GRP

GRP Limited reported a robust 20% year-on-year growth in total income for Q3 FY25, reaching INR 1,327 million, and a similar 20% growth for the nine-month period to INR 3,912 million. EBITDA for Q3 FY25 also increased by 20% to INR 130 million, with a 22% rise for 9M FY25 to INR 363 million. However, gross margins experienced pressure, declining 246 basis points YoY in Q3 FY25 to 53.1%, primarily due to elevated raw material costs and fixed customer pricing.

The Reclaim Rubber business saw a 9% increase in volumes for the nine-month period, contributing to the overall 12% volume growth. This growth was achieved despite subdued global demand for tyres, indicating increased adoption of Reclaim Rubber in both tyre and non-tyre segments. While natural rubber prices remained high, they moderated slightly, but are expected to stay elevated in forthcoming quarters.

The non-Reclaim business demonstrated strong performance with a 24% increase in volume, though it was somewhat constrained by the Diwali festive season. The company's subsidiary, GRP Circular Solutions Limited, and GSPL, generated INR 210 million in revenue but incurred a loss of INR 43 million for YTD FY25. Management expects the subsidiary to cease bleeding and improve profitability post April 1, 2025, driven by new regulations on circularity.

GRP recorded an income of INR 121 million from EPR credits for YTD FY25. As of December 2024, the stock of EPR credits is valued at approximately INR 180 million, calculated at the minimum support price adjusted for transaction costs. The company plans to execute sales of these credits at appropriate time^⏳s, acknowledging that the timing and value can fluctuate.

The company has achieved operational efficiencies through automation, reducing employee costs from 12.5% to 11.2% during the quarter. Significant savings of INR 0.5 crores from renewable power and INR 2.5 crores from switching to biofuel sources were realized. These initiatives not only mitigate rising power tariffs but also contribute to reducing GHG emissions, aligning with the company's broader vision for sustainable growth.

GRP's announced capex plan of INR 250 crores for expanding the tyre recycling ecosystem is progressing, with approximately INR 33 crores already incurred. The company expects to receive proceeds from a line of credit from French DFI Proparco in the current quarter and has secured shareholder approval for an additional INR 150 crores through a Qualified Institutional Placement. The first line of crumb rubber and the continuous pyrolysis line are on track to commence operations by Q4 FY25.

Management anticipates gross margins to stabilize and return to normal levels from Q4 FY25, following pricing adjustments effective January 1, 2025. Consolidated EBITDA margins are projected to move towards mid-teens and potentially high-teens, while the new pyrolysis business is expected to generate 12-14% EBITDA margins. The company remains committed to its long-term growth strategy, leveraging new technologies and investments in new businesses within the circular economy.