GANECOSNSEQ2 FY2023November 26, 2022

Ganesha Ecosphere Limited

5,798words

95turns

10analyst exchanges

4executives

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Management on call

Gopal Agarwal

CHIEF FINANCIAL OFFICER – GANESHA ECOSPHERE LIMITED

Prashant Khandelwal

SENIOR VICE

Yash Sharma

PROMOTER GROUP – GANESHA ECOSPHERE LIMITED

Jenish Karia

ANTIQUE STOCK BROKING

Key numbers — 40 extracted

103%

crease in sale volume. On standalone basis, during September quarter of FY23, Company operated at 103% production capacity during the quarter and achieved production of 27,950 MT. We had achieved prod

27,950 MT

FY23, Company operated at 103% production capacity during the quarter and achieved production of 27,950 MT. We had achieved production of 27,645 MT during June,22 quarter and 27,928 MT during September, 2

27,645 MT

capacity during the quarter and achieved production of 27,950 MT. We had achieved production of 27,645 MT during June,22 quarter and 27,928 MT during September, 21 quarter. So broadly the quarterly produ

27,928 MT

ieved production of 27,950 MT. We had achieved production of 27,645 MT during June,22 quarter and 27,928 MT during September, 21 quarter. So broadly the quarterly production is more or less stable on y-o-y

Rs. 314.14 crore

production is more or less stable on y-o-y and q-o-q basis. We clocked revenue from operations of Rs. 314.14 crore during Q2FY 23 vs. Rs. 248.12 crore during Q2 FY22. turning into a growth of 26.6% over correspon

Rs. 248.12 crore

y-o-y and q-o-q basis. We clocked revenue from operations of Rs. 314.14 crore during Q2FY 23 vs. Rs. 248.12 crore during Q2 FY22. turning into a growth of 26.6% over corresponding quarter. Broadly contribution o

26.6%

of Rs. 314.14 crore during Q2FY 23 vs. Rs. 248.12 crore during Q2 FY22. turning into a growth of 26.6% over corresponding quarter. Broadly contribution of Fibre and Yarn is 84% and 1

84%

of 26.6% over corresponding quarter. Broadly contribution of Fibre and Yarn is 84% and 16% respectively in these numbers. The growth in revenue was achieved on the back of higher r

16%

% over corresponding quarter. Broadly contribution of Fibre and Yarn is 84% and 16% respectively in these numbers. The growth in revenue was achieved on the back of higher realizati

Rs. 103.5

ons of PSF and yarn as well as increase in sales volume. We could achieve average realizations of Rs. 103.5 per kg during this quarter vs. Rs. 88.6 per kg during corresponding last quarter. In volume terms,

Rs. 88.6

n sales volume. We could achieve average realizations of Rs. 103.5 per kg during this quarter vs. Rs. 88.6 per kg during corresponding last quarter. In volume terms, we sold 29,232 MT fibre and yarns durin

29,232 MT

ring this quarter vs. Rs. 88.6 per kg during corresponding last quarter. In volume terms, we sold 29,232 MT fibre and yarns during Q2 FY23 as against the sale of 26,913 MT during corresponding last quarter

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Guidance — 20 items

Gopal Agarwal

opening

“Despite slow down in the global market, our exports are increasing and we expect to achieve even higher export sale during current financial year on the back of diversified product range as well as approved vendor status of some international brands.”

Gopal Agarwal

opening

“Part of the projects would be operational during current quarter and part of the project is expected to have some more time in commercialization.”

Yash Sharma

“There is at least a period of two years to three years to set up a capacity for this kind of a project.”

Yash Sharma

“So, but the demand rise that is currently existing, if you talk about Europe or US, they are, I mean from the next year itself they required 20% to 30% recycled content.”

Prashant

“It will be, the total installation would be 26 megawatts DC.”

Srivathsan

“And lastly, just wanted to get on the capex plan and what kind of incremental volumes you can expect it to be great to get an update...”

Gopal Agarwal

“And in the next quarter, we'll be starting our FDY plant and bottle-to-bottle chips.”

Gopal Agarwal

“The total incremental capacity is about 50,000 tons in this facility and the total project cost is about INR 450 crores.”

Gopal Agarwal

“But with the start of this Warangal plant, we would be able to put more buyers and the material in the Tirupur market going forward.”

Muthu Kumar

“And the last question, sir, what is the earnings outlook we can expect for next two years to three years, that is bottom line, both bottom line and top line?”

Risks & concerns — 6 flagged

Supplies of commodities and food grains affected adversely which further fuelled the inflationary pressure in the economies.

