Release Date: May 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ganesha Ecosphere Ltd (BOM:514167, Financial) achieved a consolidated revenue of INR305.53 crore in Q4 FY24, showing a 7% improvement over the previous quarter.
- The Warangal unit has started contributing significantly with over 80% capacity utilization in its first month of operation.
- EBITDA margins improved to 15.40% on a consolidated basis, up by 137 basis points from the previous quarter.
- The company has achieved almost zero debt status by repaying term debt and setting off working capital borrowings.
- Ganesha Ecosphere Ltd (BOM:514167) is installing a rooftop solar power plant at the Warangal unit to enhance sustainable operations and reduce power costs.
Negative Points
- The textile sector, which constitutes a significant portion of the company's business, is still under pressure with slow demand recovery.
- EBITDA per ton dropped to INR10,012 in Q4 FY24 from INR10,999 in Q3 FY24 and INR11,580 in Q4 FY23.
- The average realization per ton decreased to INR83,190, down by 3% from the previous quarter.
- The company faced delays in approvals for commercialization of products at the Warangal unit, affecting initial performance.
- Inventory levels have been higher due to slow-moving textile business, impacting working capital cycles.
Q & A Highlights
Q: So my first question would be on CapEx front. So I would like to understand how much total CapEx has been planned on, how much has been spent on and what all the product segment capacity has been live now and any new capacities still pending to be introduced?
A: Yeah. So we have spent over about INR600 crore on our Warangal unit and almost all the plants have been operational except this rPET granule line, which is expected to be operational by end of next month. And for future expansions, we are elaborating and discussing in house and once we are -- once the project is approved by the Board, we will come out with that numbers.
Q: Okay. My another question would be on -- since we have already shared the blended EBITDA margin would be around 15%, 16% after the existing capacity and the new capacity has been fully capitalized. But can I get to know that the new capacity which has been introduced, what is the maximum sales we can do from that plant.
A: Yeah. From our subsidiaries and standalone basis -- consolidated basis, we are looking for sales of about INR1,700 crore to INR1,800 crore when all the plants will be fully operational.
Q: So we have also shared the rigid plastic capacity of HDPE and PP you have said in Q2 con call, and it is taking time during that time. So what is the current status on the same and how we are planning on that front?
A: Yeah. So we are slowly moving up in that direction, but we are not very fast. And now our focus is 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.
Q: Any strategic reason we have chosen that because I understand B2B granule chips, which we are seeing at the better margin and has been on the demand, but HDPE and PP, we are not doing -- and previously, we are doing any specific reason, or we have chosen not to pursue further?
A: So basically -- hello, hi. The reason behind going through 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. Still EFSA, European Food Safety Council has also not decided the particular process with which we can obtain the food grade material.
Q: And sir, any update on Manjushree?
A: So for applied science DNA with US partner, it is traceability system where you can trace the product by doing a few things testing at the consumer end, and it is easily identifiable that whether the recycled fiber or recycled yarn has been used in that garment or whatever the end product, end consumer product.
Q: Sir, my first question is just to understand your current capacity for rPET granules currently is 28,000 tons?
A: Yes, Dhruv. It is 28,000 ton at present.
Q: And you are saying, it's running at 80% utilization?
A: Right.
Q: Okay. And another 14,000 ton of capacity is going to get commissioned in June of 2024?
A: Right.
Q: So post that, I mean, as you said that you are still evaluating. So if we put up a new capacity, what will be the timeline for, say if you announced one today, how long will it take for you to commission a new facility?
A: So it takes 15 to 18 months time to commission the new facility fully operational.
Q: And the current one, which you're running at 80%? I mean, what can be -- I mean, is this peak utilization or is it -- can you go a little further up?
A: No, we can go little further. We can go by more than 90%.
Q: Sir, the second thing I want to understand is that if I look at the subsidiary numbers because it covers Nepal and Warangal, I think these are the two subsidiary entities. Going by the EBITDA per ton this quarter or EBITDA per kg, you have done somewhere about INR30 per kg. And on EBITDA margin of 22%.
A: So we -- the numbers are quite achievable and in future also. So we are watching and the regulations is we started from FY25. So we are, in fact, looking for the improvement in margins moving ahead.
Q: I mean, so you're saying that earlier you used to talk about INR20 per kg for this business. Now you're INR30, you're saying there's a scope to even improve this?
A: Yes, because the regulation has not started and all the branches have started our product on trial basis. And also, we are able to put margins to other products.
Q: And currently, have you locked in customer in terms of a long-term contract or all this currently sales are all on spot basis as and when required?
A: So basically, it's a mix of the two. We have a few customers whom we have locked for year long contracts and the multiyear contracts also already under discussion. And there are some sales that we are currently doing on spot basis itself based on the demand from domestic as well as the export markets.
Q: What would be FY25 CapEx that you will be spending?
A: So for FY 25, we are finalizing the CapEx plan, which will be final very soon. So after finalization of the plan, we'll come back with the numbers. As of now, there is not a great expenditure because we have to spend some amount on the solar installation, which is about INR30 crore, INR32 crore and some maintenance CapEx are there and the CapEx for the third line is already there, and we have also to make some modifications in the machinery for improvement of the capacity. So roughly as of now, we are having the CapEx of around INR70 crore to INR80 crore. But for capacity matching capacity expansions, we will come out with the plans very soon.
Q: And sir, lastly, just on your legacy business or the base business, just to understand because there is still pressure in this business. We have seen
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
