GRP — Q1 FY26 earnings call

Call held 28 Jul 2025

Management summary

GRP Limited reported a challenging Q1 FY26 with consolidated total income declining 2% YoY to ₹1,247 million and EBITDA falling 18% YoY to ₹109 million, primarily due to volume reduction, export decline from tariff uncertainties, and gross margin pressure in butyl reclaim rubber. Despite these headwinds, the non-reclaim rubber business showed strong 17% growth, and new projects like tyre pyrolysis oil are on track for Q2 commercialization. The company is focused on scaling new ventures and improving operational efficiencies to restore growth momentum.

Highlights

  • Non-reclaim rubber business registered a strong 17% year-on-year growth, driven by robust performance in polymer composite and custom die forms businesses.

  • Subsidiaries (GRP Circular Solutions Limited and GSPL) showed improved revenue, reporting a combined top line of ₹74 million, with a target to achieve positive EBITDA by end of FY26.

  • New technology installed in reclaim rubber operations yielding encouraging results, with product approvals from several tyre and non-tyre customers.

  • First phase of tyre pyrolysis oil project undergoing cold trials, with commercial operations expected to begin in Q2 FY26.

  • Board approved investment in additional capacity for solar power generation, targeting 50% renewable energy by 2028.

Concerns

  • Consolidated total income declined 2% year-on-year to ₹1,247 million, primarily due to a 7% reduction in volumes.

  • EBITDA decreased 18% year-on-year to ₹109 million, with EBITDA margins contracting to 8.7% from 10.5% in Q1 FY25.

  • Gross profits decreased 7% year-on-year to ₹624 million, impacted by continued inflation in raw material costs for specific rubber grades and an unfavourable product/geographic mix.

  • Export revenues declined by 9% due to tariff-related uncertainties in key overseas markets and port congestion challenges.

  • Butyl reclaim rubber segment faced significant gross margin pressure for the third consecutive quarter due to raw material cost inflation and supply-demand imbalance for inner tubes.

Key financials

  1. Total Income 1,247 Mn -2%YoY
  2. EPR Income ₹4.56 Cr
  3. Gross Profits 624 Mn -7%YoY
  4. EBITDA 109 Mn -18%YoY
  5. EBITDA Margin 8.7%
  6. Profit After Tax 17 Mn
  7. Debt-Equity Ratio 0.86

What they filed

Q1 FY27: revenue up 26.7%, net profit up 140.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue132 132 160 124 132 +1%135 +2%145 −10%157 +27%
EBITDA10 13 33 10 11 +8%11 −15%9 −73%17 +70%
Net profit3 4 19 2 2 −22%1 −81%-1 −107%4 +140%
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

  • Non-Reclaim Rubber Business
    17% Growth
  • GRP Circular Solutions & GSPL (Subsidiaries)
    74 Mn Combined Top Line

Order book

low confidence
Management discussed capacity and revenue potential from new projects rather than a traditional order book for signed contracts.

Source: Inferred

Capital allocation

high confidence
  • Capex EUR 7.5 Mn this quarter · ₹150 Cr (FY26) planned
    • Waste to energy business (GE project)
    • Reclaim rubber (traditional process and new technology)
    • Plastic recycling (augmenting current capacity)
    • Additional capacity for solar power generation
    We have therefore drawn a total of €7.5 million from the facility that has been earmarked from Proparco as part of the ECB as of Q1 FY26. The board has also approved the investment in additional capacity for solar power generation for our Gujarat and Maharashtra reclaim rubber manufacturing units under a group captive arrangement. ... I think as recently even as at the AGM, we have indicated that the Rs. 150 crores out of the Rs. 250 crores announced CAPEX, we are fairly confident, and we are going to be deploying most of it by December 25 to January 2026. ... As far as the CAPEX breakup is concerned, of the Rs. 150 odd crores, bulk of it or closer to 70% to 75% of, so let me give you the numbers as of today. Against FY25, the total number spent on the GE project until Q1 of....just give me a minute. So, of the total CAPEX, sorry, approximately, what do you call it, around 65% to 70% of that CAPEX is intended for the GE, which is the waste to energy business and the remaining 30% will be split between a combination of the reclaim rubber for the traditional process and for the new technology and some incremental investments will be made in the plastic recycling, more for augmenting the current capacity, but not for capacity expansion.
  • Debt Debt disclosed
    Our debt-equity ratio is 0.86 as at 30th June 2025.

