Pune: Bioprocesses and engineering firm Praj Industries Ltd has set its sights on Brazil for an acquisition, days after Tata Sons Ltd, the holding company of the Tata group, picked up 7.03% stake in the company for Rs336.8 crore.
Praj executive chairman Pramod Chaudhari said a final decision on an acquisition will be taken before March. Brazil is the world’s second largest ethanol producer. Chaudhari said Praj has been scouting for an acquisition in Brazil for the past three months and one potential deal was called off recently as it became too expensive.
“Brazil will be a key driver for growth for Praj in next two years,” he said. “We have to decide whether we want to limit our presence to part of the ethanol value chain or go the entire length and then decide what company and of what size we will acquire. Ethanol is here to stay and I want to take this company to the No.1 slot in that business.”
Ethanol production in Brazil is tipped to grow from 18 billion litres currently to 30 billion litres in 2010 and touch 50 billion litres over the following decade.
Praj has recently got the approval of its board to raise up to $125 million (Rs496.25 crore). In 2006-07, it posted a net profit of Rs86.6 crore on revenues of Rs630 crore.
Praj shares are trading at Rs236.85 on the Bombay Stock Exchange, off their record high of Rs268 in June, giving the company a market capitalization of about Rs4,300 crore. Venture capitalist Vinod Khosla holds 8.9% stake in the company and independent investor Rakesh Jhunjhunwala owns 8.2%. The Chaudhari family now holds a 19.14% stake in the company.
The Tata Sons investment is in line with group company Tata Chemicals’ plans to manufacture biodiesel. “At the moment, it (Tata stake) is a simple financial investment and we have not gotten into it with any pre conceived ideas. We will wait to see how it will shape up in the future,” Chaudhri said.