In the GenNext world, waste of the past is best of the present. Otherwise, how can one believe that a Punjab-based company will be depending on rice husk to power its new power generation plants.
The story from Lakshmi Energy and Foods Ltd - previously Lakshmi Overseas - is a simple case of adjusting with the changing times. As part of the mega-plan for jumping on to the power generation bandwagon, Lakshmi Overseas, one of the largest food grain processing companies in India, changed its name to Lakshmi Energy and Foods Ltd.
For Lakshmi Energy, the new name reflects the business it is going to be in along with being India's largest producers of non-basmati varieties of rice. The new business comprises of generating electricity.
Typically, the fact that a food processor is getting into the business of power generation scares analysts and investors alike. The power generation sector is saddled with huge capital costs, a long gestation period and tremendous policy bottlenecks.
When unrelated players get into this area, the investor community perceives this as a negative. However, this might not be the case for Lakshmi Energy.
According to company sources and reports on its website, the firm will be creating energy hubs at different locations in Punjab, using the by-product husk as the fuel instead of the conventional fuel coal.
Coal needs to be hauled over several of miles to reach power plants of northern India. This captive biomass would become a new avenue for electricity generation. The husk that was wasted until now will now be put to good use.
Experts feel that husk has high calorific value. Lakshmi Energy is initially setting up a 30 MW power plant. The power plant is expected to be the first of the four plants the company will install. The total generation capacity is expected to be 105 MW in 3 to 4 years.
According to the company website, these will add to the strong revenue growth already demonstrated. Revenues have doubled in the last three years in reckoning (FY 2004 to FY 2006). Emphasis on branding and widening of the product portfolio to de-oiled cakes and rice bran oil has seen the good work being translated in the current year as well.
Revenues for the first nine months ended December 2006 (FY 2007) stood at Rs 491 crore (Rs 4.91 billion), a 20 per cent jump over the same period in the previous year. The net profit, however, has doubled to Rs 70.04 crore (Rs 700.4 million) in the first nine months of FY 2007, overt the same period last year.
The earnings, analysts expect, will be stronger this year. The management also intends to declare another dividend before the year closes out.
