Ganesha Ecosphere Limited — Q2 FY26 earnings call

Call held 12 Nov 2025

Management summary

Ganesha Ecosphere faced a challenging Q2 FY26 with EBITDA margins compressing to 6.1% and net profits turning negative, primarily due to inventory losses from volatile raw material prices and reduced rPET granule deliveries following a MOEF draft notification. The company expects a recovery in its legacy business with EBITDA margins improving to 7-9% by Q3/Q4 FY26, and anticipates demand recovery in the B2B segment from January 2026. Brownfield expansion at Warangal is on track for March 2026, adding 22,500 TPA rPET capacity.

Highlights

  • EBITDA margins compressed to 6.1% in Q2 FY26.

  • Net profits turned slightly negative in Q2 FY26.

  • Raw material prices surged from INR43-45/kg to INR55-56/kg before retreating to INR43-44/kg between March and June 2025.

  • Average raw material carrying cost was approximately INR50/kg by end of June quarter, while market prices declined to INR44-45/kg.

  • Deliveries of rPET granules were only 70% of production due to MOEF draft notification.

  • Selling prices dropped by about 4% across businesses.

  • Legacy business EBITDA margins are expected to improve to 7-9% range in Q3 and Q4 FY26.

  • Brownfield expansion at Warangal (22,500 TPA rPET capacity) is on track to be operational by end-March 2026, with an estimated annual revenue potential of INR225-250 crores.

  • Inventory losses of INR10-11 crores were incurred in Q2 FY26, but the entire high-cost inventory was consumed.

Concerns

  • Raw Material Price Volatility

  • Regulatory Uncertainty (MOEF Draft Notification)

Key financials

  1. EBITDA Margin 6.1%
  2. Net Profit —
  3. Inventory Loss ₹10 Cr
  4. Raw Material Carrying Cost ₹50/kg
  5. Selling Prices Decline 4%
  6. Capacity Utilization 80%

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.

Segment breakdown

  • Legacy Business (rPSF & Yarn)
    65% Revenue Contribution
  • PET Business (Bottle-to-Bottle)
    35% Revenue Contribution

Guidance & targets

Profitability

  • Legacy Business EBITDA Margins Profitability · Q3 and Q4 FY26 · Medium confidence 7-9%
    we anticipate an improvement in EBITDA margins to the 7-9% range during the December and March quarters in our legacy business.

    — Yash Sharma

  • Legacy Business EBITDA Margins (Longer Term) Profitability · Over next quarter and March quarter (Q4 FY26) · Medium confidence More than 10%
    May be over next quarter and March quarter, we will be more than 10%.

    — Gopal Agarwal

  • Traditional Business Long-term Gross Margin Profitability · Long-term · High confidence 62-66%
    So it is -- normally, it is in the range of 62% to 65%, 66%.

    — Gopal Agarwal

Capacity

  • Brownfield Expansion Operational Date Capacity · Q4 FY26 · High confidence End-March 2026
    Our brownfield expansion at Warangal is on track to be operational by end-March 2026, adding an additional 22,500 metric tons per annum of rPET capacity

    — Yash Sharma

  • rPET Business Capacity Utilization Capacity · From March onwards (Q4 FY26) · Medium confidence 90% plus
    But from March onwards, we are expecting we would reach to 90% plus capacity utilization in our rPET business.

    — Gopal Agarwal

  • Greenfield Expansion Operational Date Capacity · FY27 · Medium confidence End of next financial year
    Expected to be operational by end of this next financial year.

    — Gopal Agarwal

Revenue

  • Brownfield Expansion Annual Revenue Potential Revenue · Annually (after operational) · High confidence INR225-250 crores
    And the revenue potential of this line is about INR225 crores to INR250 crores annually.

    — Gopal Agarwal

Capex

  • Greenfield Expansion Capex Capex · null · High confidence INR500 crores
    So expected capex is about INR500 crores for that project.

    — Gopal Agarwal

Risks & concerns

  • Raw Material Price Volatility

    high

    Sharp fluctuations in PET waste prices (INR43-56/kg) led to significant inventory losses (INR10-11 crores) in Q2 FY26.

    Management acknowledged

  • Regulatory Uncertainty (MOEF Draft Notification)

    high

    Draft notification proposing carryover of mandatory recycled plastic usage shortfall led F&B industry to reduce/postpone rPET purchases, impacting deliveries (only 70% of production) and profitability.

    Management acknowledged

  • B2B Segment Demand Slowdown

    medium

    Sales and deliveries in the B2B segment are expected to remain below expectations in Q3 FY26 due to pending final MOEF notification and seasonal slowdown in beverage demand.

    Management acknowledged

  • Greenfield Expansion Delays

    low

    Greenfield expansion project is slightly delayed due to the market scenario regarding rPET uses, now expected by end of FY27.

