Ganesha Ecosphere Limited — Q3 FY25 earnings call

Call held 3 Feb 2025

Management summary

Ganesha Ecosphere delivered strong Q3 FY25 results, driven by robust performance in its rPET granule segment, which saw significant revenue and profit growth. The company announced substantial capacity expansions for rPET granules with a revised capital outlay of INR 700 crores, aiming for higher revenue contribution and margins from value-added products. However, the legacy rPSF and yarn businesses faced challenges due to high raw material costs and depressed textile demand, leading to margin erosion and an uncertain profitability outlook for the near term.

Highlights

  • Consolidated revenue for Q3 FY25 stood at INR 397.80 crores, marking a 39.7% increase year-on-year.

  • Consolidated EBITDA for Q3 FY25 was INR 56.50 crores, up 41.3% from Q3 FY24, with an EBITDA margin of 14.2%.

  • Consolidated PAT for Q3 FY25 surged by 133% year-on-year to INR 29.71 crores.

  • The rPET granule segment operated at a 75% capacity utilization during Q3 FY25.

  • Total rPET granule capacity is planned to reach 1,32,000 tons per annum after expansions in Odisha (67,500 TPA) and Warangal (64,500 TPA).

  • The revised capital outlay for the total 90,000 TPA expansion is estimated at approximately INR 700 crores.

  • Management expects 65% of future revenue to come from value-added products, targeting 22-25% EBITDA margins in this segment.

  • FY26 revenue is projected to be around INR 1,800-1,900 crores.

Concerns

  • Soaring feedstock (PET bottle scrap) prices

  • Depressed demand and oversupply in the textile industry

  • Uncertain long-term profitability of traditional business

Key financials

  1. Consolidated Revenue ₹397.8 Cr +39.7%YoY
  2. Consolidated EBITDA ₹56.5 Cr +41.3%YoY
  3. Consolidated EBITDA Margin 14.2%
  4. Consolidated PAT ₹29.71 Cr +133%YoY
  5. Consolidated Production 40,630 tons
  6. Consolidated EBITDA per ton ₹13,906

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

Share of Revenue
₹397.8 Cr Total
  • Standalone Business ₹268.02 Cr 67.4%
  • Subsidiary Businesses ₹129.78 Cr 32.6%

Guidance & targets

Capacity

  • rPET granule capacity in Odisha Capacity · Ongoing project · High confidence 67,500 tons per annum

    Previously 45,000 tons per annum → 67,500 tons per annum

    With regards to our expansion plans of 45,000 tons per annum of rPET granules in Odisha, we have decided to increase its size to 67,500 tons per annum

    — Gopal Agarwal

  • rPET granule capacity in Warangal Capacity · Ongoing project · High confidence 64,500 tons per annum

    Previously 42,000 tons per annum → 64,500 tons per annum

    We are also looking for increasing the rPET granule capacity at Warangal from 42,000 tons to 64,500 tons per annum.

    — Gopal Agarwal

  • Total rPET capacity Capacity · Post expansion · High confidence 1,32,000 tons per annum
    And after this expansion, our total rPET capacity would reach to around 1,32,000 tons per annum.

    — Gopal Agarwal

Capex

  • Capital outlay for 90,000 TPA expansion Capex · For 90,000 tons expansion · High confidence ~INR 700 crores

    Previously INR 450 crores → ~INR 700 crores

    About INR700 crores. Earlier, we were for the two lands, we had a capex of INR 450 crores, but now it is 90,000 tons, it has been now INR700 crores.

    — Gopal Agarwal

Revenue

  • Revenue contribution from value-added products Revenue · Going forward (2-3 years) · Medium confidence ~65%
    So with this capacity addition of 90,000 tons, we are looking for about 65% revenue will come from the value-added products.

    — Gopal Agarwal

  • Consolidated Revenue Revenue · FY25 · Medium confidence INR 1,560-1,570 crores

    Previously INR 1,600 crores → INR 1,560-1,570 crores

    So the balance, it may not be -- it was only the guidance of INR1,600 crores. So always, it is not it may be INR1,560, or INR 1,570, but we are not far away from INR1,600.

    — Gopal Agarwal

  • Revenue Revenue · Next financial year (FY26) · High confidence INR 1,800-1,900 crores
    Next financial year, we are looking at around INR1,800 crores to INR1,900 crores revenue.

    — Gopal Agarwal

Margin

  • EBITDA margin for value-added products (rPET granule) Margin · Once minimum threshold capacity achieved (second year) · High confidence 22-25%
    So we are looking for EBITDA margins in the range of 22% to 25% in this business.

    — Gopal Agarwal

  • Blended margin Margin · Future · Medium confidence much more than 16%
    Yes, we hope so. In fact, we expect the blended margin much more than that.

    — Gopal Agarwal

Operationalization

  • Warangal brownfield expansion operationalization Operationalization · December 2025 · High confidence By end of this calendar year
    Yes, of course, we are looking for operationalizing this plant -- this expansion by the end of this calendar year.

    — Gopal Agarwal

  • Odisha greenfield expansion operationalization Operationalization · FY27 · High confidence 15 to 18 months
    And Orissa will take at least 15 to 18 months?

