Ester Industries Limited — Q3 FY25 earnings call

Call held 7 Feb 2025

Management summary

Ester Industries reported a strong Q3 FY25, with consolidated EBITDA reaching ₹65 crores and PAT turning positive at ₹25 crores, driven by accelerated momentum in both Film and Specialty Polymer segments. The Film business saw improved margins and profitability due to better product mix and exports, while Specialty Polymers achieved strong Y-o-Y growth. The company's JV with Loop Industries is progressing as planned, though the Specialty Polymer revenue target for FY25 might see a slight shortfall.

Highlights

  • Overall business momentum sustained and accelerated, with strong performance in both Film and Specialty Polymer segments.

  • Film business registered solid performance with improved margins and profitability, driven by better product mix and increased exports.

  • Specialty Polymer business achieved strong Y-o-Y growth, with 40% volume increase in Q3 FY25.

  • Consolidated EBITDA for Q3 FY25 turned positive at ₹65 crores, compared to a negative ₹15 crores in Q3 FY24.

  • The joint venture with Loop Industries is progressing according to its established timeline, targeting commercial operations by Q2 Calendar Year 2027.

Concerns

  • The Specialty Polymers revenue target of ₹200 crores for FY25 might be missed by 10-15%.

  • The BOPET film market still faces a demand-supply mismatch of around 12,000-15,000 tons per month, though it is narrowing.

Key financials

  1. Standalone Total Income ₹277 Cr +31.3%YoY
  2. Standalone EBITDA ₹44 Cr
  3. Consolidated EBITDA ₹65 Cr
  4. Consolidated PAT ₹25 Cr

What they filed

Q1 FY27: revenue up 21.5%, net profit up 50.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue298 275 258 279 260 −13%250 −9%256 −1%339 +22%
EBITDA32 42 33 26 11 −66%10 −76%24 −27%32 +23%
Net profit12 19 12 10 -5 −142%-5 −126%4 −67%15 +50%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Specialty Polymers
    785 MT Sales Volume (excl. R-PET)2,610 MT 9M Sales Volume (excl. R-PET)30% EBITDA Margin
  • Film Business
    5% Exports Volume Growth (Consolidated)27% Value-Added Products Share (Consolidated)
  • Ester Filmtech
    ₹90 Cr Revenues₹22 Cr Reported EBITDA6,698 MT Sales Volume

Order book

low confidence
The export business is described as a very recurring kind of business, not tender-driven, leading to repeat business once a product is established with a customer.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹1,400 Cr 40% equity, 60% debt for JV project
    • JV Project Land ₹90 Cr
    • JV Project Plant and Machinery ₹1,000 Cr
    • Extruder in Ester Filmtech Hyderabad
    As far as the funding is concerned, the breakup of $165 million, Saurabh, would you please? You have ready numbers. So, it is $165 million close to Rs. 1,400-1,500 crore. It will be funded through debt and equity. Equity will be 40%. 60% will be debt. And the 40% equity is going to come equally in equal parts from Ester and Loop. So it is going to be Rs. 280 crore each from Ester Industries and Loop. ... So, roughly around Rs. 90 crore is for the land part, and around Rs. 1,000 crore is for the plant and machinery which we are planning in this, and the balance part is your GST and interest during construction etc.
  • Debt Net ₹600 Cr Maturity: Current maturity till March: Rs. 3-4 crore. Next year maturity: Rs. 80-85 crore.
    • Repayment Annual repayment obligation for Ester Filmtech's existing debt ₹50 Cr
    As far as net debt is concerned, it is standing at about Rs.600 crore as on 31st December 24. Consolidated. This is called consolidated Rs.600 crore, including working capital, both for Ester Industries and Ester Filmtech. ... Long term will be about Rs.400 crore and working capital will be about Rs.200 crore. And our current maturity till March, how much is it? ... March Quarter, there is hardly an amount to be paid, Rs.3 to Rs.4 crore. Next year it is Rs.50 plus Rs,35, Rs.80 to Rs.85 crore.
  • M&A Loop Industries Inc. (ELITe JV) Joint venture · Integrated · Consideration ₹[object Object] (mixed)

    To facilitate profitable growth through a groundbreaking and transformative initiative in chemical recycling.