    Management acknowledged

Areas of evasion (2)

  • FY26 overall revenue outlook
  • consolidated margins for FY26

Q&A highlights

3 direct
Impact of MOEF draft notification and lack of communication Direct
The main reason for the dismal performance of the Q2 was because of the inventory losses and -- as well as the deferring of the notifications because of which we could not deliver the quantities which we are anticipating in the market especially on the B2B segment. So the margins were affected. And -- but given the developments in the market and especially the regulation is intact and this notification impact is limited only to this current year only.

Directly addresses the core reasons for the Q2 underperformance and clarifies the temporary nature of the regulatory impact.

Asked by Prakash Kapadia

Raw material price volatility and inventory management Direct
On the inventory side, yes, obviously, we have learned our lessons from what happened this year. Obviously, we have now put in place systems to be more vigilant of what is happening in the global markets, which led to this sharp a very, very sharp decline, which even we could not predict at that time as to this would happen and which led to a decrease in the finished goods prices also.

Reveals management's acknowledgment of past inventory missteps and their commitment to improving vigilance against price volatility.

Asked by Prakash Kapadia

Future of MOEF mandate and potential deferrals Direct
This is solely depending on the progress of the first year itself. So even in last meeting, MoEF has clearly mentioned that if, let's say, let's presume a position because we were asking what is the clarity on using the rPET content or recycled plastic content. One of the officers has clearly mentioned that if let's presume a position where we don't issue any new notification, then in that case, the existing 30% mandate is prevailing for the current year itself. So don't wait for any notification.

Clarifies the government's stance on the existing mandate and the likelihood of future deferrals, suggesting that the 30% mandate for FY26 is still in effect if no new notification is issued.

Asked by Dhirendra Kumar

3 min read 5 chapters

Detailed narrative

Q2 FY26 Performance Impacted by Raw Material Volatility and Regulatory Uncertainty

Ganesha Ecosphere reported a challenging Q2 FY26, with EBITDA margins compressing to 6.1% and net profits turning slightly negative. This underperformance was primarily driven by significant inventory losses of INR10-11 crores, resulting from sharp fluctuations in raw material (PET waste) prices. Prices surged from INR43-45/kg to INR55-56/kg before retreating to INR43-44/kg, while the company's average carrying cost remained around INR50/kg. Additionally, a MOEF draft notification proposing a carryover for mandatory recycled plastic usage shortfalls led to reduced purchases by the F&B industry, limiting rPET granule deliveries to only 70% of production and causing a 4% drop in selling prices across businesses.

Legacy Business Showing Signs of Revival, B2B Segment Awaits Regulatory Clarity

The company's legacy business, comprising 65% of total revenue, is showing signs of recovery with strong order flows and resilient PSF market demand. Management anticipates an improvement in EBITDA margins for the legacy business to the 7-9% range during the December and March quarters of FY26, potentially exceeding 10% by Q4 FY26. In contrast, the B2B segment (35% of revenue) is expected to see sales and deliveries remain below expectations in Q3 FY26 due to ongoing uncertainty surrounding the final MOEF notification and seasonal slowdowns. However, a recovery in demand and deliveries is projected from January 2026, driven by increasing regulatory mandates for recycled content usage in FY27.

Capacity Expansion Plans Progressing with Minor Delays

Ganesha Ecosphere's brownfield expansion at Warangal, adding 22,500 metric tons per annum (TPA) of rPET capacity, is on track to be commercially operational by end-March 2026. This expansion, which involved a capex of approximately INR130 crores, is expected to generate an annual revenue potential of INR225-250 crores. The greenfield expansion project, with an estimated capex of INR500 crores, has been slightly delayed due to the market conditions and is now expected to be operational by the end of FY27. The company reported an average capacity utilization of about 80% on a console basis in Q2 FY26 and expects rPET business capacity utilization to reach over 90% from March 2026 onwards.

MOEF Notification and Industry Capacity Dynamics

The MOEF's draft notification, issued in June 2025, allows for the carryover of any shortfall in mandatory recycled plastic usage for FY26 over the next three years. This was a response to the user industry's concerns about insufficient available capacity (70,000 tons approved capacity vs. >200,000 tons demand in April 2025). While the final notification is still pending, expected within the next month, the existing 30% mandate for FY26 remains in effect if no new notification is issued. Industry-wide FSSAI approved rPET capacity has increased from 70,000 tons six months ago to about 210,000 tons currently, with Ganesha's own approved rPET food-grade capacity at 42,000 tons.

Product Mix Evolution and Premium Fiber Development

Currently, Ganesha Ecosphere's product mix is 65% from PSF, 20% from chips, and the rest from yarn. Following the completion of both brownfield and greenfield expansions, the product mix is projected to shift significantly, with chips contributing 65% and the remaining 35% from other businesses. The company is also developing premium fibers, such as flame retardant and antibacterial fibers, which are gaining traction quarter-to-quarter and are expected to yield good margins. These specialty fibers are primarily targeted for high-end industrial applications, including automotive, rather than mass-market consumption.

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