds a Masters
Degree in Organic Chemistry and
Master in Management from
Bombay University. He was conferred
a diploma by the Plastic and Rubber
Institute, London and has successfully
completed
the
Executive
Development Program of Wharton
Management School in 2000.
RoE
(%)
23.0
10.0
12.0
12.0
RoCE
(%)
24.0
11.0
20.0
14.0
EV/
Sales
1.0
1.0
0.5
0.7
EV/
EBITDA
6.3
12.1
5.1
7.3
Satyam Agarwal
(AgarwalS@MotilalOswal.com); +91 22 3982 5410
Deepak Narnolia
(Deepak.Narnolia@MotilalOswal.com)/Nirav
Vasa
(Nirav.Vasa@MotilalOswal.com)
Investors are advised to refer through disclosures made at the end of the Research Report.
1

C
orner
O
ffice
FY13 - segment wise revenue composition
FY13 - geography wise revenue composition
the
Segmental revenue composition (%)
FY13 order book progression (INR b)
Ethanol blending programme – Fact file
2003
2006
2008
2013
2017
5% blending mandates in nine major cane producing states & five UTs. Rate finalized
by Tenders with a Cap fixed by OMCs.
5% blending mandates in twenty states, eight UTs. Uniform procurement price fixed
at Rs 21.50 per liter (Ex-factory) for 3 years.
5% blending became mandatory across all states in the country; however supply
defaults due to better realization on RS & ENA.
50% of supplies tendered for, OMCs require more time to procure balance. OMCs to
tender for balance quantity.
Indicative target of 20% blending across the country.
Source: Industry
3 July 2013

C
orner
O
ffice
Ethanol production and distribution (million litres)
Calendar year
Opening stock
Production
Imports
Total supply
Exports
Consumption
Industrial use
Potable liquor
Blended petrol
Other use
Total consumption
Ending stocks
Total distribution
2006
483
1,898
29
2,410
24
619
745
200
75
1,639
747
2,410
2007
747
2,398
15
3,160
14
650
800
200
100
1,750
1,396
3,160
2008
1,396
2,150
70
3,616
3
700
850
280
110
1,940
1,673
3,616
2009
1,673
1,073
320
3,066
3
700
880
100
100
1,780
1,283
3,066
2010
1,283
1,435
150
2,868
3
2011
1,085
1,934
50
3,069
10
the
720
750
900
950
50
250
110
110
1,780
2,060
1,085
999
2,868
3,069
(Source: FAS/New Delhi)
Brewing Process
Malting
Barley/Wheat/Rye (or any
grain that has starch) is to
beer what the grapes are to
wine. The grain has to be
malted before brewing. The
grains are allowed to
germinate and then quickly
dried and roasted in a kiln
before the plant starts to
develop.
This
process
activates enzymes that are
required to modify complex
starches
into
simple
fermentables sugars.
Fermentation
The wort is then cooled and
pumped into fermentation
tanks. In these tanks is
added yeast that converts
sugars to alcohol, carbonic
acid and other by products.
Different yeasts give beer
their tastes and characters.
Fermentation usually takes
place
between
10-13
degrees celsius and can
take anywhere from 10 to 12
days.
Filtering and Tapping
After the maturation the beer is filtered to
remove the last traces of yeast and other residue.
Though there are some specific beer styles (like
our wheat beers) that are served unfiltered/
cloudy. After filtering the beer is transferred to
bright beer tanks where it is held for tapping,
bottling or kegging.
Brewing
In the brewing process, the
malt is first lightly crushed
and steeped in hot water.
This activates the sugar
producing enzymes that aid
the starch in the grain to
convert into sugars. This
mixture is then strained. The
sugary liquid called wort is
left behind that is boiled for
60 to 90 minutes with hops
that are added at different
times.
Maturation
After
the
primary
fermentation, the beer is
moved to large tanks where
it is held at 8-12 degrees
celsius for 2-3 weeks. Here
the secondary fermentation
and maturation takes place.
Unwanted byproducts are
broken down and more
carbonic acid is produced.
Yeast, hops residue and
proteins sink down and the
beer becomes sparkling
clear.
Source: Doolally Brewing Company
3 July 2013

C
orner
O
ffice
N O T E S
the
3 July 2013

Capital Goods
Report Gallery

Disclosures
This report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement
to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates
or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or its
affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or
employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report . MOSt or any of its affiliates
or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness
for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision
based on this report or for any necessary explanation of its contents.
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest
Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Disclosure of Interest Statement
1. Analyst ownership of the stock
2. Group/Directors ownership of the stock
3. Broking relationship with company covered
4. Investment Banking relationship with company covered
Companies where there is interest
None
None
None
None
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or
will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible
for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to
law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For U.K.
This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to
which this document relates is only available to investment professionals and will be engaged in only with such persons.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States.
In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state
laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein
are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major
institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended
(the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into
a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within
the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,
MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst
account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors
Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore
to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Nihar Oza
Kadambari Balachandran
Email: niharoza.sg@motilaloswal.com
Email : kadambari.balachandran@motilaloswal.com
Contact: (+65) 68189232
Contact: (+65) 68189233 / 65249115
Office address: 21 (Suite 31), 16 Collyer Quay, Singapore 049318
Motilal Oswal Securities Ltd
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com