    JV capitalised by Rs. 17 crores, with Rs. 8.50 crores each contributed by Ester and Loop. Total CAPEX for the JV is Rs. 1,400-1,500 crores.

    JV Company, ELITe, has been capitalised by an amount of Rs. 17 crores with Rs. 8.50 crores each contributed as Equity by Ester and Loop. ... So, it is $165 million close to Rs. 1,400-1,500 crore. It will be funded through debt and equity. Equity will be 40%. 60% will be debt. And the 40% equity is going to come equally in equal parts from Ester and Loop. So it is going to be Rs. 280 crore each from Ester Industries and Loop.

Guidance & targets

Revenue

  • Specialty Polymers Revenue Revenue · FY25 · Medium confidence close to ₹200 crore, but 10-15% short

    Previously ₹200 crore → close to ₹200 crore, but 10-15% short

    See on Specialty Polymers, indeed the target was to do Rs. 200 crore top line as we had shared earlier. But right now, given the way 3 quarters have shaped up, we believe that it's going to be quite tough for us to hit that Rs.200 crore top line. And we are looking to come close to it, but I believe that in the end we might end up being 10% to 15% short in the top line target of Rs. 200 crore.

    — Vaibhav Jha

  • Ester Filmtech Revenue Revenue · Current Fiscal · High confidence approximately ₹360 crores
    Our Wholly owned subsidiary, Ester Filmtech generated revenue of Rs. 90 crores with volumes of 6,698 MT during the quarter. We expect the entity to deliver revenues of approximately Rs. 360 crores in current fiscal

    — Vaibhav Jha

  • Ester Filmtech Revenue Revenue · Next Fiscal · High confidence ₹450–₹500 crore
    and Rs.450– Rs.500 crore upon achieving optimal utilization at reasonable prices / margins during next fiscal.

    — Vaibhav Jha

Demand Growth

  • BOPET Film Demand Growth in India Demand Growth · Next Financial Year · High confidence 9% to 10%
    So, that makes us very confident that if we take, say, a growth of 6.5% in the GDP, and multiply it by 1.5x, so 9% to 10% of the growth in demand in India should come because of the natural progression plus whatever growth we get due to the implementation of PWMR would be on top of that.

    — Vaibhav Jha

Commercial Operations

  • JV Commercial Operations Start Commercial Operations · CY27 Q2 · High confidence Second quarter of calendar year 2027
    Our objective is to initiate commercial operations in the second quarter of calendar year 2027.

    — Vaibhav Jha

Profitability

  • Specialty Polymers EBITDA Margin Profitability · Ongoing · High confidence 30%, 33%
    In terms of profitability, we think that the profits are going to remain stable around the EBITDA levels of 30%, 33%.

    — Vaibhav Jha

  • Ester Filmtech EBITDA Margin Profitability · Next Fiscal · High confidence 18% to 20%
    And are we on a sustainable basis will be able to make 18% to 20% EBITDA margin in a Filmtech which we reported in the Q3?

    — Pradeep Rustagi

Volume

  • Specialty Polymers Volume Growth Volume · Next Financial Year · High confidence double-digit growth
    But overall, in terms of understanding the volume growth, it would be safe to say that we are looking at a double-digit growth in specialty polymers.

    — Vaibhav Jha

Capacity Utilization

  • Ester Filmtech Capacity Utilization Increase Capacity Utilization · Going forward · High confidence over 10 percentage point
    We are currently operating at about 55% to 60%. Going forward, we could see an increase of over 10 percentage point in capacity utilization.

    — Pradeep Rustagi

Sales Volume

  • rPET Sales Volume Sales Volume · Q4 FY25 · High confidence 800 to 1,000 tons
    In the fourth quarter, we are expecting rPET sales to be in the range of about 800 to 1,000 tons.

    — Pradeep Rustagi

What to watch in Q4 FY25

Specialty Polymers Revenue Achievement

Next quarter (Q4 FY25 results)
Current Expected to be 10-15% short of ₹200 crore target for FY25
Target Closer to ₹200 crore or clear guidance for FY26

Why it matters

Indicates the company's ability to meet ambitious growth targets in a high-margin segment.

we believe that it's going to be quite tough for us to hit that Rs.200 crore top line. And we are looking to come close to it, but I believe that in the end we might end up being 10% to 15% short in the top line target of Rs. 200 crore.