Guidance & targets

Profitability

  • Subsidiaries EBITDA Profitability · end of this financial year (FY26) · High confidence Positive EBITDA
    And based on current momentum, we expect the subsidiaries to achieve a positive EBITDA by end of this financial year, marking a key milestone in our diversification and growth strategy.

    — Harsh Gandhi

Operations

  • Tyre Pyrolysis Oil Commercial Operations Operations · Q2 of this fiscal (FY26) · High confidence Begin commercial operations
    And therefore, we can confidently say that commercial operations should begin in Q2 of this fiscal.

    — Harsh Gandhi

  • Recovered Carbon Black Commercial Operations Operations · end of this fiscal year (FY26) · High confidence Commence commercial operations
    We have finalized the technology for manufacturing of the recovered carbon black and are targeting to commence the commercial operations for that part of the project by end of this fiscal year as well.

    — Harsh Gandhi

Renewable Energy

  • Renewable Energy Transition Renewable Energy · by 2028 · High confidence 50%
    This marks a key step in advancing our renewable energy transition, targeting 50% by 2028, and thereby further reducing our carbon footprint.

    — Harsh Gandhi

Capex

  • Deployment of ₹150 crores CAPEX Capex · by December 25 to January 2026 · High confidence Most of it deployed
    I think as recently even as at the AGM, we have indicated that the Rs. 150 crores out of the Rs. 250 crores announced CAPEX, we are fairly confident, and we are going to be deploying most of it by December 25 to January 2026.

    — Harsh Gandhi

Revenue

  • Revenue from Phase-1 integrated tyre-to-energy business Revenue · once project is completely commercialized · Medium confidence ₹125-140 crores
    I think once the entire 30,000 tons of pyrolysis, which means 35,000 tons of crumb along with rCB and everything is commissioned, we expect revenues to be in excess of about Rs. 125 crores as part of that Phase-1. And when we will achieve that will be a function of achieving a higher utilization. But yes, between Rs. 125 to 140 crores of revenue can be expected once this project is completely commercialized.

    — Harsh Gandhi

  • Additional incremental revenue (reclaim, crumb, plastics) Revenue · once project is completely commercialized · Medium confidence ₹40-50 crores
    But if you add the incremental revenues coming from reclaim rubber, from crumb rubber and from the plastics, that should be at least another Rs. 40 to 50 crores of additional incremental revenue.

    — Harsh Gandhi

Volume

  • Incremental volume growth (new technology) Volume · upcoming quarters · Medium confidence Incremental volume growth
    We have received product approvals from several tyre and non-tyre customers, providing confidence in capturing incremental volume growth in the upcoming quarters.

    — Harsh Gandhi

Margins

  • Incremental margins and GHG emission reductions (new technology) Margins · coming year · Medium confidence Meaningful incremental margins and significant GHG emission reductions
    meaningful incremental margins and significant GHG emission reductions for the reclaim business as a whole. We are aiming to convert more SKUs to this process in the coming year.

    — Harsh Gandhi

What to watch in Q2 FY26

Subsidiaries EBITDA

end of FY26
Current Still bleeding
Target Positive EBITDA

Why it matters

Achievement of positive EBITDA for subsidiaries is a key milestone in diversification and growth strategy.

And based on current momentum, we expect the subsidiaries to achieve a positive EBITDA by end of this financial year, marking a key milestone in our diversification and growth strategy.

Risks & concerns

  • Persistent macroeconomic uncertainties and evolving geopolitical tensions

    high

    These factors contribute to a highly dynamic global landscape impacting performance.

    Management acknowledged

  • Tariff-related uncertainties and port congestion challenges

    high

    Led to a 9% decline in export revenues and created major uncertainties in sourcing strategies for global tyre manufacturers.

