Firstly, I don’t share a different opinion in terms of valuation as to what you said. That’s why I mentioned one has to be incredibly patient. By the magnitude of patience, I probably would take a longer view than 5-7 years. Of course there are opportunity costs attached. But beyond the definite cash generating bit, the other business is still in stealth mode. And it’ll be while before anything meaningful happens. I say that because that’s where we are globally. R&D money flowing in but yet to reach scale up in these newer techs.
For eg, I track a European company in bioeconomy space. They have been working on a product with a multi-billion dollar replacement potential. Have been doing it for many years. And they are yet to scale up. All at the cost of equity infusions, grants and pledges by customers who want to decarbonise. So this space is hard to value but I would want to keep my one leg in.
On the opex revenues bit, I don’t have a reason to believe the expectations should be very high until the newer gen scales. Secondly, another source for it would be where Praj has a product or systems IP. Which it could out-license. It’s not gonna happen any time soon.
The competency in Biopharma and Fermentation API synthesis is quite different. Their expertise will be more towards the API synthesis side because of their legacy of working with microbial fermentation.
I have actually asked them in the past of their right to win in Biopharma competing with global leaders such as Thermo and Sartorius. And they hinted that their expertise is in Hi-purity water systems. So, reading more into it, I would argue that it won’t be worth betting them getting very deep into Biologics value chain. Because the global giants offer much more than just equipment. These are entire platforms along with cell lines and media. So there’s difference in expression systems, media, fermenters as well as monitoring tools and software.
So, I would at least from where we stand right now, put Biomaterials or positives on the fuel side much above the rest. Because that’s where their competencies lie. When enquired about CBG on the call, they had indicated about being cautious because these are gas-based systems and Praj has had liquid-based expertise. So, there’s no definitive over there as well.
But I think there would be enough opportunities in the biomaterials space going forward such as 2G space because of a very beneficial use of ligno-waste. Rest is wait and watch.