Samir Somaiya, CMD, Godavari Biorefineries Ltd. spoke exclusively to Pravin Prashant, Editor, Indian Chemical News on expansion plans, revenue forecast, Capex plan, market share in Ethanol blending, R&D and sustainability. Excerpts of the interview:
What's your expansion plan for the next 2 years?
We have just completed an expansion plan in our Ethanol capacity. We have spent Rs. 70 crore and have expanded our Ethanol capacity from 200,000 liters per day to 320,000 liters per day last year and 400,000 liter per day in past few months. So, we have effectively doubled our daily capacity of Ethanol. I think in the next couple of years we would like to spend more money further expanding our Ethanol capacity and also enter into specialty chemicals based on Ethanol.
Two years ago we put 38 million liters into the Ethanol program and in the coming year we expect to deliver 70 million liters and we would like to create an Ethanol capacity in such that it can go to 100 million liters to deliver it into Ethanol production capacity. We make chemicals that go into pharma intermediates and agro intermediates so we have lined up couples of new chemistries that we want to invest in the future so we are planning to expand our footprint in specialty chemicals as well.
I would say 90% of what we produce probably will go under Ethanol blending and 10 to 15 % of production would continue to be catered to customers of ours which we had over the last many years.
What's your revenue forecast for FY 2020-21?
We are anticipating a turnover of Rs. 1,500 crore in 2021. If you look into the past, sugar used to be a large percentage of top line mix. Going forward we anticipate sugar, Ethanol and chemicals will contribute one third each in terms of revenue. Sugar would be about Rs. 400 - 500 crore, Biofuel or Ethanol will be Rs. 400 - 500 crore and Chemicals will be Rs. 500 crore. That's how we are rebalancing our portfolio and then going to grow Chemicals and Ethanol space.
What is Godavari Biorefineries doing so that its chemical division grows to one third?
I look at Sugarcane and agriculture as a great feedstock for food, fuels and specialties and in specialties we look at the sugar and fibers as the source. So going forward, we would further see the use of Ethanol also for chemical making specialty chemicals and bagasse also to be used making specialty chemicals which go into the market. In the past one year and coming year and a half you will see Ethanol portion expand because that’s where our focus has been and post that we would definitely see emphasis on chemistry and chemical coming out from bagasse and Ethanol.
Are you planning to have new factories under your expansion plan?
Our current aim is to do expansion in both the current locations. We think that we have a very good base in terms of infrastructure, people and it is easier to do the ground field expansion right now. So this is how we are expecting to go forward from the logistical standpoint and from the human standpoint and this is where we will grow our business.
Are you looking for any Capex expansion in the next two years?
We would be looking at those currently under preparation but we will definitely do a Capex expansion and we would look at expansion in Ethanol and in chemistry and renewable chemistry which we are talking about.
What is your market share in Ethanol blending and how do you see the biorefineries policy of the government of India?
I think the government policy in biofuels is very good. The previous policies used to look at molasses or Ethanol as a bioproduct of the sugar industry. The current policy mixes Ethanol and sugar industry as substitutes and they give optionality to de risk the business as well as to de risk the farming sector so I think the policy is very good.
India has to look at sugarcane surplus as an asset and this policy recognises it as such. So this surplus sugarcane with the policy will start converting to Ethanol and I believe in the next couple of years we will see local Ethanol meeting almost 20% of the gasoline needs or the petrol blending needs all over the country.
I think the policy is very good and as a company Godavari Biorefineries is actually diverting more than 40% of its sugar and cane to Ethanol so we have gone almost towards the Brazilian model where companies in Brazil have and optionality towards almost 50% of its sugars where they can swing between sugar and Ethanol and this is what we have created in our company.
More than 3 billion litres have been bid and we will be around 17 million litres so market share is actually small but I would like to say we have pioneered the use of sugarcane juice and syrup for Ethanol. This is a new policy by the government of India earlier it was molasses and they have also allowed sugarcane juice and syrup and I would like to say that we have been working on one of the first few to pioneer the use of this to make Ethanol. So in that sense we have done a good job.
How big is the biorefineries blending market in India?
This coming year we should blend about 7-8% of gasoline or petrol with Ethanol and the government wants to take it to 20% that’s how big it is. The nice thing about Ethanol is it's a low carbon greenhouse gas or climate change mitigating fuel and it drives the rural economy so in terms of rupees, I think they are wanting about 300 crores litres and if you multiply with about Rs. 55 - 60 a litre.
Where do you stand viz a viz other players in the biorefineries blending market?
We would be one of the larger players. The issue is we have one Ethanol based facility and this one Ethanol based facility is at a single point I think we do 400,000 litres per day and it’s among the larger one in the country but there might be others who have 100,000 litres per day and we might have 5 or 6 of them. Our approach as a company is to go deep rather than to do a horizontal experiment. We want to make value out of that stick of cane and we want to go into the de risking approach. We would be amongst the largest.
Do you have inhouse R&D or do you have tie-ups with R&D institutions?
We have a combination of both. We have a very good research lab in New Mumbai and we do a lot of our own research with our scientist and we don’t think we have the answers for everything so we do tie-ups with education institutions with research labs and we think its partnership and collaboration which will take us forward.
Any numbers to the R&D budget which you invest?
More than numbers, it's lots of people. We have 25-30 scientists working on the R&D front and that numbers change year on year. We have accruable research which is a strong point for us. Like all chemical companies we have also launched your own hand sanitizers product called ‘Pavan’.
How has the hand sanitization market done for Godavari Biorefineries?
To be honest in the beginning it was very good but we need to develop a much better B2C marketing capabilities to succeed.
On the sustainability part are you also looking at becoming net zero at some point of time?
Currently, we are measuring our current carbon footprint. We are quite ahead already but definitely our game is to be sustainable even outside the ecosystem which is farming system and sustainability with the company. We were in fact one of the first in India to even get a million dollar to set up a cogeneration plant 20 years ago and at that time cogeneration from Bagasse was not very common in India. We got grants from the USA and to demonstrate how greenhouse gas mitigation plants can be done in the company. Our focus entirely is to be a renewable company with a low carbon footprint.
Anything specific which you are working on sustainability?
I talked about the whole emphasis on sustainable farming and that itself is a big focus on how to make farming more sustainable. I talked about simple issues like extracting potash from ash that itself creates a more circular economy and also creates a different sustainability.
Godavari Biorefineries would be completing 81 years. How do you see this complete journey?
I would love to say that we are ready for the future.
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