Feb 2024 concall
1…PERFORMANCE
A…Textile sector recovery
=Under the shadow of slowdown in textile sector, our operations were slided for a while during
H1 FY2024, but we are pleased to share that our operations have geared up in the 3rd quarter
and improved significantly over the last two quarters due to stabilization of RPSF prices as well as moderation in the prices of raw material, which improved our gross margins.
=We are more or less back on track after a subdued performance achieved during the first half of financial year 24, owing to the downturn in the textile sector due to slower export demand,
cheap imports, particularly from China, and over capacity of polyester in the Southeast Asian countries.
2…Warangal plant from 3rd quarter
=Operations of Warangal unit has started to pick up from 3rd quarter onwards.
=During the quarter, operational results of our Warangal units were also improved due to the start
of dispatches from our rPET Granules Production line and we could operate this production line in full stream during the quarter.
=We operated the existing production line at 86% capacity utilization during the quarter.
3…Capacity utilization
=Company achieved production volume of 28,447 metric tons during
the quarter by utilizing the production capacity at 107%
=rPet granules@87% utilizatuin
=ppsf@50% utilization
4…Revenue
.We registered revenue from operations of INR245.75 crores during the quarter, which is lower by 5.7% from last quarter and 9.23% from Q3 FY23
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FUTURE GROWTH
1…Warangal plant@value added high margin products
=At this plant we have value added products like RPSF, PPSF, iB2B granules and also filament yarn.
A-RPSF @ 12,600 capacity
B-Rpet granules@3 production lines
C -filament yarn @12,240
D-PPSF @10,800.
= Because in textiles, there is a huge product range ranging
from INR75 a kg of a product to INR120 a kg of the product as well.
=We are working very, very aggressively on making a better product marketing mix for us by entering specialized products, by entering into special value-added products and even the textile segment.
=Basically, in the South
India plant, we have designed our lines in a way that we will be able to and we are focusing on much more value-added products and different kind of product portfolio than what we have done in the existing capacities. Because of that, the profitability as well as the realization are slightly
different.
=Higher margin in Q3 is due to higher realization in south plant
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2…rPET granules
=Basically there are three production lines we are talking.
= So, one is already up and operational and for that we have mentioned we are already operating at 86% in Q3.
= The second line of PET granules as well as RPSF is under implementation, which is hopefully to be operational by the end of this month.
=And third line is under dispatch and that is also expected to be operational by June 24.
=So, overall three production lines are there.
=Combined capacity is 42,000 tons. One line is 14,000 tons.
=, So, by June 24, our entire capacity of 78,000 tons will be operational.
=With approvals of our products from many marquee brands domestically as well as globally, and getting repeat
orders, we now have a very fair visibility of the market through targeted.
=There is a huge demand that is going to be created in the next coming
five years. Because today, the consumption of rPET granules in India is almost at 0% and it is
going to go to 50% in the next – 60% in the next five years.
= So, a market of 1 million tons of
rPET is going to be created and the current capacities are not even 5% of what is needed. So, for
the next couple of years, there is going to be a huge growth scenario, both from the demand as well as the supply side
=Beverage companies or other food companies or FMCG companies for the supply of rPET chips.
-We are working with over 40 brands right now in India as well as
globally regarding our rPET for our rPET granule market.
-And we have got around 15 approvals already and the other ones are under final stages of product trials and approvals and all that.
-So, for FY25, we see a very strong demand and fair visibility to uptake our capacity to a very good optimum utilization level
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3…Recycled filament yarns
=Though the marketing of recycled filament yarns will still take a couple of quarters to reach at optimum utilization levels, owing to the downturn in the textile industry.
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4…PPSF
=We are presently operating at
about 50% and next one or two quarters, it will be at optimum capacity utilization
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5…Product mixture change
A…rPSF
=Presently, most of our products, our main product is RPSF and that is for the textile value chain, be it the clothing or it is a technical and non-woven textiles or the stitching.
=So, primarily, it is for the textile sector.
B…rPET granules
=But going forward, we are going for this rPET granules.
= So this is for the packaging sector.
=Presently we are having 14,000 ton line, which is about 10% of our overall production capacity.
=But after the expansion of our two more lines from Warangal itself, it will be around 54%-55%
of the overall revenue from the Warangal unit.
=So, basically, in the next year, we would be having the total install capacity of about 79,000 ton
in our Warangal unit. So, out of which 42,000 will be for the rPET granules. So it is almost 54%-55% total.
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6…Realization of products
=So, in case of filament yarn, the
realizations are much more than this rPET granules.
=But in case of fiber, it is lower than the rPET granules.
=rPET chips v/s rPSF
-The margin profile currently is slightly better with rpet granules than the textile business
-Although we are working to improve our margin profile on the textile business also, but not really comment right now margin profile due to the sensitivity of the nature of the
product.
-But definitely, we are trying to improve our margin profile overall on both textiles and packaging as well.
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7…Capex
=Capex at warangal plant completed@600cr
=rPET granules@3 production line
=rPSF expansion
=For the fund raised from the market we are going ahead with one more production line and hopefully it will be at Warangal location.
=But we are first going for the ordering of the plant and machinery and we are looking for the suitable locations. So, we will come back to the investors
when we will finalize the location. But as of now, we are discussing on the location.
=we have raised the capital so we are not looking for any debt as of now.
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8…rPET use by regulations,
Not by choice
=Currently since the recycled pet market is fairly, fairly new, it is always being compared to the virgin pet market.
= If you look at the developed
economies worldwide, globally, at some point of time, there is going to be a de-linkage between
the virgin pet polymer and the recycled PET polymer.
=Recycled PET polymer is going to be in use and because of the regulations which will be applicable for usage of recycled polymer and not because as a choice to use it in the packaging
applications.
=So definitely currently there is a linkage but going forward in the coming years as we develop
and the industry matures, there is going to be a de-linkage. So it is not going to depend really on
the crude oil prices. It is going to depend on the collection cost and the recycling cost which will
be there to use the waste
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9…Warrents
A …To fuel the further growth of the business,
B… Rationalizing the debt levels and C…enhancing the long-term resources, we have also issued equity shares worth INR350 crores and
warrants worth INR150 crores to institutional investors and promoters of the company.
=Fundraising has been completed during first week of February 2024.
=This will help us solidify and even strengthen our strategic position in the recycling industry going forward
=after the QIP money has come in, the debt would have gone down.
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10…Revenue and ebidta guidance
=For next financial year, we are expecting revenue growth of about 50% from current run rates
=18% to 20% EBITDA
margin as a whole from the south plant will be achieved.
=So, the overall margins we are expecting about 15%-16% EBITDA margins on overall basis
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11…Raw material sourcing-Not problem
=The consumption in India itself is growing at 13% CAGR
approximately as of today. And because the consumptions are increasing at a very good rate in
India , we don’t think it should be a problem
=We already have a very good
footprint in the raw material sourcing part, and we source raw materials on a very good, very big scale today. And because of which our raw material sourcing capabilities are quite
strengthened as of today.
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12…Three strong moats
= Targeted marketing strategies, =Improving product portfolio mix
=Strong scrap sourcing network.
Disc…invested