Release Date: February 16, 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 production volume of 28,447 metric tons during the quarter, utilizing production capacity at 107%.
- The company reported an EBITDA of INR31.29 crores during Q3 FY24, which is an increase of 372 basis points quarter-on-quarter.
- The Warangal unit's operational results improved due to the start of dispatches from the rPET Granules Production line, operating at 86% capacity utilization.
- The company raised INR350 crores through equity shares and INR150 crores through warrants to institutional investors and promoters, strengthening its strategic position.
- Ganesha Ecosphere Ltd (BOM:514167) expects a revenue growth of about 50% for the next financial year, driven by increased capacity utilization and new production lines.
Negative Points
- The Indian textile sector is facing strong headwinds due to a decline in exports and cheaper imports from neighboring countries, adversely affecting demand and prices.
- Revenue from operations during the quarter was INR245.75 crores, which is lower by 5.7% from the last quarter and 9.23% from Q3 FY23.
- PAT at INR19.55 crores is lower by INR1.38 crores compared to INR20.93 crores earned during Q3 FY23.
- The company faced a subdued performance during the first half of FY24 due to a downturn in the textile sector, impacting overall financial results.
- The profitability at INR18.98 crores is quite lower due to higher interest and depreciation expenses of subsidiaries, despite the Warangal unit's operations picking up.
Q & A Highlights
Q: Regarding the headwinds, when do you think or how long it can last because we are seeing recession in different parts of the world also. What is your take on that first question?
A: Definitely. You are right. There is also currently undergoing a downward trend in the textile segment. It is very difficult to comment right now on until how long it can go on. The experts have suggested that it might take around a year or so until again the textile industry starts getting to good utilization levels. That is the current expectation that we have. It is very difficult to predict what the future scenario would look like.
Q: The second question on this line is that something is getting operational in February and something in June. When do you think we can reach some optimal level of utilization for these two lines you mentioned in your opening remarks?
A: We are having the fair visibility about the offtake of the rPET granules in the next year. We are expecting the second line and third line will be fully utilized by the end of June itself.
Q: What about the third line? You said something will be operational by Q1 end. What about that?
A: That will be fully utilized in September. We are expecting it in September 2024.
Q: Based on all these factors, any growth guidance you are thinking right now or you are aspiring for next financial year?
A: For next financial year, we are expecting revenue growth of about 50% from current run rates.
Q: When we say 87% utilization in the rPET granules, it is the 14,000-ton lines in South India which operate at 87% and not the entire plant, right?
A: Correct. It is for the rPET granule line only.
Q: What about the PPSF line and the filament line? How are those lines ramping up and what is the expectation for the next year for these two products?
A: Yes, I already told that filament yarn will take some more quarters to ramp up because of the downturn in the textile industry and PPSF is already scaling up. We are presently operating at about 50% and next one or two quarters, it will be at optimum capacity utilization.
Q: You mentioned in the opening remarks that the business benefited from cheaper sourcing of raw materials. Was it because of the north plant sourcing raw materials from Nepal or is there something else with regards to raw material prices?
A: No. We are talking about the general scenario of the raw material prices which we sourced within the country itself.
Q: Do you expect the South plant EBITDA to cross 25% guidance that we were giving earlier or do you want to maintain that guidance?
A: We have never given EBITDA guidance of 35% in the South plant. It is product-to-product but overall we have given the guidance of 20% EBITDA margins in our South plant, which we hopefully achieve during next financial year, 18% to 20% EBITDA margin as a whole from the South plant will be achieved.
Q: The next is on the fund raise that we have done how much capacity do we plan to put using this fund? Where will this capacity come in and will any debt be utilized for setting up the new capacity?
A: So 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.
Q: And no debt will be involved in the future CapEx expansion?
A: So we have not made any great extension plan as of now. We are discussing the extension plan and whenever any extension plan will be finalized, we will let you know. But of course, we have raised the capital so we are not looking for any debt as of now.
Q: Varun Beverages on their call mentioned that Indorama is setting up two lines by end of next year. So any pressure on the raw material sizing or on the utilization levels that we are seeing for the next year? Any commentary on that?
A: Not really. So basically you see that the raw material availability in India is also going at very unprecedented levels right now. 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 right now because India was already on sub-par consumption, sub-average consumption levels if you compare globally. So not really. We don't think it should be a problem because 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.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