Risks & concerns

  • Specialty Polymers Revenue Target Miss

    medium

    The FY25 revenue target of ₹200 crores for Specialty Polymers is likely to be missed by 10-15% due to current quarter performance.

    Management acknowledged

  • BOPET Demand-Supply Mismatch

    medium

    An oversupply of 12,000-15,000 tons per month still exists in the BOPET market, though it is narrowing and expected to stabilize.

    Management acknowledged

  • Attrition

    low

    Management stated that recent attrition is not alarming, as departing employees had served for 4-5 years and new opportunities arise.

    Management downplayed

Q&A highlights

7 direct
BOPET Market Demand-Supply Scenario Direct
So, this is making the market more balanced with respect to supply-demand, and therefore, we expect that this recovery should continue and the margins should stabilize, given that the supply and demand are now coming closer to each other. Also, the other thing that we are expecting is from 1st of April, the government is going to implement PWMR rules for flexible packaging and polyester is a substrate where the recycled content can be much higher than the other substrates.

Management provided a detailed outlook on market dynamics, highlighting the narrowing demand-supply gap and the positive impact of upcoming regulatory changes (PWMR rules) on BOPET demand.

Asked by Jatin Damania

Specialty Polymers FY25 Revenue Target Partial
See on Specialty Polymers, indeed the target was to do Rs. 200 crore top line as we had shared earlier. But right now, given the way 3 quarters have shaped up, we believe that it's going to be quite tough for us to hit that Rs.200 crore top line. And we are looking to come close to it, but I believe that in the end we might end up being 10% to 15% short in the top line target of Rs. 200 crore.

Management acknowledged a potential shortfall in achieving the previously guided revenue target for the high-margin Specialty Polymers segment, indicating challenges in execution or market conditions.

Asked by Krushna Parekh

BOPET Gross Spreads and Peak Levels Direct
So, we generally focus on 12-micron commodity films. So, the value addition, which is the difference between selling price and raw material cost, in the December quarter it stood at about Rs. 43 per kg. But the blended VA for the domestic or export market would be much higher for us... The peak that we saw was in, let's say, March '22 quarter or June '22 quarter, it was in the range of Rs. 55 to Rs. 60 kg.

Management provided specific gross spread figures for commodity films and compared current levels to historical peaks, offering insight into the current profitability environment.

Asked by Aditya Vora

Specialty Polymer Q-o-Q Decline and Seasonality Direct
There is definitely a seasonality, because what we see, one of major segments that we target is the Consumer Electronics segment, and the trend over there is that the manufacturing of Consumer Electronics is done in Q2, so most of the sales happen then. And in Q3 because of the holiday season in the global markets, the manufacturing is on a low side... And coming to the lower EBIT margin for the Specialty Polymer. So, what has happened that if you see there is a significant increase in the volume of sales. That is because of the sale of rPET in the domestic market. The margins in rPET that is sold in the domestic market is lower than the normal Specialty Polymer product. So, that has pulled the EBIT down from 33% to 30%.

Management explained the reasons for the quarter-on-quarter decline in Specialty Polymer revenues and margins, attributing it to seasonality in consumer electronics and a higher mix of lower-margin rPET sales.

Asked by Aditya Vora

JV Project Scale, Funding, and Breakup Direct
So, it is $165 million close to Rs. 1,400-1,500 crore. It will be funded through debt and equity. Equity will be 40%. 60% will be debt. And the 40% equity is going to come equally in equal parts from Ester and Loop. So it is going to be Rs. 280 crore each from Ester Industries and Loop. ... So, roughly around Rs. 90 crore is for the land part, and around Rs. 1,000 crore is for the plant and machinery which we are planning in this.

Management provided a detailed breakdown of the large-scale JV project's CAPEX, funding structure, and the specific allocation for land and plant/machinery, addressing concerns about its size.

Asked by Saket Kapoor

Ester Filmtech Debt Repayment Schedule Direct
Coming to the debt of Ester Filmtech, the repayment obligation is Rs. 50 crore each year. So, going by the current outstanding of about, so by 2030 we would be, existing debt will be liquidated.

