Ganesha Ecosphere Limited — Q1 FY26 earnings call

Call held 14 Aug 2025

Management summary

Ganesha Ecosphere faced a challenging Q1 FY26 due to significant raw material price inflation and suppressed demand, impacting both legacy and rPET granule businesses. However, management expressed optimism for Q2 FY26 and beyond, citing normalizing raw material costs, improving demand, and strategic capacity expansions. The company remains confident in its long-term market share goals and ability to surpass previous fiscal year's financial performance.

Highlights

  • Q1 FY26 was challenging due to a spike in raw material prices, severely impacting the legacy RPSF and yarn business.

  • Raw material costs swelled to 70% of revenue in Q1 FY26, up from 64% in the previous quarter.

  • Pet bottle scrap prices, a key feedstock, reached an unprecedented INR55-56 per kg during April-May 2025.

  • Production levels for the legacy business decreased to 95% from 99% in the last quarter.

  • The rPET granule business experienced a ~25% drop in production and sales volume from the last quarter.

  • Promoters infused INR104 crores in July through equity warrant conversion, strengthening the company's financial position.

  • Management anticipates PET bottle scrap prices to normalize to INR41-44 per kg in Q2 FY26, leading to significant gross margin improvement.

  • Guidance for FY25-26 revenue is approximately INR1,500 crores, with confidence in surpassing FY24-25 revenue and bottom line figures.

Concerns

  • Raw material price volatility (PET bottle scrap)

Key financials

  1. Raw Material Cost as % of Revenue 70%
  2. Raw Material Cost as % of Revenue (Previous Quarter) 64%
  3. Current Debt ₹550 Cr
  4. Average Cost of Debt 8.5%
  5. Promoter Infusion (July) ₹104 Cr
  6. Export Revenue (Last Quarter) 12%
  7. Export Revenue (Previous Year) 9%

What they filed

Q1 FY27: revenue up 25.8%, net profit up 163.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue387 398 344 337 363 −6%357 −10%424 +23%424 +26%
EBITDA55 57 51 36 22 −60%31 −46%52 +2%60 +67%
Net profit27 30 24 11 0 −100%5 −83%23 −4%29 +164%
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.

Guidance & targets

Market Share

  • Market Share in Recycling PET Granules Sector Market Share · Next 5 years · High confidence ~30%
    Yes. So for our long-term vision as per our long-term vision, we are looking for having around 30% of the market share in the recycling pet granules sector. So over next 5 years, our target is intact.

    — Gopal Agarwal, CFO

Capacity

  • Approved rPET Capacity (Industry) Capacity · Current · High confidence ~1.67 lakh tons
    With new approvals in place, the current approved capacity now stands to around 1.67 lakh tons and thus easing the fear of packaging industry about the availability of required volume of rPET material for complying to the regulatory guidelines.

    — Yash Sharma, Director, Ganesha Ecopet

Capacity Expansion

  • Brownfield Expansion at Warangal Capacity Expansion · As per schedule (operational) · High confidence 22,500 tons
    Our brownfield expansion of 22,500 tons at Warangal will be operational as per schedule.

    — Yash Sharma, Director, Ganesha Ecopet

Revenue

  • Total Revenue Revenue · FY25-26 · Medium confidence ~INR1,500 crores
    So as of now, we are giving the guidance of about INR1,500 crores in view of the present circumstances and the situation prevailing.

    — Gopal Agarwal, CFO

Profitability

  • Surpassing FY24-25 Bottom Line Profitability · FY25-26 · High confidence Surpass FY24-25 numbers
    We are confident in surpassing the revenue and the bottom line number of the '24-'25.

    — Gopal Agarwal, CFO

Debt

  • Peak Debt Level Debt · FY27 and FY28 · Medium confidence ~INR700 crores
    We are looking around INR700 crores of the debt, peak level.

