Wednesday, November 19, 2008

Bio-Diesel & Its Future Prospect

The importance of Bio-fuel (bio-diesel & ethanol) is increasing rapidly with growing anxiety over crude oil supply and fast climatic changes. Bio-diesel is an environment friendly fuel prepared from edible and non-edible vegetable oils. Blending of Bio-diesel with petro-diesel has tremendous positive social, ecological and economic impact on the society. If India wants to become a Developed Nation by 2020, as envisaged by former President, Dr. A P J Abdul Kalam, we need to become self sufficient in the energy sector.Global Energy Scenario: - Petroleum products constitute a major source of energy needs of the world. Energy is one of the major inputs for the economic development of any country. According to conventional wisdom, the world is likely to run out of petroleum in the near future. Besides, current patterns of energy production and use have negative impact on the environment. At the same time, there is a need, especially in developing countries, for higher levels of energy supply and use for economic development. This has generated renewed interest in bio-fuels.
Rudolph Diesel (1858-1913) had famously said, “The use of vegetable oils for engine fuel may seem insignificant today. But such oils may become in course of time as important as petroleum and coal tar products of the present time” -.Needless to say, his words have come true.Indian Prospects: -Oil constitutes over 35% of the primary energy consumption in India. It is expected that this would rise both in terms of absolute amount and proportion. The International Energy Outlook (IEO) has projected that India will consume over 5 million barrels of oil a day by 2030; more than double its current consumption. In the light of the above, Government of India is expected to announce its National Bio-fuel policy soon. The policy is expected to lay special emphasis on bio-diesel as diesel constitutes a major portion of our petroleum consumption.
Bio-diesel can be manufactured from both edible & non-edible oilseeds through trans-esterification. However the demand for edible oil exceeds supply, therefore Government has decided to use non-edible oilseeds as bio-diesel feedstock. Jatropha and Karanj have been found to be most suitable crops in the Indian conditions. India plans to replace around 5% of its current 40 million tonnes of annual diesel consumption with bio-diesel within five years. This has opened an era of opportunity for entrepreneurs and corporates. The Planning Commission has suggested that, corporates should be given tax cuts to adopt contract farming of Jatropha and Karanj in private wastelands. It has further recommended that Jatropha and Karanj cultivation should be covered under NREGA.
Thus we can safely presume Bio-diesel sector has a bright future.

Market Opportunity for Solar Power

Globally, energy is fast emerging as a critical issue, especially as existing power generation options have limitations in terms of growth potential and long-term sustenance. With the Sun supplying 10,000 times the amount of energy needed every year by Earth, and with technological breakthroughs fast lowering harnessing and distribution costs, solar power is fast emerging as the most viable and eco-friendly power generation option for tomorrow—with no moving parts, no noise and zero emissions.
Solar Market grew by 30% over in the last 18 years. In Year 2006, the global market for PV energy was 2 GW, grew by 41% compared to the previous year. Market is projected to grow from $15.6 Billion in 2006 to $69.3 Billion by 2015. Further California Solar Initiative should add another incremental $13.2 Billion cumulatively.
The PV space is expected to grow five-fold to a global market size of Rs 300,000 crore ($70 billion) by Year 2015 as per Clean Edge Energy research. As the group is one of the early entrants in this space, and having exposure to domestic and international markets since 1994, Saptashva is well-positioned to leverage this explosive growth curve.
UBS’s global demand estimate is for solar electricity to grow from 5GW in 2008 to 22GW by 2012 (a 46% CAGR). It expects Spain, Italy, and France to increase to 35% by 2012 (up from 27% in 2007) of the global market and drive solar growth in the near term. Its estimate for global solar demand in 2010 is 10GW, which is the base case scenario. The aggressive case assumes faster adoption of solar PV in key growth markets of Spain and the US, with the approval of higher feed-in tariffs in Spain and passage of an energy bill in the US, which includes the extension of Solar Investment Tax Credits with removal of the residential cap and utility exemption.
Given the uncertainty of solar in the US market in 2009 and 2010, UBS believes it is more prudent to assume the conservative scenario. However, if the US Energy Bill passes with the solar investment tax credits included, UBS believes the more likely scenario would be closer to its aggressive case of 13GW by 2010. The conservative scenario assumes a five-year CAGR of 30%, resulting in 5.5GW by 2010, and the aggressive scenario assumes a five-year CAGR of 55%, resulting in 13GW in 2010. The conservative scenario is based on sustaining the 2002-07 solar CAGR of 30%. Global solar demand reached 2GW in 2006, and UBS believes demand could grow by 70% in 2007 to reach 3.4GW lead by demand growth in Spain and Germany. It estimates that global demand will grow at a steady rate above 40% year over year until 2011, as solar PV generated electricity cost approaches grid electricity in regions with high retail electricity rates and high solar irradiance.

