The Hindu Business Line : Joint venture – growth opportunity for Praj

The formation of a joint venture between Praj Industries and Brazil-based Jaragua Equipamentos Industriais (an engineering, procurement, construction and manufacturing company) appears in line with the management’s strategy to establish presence in the growing ethanol market in Brazil.

Praj had earlier this year announced its intention to enter the Brazilian market. This venture, which will provide end-to-end solutions for ethanol production from sugarcane juice, is likely to present a huge growth opportunity for Praj.

Strategic move

Praj’s strategic entry through the joint venture route may help it tap the business opportunities in Brazil’s ethanol market to its advantage. The joint venture appears both strategic and significant; Praj will hold 54 per cent stake in Praj Jaragua Bioenergia S.A, the joint venture company, while Jaragua will hold the rest.

The venture presents Praj an opportunity to benefit from the growing Brazilian biofuels market (estimated to double in production by 2010). Having already set up office in Brazil, the joint venture with Jaragua is likely to seal its entry into the market. Further, benefits by way of synergies of resources and established market presence of its partner may also help Praj.

New Market

The joint venture route may also offer Praj a better on-ground presence to serve its Brazilian customers with an improved local understanding.

It is also expected to considerably reduce the time-to-market of Praj’s products, which is a positive. Praj’s established presence in the US and Europe inspires confidence in its ability to gain a foothold in a new market. The company had earlier acquired a US-based engineering company and forged a venture with Netherlands-based Aker Kvaerner to gain entry into the respective markets.

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