    — Gopal Agarwal, CFO

Capex

  • Capacity Addition Capex · By FY27 · High confidence 90,000 tons
    So we have already announced the capacity addition by about 90,000 tons, including this Warangal expansion, brownfield expansion. So the brownfield expansion, it will be the mix of brownfield and greenfield. So total 90,000 capacity will be added by FY '27.

    — Gopal Agarwal, CFO

Revenue Mix

  • Subsidiary Revenue Contribution Revenue Mix · FY26, FY27 · High confidence ~35%
    Total revenue mix that would be around 35% from the subsidiary and 65% from the legacy business.

    — Gopal Agarwal, CFO

Export Revenue

  • Export Revenue as % of Total Revenue Export Revenue · This year (FY26) · Medium confidence 15-20%
    Yes. So barring that, we are expecting we would be making around 15% to 20% of our total revenue from exports.

    — Gopal Agarwal, CFO

Risks & concerns

  • Raw material price volatility (PET bottle scrap)

    high

    Pet bottle scrap prices reached INR55-56/kg in Q1, impacting profitability, but have since normalized to INR41-44/kg.

    Management acknowledged

  • Overcapacity and suppressed demand in user industries (yarn spinning, non-woven textile)

    medium

    Overcapacity in the industry and suppressed demand from textile sectors, exacerbated by cheaper imports and US tariff uncertainty, prevented passing on raw material cost increases.

    Management acknowledged

  • High premium of rPET granules vs virgin PET

    medium

    rPET granule pricing had a 35-40% premium over virgin PET, which, combined with crashing virgin prices, deterred purchases; premium has since reduced by ~20%.

    Management acknowledged

  • Mismatch between announced and actual rPET capacity on ground

    medium

    While 3.5 lakh tons of rPET capacity is announced for the next 2 years, actual on-ground capacity is historically much lower (e.g., 180,000 tons vs 300,000 tons announced in 2023).

    Analyst acknowledged

Q&A highlights

3 direct
EPR guidelines, carryforward of shortfalls, and potential competition from new capacities. Direct
So the EPR requirements have not shifted, but they have just allowed carryforward of the shortfalls, if any, if the brands are facing, number one. Number two, yes, obviously, it's very important that the industry capacity gets created because unless the industry capacity gets created, there is a very strong stance from the industry that how are they supposed to even complete their required rPET targets if the capacity is not there on the ground.

Clarifies the nuanced impact of the MoEF draft notification on EPR compliance and highlights the ongoing challenge of ensuring sufficient high-quality rPET capacity in the industry.

Asked by Mann Ashar

Sustainability of margins for rPET granules given increasing supply and competition. Direct
So the industry is a very nascent industry, and the industry is developing. And so it is very, very difficult to predict the pricing and the margins presently over next 3, 4 years. So definitely, we expect the margins would be maintained until the demand supply gap is there and which we expect would be next 3, 4 years when the 60% mark is achieved.

Addresses investor concerns about future profitability in a growing but competitive market, providing a timeframe for margin stability based on demand-supply dynamics.

Asked by Dolly

The effectiveness of EPR penalties and whether companies might prefer paying penalties over using recycled content. Direct
So Dolly, here, we would like to bring your attention towards the penalty and consequences of the penalty. So penalty is not the forgo of your liabilities. Penalty is because you have not done what has been asked by the regulation. Beyond this, there will be even if you are not completing your mandatory targets of using recycled plastic, there will be environment compensation cases that may be taken by the courts taken to the courts and even up to the unit closure may happen because if you are not completing your mandate means you are still damaging the environment.

Provides a strong clarification that penalties are not a substitute for compliance and that non-compliance carries further severe environmental and legal consequences, reinforcing the long-term regulatory push for recycled plastic use.

Asked by Dolly

3 min read 7 chapters

Detailed narrative

Challenging Q1 FY26 Performance

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.

Raw Material Price Normalization and Demand Recovery

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.

EPR Regulations and Industry Capacity Dynamics

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.

Capacity Expansion and Funding Strategy

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.

Long-Term Vision and Competitive Advantage

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.

Financial Guidance for FY26

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.

Debt Levels and Future Expansion Plans

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.

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