GRP Q4 FY26 earnings call

GRP Limited reported a challenging Q4 FY26, with total income contracting 10% YoY to INR 145 crores and EBITDA plummeting 71.6% YoY to INR 9.4 crores, resulting in a PAT loss of INR 1.3 crores. For the full FY26, total income declined 3% YoY to INR 538 crores, and EBITDA fell 38.2% YoY to INR 42.9 crores. The moderation in income was largely attributed to a high comparative base in FY25, which benefited from substantial EPR credit recognition, and persistent softness in export demand. Profitability was further impacted by softened export volumes, lower spreads, inflationary raw material costs, and initial scale-up costs for new businesses.

FY26 was a transition year marked by significant strategic investments and the commissioning of new business platforms. The Pyrova Energy business, a key initiative, saw its Phase 1A completed by October 2025, with India's largest single-line reactor (15,000 tons capacity) and integrated crumb rubber facility achieving operational stability in Q4 FY26. Phase 1B, which includes a recovered carbon black facility and additional pyrolysis capacity, is underway and expected to be commissioned by February 2027. Cumulative investment in Pyrova Energy reached approximately INR 79 crores by March, equivalent to the EPR income recorded from FY24-26, demonstrating the company's commitment to reinvesting in future growth.

The Reclaim Rubber business faced significant headwinds in FY26, with 33% of revenues from key U.S. customers and 44% of associated raw material margins impacted by tariffs. Export volumes declined by about 15%, though domestic volumes grew nearly 10%, supported by proactive market development. Raw material inflation, reaching up to 43% in certain SKUs, also pressured margins. However, the company managed to rebalance its geographic mix and expects the restoration of U.S. volumes in FY27, which should help improve margins. A new low-emission Reclaim Rubber technology was commercialized, and another line is planned for commissioning by end of Q1 (next FY), increasing capacity to 700 tons/month.

In plastic recycling, underlying demand from the automotive sector remained healthy, driven by domestic auto growth and OEM sustainability focus. However, lower virgin polymer prices and aggressive low-cost polypropylene imports impacted the industry environment, affecting both volumes and margins. GRP is pivoting closer to the automotive value chain, where demand for recycled polypropylene and nylon is expected to be strongest due to EPR mandates. The TPO (pyrolysis oil) product currently serves three markets: road construction, industrial furnaces, and the petchem value chain, with road construction offering the lowest price point and petchem the highest.

GRP incurred approximately INR 170 crores in capex from FY24-26, with about 50% allocated to Pyrova Energy, 30-35% to Reclaim Rubber, and 15% to other businesses including renewable energy projects. For FY27, the company targets a growth capex of INR 90-100 crores. Despite subdued profitability, management expressed comfort with its funding strategy, planning a prudent mix of debt and internal accruals. The company has unutilized limits from a DFI Proparco loan and can trigger the sale of unsold EPR credits to manage cash flow, maintaining strong debt serviceability ratios despite an increase in debt-to-equity to 1.15 in FY26.

The company's cumulative investment in Pyrova Energy (INR 79 crores) is broadly equivalent to the EPR income recorded from FY24-26, reflecting a strategy to reinvest these inflows into growth platforms. EPR credit pricing is currently around INR 2.52/kg, with approximately 85% of credits contracted and 15% available on the spot market. Accrual of EPR income from the Pyrolysis business is awaiting government approvals, with retrospective accrual expected in H1 FY27. Management anticipates a meaningful impact and contribution from EPR income as pyrolysis, crumb rubber, and rCB capacities scale up, with full year effects on margins expected by FY28.