Praj Industries: Stock’s Historic Decline and Future Outlook

Pune – Praj Industries, a leading company in ethanol technology and engineering, is currently facing significant financial challenges. Once known as a ‘multibagger’ stock, it has experienced a decline of over 50% in 2025, marking its worst annual performance since 2008.

Key Reasons for the Decline and Financial Impact: The company’s recently announced June quarter results have been identified as the primary cause of this sharp decline. In this quarter, the company’s consolidated net profit saw a massive 94% drop, falling to just ₹5.34 crore compared to ₹84.18 crore in the same period last year. Several key factors contributed to this significant fall:

• Rising Costs and Decline in Domestic Business: Increased production costs and a slowdown in the domestic ethanol business were major contributors to the reduced profit.
• Project Execution Delays: Delays in project execution and limited liquidity at customers’ end negatively impacted the company’s earnings.
• Policy Uncertainty: Domestic demand remained sluggish due to policy uncertainty beyond the current 20% ethanol blending target and ambiguity regarding the timeline for the new EBP mandate. This has led to limited new ‘greenfield’ opportunities for the company.
• Pressure on Producers: Ethanol producers, especially sugar mills, continued to face margin pressures due to rising production costs and the absence of price revisions. This has dampened their investment appetite.
• Burden of Mangalore Project: The company’s Mangalore project has become a significant financial burden due to execution delays. US tariffs on Indian exports are also affecting the commencement of these projects.
• Decreased Order Bookings: Despite a healthy pipeline of inquiries for 1G ethanol from the Americas, order bookings remained low due to delayed decision-making processes.
• Revenue and Order Backlog: The company’s revenue dropped by 8.4% to ₹640 crore. While quarterly order intake was lower at ₹795 crore, and the overall order backlog remained robust at ₹4,448 crore, the slow pace of revenue recognition is putting pressure on FY26 growth.

Brokerage Perspectives: Given these challenges, many brokerage firms have cut Praj Industries’ stock ‘target price,’ but their outlook on its long-term potential remains mixed:

• Centrum Broking remains positive about Praj Industries’ long-term prospects. They cite the company’s market leadership in domestic ethanol plant equipment, strong R&D capabilities, and unique pure-play exposure to the bioenergy value chain as factors that will enable the company to benefit from increasing ethanol adoption. While maintaining an ‘ADD’ rating, they reduced the target price from ₹590 to ₹460.
• Prabhudas Lilladher noted that the company’s diversification into CBG (Compressed Biogas), bio-bitumen, biopolymers, and SAF (Sustainable Aviation Fuel) is gaining traction, opening up new avenues for growth. However, due to near-term challenges, they downgraded the stock to ‘Hold’ from ‘Buy’ and lowered the target price from ₹545 to ₹393.

The stock’s decline saw Praj Industries’ shares fall 9% in July and 14% in August, marking the second consecutive monthly drop. In summary, while Praj Industries is currently navigating short-term financial and policy challenges, analysts believe its fundamental strengths and diversification in the bioenergy sector offer strong potential for long-term growth.