Management clarified the annual debt repayment commitment for the subsidiary and provided a timeline for the extinguishment of existing debt, offering clarity on future financial obligations.

Asked by Saket Kapoor

Specialty Polymer Product Pipeline Direct
Yes, so there are two strategies that we are taking in specialty polymer. One is farming what we already have, right? Like MB03 has good potential, and we are looking at other chemicals which are there but very small... So, we have the pipeline where the approval processes are on, and we are expecting some gains in the coming quarters. ... sometime during next financial year, we should see those pipelines also materializing.

Management outlined its strategy for the Specialty Polymer segment, focusing on both existing product potential and a strong pipeline of new products with approval processes underway, expected to materialize next fiscal year.

Asked by Jatin Damania

Company Rating Upgrade Direct
We are targeting, we have been in discussion with the rating agencies, and we are talking to them to consider an upgrade, and we have a strong case to pursue that. And basis the December result that we have just declared and the expected performance of March. We expect some improvement in the rating from our rating agency.

Management indicated active engagement with rating agencies for an upgrade, suggesting confidence in improved financial performance and potential for lower cost of debt.

Asked by Saket Kapoor

2 min read 7 chapters

Detailed narrative

Q3 FY25 Performance Overview

Ester Industries reported a strong Q3 FY25, with consolidated EBITDA of ₹65 crores, a significant turnaround from a negative ₹15 crores in Q3 FY24. Consolidated PAT also turned positive at ₹25 crores, compared to a loss of ₹45 crores in the prior year. Standalone total income grew 31% YoY to ₹277 crores, driven by robust performance across both Film and Specialty Polymer businesses.

Film Business Resurgence and Product Mix

The Film business demonstrated a strong resurgence, achieving margin enhancement and improved profitability in Q3 FY25. This was primarily due to a better product and market mix, with increased exports of high-margin value-added products. The share of value-added products on a consolidated basis rose to 27% in Q3 FY25, up from 16% in Q3 FY24, contributing to overall better profitability.

Specialty Polymer Segment Growth and Outlook

The Specialty Polymer business registered strong Y-o-Y growth, with sales volume (excluding R-PET) increasing by 40% to 785 MT in Q3 FY25. For the nine months, volume grew 55% to 2,610 MT. While the FY25 revenue target of ₹200 crores might see a 10-15% shortfall, management expects to maintain EBITDA margins of 30-33% and achieve double-digit volume growth in the next fiscal year.

Ester Filmtech Performance and Future Plans

The wholly-owned subsidiary, Ester Filmtech, generated revenues of ₹90 crores in Q3 FY25, with an EBITDA of ₹22 crores. The company expects Ester Filmtech to achieve revenues of approximately ₹360 crores in the current fiscal and ₹450-500 crores in the next fiscal year upon optimal utilization. An extruder is planned for commissioning by June/July 2025 to convert PET bottle flakes into granules, supporting PCR content requirements.

Loop Industries JV Progress and Funding

The joint venture with Loop Industries Inc. (ELITe) is progressing as per schedule, with commercial operations targeted for the second quarter of calendar year 2027. The total CAPEX for the JV is estimated at ₹1,400-1,500 crores, funded by 40% equity and 60% debt. Ester and Loop have each contributed ₹8.5 crores in equity, with Ester having raised ₹175 crores via share warrants, of which 25% has been received.

BOPET Market Dynamics and Regulatory Tailwinds

The BOPET market is expected to see strong demand growth of 9-10% in the next fiscal year, driven by natural growth (1.5x GDP growth) and the implementation of Plastic Waste Management Rules (PWMR) from April 1, 2025. These rules mandate 10% recycled content in flexible packaging, which is anticipated to boost demand for polyester film and help narrow the existing demand-supply mismatch of 12,000-15,000 tons per month.

Debt Profile and Rating Outlook

Consolidated net debt stood at ₹600 crores as of December 31, 2024, with long-term borrowing at ₹400 crores. Ester Industries holds an A- rating, and Ester Filmtech a Triple B. Management is in discussions with rating agencies for a potential upgrade, citing strong Q3 results and expected future performance. Ester Filmtech has annual debt repayments of ₹50 crores, with existing debt projected to be extinguished by 2030.

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