Praj Industries

The funds will be used mainly to reduce the high cost debt that has marred Prajs operational results. Prajs product line comprises distillation equipment, brewery machinery, fermentation reactors and allied equipment catering predominantly to the food grain based units. It suffered severely due to the crash in the price of molasses between 1994 and 1996.

With the shift in basic feedstock to molasses, most of the foodgrain based projects failed to take off. Hence between 1994-95 and 1995-96 Prajs inventory moved up substantially from Rs 51.93 crore to Rs 77.61 crore. As turnover declined from Rs 59.58 crore to Rs 55.19 crore during this period, the inventory turnover ratio moved up drastically from 0.87 times to 1.40 times. Overall interest charges rose from Rs 0.99 crore to Rs 2.04 crore.

The situation worsened in the first half of 1996-97 as Prajs turnover came down to Rs 23.28 crore against Rs 25.11 crore in the corresponding period in the previous year. The drop in sales is also due to the tight money situation that forced Praj to defer orders worth Rs 35 crore.

Praj will also set up a 100 per cent subsidiary at Europe and expand activities in the areas of dairy, food, bio-pharma and health care. The European subsidiary will give a better thrust to its export operations. The emphasis on exports is a necessity as prohibition in states like Haryana and Andhra Pradesh and a general slowdown in the economy led to lower demand.

Given the current financial situation, if it goes public again it is unlikely to obtain a premium. The equity dilution will be at a higher cost. The acceptability of its indigenous technology in the export market is crucial for future growth.