Praj-IndianOil JV: Analysts say development positive for Praj; biodiesel among next growth drivers for company

Praj Industries share price: Shares of Praj Industries rallied as much as 9.5 per cent to Rs 405.90 apiece on the BSE on Friday, a day after the company announced it has signed a term sheet with IndianOil Corporation (IOC) to advance plans to strengthen biofuels production capacities in India. 

Various biofuels covered under this MoU include Sustainable Aviation Fuel (SAF), Ethanol, Compressed biogas (CBG), biodiesel, and bio bitumen, among others. Earlier in October 2021, both companies entered into an agreement to form a 50:50 joint venture to this end.

Talking about the development, Shrikant Madhav Vaidya, Chairman, IndianOil, said, "The collaboration with an Indian biofuel major, Praj, is a remarkable milestone in IndianOil’s green energy transition journey. It will strengthen our resolve to achieve our goal of net-zero operational emissions by 2046 and maintain our leadership in the green energy domain."

At the time of writing this report, the stock was trading 7.77 per cent higher at Rs 399.35 on the BSE. 

Praj Industries' share price: What do analysts say?

Prabhudas Lilladher notes that IndianOil and Praj have been collaborating to facilitate India’s energy transition towards a greener future in the past as well. They believe this development is positive for Praj, and SAF, CBG, and biodiesel will be the next growth drivers for Praj in the medium to long run.

"We believe PRJ is well poised to benefit from upcoming opportunities given its strong leadership in domestic ethanol plants (nearly 50 per cent market share), global presence, and focus on future-ready technologies like 2G plants, Compressed biogas (CBG), ECTA, SAF, etc.," the brokerage added.

The stock is currently trading at a price-to-earnings multiple (PE) of 24.4x/22.6x FY24/25E. "We have a Buy rating on the stock with a TP of Rs 475," it added.

Over the last 12 months, the share price of the company has slipped 5.66 per cent (from July 7, 2022, to July 6, 2023 closing level), Trendlyne data show. 

About Praj Industries

Praj Industries is India's leading industrial biotech company. Over the past four decades, Praj has focused on the environment, energy, and agri-process industries, with over 1,000 customer references spanning over 100 countries across all five continents, the company claims. BioMobilityTM and BioPrismTM are the mainstays of Praj's contribution to the global bioeconomy.