Praj Industries Limited

Praj Industries reported a Q2 FY26 income from operations of ₹8.42 billion, a modest increase from ₹8.16 billion in Q2 FY25. However, profitability saw a significant decline, with PBT falling to ₹296.1 million from ₹744.4 million and PAT to ₹192.8 million from ₹538 million year-on-year. This compression was attributed to higher other expenses due to increased execution activity and under-absorption of fixed costs at the GenX facility, despite lower material costs from a favorable sales mix. The effective tax rate for Q2 FY26 stood at 35%.

The company demonstrated strong order book momentum, securing new orders worth ₹8.1 billion in Q2 FY26. The domestic market contributed significantly, accounting for 73% of this intake. As of September 30, 2025, the total order backlog stood at a healthy ₹44.2 billion, with domestic orders comprising 65% of this total. This robust backlog provides strong revenue visibility for the coming quarters, despite some project execution cycles being extended due to external funding challenges.

Praj is reorienting its strategy for the GenX facility, shifting focus from stalled energy transition projects to a broader customer base in traditional oil and gas, piping, and structure. While the initial goal was to achieve ₹1,500 crore turnover, full capacity utilization for GenX is now expected by FY28, a year later than the previous FY27 target. This revision is due to the time required for facility inspections, audits, and onboarding customers from these new segments, leading to continued under-absorption of fixed costs (₹8.5-9 crore per month).

Praj is actively developing and commercializing new technologies under its 'BioVerse' strategy. The alcohol-to-Jet demo plant at Praj Matrix is now operational, successfully producing certified Sustainable Aviation Fuel (SAF) from ethanol, marking a significant milestone. In the Compressed Biogas (CBG) segment, the company has commenced its first Napier Grass-based project and reports a healthy pipeline of inquiries. Praj is also exploring bioplastics (lactic acid/polylactic acid) and isobutanol for diesel blending, with demo plants and ongoing discussions, though no orders have been booked yet.

The domestic ethanol segment faces headwinds, including negative news around blending and a slowdown in greenfield projects, as India has achieved its EBP20 target. Praj is shifting its focus to brownfield opportunities like plant enhancements and efficiency improvements for existing installations. Internationally, US tariffs are impacting new orders by increasing customer payback periods by 5-6 months, though Praj's low-carbon solutions remain attractive. The company is actively exploring strategies to mitigate the tariff impact^🌐 and continues to pursue the US market.

Management highlighted that project execution cycles are being extended due to challenges in customer funding arrangements, specifically delays in achieving financial closure, securing equity contributions, and arranging debt. This issue persisted in Q2 FY26. However, some projects that were previously stalled due to funding issues have now reached financial closure and are moving into the execution phase, indicating a gradual improvement in the situation.