    Management acknowledged

  • Sustained inflation in raw material costs for automotive inner tubes

    high

    Impacted gross margins, particularly for butyl reclaim rubber, which is a key raw material.

    Management acknowledged

  • Imbalance between demand and supply for inner tubes

    high

    Caused by radialization, new manufacturing capacity for butyl reclaim in other countries, and diversion of tubes to domestic production, leading to margin pressure for butyl reclaim rubber.

    Management acknowledged

  • Unfavourable product and geographic mix

    medium

    Contributed to lower export volumes and pressure on top line and profitability.

    Management acknowledged

  • Subsidiaries operating at sub-optimal scale and bleeding

    medium

    GRP Circular Solutions and GSPL are not yet profitable, though they are targeting positive EBITDA by FY26 end.

    Management acknowledged

  • Headwinds in engineering plastics division

    medium

    Due to reduction in virgin nylon prices and softening demand in the Indian automotive sector, impacting volumes and margins.

    Management acknowledged

Q&A highlights

5 direct
Gross margin pressure in butyl reclaim rubber Direct
I mentioned in my opening comments as well that butyl inner tubes, inner tubes that is used to produce a grade of reclaim called butyl reclaim. That is the one that has been most affected. And this is not just for this quarter, but we have been cautioning about the reduction in the gross margins for that particular SKU for the last three quarters.

Identifies the specific product category (butyl reclaim rubber from inner tubes) as the primary driver of persistent gross margin pressure over the last three quarters.

Asked by Veer

Revenue contribution and commercialization timeline of integrated tyre-to-energy vertical (crumb, TPO, rCB) Direct
I think once the entire 30,000 tons of pyrolysis, which means 35,000 tons of crumb along with rCB and everything is commissioned, we expect revenues to be in excess of about Rs. 125 crores as part of that Phase-1. And when we will achieve that will be a function of achieving a higher utilization. But yes, between Rs. 125 to 140 crores of revenue can be expected once this project is completely commercialized.

Provides a clear revenue potential target for the new integrated tyre-to-energy business once fully commercialized, indicating significant future contribution.

Asked by Balasubramanian

Impact of renewable energy initiatives on operating costs and EBITDA margins Partial
I think if you look at only over the last eight quarters on a consistent basis, we have seen manufacturing costs have reduced. In fact, even on an annualized basis last year itself, the operating costs have come down to the tune of about 4%. I mean, if you look at just energy alone, our annualized savings from energy was close to Rs. 7 crores last year on account of the switchover.

Management confirms energy savings from renewable initiatives but notes that overall manufacturing cost reductions are 'hidden' due to other challenges impacting gross margins, suggesting a complex interplay of factors.

Asked by Veer

Reasons for not passing on raw material price increases for butyl reclaimed rubber Direct
I think it is the persistent pressure over the last few quarters that you are talking about, again, I have mentioned this on first calls as well. Everything is to do with that one particular SKU. To put it in perspective, this is a grade where our margin from that product over the margin on the other products was almost 25% higher margin. At a gross margin level, this particular product category had a margin which was roughly 25% higher. Today, it is in line with the gross margin with the other grades of products that we have. That is the reason.

Explains that the butyl reclaim rubber product, which previously had significantly higher margins, is now facing pressure due to an imbalance in inner tube supply and demand, making it difficult to pass on costs.

Asked by Divy Agarwal

Capacity utilization of the reclaimed rubber segment Direct
So, we, it has dropped to about 80% from a high of closer to 88% odd. So, that, as I said, the factors I have already indicated, but there has been that 8% odd drop in the utilization.

Quantifies the decline in reclaimed rubber capacity utilization, linking it to previously mentioned external market headwinds and operational downtime.

Asked by Divy Agarwal

Demand-supply gap and pricing pressure outlook in reclaim rubber markets Partial
I think some of this is transient to what is happening in terms of the tariff. So, our conversation with our tyre Company customers is giving us enough confidence that starting Q3 of this fiscal, there will be normalcy in some of these markets as well. And I think as we speak, we are seeing everyday new tariffs getting signed up. So, I am pretty sure that any impact on account of tariffs will kind of start normalizing in the next couple of months.