XL Telecom- Multi-Multi bagger stock

XL Telecom & Energy has transformed itself from a low margin Telecom company by diversifying substantially into the high margin business of Solar Photo Voltaic Modules (SPV). It has a order book of around 2.2 billion in Solar Photo Voltaic divisions and has secured orders for the supply of Fuel Ethanol from the oil companies.Buy XL Telecom & Energy at Current Market Price of Rs 60for a 24 month target of Rs 1800.This company has transformed itself from a low margin Telecom company by diversifying substantially into the high margin business of Solar Photo Voltaic Modules (SPV). It has a order book of around 2.2 billion in Solar Photo Voltaic divisions and has secured orders for the supply of Fuel Ethanol from the oil companies. For the period 2007-2008 barring unforseen circumstances the company should post a PAT of approximately Rs 45 crores on an equity of Rs 14.5 crores. For 2008-2009 barring unforseen circumstances the company should close with a turnover of Rs 1292 crores and PAT of Rs 155 crores. By then the equity would be Rs 26 crores. Thus the expected EPS would be Rs 60 approximately. It is expected for 2009-2010 that turnover would be approximately Rs 1645 crores yielding a PAT of Rs 222 crores which will result an EPS of 85.This Share therefore has the potential to touch Rs 1800 within the next 24 months.Technical View: Stock has very strong support around 60region and minor resistance at INR 55.00

Praj Industries- Giant in making in Bio-Diesel segment

Praj Industries is the world's single largest supplier of molasses based distillery technology, plant and equipment.

Demand: The need for alternative energy sources like bio-fuels, ethanol etc., other than oil, considering the huge volatility in the crude oil prices. World ethanol demand is slated to double in the next four years from 40 billion to 80 billion litres. Praj, which gets 50 per cent of its revenues from global markets, is seen as an emerging player. The government’s decision to blend ethanol with fuel has given a major boost to Praj’s business.

First-mover advantage & Barriers to Entry: Praj has "finger-printed" almost 2,500 varieties of molasses from around the world at its research laboratory. Bio-processes are not easy to master. It requires thorough knowledge of raw materials and the ability to offer flexible solutions for commercial acceptance. New players can't easily get in.

Investors: The Company has caught the attention of global and Indian investors. Vinod Khosla, the Silicon Valley-based billionaire who has recently climbed onto the ethanol bandwagon, has bought a 10 per cent stake for Rs 117.1 crore. Khosla’s interest in Praj is primarily because of its R&D in different feedstock. That was also one of the reasons why Virginia- based Delta-T tried unsuccessfully in 2002 to acquire a stake in Praj. Top broker-investor Rakesh Jhunjhunwala owns 7 per cent. His logic: “Ethanol is hot globally and this company has the potential to become a global leader.”

Competitors: The main competitor of Praj in Fuel Ethanol plants would be Alfa Laval. Praj officials expect other players to enter the field because of the huge opportunity available.

Some more facts:Built more than 50 plants worldwide in the past four years.Has customers in over 30 countries, and continues to invest heavily in R&D.Captured a 6 per cent global market share despite stiff competition from bigger rivals. Praj aims to double its market share in a few years.The company did not neglect the domestic market and has established a 60 per cent market share within India.Debt-free.

Risks: Global technology developments could easily undermine Praj’s traditional strength — its research.

Conclusion: A good Long term investment. Tatget INR 350 by Dec'2009
Short term target INR 100 by Jan'2009



As per Sep 08 share holding pattern of the company, Rakesh Jhunjhunwala is holding 11,477,642 shares and Rekha Jhunjhunwala is holding 4,048,000 shares of Praj Industries