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Thursday, November 20, 2008

Praj Industries- Giant in making - Bio-Diesel segment

Praj Industries is the world's single largest supplier of molasses based distillery technology, plant and equipment.Praj Industries has been one of the fancied stock in the recent rally not only among the traders as well as among the investors too.



Demand: The need for alternative energy sources like bio-fuels, ethanol etc., other than oil, considering the huge volatility in the crude oil prices. World ethanol demand is slated to double in the next four years from 40 billion to 80 billion litres. Praj, which gets 50 per cent of its revenues from global markets, is seen as an emerging player. The government’s decision to blend ethanol with fuel has given a major boost to Praj’s business.

First-mover advantage & Barriers to Entry: Praj has "finger-printed" almost 2,500 varieties of molasses from around the world at its research laboratory. Bio-processes are not easy to master. It requires thorough knowledge of raw materials and the ability to offer flexible solutions for commercial acceptance. New players can't easily get in.

Also Read:PRAJ INDUSTRIES - Safe Investment for 2009

Investors: The Company has caught the attention of global and Indian investors. Vinod Khosla, the Silicon Valley-based billionaire who has recently climbed onto the ethanol bandwagon, has bought a 10 per cent stake for Rs 117.1 crore. Khosla’s interest in Praj is primarily because of its R&D in different feedstock. That was also one of the reasons why Virginia- based Delta-T tried unsuccessfully in 2002 to acquire a stake in Praj. Top broker-investor Rakesh Jhunjhunwala owns 7 per cent. His logic: “Ethanol is hot globally and this company has the potential to become a global leader.”

Competitors: The main competitor of Praj in Fuel Ethanol plants would be Alfa Laval. Praj officials expect other players to enter the field because of the huge opportunity available.

Some more facts:
Built more than 50 plants worldwide in the past four years.Has customers in over 30 countries, and continues to invest heavily in R&D.Captured a 6 per cent global market share despite stiff competition from bigger rivals. Praj aims to double its market share in a few years.The company did not neglect the domestic market and has established a 60 per cent market share within India.Debt-free.

Risks: Global technology developments could easily undermine Praj’s traditional strength — its research.

Conclusion: A good Long term investment. Tatget INR 350 by Dec'2009
Short term target INR 100 by Jan'2009

As per Sep 08 share holding pattern of the company, Rakesh Jhunjhunwala is holding 11,477,642 shares and Rekha Jhunjhunwala is holding 4,048,000 shares of Praj Industries

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