Management expects normalization in some affected markets and tariff impacts to subside in the next couple of months, suggesting potential relief from pricing pressures in Q3 FY26.

Asked by Radha

GRP's 'right to win' and market share strategy among tyre OEs Direct
I think the evidence is in the numbers. The fact that we have the broadest category and SKUs on offer to work with the tyre companies, the innovation that we are investing in to ensure that these newer technologies to offer them lower GHG emissions as well as newer technologies and processes to help them use more reclaim. We have generally been the go-to manufacturer when it comes to any kind of long-term development.

Highlights GRP's competitive advantages through broad product offerings, innovation, and focus on lower GHG emissions, positioning them as a preferred partner for long-term development with tyre companies.

Asked by Radha

3 min read 6 chapters

Detailed narrative

Q1 FY26 Consolidated Performance Overview

GRP Limited faced a challenging Q1 FY26, with consolidated total income declining 2% year-on-year to ₹1,247 million. This dip was primarily due to a 7% reduction in volumes, driven by external market headwinds and a one-time operational downtime for a plant upgrade. Gross profits decreased 7% to ₹624 million, and EBITDA saw an 18% decline to ₹109 million, resulting in EBITDA margins contracting to 8.7% from 10.5% in Q1 FY25. Profit after tax stood at ₹17 million, down from ₹44 million in Q1 FY25.

Reclaimed Rubber Sector Challenges and Export Performance

The reclaimed rubber sector experienced significant headwinds. Export revenues declined by 9% due to tariff-related uncertainties in key overseas markets (Europe and North America) and port congestion. The global OE tyre segment remained flat, with sharp declines in Europe (-8%) and North America (-5%). Domestically, reclaim rubber exports grew by a slower 5% compared to 10% in FY25, with notable declines in shipments to Europe and North America by almost 14%. The butyl reclaim rubber segment, a significant contributor, faced persistent gross margin pressure for the third consecutive quarter due to sustained inflation in raw material costs for automotive inner tubes and an unfavorable product/geographic mix.

Non-Reclaim Rubber Business and Subsidiary Progress

In contrast to the reclaimed rubber segment, the non-reclaim rubber business delivered a strong 17% year-on-year growth. This was fueled by robust performance in polymer composite and custom die forms businesses, supported by stable demand and favorable margin profiles. However, this growth was partially offset by a decline in the engineering plastics division due to lower virgin nylon prices and softening demand in the Indian automotive sector. Subsidiaries, GRP Circular Solutions Limited and GSPL, continued to improve, reporting a combined top line of ₹74 million, and are expected to achieve positive EBITDA by the end of FY26.

New Projects and CAPEX Plans

The crumb rubber plant, which became operational last quarter, has started supplying material to bitumen modifiers, with several approvals secured. The company anticipates a pickup in volumes in Q4 FY26 as the road surfacing season recommences. The first phase of the tyre pyrolysis oil project is undergoing cold trials, with commercial operations expected to begin in Q2 FY26. The company also targets to commence commercial operations for the recovered carbon black project by the end of FY26. Total CAPEX of ₹150 crores (out of ₹250 crores announced) is expected to be deployed by December 2025 to January 2026, with 65-70% allocated to the waste-to-energy business and the remainder split between reclaim rubber and plastic recycling.

Strategic Investments and Renewable Energy Transition

GRP drew €7.5 million from Proparco as part of the ECB in Q1 FY26 to fund strategic investments. The board has approved additional capacity for solar power generation for its Gujarat and Maharashtra reclaim rubber manufacturing units under a group captive arrangement. This initiative is a key step towards the company's renewable energy transition, targeting 50% renewable energy usage by 2028, aiming to reduce its carbon footprint and achieve meaningful incremental margins and GHG emission reductions for the reclaim business.

New Technology and Operational Efficiencies

The new technology installed in reclaim rubber operations has shown encouraging results, securing product approvals from several tyre and non-tyre customers, which is expected to drive incremental volume growth in upcoming quarters. Additionally, one production line has switched to an alternate process, significantly reducing manpower dependence and GHG emissions. Approvals for this new process have been received from customers, and the company aims to convert more SKUs to this process in the coming year.

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