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AGM speech 2006 |
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Chairman's Speech Delivered at the 20th Annual General Meeting of the Shareholders of Praj Industries Limited.
21st July, 2006
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From Good To Great
The Year 2005-06 was a year of reinforcement/securitizing our future. We began preparations keeping market developments in mind. Then we moved on to what needed to be addressed within our organizational periphery and what could be the outcome. And so, the Year 2005-06 has led to a phase of wherein we will see Praj move from Good to Great. In the coming years we hope to make that quantum leap that we have planned. The anticipation is there and so is the preparation. We already have a fair visibility.
Some Key happening in the market prompted us to consider an acceleration in our future plans. One was the rapid development of ethanol programmes and another was the recognition of Praj's technical skills on a global platform. We knew that the time had come for us to take the Leap from Good to Great.
Just to give you an idea on the developments in Ethanol Programmes worldwide.
In his State of Union Address, President Bush outlined the importance of energy security through introduction of biofuels. This gave a fillip to not only the US ethanol markets, but the markets outside USA as well. It also provided a role model for other countries to follow. We now have the European Union which is trying to meet with its Biofuel targets.
While overseas markets have responded including Thailand and Australia, where we see some activity in terms of building capacities, India's ethanol programme has been under re evaluation and we are confident that it will be re activated in October this year, as has been announced.
Notwithstanding Government policies, Ethanol remains the singlemost dominant renewable transport fuel due to its ease of production and blending.
The interest in Ethanol can be seen by the growing number of new generation investors who are enabling the industry with funding as also a large number of developers who bring experience from other industries like energy sector for building large capacity plants. We also see integration of different sectors like oil and power, animal feed/grain/sugar and fertilizer into setting up of ethanol capacity building.
Another trend is that of sugar-ethanol-crude oil relationship. Ethanol has traditionally been following sugar economy, however, now it is also following the crude oil trend. Sugar economy is undergoing a major change worldwide. With EU and ACP countries getting used to the new regime, it will be another year till we see some clear trends. But, it is clear that ethanol will get its due from the changes.
In India, we have seen certain states promoting Sugar-Ethanol industry very actively. We have seen Uttar Pradesh implementing a sugar policy which has seen sugar production capacity go up significantly. We will see this trend in other states too.
Ethanol is at a major inflection point. Today, the renewable energy markets and particularly ethanol is growing at about 15-20% p.a. Future acceleration in ethanol will depend upon the extensive availability of feedstocks and its cost effectiveness in different countries. Not to mention its potential for job creation and environmental benefits.
And, this is precisely where our Good to Great efforts begin:
Technology Accelerator - Cellulosic Biomass is definitely a direction we will be taking when it comes to Ethanol production processes. Cellulosic biomass like straw, switchgrass, bagasse,etc are potential raw materials requiring a process which needs further evaluation in order to make it more cost effective. This would involve working with newer media in our R & D Centre and create a different set of knowledge for future commercialization.
Your Company is evaluating investment in new R & D facility which will not only extend our study in biofuels including newer technology for production of alternative biofuels other than ethanol , but also expand our vista of research.
With this investment in place, we will see R & D spend exceeding the 1% mark.
Our experience with Sweet Sorghum in the past has given us hope that there is a possibility of creating newer sources of ethanol. But, it requires a lot of perseverance and conviction to chase these objectives. Praj is committed and will definitely work towards bringing in newer technologies, options and methods for promotion of ethanol.
Execution Excellence. As they say God is in the details. Any plan needs an equally strong execution. Today, we have a corpus of good orders. We have a strategy in place. We have a good market spread. Our brand name is strong. It is how we execute the plan or the orders that will make a difference to our future growth. Having realized this very early on, we have taken care to understand the nuances of executing the quantum. Our successful execution of five projects in Colombia is a testimony to our execution philosophy. But, we are not resting on our laurels. We are enhancing all aspects of our resource base. We have added to our manufacturing capacity, adding almost an equal capacity. We have added to automation levels in engineering and manufacturing. We will further augment our execution strength with two other manufacturing base and as a long term resourcing policy we will be taking up a base near the port which will reduce our time to market.
Our engineering seats have already gone up. We have added to the middle level management. We are blending the right mix of experience with youthful enthusiasm so that the energy will propel the results.
Our Companywide ISO 9000:2008 certification comes at an opportune time and will guide our continual enhancement programme. Our focus on quality has seen internal quality audits being conducted by external agencies.
One of the recent examples of engineering/execution excellence is the skid mounted ethanol plant supplied to Australia. To overcome shipping constraints and to bring down the time and on-site cost, we designed a skid unit which consisted of just nine skids perfectly meshed together.
While we do our best to rise to the occasion, there are certain areas of concern. One being the availability of raw material for construction like stainless steel and the price volatility in such raw materials. The other is that of infrastructure including power situation and port congestion.
While your Company has taken specific steps to handle such situations, it is imperative that industry works together to resolve such issues which might hamper the speed of growth.
Market Dominance: Our recent breakthroughs in USA and earlier breakthrough in UK are very encouraging. While USA and Europe both have been on our radar, the breakthrough period - from first customer contact to finalization - has been relatively short. With these orders, Praj would have moved on to the bigger capacity plants which in turn means higher per project realization in terms of sales and profits. Overall, we see project sizes becoming bigger as they would be more sustainable.
The challenges of expanding into different markets lies in scaling up in terms of resources, especially manpower. We have geared ourselves to recruit and retain the quality of manpower required to address.
Just as in Ethanol Technology, we see Brewery engineering & machinery business also expanding. Demand for building new capacities is on the rise and our new manufacturing facility will see us meeting this demand.
Delivering Value: At the end of the day, it is about delivering value. To our customers, to our various stakeholders and to our shareholders. Our quest for new technology and enhancing our resource base will help us gain new customers and retain the confidence of existing ones. Our aim to become a dominant player in the ethanol technology market will also improve shareholder value. We will also look at different business models which will further expand our volumes and spur growth.
At the end, I would like to place on record my sincere thanks to each and everyone of our shareholders for reposing their trust in us. We hope that this journey from Good to Great will be as gratifying for you, as we anticipate.
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