Concall AI

Ganesha Ecosphere Limited — Q2 FY25 earnings call

Call held 14 Nov 2024

Management summary

Ganesha Ecosphere reported a strong Q2 FY25, with significant year-on-year growth in turnover, EBITDA, and PAT, driven by performance in both legacy and subsidiary businesses. The company is actively pursuing expansion with a new 45,000-ton rPET granules facility in Odisha and is optimistic about ramping up capacity utilization at its Warangal plant. Despite headwinds in the rPSF segment, strategic shifts towards exports and value-added products are yielding positive results.

Highlights

Consolidated turnover for Q2 FY25 was INR 386.8 crore, marking a 39% YoY increase.
Achieved highest quarterly EBITDA of INR 55 crore, representing 14.3% of operational revenue, significantly up from 9.09% in Q2 FY24.
PAT for Q2 FY25 stood at INR 27.11 crore, a substantial rise from INR 2.80 crore in Q2 FY24.
Half-yearly operational revenue (H1 FY25) reached INR 723.35 crore, with EBITDA at INR 102.97 crore and PAT at INR 49.65 crore.
QoQ growth was 15% in operating revenue, 16% in EBITDA, and 20% at PAT level.
Standalone business achieved 106% capacity utilization, while Warangal operations were at 58% and rPET Granules segment at 72%.
Odisha expansion plan for 45,000 tons capacity with an estimated capital outlay of INR 450 crore is on course, with production expected by March 2026.
Warangal project is expected to achieve a quarterly revenue run rate of INR 160-175 crores in Q4 FY25 and INR 750-800 crores for FY26.

Key financials

2 periods

Headline

Consolidated Turnover
₹386.8 Cr
YoY +39% QoQ +15%
Consolidated EBITDA
₹55 Cr
YoY +117.2% QoQ +16%
Consolidated EBITDA Margin
14.3%
Consolidated PAT
₹27.11 Cr
YoY +868.2% QoQ +20%
Standalone Capacity Utilization
106%
Warangal Capacity Utilization
58%
rPET Granules Capacity Utilization
72%
Consolidated Average Realization
₹95
Total Debt
₹500 Cr

H1

FY25 Operational Revenue
₹723.35 Cr
YoY +35.8%
FY25 EBITDA
₹102.97 Cr
YoY +102.6%
FY25 PAT
₹49.65 Cr
YoY +669.8%
FY25 EPR Revenue
₹3.5 Cr

What they filed

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

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	387	398	344	337	363 −6%	357 −10%	424 +23%	424 +26%
Expenses	332	341	293	301	341	326	372	364
EBITDA	55	57	51	36	22 −60%	31 −46%	52 +2%	60 +67%
Margin	14%	14%	15%	11%	6%	9%	12%	14%
Other income	4	5	5	3	5	4	5	4
Interest	10	11	10	10	11	10	9	9
Depreciation	14	14	14	16	16	16	17	17
Profit before tax	36	37	32	14	1 −97%	8 −78%	31 −3%	37 +164%
Tax rate	25%	20%	27%	25%	186%	42%	25%	22%
Net profit	27	30	24	11	0 −100%	5 −83%	23 −4%	29 +164%
EPS	10.70	11.72	9.33	4.22	-0.19	1.77	8.66	10.83

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

Capacity

Odisha Capacity Capacity · Phase one · High confidence 45,000 tons

expansion plan, which we are looking for as a INR450 crores investment, 45,000 capacity, it is first phase only - Phase one only. So, the entire capacity would be, 45,000 will be operational in one go.

— Gopal Agarwal

Capex

Odisha Capex Capex · Phase one · High confidence INR 450 crores

expansion plan, which we are looking for as a INR450 crores investment, 45,000 capacity, it is first phase only - Phase one only. So, the entire capacity would be, 45,000 will be operational in one go.

— Gopal Agarwal
Total Capital Employed (all projects) Capex · future · High confidence INR 550 crores

we are looking for about INR550 crores for all these projects, including the working capital.

— Gopal Agarwal

Operations

Odisha Production Start Operations · March 26th · High confidence March 2026

we are trying to commence the production by March 26th.

— Gopal Agarwal
Odisha Full Potential Operations · FY28 · Medium confidence FY28

So, the full potential of the plan will be in FY'28 only.

— Gopal Agarwal
JV Wash Lines Startup Operations · from now · High confidence max one year

basically, it will take one year from here maximum for the startup of these wash lines.

— Prashant

Capacity Utilization

Warangal rPET Granules CU Capacity Utilization · by March · High confidence 90%+

we are already working at about 72% capacity in rPet granules and we expect it to, by March, it will ramp up to 90% plus level.

— Gopal Agarwal
RPSF Capacity Utilization Capacity Utilization · by March · High confidence 90%

we are also expecting that our RPSF, we are already 80%-85% and that will also ramp up to 90% by March.

