Ganesha Ecosphere Limited
Q1 FY26
Call date · August 14, 2025
1 · Management Commentary
Key Positives
- rPET granule business maintained revenue and margins despite industry headwinds.
- PET bottle scrap prices have normalized (INR41–44/kg), improving gross margins.
- Export orders for RPSF from Europe have increased, aided by rupee depreciation.
- Sale visibility for rPET granules is strong through December, with improved uptakes from brand owners.
- Promoters infused INR104 crores via equity warrant conversion in July.
- Brownfield expansion of 22,500 tons at Warangal on schedule; new FSSAI licenses broaden industry capacity.
Key Negatives
- Q1 was the lowest quarter for RPSF and yarn business in several years due to raw material price spikes and demand slowdown.
- PET bottle scrap prices reached unprecedented INR55–56/kg in April–May, with limited ability to pass on costs.
- Overcapacity and suppressed demand in user industries (yarn spinning, non-woven textiles) due to cheaper imports and US tariff uncertainty.
- rPET granule production and sales dropped ~25% QoQ; beverage industry demand hit by early monsoon.
- rPET granules traded at a 35–40% premium to virgin due to high feedstock costs and falling crude prices.
Forward Guidance
- Capex: Brownfield expansion at Warangal (22,500 tons) operational as scheduled; total 90,000 tons capacity addition (brownfield + greenfield) by FY27, taking total granule capacity to 132,000 tons.
- New products/segments: Continued focus on rPET granules and value-added products.
- Client wins/losses: Strong export orders for RPSF; improved order book for rPET granules through December.
- Revenue/margin outlook: Confident of surpassing FY25 revenue and bottom line; FY26 revenue guidance at INR1,500 crores.
- Strategic initiatives: Realigned business strategy to address new challenges; maintaining long-term target of 30% market share in rPET granules.
2 · Q&A Highlights
Q 1 (Composite): How is the company managing raw material sourcing and integration for new capacities, especially with the Race Eco Chain JV and Orissa greenfield project?
A (Management):
• Orissa plant will be fully integrated with both washing and granulation lines; JV washing lines provide primary wash, with food-grade re-washing at the main plant.
Q 2 (Composite): What is the impact of EPR regulation changes and capacity approvals on competition, demand, and realizations?
A (Management):
• EPR requirements have not shifted, only shortfall carryforward allowed for FY26; industry capacity creation is ongoing but high-quality rPET supply remains limited; long-term fundamentals remain strong.
Q 3 (Composite): What is the company’s long-term market share and capacity expansion plan in rPET granules?
A (Management):
• Targeting 30% market share in rPET granules over 5 years; 90,000 tons capacity addition by FY27; further expansion to be planned post current phase.
Q 4 (Composite): How sustainable are current margins given industry nascence and upcoming supply additions?
A (Management):
• Margins expected to be maintained for next 3–4 years due to demand-supply gap; margin pressure may emerge as industry matures and supply increases.
Q 5 (Composite): What is the current debt level, cost of debt, and capex funding plan?
A (Management):
• Current debt ~INR550 crores at 8.5% average cost; INR125 crores Warangal capex funded via internal accruals and INR104 crores promoter infusion; peak debt expected at INR700 crores by FY27–28.
Q 6 (Composite): What is the revenue and product mix outlook for FY26–27?
A (Management):
• Revenue mix: ~35% subsidiary (rPET granules), ~65% legacy business (mainly recycled PSF); major contributor in FY26 will be recycled PSF.
Q 7 (Composite): What is the export outlook and impact of tariffs/regulations on export markets?
A (Management):
• rPET flakes/granules currently exempt from US tariffs; European SUPD regulation restricts recognition of non-EU waste, impacting Indian PET flake exports; export revenue was 12% in Q1 (vs 9% last year), expected to rise to 15–20% in FY26.
Q 8 (Composite): What is the guidance for FY26 revenue and margins?
A (Management):
• FY26 revenue guidance at INR1,500 crores; confident of surpassing FY25 revenue and bottom line; margin improvement expected as raw material prices normalize.
3 · Other Key Numbers
- PET bottle scrap prices peaked at INR55–56/kg (April–May), now normalized to INR41–44/kg.
- Raw material cost rose to 70% of revenue (vs 64% last quarter).
- Production levels at 95% (vs 99% previous quarter).
- rPET granule production/sales dropped ~25% QoQ in Q1.
- rPET granules traded at 35–40% premium to virgin in Q1; premium now reduced by ~20%.
- Approved rPET industry capacity: ~1.5–1.67 lakh tons.
- Estimated rPET demand for FY26: ~2 lakh tons (organized sector).
- Promoter infusion: INR104 crores via equity warrants (July 2025).
- Warangal unit: 2 lines FSSAI and brand approved; 3rd line FSSAI approved, brand approval pending.
- Current debt: ~INR550 crores; peak debt expected at INR700 crores by FY27–28.
- Export revenue: 12% in Q1 FY26 (9% in FY25); FY26 estimate 15–20%.
- FY26 revenue guidance: INR1,500 crores.
- Targeted total rPET granule capacity post-expansion: 132,000 tons by FY27.