Ganesha Ecosphe.

Ganesha Ecosphere experienced a challenging Q1 FY26, with raw material costs swelling to 70% of revenue, up from 64% in the previous quarter. This was primarily driven by unprecedented^🌐 pet bottle scrap prices reaching INR55-56 per kg in April-May 2025. The legacy RPSF and yarn business saw production levels drop to 95% from 99%, and the rPET granule business's production and sales volume decreased by approximately 25%. These factors, coupled with overcapacity and suppressed demand in user industries, significantly impacted profitability.

Management noted a positive shift in the current quarter (Q2 FY26), with PET bottle scrap prices normalizing to INR41-44 per kg, which is expected to significantly improve gross margins. Demand is also showing signs of improvement with the onset of the festive season, and orders for September and October deliveries have picked up significantly. The ease in price differential between virgin and recycled granules has led to a significant increase in rPET granule sales volume and production run rates.

The MoEF's draft notification allows for a carryover of shortfalls in mandatory rPET usage for FY25-26 over the next three years, but this will be over and above future targets. The current approved rPET capacity across the industry stands at approximately 1.67 lakh tons, easing concerns about material availability. Management highlighted a significant mismatch between announced capacities (e.g., 3.5 lakh tons for next 2 years) and actual on-ground capacity, emphasizing the importance of high-quality rPET availability.

The company's brownfield expansion of 22,500 tons at Warangal is operational as per schedule. Ganesha Ecosphere has announced a total capacity addition of 90,000 tons by FY27, comprising a mix of brownfield and greenfield projects. The INR125 crores capex for Warangal is being funded entirely through internal accruals and cash balances, including INR104 crores from promoter warrant conversion in July, with no new debt being taken for this expansion.

Ganesha Ecosphere aims to achieve approximately 30% market share in the recycling PET granules sector over the next five years. Despite anticipated competition, management believes the company's operational efficiency in sourcing, operations, sales, and volumes will provide a 'competitive advantage.' They expect margins to be maintained for the next 3-4 years until the demand-supply gap closes and the industry reaches a 60% utilization mark.

For the full fiscal year FY25-26, Ganesha Ecosphere is guiding for a total revenue of approximately INR1,500 crores. Management expressed confidence in surpassing both the revenue and bottom line numbers achieved in FY24-25. The targeted revenue mix for FY26-27 is approximately 35% from the subsidiary (rPET granules) and 65% from the legacy business. Export revenue is expected to increase to 15-20% of total revenue for FY26, up from 12% in the last quarter and 9% in the previous year.

The company's current debt stands at around INR550 crores, with an average cost of 8.5%. Management projects a peak debt level of approximately INR700 crores for FY27 and FY28. Following the planned 90,000 tons capacity addition, which will bring total capacity to 132,000 tons from the current 42,000 tons, the company intends to finalize plans for further capacity expansion, acknowledging that such additions typically require 2-2.5 years for implementation.