— Gopal Agarwal
Filament Yarn Capacity Utilization Capacity Utilization · by March, after March · High confidence 70%-75% (by March), 80%-85% (after March)

for the filament yarn, we are expecting it will be around 70%-75% by March and 80%-85% after that.

— Gopal Agarwal

Revenue

Warangal Quarterly Revenue Run Rate Revenue · Q4 · High confidence INR 160-175 crores

on a quarterly basis, we are expecting a run rate of about INR160-175 crores.

— Gopal Agarwal
Warangal Annual Revenue Potential Revenue · next year (FY26) · High confidence INR 750-800 crores

the total revenue potential we are targeting is between INR750 to INR800 crores for the full year. That we are expecting in next year.

— Gopal Agarwal
Warangal Annual Revenue Revenue · FY25 · High confidence INR 500-550 crores

this year in FY'25, we are expecting around INR500 to INR550 crores from Warangal project.

— Gopal Agarwal
Consolidated Top Line Revenue · FY25 · High confidence INR 1,500-1,600 crores

for the current fiscal here, we are expecting a top line of INR1,500 to INR1,600 crores

— Gopal Agarwal
Consolidated Revenue Growth Revenue · next couple of years · High confidence 25%-30%

we are expecting a revenue growth of about 25% to 30% every year for the next couple of years.

— Gopal Agarwal
Warangal Max Quarterly Revenue Run Rate Revenue · at maximum capacity utilization · High confidence INR 200 crores

as maximum capacity utilization, we are expecting a run rate of about INR200 crores from the Warangal project.

— Gopal Agarwal

Profitability

Warangal EBITDA Margin Profitability · Current, expecting improvement · Medium confidence ~22%

Currently, we are operating at about 22% EBITDA margins at our Warangal project. And so, we are expecting it will improve further from here.

— Gopal Agarwal
Consolidated EBITDA Margin Profitability · FY25 · High confidence 14.5%-15%

with EBITDA of 14.5% to 15%.

— Gopal Agarwal
Consolidated Long-term EBITDA Margin Profitability · Long-term · Medium confidence 16%-17%

On a long-term basis, we are looking at EBITDA of about 16% to 17%.

— Gopal Agarwal

Working Capital

New Project Working Capital Cycle Working Capital · future · High confidence 45-50 days

we are looking out a working capital cycle of 45 to 50 days.

— Gopal Agarwal

Efficiency

New Project Asset Turnover Efficiency · year two · Medium confidence ~INR 1.25 crores

the asset turnover is closer to INR1.25 crores, if I'm not wrong.

— Gopal Agarwal

Funding

Warrant Conversion Proceeds Funding · May 2025 · High confidence INR 110 crores

the warrant conversion is due in May 2025, 6 months from now. So, around INR110 crores will come from the warrants.

— Gopal Agarwal
Warangal Government Subsidy Funding · March quarter (or April) · High confidence INR 30-40 crores

the subsidy, we are expecting to get about INR30-INR40 crores in March quarter. So, it may be in April.

— Management

Cash Flow

EBITDA to Cash Flow Conversion (Orissa Capex) Cash Flow · new projects · High confidence 60%-70%

we are looking for about 60%-70% EBITDA margin will flow to the cash flow.

— Gopal Agarwal

Depreciation

Useful Life of Asset (Incremental Capex) Depreciation · N/A · High confidence 18-20 years

we are taking the life of the... useful life of the asset about 18 years. 18 to 20 years.

— Gopal Agarwal

Debt

Average Cost of Borrowings Debt · Current · High confidence 8.3%-8.5%

Currently, it is about 8.3% to 8.5%.

— Gopal Agarwal

Risks & concerns

Headwinds in rPSF business due to over-capacity in yarn segment and cheap fabric imports.
medium

rPSF business faces challenges from over-capacity, cheap imports, subdued demand, and new industry capacities.

Management acknowledged
Surging raw material prices and lower than expected festive demand impacting current quarter.
medium

Current quarter (Q3 FY25) faces bumpy outlook due to rising RM prices and weak festive demand.

Management acknowledged
Difficulty in passing on raw material price increases in rPSF segment.
medium

Management is trying to improve export business and shift to value-added products to mitigate this.

Management acknowledged
Lag in receiving government incentives for Warangal project.
low

Incentives are yet to be received but expected by Q3 or Q4 FY25.

Analyst acknowledged

Areas of evasion (1)

Specific names of machinery suppliers for Odisha plant, citing confidentiality.

Q&A highlights

2 direct

Potential conflict of interest between Ganesha's yarn business and promoter entity GSPL's yarn business, and future expansion plans. Direct

So, GSPL is into the yarn spinning business. So, we are making the spun yarn. In Warangal, we are not taking the spun yarn. There is the filament yarn. Filament yarn is completely different from the spun yarn. So, there is no conflict of interest in that sense. But of course, we are having some yarn spindles with us in our Bilaspur plant. So, we are selling the recycling fiber to the GSPL and we are making the yarn. And eventually, we may exit out of the spun yarn business later on.

