Ganesha eco- May 2024 - concall summary
1…Textile(rPSF) v/s packaging business(rPET)
=At present, our major products is going to the textile sector. Mainly 60% to 65% we are selling to the textile sector.
= But, going forward, as we are moving ahead on the putting of more and more rPET general capacities, the major turnover, will come from the packaging industry.
=So, going forward, say, in the next one or two years, we are seeing almost 50% contribution in sales will be from the packaging sector, 50% from the textile and technical textile sector.
2…TEXTILE BUSINESS(rPSF)
=Stable margin in textile business despite sector is not performing well
=Our major products is going to the textile sector. Mainly 60%, 65% we are selling to the textile sector and the textile sector is not in good shape at all since last one year and so.
=We have seen both realizations per ton as well as the EBITDA per ton falling off further and even the demand hasn’t picked up materially.
=Past yr was started in the realm of disappointments prevailing around the downturn in the textile industry with subdued demand and sliding prices due to various global and domestic macros which shadowed the performance of our company as well along with significant drop in our
operating margins as well as profitability during the first quarter.
=But even though we are not doing very bad in our textile business, we are still maintaining our margins of over 11% except the quarter one and two when the prices dropped off quickly and we suffered. So, after that we have come back and now we are earning more than 11% EBITDA
margin and historically, we are on 11% plus band in legacy business.
=We are looking for the recovery in the textile sector which seems to be happening around July and August month.
3…WARANGAL PLANT
=We achieved a very good set of numbers from our Warangal plant where we achieved operating profits of more than 22% during the quarter on the back of improved capacity utilization of existing Rpet granule plant as well as the start of the operations in the RPSF production line and the second production line of rPet granules.
=At Warangal unit, RPSF line as well as 2nd rPET Granule Line started with effect from 1st March 2024 and both the lines are operating at over 80% capacity utilization during 1st month
of operation.
= 3rd line is also expected to be operational by June end
4…rPET- HUGE OPPORTUNITY
A…Govt regulations for rPET
=As of now ,there is much clarity on the ground for the implementation of the rules from the April 25 onwards.
= Even the Ministry of Environment has notified the penalties also for default in using these recycling stuff in packaging products.
=The regulation was notified in May '22 to be effective from April 25. And this timeline is intact. So, they have made some changes in between regarding the penalties and all those things. But the timeline is intact.
=As per the EPR guidelines from FY '26 onwards, the company will have to use 30% of the recycled product
B…We want to gain 25% market share in the rPET granules. And somewhere it’s quoted around 1 million tons would be the total capacity which would be needed.
C…Our capacity for rPET granules
=rPET granules current capacity is 28,000 tons
=And another 14,000 tons of capacity is going to get commissioned in June of 2024
=It takes about 15 months to 18 months’ time to commission the new facility fully operational
D…Competitiors
=There are a couple of players who are coming up with capacities. The existing fiber recycling players, some of the bigger players like JB
Ecotech Alliance, VLS etc., have also announced their rPET capacities as well.
=Each of them are coming up with one line capacity currently. And other than that, in terms of big players,
Indorama is also coming up with capacity for rPET in the coming up years.
=So, as of today, the current expected capacity for the rPET industry by FY '25 end would be around 200,000 to 250,000 tons, which is currently under installation.
5…STRONG NETWORK FOR RAW MATERIAL COLLECTION
=We are already in this field since last 30 years. We are having quite a grassroots level sourcing network. So, you see, we are already collecting more than 150,000 tons of material
on a yearly basis. And with the ramp-up of our capacity in Warangal, we have already put the
network in place for getting the raw material
6…DEBT REDUCTION
=Qip funds raised at the recent QIP as well as preferential warrants issue, we have set off entire working capital borrowings as well as repaid term debt of the holding company
=Debt in our book is around INR400 crores as of now.
= We are already having the
cash of INR180 crores with us and also all the units have started to contribute towards the cash profits.
=So, we don’t see any uptick in the borrowings in near future,
7…CAPEX
=We have spent over about INR600 crores on our Warangal unit and almost all the plants have been operating, except this rPET granule line, which is expected to be operational by end of next month.
=For future expansions, we are elaborating and discussing in-house. And, once the project is approved by the board, we will come out with that numbers
8…REVENUE AND MARGIN GUIDANCE
=For Fy 2025 ,we are looking for a sales turnover of over INR1500 to INR1600 crores on consolidated
basis and margins should be now to 16% on blended basis.
9…HDPE and PP BUSINESS
=We are slowly moving up in this business , but we are not very fast and now we are focusing on the rPET granule side.
=So, we are not very much aggressive on that front, but of course, we are moving ahead with that slowly
=The reason behind going slow with HDPE, PP or I should say non-PP segment is that the regulation for approval from FSSAI for food safety of HDPE, PP is still pending. The FSSAI
and EFSA both are not very much clear. It is still the EFSA, European Food Safety Council has
also not decided the particular process with which we can obtain the food grade materials.
=For non-food grade HDPE, PP
recycling we are having a very vast unorganized sector which is recycling these materials in India and for a corporate organization like us the food grade is a better sector where we can
expand faster and we can serve the big brands who are using food grade PP and HDPE granules.
So, at one side, the regulation is still going very slow and the second side we are also working on the supply chain system because a proper traceable supply chain system is still in the emerging stage for HDPE, PP and all other non-PP plastic.
=So, these are the two things which
are slowing down the pace for development in this non-BT segment.
10…FORWARD INTEGRATION INTO FABRIC BUSINESS
=We are not having any plan
=Our core focus is now on the recycling only and mainly on the rPET
granules.
=So, we are not having an immediate plan in going into the yarn or the fabric business in Ganesha Ecosphere.
11…FORWARD INTEGRATION INTO rPET BUSINESS
=We have no plan is there for the going ahead into moving further in the rPET business.
=But yes, it is not ruled out completely. Whenever we will get any opportunity or any business proposition, we
may move it from the rPET granules to further value addition
Disc…invested