Hi-Green Carbon

Hi-Green Carbon is aggressively expanding its capacity, reporting a consolidated turnover of ₹96 crores in FY25. The second plant in Dhule, operational since November 2024, is currently at 70% capacity. A third plant in Dhar, Madhya Pradesh, is under construction and expected to be operational by October-November 2025. This expansion aims for a 10x increase in total capacity compared to pre-IPO levels within the next 7-10 years, with new plants typically reaching 70-80% utilization within 3-4 months of operation.

The company's pyrolysis process yields fuel oil, raw carbon (upgraded to rCB), and syngas. While fuel oil and rCB are sold, syngas is primarily used internally, with 50% for pyrolysis and the remainder for thermal energy. At the Dhule plant, the company is investing approximately ₹2 crores to convert excess syngas into power for self-consumption and potential grid export, rather than sodium silicate production. This strategic shift aims for energy self-sufficiency and improved margins by reducing energy costs.

Hi-Green Carbon reported a consolidated turnover of ₹96 crores for FY25. Gross margins have seen a reduction from 40% to 34% (FY24 vs FY25), attributed to the initial costs of new plant ramp-up, higher raw material costs, and competitive pressure from lower virgin carbon prices. Management targets a sustainable EBITDA margin of 20-25% in the long term, expecting stabilization as new plants reach full utilization and operational efficiencies improve.

The company maintains a capital allocation strategy of 50% debt and 50% equity for expansions. The Dhule plant incurred a total cost of approximately ₹48 crores, with an additional ₹10 crores for working capital, funded by a ₹14 crore term loan (₹4 crores already repaid). The Dhar plant is expected to have a similar cost. The average cost of long-term debt is around 9%, with specific rates of 8.87% from Central Bank and 8.75% from PNB for the MP plant.

Recovered Carbon Black (rCB) is gaining adoption in master batch, plastic, solid tire, and two-wheeler tire industries. However, major Indian four-wheeler tire manufacturers are still in the R&D phase, evaluating rCB properties. The company emphasizes its proprietary technology and expertise in maintaining consistent rCB quality, which is crucial for customer approvals and market penetration, especially as global research in Europe drives rCB adoption. The approval process for rCB can take 9-12 months.

The introduction of the EPR (Extended Producer Responsibility) policy has positively impacted raw material sourcing by organizing waste tire collection channels. However, the company has chosen to avoid generating EPR credits in FY25 due to perceived ambiguity and the risk of 'double crossing' in the policy framework, prioritizing safety and clarity over immediate credit generation. Past regulatory bans on pyrolysis in Gujarat have been lifted, opening new avenues for expansion.

Hi-Green Carbon believes its continuous pyrolysis technology offers a significant competitive advantage due to its consistency, scalability, and energy efficiency compared to batch processes. The company actively protects its proprietary technology and experience, which it views as a key differentiator against newcomers, some of whom face challenges with imported technology. This focus on internal R&D and technology refinement is central to its long-term growth strategy.