Detailed Narrative
Q3 FY26 Financial Performance Overview
GRP Limited reported a marginal 2% YoY increase in total income to INR 135.2 crores for Q3 FY26. Despite this, gross profit declined by 5% to INR 66.6 crores, and EBITDA fell 14% to INR 11.2 crores. Adjusted PAT saw a significant 49% YoY decline to INR 2.3 crores, primarily impacted by higher raw material costs, a 45% decline in export margins due to US tariffs, and fixed costs from underutilized new plants.
Impact of US Tariffs and Export Market Challenges
The company experienced a nearly 40% YoY decline in export volumes to North American markets in Q3 FY26, largely due to the impact of US tariffs. However, recent tariff reductions from 50% to 18% are expected to improve export volumes and realizations, with benefits anticipated from the current quarter. Commercial conversations with US customers have resumed, though a full recovery timeline is still uncertain, expected to gain clarity in 3-4 weeks.
Green Energy Initiatives and Project Delays
GRP is progressing with its integrated tyre recycling ecosystem, including tyre pyrolysis, recovered carbon black (rCB), and crumb rubber. While the yield profile of tyre pyrolysis is encouraging, stabilization of the technology has taken longer than anticipated, leading to below-expected capacity utilization. Consequently, the next stage of expansion for pyrolysis and rCB commissioning has been deferred to August 2026, with commercial production expected in H2 FY27.
Domestic Market Strength and Diversified Portfolio
The domestic market provided support, with reclaim rubber domestic revenues growing 17% YTD and GRP's market share improving by 200 basis points. The company's diversified portfolio and focus on non-tyre applications contributed to overall volume stability, with incremental gains from new businesses like Tyre Pyrolysis Oil balancing declines in export-linked volumes. Income from pyrolysis and crumb rubber businesses also began to build, supported by sales to cement and steel industries.
Headwinds in Recycled Polyolefin Segment
The recycled polyolefin segment faced significant challenges, with industry prices declining 4-5% sequentially in Q3 and remaining 30-35% lower YoY. This was driven by a sharp decline in virgin polypropylene prices and increased low-cost imports, particularly from China. These factors hindered the company's ability to increase volumes and scale in this market, and demand momentum linked to EPR benefits has been slower than anticipated.
Capital Expenditure and Debt Position
GRP deployed approximately INR 50 crores in capex for FY26 YTD, with INR 31 crores allocated to pyrolysis and rCB. An additional INR 80 crores is planned for FY27 for pyrolysis and rCB, alongside INR 12-15 crores for new reclaim rubber technology. Gross debt stood at INR 180.2 crores as of December 31, 2025, with a debt-to-equity ratio of 0.92. Management expressed comfort with current leverage and expects improvement in debt ratios in the coming quarters.