— Gopal Agarwal

Strong US dollar, being safe heaven asset, is dropping the values of almost all the currencies of the world and thus increasing inflationary pressure.

— Gopal Agarwal

India also got its share of sufferings in the form of high inflation particularly imported inflation, increasing interest rates, weak currency, higher oil prices, widening current account deficit etc.

— Gopal Agarwal

The prices of cotton in the domestic market are on a downhill right now, and due to the weak demand in the domestic market.

— Darshita Shah

So the cotton prices have started to fall in the domestic market due to weak demand, so are we seeing something like that as well?

— Darshita Shah

But of course, because of the fall in the prices of cotton, we are looking for some downward pressure on the PSF prices.

— Gopal Agarwal

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Q&A — 10 exchanges

Sir, congratulations for a very good set of numbers and I really like how we have evolved as in a business perspective. Sir, my first question is that sir, in recycled yarn, sir I wanted to understand how much is imported, and how much is domestically sourced? Asking this from a perspective that India is a very small player in the global scheme and considered in the virgin man-made fiber, while we are very competitive in the cotton segment. So I wanted to understand how much is currently imported in the recycle segment, or is it just domestically sourced?

Gopal Agarwal

Thank you Gunjan. I think, you are asking about the imports of the recycled yarns and fiber in the country. Am I right? Correct. Yes. So the recycled fiber and yarn is not being much imported into the country. Basically, domestic production is being sold in the market. So it is largely a domestic market only, there is no import competition there? Yes. It is very negligible. Sir, second question which I had is a little long-term perspective question. So sir, whenever we recycle a bottle, so right now, there's a government norm that by 2025 that you have to recycle the bottlers, will have to rec

I just wanted to get your thoughts on two pieces. One, like we said on the export demand across the world. Just wanted to understand our go-to-market for the export piece of the business. Second is also in the presentation, you had talked about adding more renewable sources, long- term PPAs on renewable side. Just wanted to understand what kind of cost savings that could lead to?

Gopal Agarwal

Thank you. On the export side, our exports are increasing because we are having some tie-ups with global brands. So all of their franchisee manufacturers are able to source the material from us. So on the back of that, we are increasing our exports. It has increased to more than 10% in our overall revenue from operations. And we are expecting this will continue to grow further. As regard the renewable sources, we are already having the 8.7 megawatts rooftop solar facility on our existing plants. And Mr. Prashant will elaborate further on the third-party tie-ups with the generators. Prashant yo

Sir, are the monopoly in this segment? Or do you have any competitors? It means place kindly advise some of competitors? Gopal Agarwal We are not a monopoly industry. We are in recycling PSF industry. Apart from us, there are more than 30 players are there in that country. The total PSF capacity is more than 600,000 tons in the country, and we are having about 15% market share.

Muthu Kumar

Could you please share what is your revenue contribution from yarn? The yarn contributes 16% of our total revenue. 84% is from the recycled fiber. Can I know what is the recycle fiber application? Gopal Agarwal Yes. recycling application. please go ahead. You see the recycle application are very wide spread. Now apart, generally the most relevant is the Apparel But Ganesha is keen to make specialized fiber. So we are catering geo-textiles, filling in pillows, soft toys, then medical textiles, than automotive textiles. So there are specialty products as well we are catering into. We are also ma

Congratulations on the good set of numbers. My first question was in line with was -- like I wanted to get some understanding as to what led to the improvement in the EBITDA margin and EBITDA per KG during the quarter?

Gopal Agarwal

Yes, EBITDA margins, our EBITDA has increased in this quarter because of the increased sales realization, increased because of the value-added products which we introduced in the market and increase the share of the value-added products in overall operations, because of the increase in prices of the input, the EBITDA margin has slightly come down in this quarter. But in absolute terms, we are having better EBITDA margins. Sir, what is the share of value-added product side now versus what was it a year ago? Yes, our value-added products, we are presently selling out around 30%, which were earli

Sir, I missed your earlier you said about the capacity increase. If you could just repeat what is the incremental capacity and when are the capacity going to kick in?