    — Gopal Agarwal

Debt

  • Total debt position (peak) Debt · Going forward (with working capital drawdowns) · High confidence INR 700-750 crores
    So presently, our total debt position is about INR500 crores. So going forward, when we draw down our working capital facilities, the debt may go up to INR700 crores, INR750 crores.

    — Gopal Agarwal

Risks & concerns

  • Soaring feedstock (PET bottle scrap) prices

    high

    Higher PET bottle scrap prices due to increased demand and seasonal impact are eroding gross margins, particularly in the legacy business.

    Management acknowledged

  • Depressed demand and oversupply in the textile industry

    high

    Demand in the textile industry is depressed, coupled with oversupply, making it difficult to pass on higher raw material prices in the rPSF and yarn segments.

    Management acknowledged

  • Uncertain long-term profitability of traditional business

    high

    Management finds it difficult to comment on the profitability of the traditional business for the next 2-3 years due to overcapacity and demand constraints.

    Both acknowledged

  • Increasing competition in the rPET space

    medium

    Many new players are entering the rPET space, but management believes their first-mover advantage, experience, collection network, and R&D provide a strong moat.

    Analyst downplayed

Areas of evasion (3)

  • Profitability outlook for traditional business
  • Specific product-level breakup of Warangal revenue
  • Direct PBT impact of EPR certificate revenue

Q&A highlights

1 direct, 1 evasive
Competition in the rPET space and Ganesha Ecosphere's competitive advantages. Direct
But you see, we are having a couple of advantages. Number one, we are the first mover. Number second we are in these businesses since last 30 years, and we understand the waste very well. Number three, we are having the robust collection network across the country. So number four, we have made a lot of R&D and we have put a lot of efforts in understanding for rPET for food grade consumption...

Management directly addressed concerns about increasing competition by highlighting the company's established market position, experience, collection network, and R&D capabilities as key differentiators.

Asked by Prasun Bansal

EPR certificates and whether they generate additional revenue at the PBT level. Partial
So it is built in the cost. It is built in the cost. And although it is you are right, there is no expenses for issuing it, but it is a part of the operation and the cost and revenue metrics.

This clarifies that EPR certificate revenue is integrated into the existing operational cost and revenue structure, rather than being a direct, incremental boost to profitability, which might adjust investor expectations.

Asked by Suraj

Profitability outlook for the traditional rPSF and yarn business. Evasive
So it is very difficult as of now to comment on the profitability for this business for the next 2 years to 3 years.

This response indicates significant ongoing challenges and uncertainty in the legacy business, suggesting that a recovery in its profitability is not expected in the near to medium term, which could impact overall company margins.

Asked by Bhavya Gandhi

2 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Highlights

Ganesha Ecosphere reported a strong Q3 FY25, with consolidated revenue increasing by 39.7% year-on-year to INR 397.80 crores. Consolidated EBITDA grew 41.3% to INR 56.50 crores, achieving a 14.2% margin. Net profit (PAT) saw a significant 133% surge year-on-year, reaching INR 29.71 crores. The rPET granule segment was a key driver, operating at a healthy 75% capacity utilization during the quarter.

Ambitious Capacity Expansion Plans

The company announced a substantial increase in its rPET granule capacity. The Odisha project's capacity is being expanded from 45,000 tons per annum to 67,500 tons per annum, and the Warangal capacity will rise from 42,000 tons to 64,500 tons per annum. This expansion will bring the total rPET capacity to approximately 1,32,000 tons per annum, with a revised capital outlay of around INR 700 crores for the 90,000 tons expansion.

Strategic Shift to Value-Added Products and Margin Targets

Ganesha Ecosphere is strategically focusing on value-added products, particularly rPET granules. Management anticipates that approximately 65% of future revenue will be derived from these products post-expansion. The company is targeting robust EBITDA margins in the range of 22-25% for the rPET granule business, which is expected to lead to a blended margin 'much more than' 16% for the overall business.

Challenges in Legacy Business Segments

The traditional rPSF and yarn businesses faced significant headwinds in Q3 FY25. Soaring PET bottle scrap prices, coupled with depressed demand and an oversupply situation in the textile industry, led to erosion of gross margins. Management indicated difficulty in passing on higher raw material costs in these commodity-driven segments and expressed uncertainty regarding the profitability outlook for these businesses for the next 2-3 years.

Operational Timelines and Financial Outlook

The brownfield expansion at Warangal is projected to be operational by December 2025, while the greenfield Odisha project is expected to take 15-18 months. For FY25, the company slightly revised its consolidated revenue guidance to INR 1,560-1,570 crores from the earlier INR 1,600 crores. Looking ahead, management projects consolidated revenue for FY26 to be in the range of INR 1,800-1,900 crores, with total debt potentially rising to INR 700-750 crores to support working capital needs for the expansion.

Competitive Advantages and Raw Material Sourcing

Management emphasized Ganesha Ecosphere's strong competitive position in the rPET market, citing its first-mover advantage, three decades of industry experience, and a robust collection network of over 300 vendors across the country. They highlighted their R&D efforts for food-grade rPET and the efficiency of India's informal collection system. The company also confirmed an agreement with Race Eco Chain to source 75% of their 12,000-13,000 tons per month of material, ensuring raw material security for expansion.

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