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AGM speech 2007 |
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Chairman's Speech Delivered at the 21st Annual General Meeting of the Shareholders of Praj Industries Limited.
5th June, 2007
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Building the Vision
At the turn of this century, we had set a vision for ourselves.Praj will be a Global No. 1 Company in ethanol technology. So, I thought it was time we re-visited our vision. In continuation of our pursuit to be Global No. 1 in ethanol technology, which we are very close to achieving, we will expand our horizons further into a newer clusters of knowledge like 'biotechnology' and blend it with our existing knowledge in 'agri processes', 'process engineering' and translate all that into viable solutions for a cleaner, greener earth.
We have developed a framework that will guide our future course of action, towards our vision. Called 'sustainability metrics', the framework consists of four elements that accord balance to the new ecosystem. The entire cycle of 'Evolution' of the Company is seen to be influenced upon as well as influencing the other three factors - 'Earnings', 'Earth' and 'Everyone'(people). Whilst earnings will continue to be an important part of our evolution, people and our habitat, planet earth will become increasingly critical. You may have noticed the same on the cover of our Annual Report.
The first step towards sustainability is a consistent and growing benchmark of performance. This year, with a topline growth over previous year of over 120% and profits growth of over 200% we have clearly shown that we can scale up in a short time. And, this scaling up is not just in terms of numbers, but also in terms of higher throughput and better solutions. This has also seen us reaching a market capitalization in which, the current BCG-BW survey termed Praj as the No. 1 value creator amongst the mid-cap Companies. This is a rare distinction. But, this also raises the bar for the Management for the future. We will continue to explore ways to enhance our performance consistently.
Another key to our sustainability has been our innovative approach. Our entry into cellulose to ethanol has demonstrated that we can match the best in the industry and possibly even surpass them when it comes to finding viable solutions. Cellulose to ethanol will come into reality in the near future, but suffice it to say that we are well on our way and on the right track. We will create a differentiation which will help us enhance our business further.
Biodiesel Technology and Plants is a new business which we introduced this year. We have always maintained that when we get into any new business or market, we must be able to create value for our customers and not just give another 'me too' product. In keeping with that, we have built some value propositions within our biodiesel solution suites which will accord a differentiator to us in time to come.
Our strategy of 'geographical expansion' has paid rich dividends. It has enabled us to create a strong presence in USA in a short time. In Europe too, our gains have been significant. We will now penetrate further while sustaining the 'territorial gains' we have made. One way is through the acquisition route wherein we have already taken 100% stake in a Company in USA, C J Schnieder. This Company is providing us greater visibility, while pursuing its own scope of work in the ethanol industry. The recently passed Renewable Fuels Standard bill which directs 35 bln gallons, five times current directive, augurs well for growth in this industry.
Yet another milestone is setting up a JV with a prominent European Company wherein Praj has a majority stake. Aker Kvaerner and Praj will create a synergy in the Biofuels industry that will bring in new paradigms. The JV will become operational by next month. The 10% blending mandate of EU will act as main driver of growth in the region.
Another market gain we are keenly working towards is Brazil. While we may not immediately go in for the acquisition route, we will create a presence through a full-fledged marketing office in Brazil, to start with. We will evaluate the opportunity and then unravel our further strategy for Brazil.
Along with promising developments in other regions, the Indian fuel ethanol programme, which has been lagging behind, seems to have got a new lease of life.
Brewery engineering and plants, our other business line, is also poised for a major upswing. We are looking at the per capita beer consumption doubling up over the next five years. Given our highly competitive position in this area, and recent tie ups and alliances with European machinery suppliers, we are sure to gain, as the market moves up.
Another sustainability tool is to create an infrastructure for better delivery cycle. The SEZ unit in Kandla is one step we have already taken towards this. One bay of the unit is already in operation. We expect that by July the entire unit will be fully operational. We are also looking at further expansion in SEZ. A new R & D centre, for which land has been acquired, is expected to be operational by end of this calendar year.
We had indicated a capital expenditure of Rs. 100 crores for all these developments. We are on target as far as our commitments are concerned for which funding is in place.
To support this growth, the most important element is manpower. We have scaled up and will continue to build the talent pool. Being a knowledge-based Company, our requirements are very niche. Our aim is to be a preferred employer, beyond our own industry. All efforts are being done to attain this status. We are casting our campus recruitment net wider, in an effort to enhance diversity. We are also recruiting more women professionals, which will create an inclusiveness while creating a larger talent pool. We have also taken steps to be in line with affirmative action.
We will pursue institutionalization within the organization. We have already put in place a re-structuring plan. Processes and systems are being re-validated. As part of this transformation and succession planning process, Shashank Inamdar , Managing Director has been inducted to lead the Company since April this year and he will be designated Managing Director & CEO of the Company from August 2007. Ofcourse, I shall carry on with the role of Executive Chairman,Chief Strategist and Mentor. As we move into the next orbit, I will be more and more on call to steer the course into newer areas.
Our preparedeness is at the peak. Our streatchability of resources is undoubted. Our ability to transform our organization into a powerhouse knowledge unquestionable.
However, it is important to take cognizance of the external challenges in the industry that we operate in - the ethanol and biodiesel industry. Some key areas of concerns have been:
- Food vs. Fuel debate
- Downward pressure of oil prices
- Sugar industry re-structuring
- Climate Change itself
It is not easy to convince the detractors that fuel cannot be at the cost of food. Empirical data shows that more grain is grown in anticipation of a better valuation. In fact, some studies by Renewable Fuels Association show that corn prices are not really much affected over the three year period when compared to some of the previous years. But, it will remain a challenge to get plenty of raw material to convert into biofuels.
We have to pave the way. The only way is to go forward and sustain the movement and to embrace the challenges and move on to the next milestone.
For Praj, the next milestone is pushing the frontiers of biofuels production technology beyond what is known today. Our dream or you may call it our technology vision, has always been - virtually no fresh water intake, virtually no new energy consumption, and no wastewater generation in our plants.
We are working on the blue print covering the next five years of our business road map. This blue print will be guided by our vision to be a powerhouse in industrial biotechnology field and continue to work towards environmental protection.
As said by someone, "We have not inherited the world from our forefathers -- we have borrowed it from our children." Let us work towards their future.
In the end, I would like to thank all our shareholders in reposing their faith in the cause and the course we are pursuing - Here is wishing you a Happy Environment Day and many more to come.
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