Gopal Agarwal

Capacity, which we are adding about 50,000 tons recycling capacities in our Warangal plant. So this capacity are distributed among the recycled PSF bottle-to-bottle chips and bottle-to-filament application. So we are going to operationalize the washing line and the PPSF capacity in this quarter itself. And bottle-to-bottle, our trials are very successful, and we are talking with the Brands and their assessment is going on. Technical assessment has been completed by some of the brands. And now the sampling and trials are going on. So we are hopeful to get it through next two to three months' ti

This was regarding the earlier comment where guided for 25%, 30% growth over four, five years. So currently, we are at around 1,100. And this is the growth rate we can go to INR 3,200 crores more than INR 3,000 crores. And current basis, our current capex plan, Warangal will add INR 600 crores and Nepal washing line will add some INR 75 crores. So can you help us with how are you planning to grow at 25%, 30%, any plans from where this further growth will come post Warangal reaching its optimum utilization levels? Gopal Agarwal Yes. Thanks, Harsh. You see the government has come out with the re

Harsh Jhanwar

And sir, what are our plans regarding the rigid plastic there at pilot stage. So how are we looking to scale up this part of the business? Certainly, the opportunity which is available in the B2B PET sector, the same opportunities are also available in the other rigid plastic. But we largely being the player in the PET segment, so we are more focusing on the PET sector, rather than the other rigid plastic sector. But of course, we started the trials and the pilot project we have installed. So we will be getting into it also because there is big opportunities from all over packaging, plastic pa

Sir, can you comment on the current scenario on the polyester yarn market as there have been increasing reports of China dumping lot of their inventories domestic as well as the other export markets?

Gopal Agarwal

Yes, the polyester market at least for us for where we are operating a recycling segment is very good for us. We are already operating about more than 100% capacity and going forward looking to the scenario, we had the demand of the recycled polyester fiber and the filament yarn is increasing. So -- and that demand is being replaced, the demand of virgin product is being replaced by the recycled one. So we are looking for the decent increase in the consumption of the recycled fiber and filament yarn going forward. Sir, any comment on the overall market, not just recycled? So in domestic front,

Now first question is with regards to the bottle-to-bottle chips. Sir you mentioned that we are seeing some demand and in negotiation with domestic players also and with global players also. So just to understand once we are negotiating with the global players, the sale will be in the exports market only or will the sales will be in the domestic market?

Gopal Agarwal

Yes. Yash you please answer. Yes. So we are basically currently our -- majorly our sales will be focused on the export market. Because currently, in India, there is not a lot of consumption, which is happening in the recycled packaging sector per se. So -- but in export markets like Europe and US, they already have many government regulations, which need -- which -- because of which people are already consuming a lot of recycled patent packaging applications like bottle-to-bottle, sheets, etcetera. So currently, our sales will be focused more on the export sector. But as time flies by and by 2

I would like to thank you, everyone, for joining on this call. I hope we have been able to address all your queries. For any further queries information, kindly get in touch with our finance or secretarial team. We also thank to Mr. Jenish for helping this out. Thank you...

Management

1. This is a transcription and may contain transcription errors. The Company takes no responsibility of such errors, although an effort has been made to ensure high level of accuracy. 2. Any of the statements made herein may be construed as opinions only and as of the date. We expressly disclaim any obligation or undertaking to release any update or revision to any of the views contained herein to reflect any changes in our expectations with regard to any change in events, conditions or circumstances on which any of these opinions might have been based upon.

Management

Speaking time

Gopal Agarwal

Moderator

Gunjan Kabra

Jenish

Darshita Shah

Muthu Kumar

Vignesh Iyer

Srivathsan

Harsh Jhanwar

Prashant

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Opening remarks

Jenish Karia

Thank you, Neerav and good morning to all the participants on the call. On behalf of Antique Stock Broking, I welcome you all to Ganesha Ecosphere Limited Q2 FY '23 Earnings Call. From the management side, we have with us; Mr. Gopal Agarwal, Chief Financial Officer; Mr. Prashant Khandelwal, Senior Vice President; and Mr. Yash Sharma from the Promoter Group. I would like to now hand over the call to Mr. Gopal Agarwal for his opening comments, post which, we shall open the floor for Q&A. Thank you, and over to you, sir.

Gopal Agarwal

Thank you Jenish. Good morning everyone and on behalf of Ganesha Ecosphere I extend a warm welcome to all of you at the Company’s Q2 and H1 FY23 earnings conference call. Thank you for taking the time to join us today. I hope all of you might have had a chance to look into our quarterly numbers and investors’ presentation available with stock exchanges and on our website. First half of FY23 have passed under the shadow of ongoing war between Russia and Ukraine upsetting almost all the economies of the world by fuelling oil, gas and energy prices, which, in turn, driven unprecedented high level of inflation in almost all the countries. Supplies of commodities and food grains affected adversely which further fuelled the inflationary pressure in the economies. To control the inflation, central banks of every country is tightening their monetary policies and are making wild increase in interest rates even at the cost of sacrificing the growth. Strong US dollar, being safe heaven asset, is

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