Ganesha Ecosphe.

Ganesha Ecosphere's standalone business demonstrated resilience in Q3 FY26, with production volumes growing 13% QoQ to 29,088 MT and sales volumes up 7% QoQ to 31,107 tons, marking the highest in five years. Revenue from standalone operations increased 5.24% QoQ to ₹272.95 crore, with EBITDA per ton significantly improving to ₹5,962 from ₹2,812 in Q2FY26, and EBITDA margins reaching 6.79%. On a consolidated basis, revenue stood at ₹357.22 crore, with EBITDA of ₹30.73 crore (up 37.67% QoQ) and PAT of ₹4.74 crore, and consolidated EBITDA per ton climbing to ₹7,638.

Consolidated performance was significantly impacted by the ongoing uncertainty surrounding the draft notification from the Ministry of Environment, Forest and Climate Change regarding the mandatory use of recycled PET. This regulatory ambiguity delayed the integration of rPET into supply chains and weakened demand, leading to a 23% decline in subsidiary revenues and a capacity utilization drop to 50%. Management noted that while the 30% mandatory recycled content for FY26 is firm with penalties for non-compliance, the industry has been postponing purchases awaiting final clarity on potential relaxations.

The legacy business showed sustainable momentum, benefiting from stable raw material prices during the quarter. The company has actively diversified its portfolio, reducing dependency on the yarn spinning sector, with over 35% of quarterly sales volume generated from non-woven and home furnishing segments. Management expects the legacy business to achieve EBITDA margins of 9%-10% and EBITDA per ton of ₹9,000-₹10,000 in FY27, indicating a return to earlier profitability levels.

The rPET granules business faced challenges from increased competition due to more FSSAI-approved players and new capacities, coupled with the regulatory uncertainty. US tariffs of 50% on Indian textile products also prevented exports to the US market. Despite these headwinds, the company expects subsidiary capacity utilization to improve to 70%-80% in Q4 FY26 and anticipates 40% mandatory recycled content for FY27 will drive demand, targeting 85%-90% utilization and 55,000-60,000 tons volume for Warangal rPET, with peak revenue potential of ₹700-₹850 crores.

Ganesha Ecosphere is implementing a brownfield project with a capital outlay of ₹130 crores, expected to be operational by March/April, specifically for 22,500 tons of rPET in Warangal. Further expansion plans include an investment of ₹450 crores over the next two years for greenfield or brownfield projects. The company also received ₹70 crores in January from the Telangana Government as part of outstanding incentives for the Warangal plant, out of a total of ₹110 crores.

The company successfully qualified its recycled Filament yarn with a leading global textile brand, which is expected to improve margins and volumes for this segment, with 20%-30% capacity utilization anticipated from February. Ganesha Ecosphere has also become a regular supplier to the International Cricket Council (ICC), providing stadium-sized flags and unity flags made from recycled materials for World Cup tournaments, highlighting global recognition for its sustainable products.

Raw material prices remained relatively stable during the quarter, a contrast to previous high volatility, which supported margin improvement in the standalone business. The company manages raw material risk by maintaining an inventory of around 30-35 days, with plans to increase it by 4-5 days during the summer season when availability is superior. This strategy helps mitigate the impact of price fluctuations and ensures consistent supply.

Addressing concerns about new entrants like Reliance Industries in PET recycling, management clarified that Reliance's collaboration focuses on Recycled Polyester Staple Fiber (RPSF), Ganesha's legacy business, and that the PET recycling industry has always been highly competitive. Ganesha remains focused on mechanical recycling due to the high costs and nascent stage of chemical recycling. The company is also exploring the recycling of Polyolefins, indicating potential diversification beyond PET in the future.