Clarifies the relationship and potential future divestment of Ganesha's spun yarn business to avoid conflict, focusing Ganesha on filament yarn in subsidiaries.

Asked by Akash Jain

Details on the Odisha expansion, including total capacity, funding, strategic location, and timeline for commissioning. Direct

So, expansion plan, which we are looking for as a INR450 crores investment, 45,000 capacity, it is first phase only - Phase one only. So, the entire capacity would be, 45,000 will be operational in one go. ... we are having the sufficient liquidity with us and accruals are also started to come from the Warangal plant. So, we are not looking for any capital expansion or the raising of funds for this expansion.

Provides concrete figures for the major expansion, confirms internal funding, and explains the strategic rationale for location based on raw material logistics.

Asked by Mann Ashar

Significant drop in subsidiary gross margin on a QoQ basis, despite the rPET granules segment having pricing power due to supply shortage. Partial

So, in the subsidiaries, we are also having the PSF and the filament yarn. So, the gross margin is also increasing in those verticals also. ... So, it takes almost one to two months time to pass on the any hike in pricing of raw material to the branch because the price are revised every month.

Highlights a potential margin pressure point in the subsidiary, with management attributing it to a lag in passing on raw material price increases, suggesting it might normalize.

Asked by Jenish Karia

3 min read 6 chapters

Detailed narrative

Strong Q2 FY25 Performance and H1 Highlights

Ganesha Ecosphere delivered a robust Q2 FY25, with consolidated turnover reaching INR 386.8 crore, a significant 39% year-on-year increase. EBITDA surged to INR 55 crore, representing a 14.3% margin, up from 9.09% in Q2 FY24. PAT saw an impressive jump to INR 27.11 crore from INR 2.80 crore in the prior year. For the first half of FY25, operational revenue stood at INR 723.35 crore, with EBITDA of INR 102.97 crore and PAT of INR 49.65 crore, demonstrating strong growth across key financial metrics.

Odisha Expansion for rPET Granules

The company is proceeding with its major expansion in Odisha, establishing a new facility with an installed capacity of 45,000 tons for rPET granules. This project entails an estimated capital outlay of INR 450 crore, which will be operational in a single phase. Management expects production to commence by March 2026, with the full potential of the plant realized by FY28. The strategic location in Odisha aims to capture raw material from the region and benefit from logistics cost savings, with the company self-funding the expansion through existing liquidity and Warangal accruals.

Warangal Project Ramp-up and Revenue Outlook

The Warangal operations are showing strong progress, with rPET granules capacity utilization expected to ramp up to over 90% by March. RPSF capacity utilization is also targeted to reach 90% by March, and filament yarn capacity utilization is projected to hit 70-75% by March, then 80-85% thereafter. Management anticipates a quarterly revenue run rate of INR 160-175 crores from Warangal in Q4 FY25, growing to an annual revenue potential of INR 750-800 crores in FY26. The project currently operates at approximately 22% EBITDA margins, with expectations for further improvement.

Raw Material Strategy and Joint Venture

To ensure sustainable raw material availability for its increasing requirements, Ganesha Ecosphere has made strategic investments and formed a Joint Venture with Race Eco. This JV will involve setting up smaller wash lines across India, with the first plant planned in Chennai, expected to start operations within a year. The strategy focuses on covering material locally within a 200-kilometer radius, aiming to optimize raw material sourcing rather than primarily reducing logistics costs.

Challenges and Mitigation in rPSF Segment

The rPSF business continues to face headwinds due to over-capacity in the yarn segment, cheap fabric imports, subdued demand, and surging raw material prices. Despite these challenges, the company is mitigating impact through increased exports and a strategic shift from spun yarn to higher-value verticals like non-woven and stuffing. While passing on raw material price increases in rPSF remains an issue, continuous efforts are being made to improve product mix and focus on value-added offerings.

Financial Outlook and Funding Strategy

For FY25, Ganesha Ecosphere projects a consolidated top line of INR 1,500-1,600 crores with an EBITDA margin of 14.5%-15%. Long-term EBITDA margins are targeted at 16%-17%, with annual revenue growth of 25%-30% expected for the next couple of years. The company plans to fund its INR 450 crore Odisha expansion internally, supported by INR 110 crores from warrant conversion by May 2025 and an anticipated INR 30-40 crores in government subsidies for Warangal by Q4 FY25. Total capital employed for all projects, including working capital, is estimated at INR 550 crores, with a current average borrowing cost of 8.3%-8.5%.

This is an AI-generated summary of a publicly available earnings call transcript.

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