GANECOSNSEQ2 FY2024November 15, 2023

Ganesha Ecosphere Limited

5,922words
106turns
9analyst exchanges
4executives
Management on call
Gopal Agarwal
CHIEF FINANCIAL OFFICER, GANESHA ECOSPHERE LIMITED
Prashant Khandelwal
SENIOR VICE PRESIDENT, GANESHA ECOSPHERE LIMITED
Yash Sharma
DIRECTOR, GANESHA ECOPET
Manish Mahawar
ANTIQUE STOCK BROKING LIMITED
Key numbers — 40 extracted
20%
adesh and other neighboring countries. Exports to European region including UK, has declined over 20% during last 6 months. Cheaper imports coupled with over capacity in yarn segment has resulted int
29,781 MT
product basket and wide customer base. On standalone basis, Company achieved production volume of 29,781 MT during the quarter by utilizing the production capacities at 110%. This is an increase of 10% ove
110%
ieved production volume of 29,781 MT during the quarter by utilizing the production capacities at 110%. This is an increase of 10% over last quarter and 6.5% over corresponding last quarter. Sales vol
10%
,781 MT during the quarter by utilizing the production capacities at 110%. This is an increase of 10% over last quarter and 6.5% over corresponding last quarter. Sales volumes also increased by 18% t
6.5%
y utilizing the production capacities at 110%. This is an increase of 10% over last quarter and 6.5% over corresponding last quarter. Sales volumes also increased by 18% to 29,434 MT over sales volu
18%
f 10% over last quarter and 6.5% over corresponding last quarter. Sales volumes also increased by 18% to 29,434 MT over sales volume of 24,887 MT during last quarter though sales volumes were flat in
29,434 MT
ver last quarter and 6.5% over corresponding last quarter. Sales volumes also increased by 18% to 29,434 MT over sales volume of 24,887 MT during last quarter though sales volumes were flat in comparison t
24,887 MT
corresponding last quarter. Sales volumes also increased by 18% to 29,434 MT over sales volume of 24,887 MT during last quarter though sales volumes were flat in comparison to corresponding year on year nu
1.5%
lat in comparison to corresponding year on year numbers. Average sale prices declined slightly by 1.5% though the decline is steep 21% over Q2FY23. Revenue from operations during the quarter Rs. 260.5
21%
g year on year numbers. Average sale prices declined slightly by 1.5% though the decline is steep 21% over Q2FY23. Revenue from operations during the quarter Rs. 260.59 crore which is down by 21% fro
Rs. 260.59 crore
y by 1.5% though the decline is steep 21% over Q2FY23. Revenue from operations during the quarter Rs. 260.59 crore which is down by 21% from corresponding last quarter due to similar decline in prices. With con
35%
r due to similar decline in prices. With concerted efforts, Company could increase its exports by 35% over last quarter though still it is down by 31% on y-o-y basis. With increase in vol
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Guidance — 20 items
Yash Sharma
opening
“We also expect the domestic markets to strengthen as Government of India has now introduced BIS standards for PSF and Yarn for standardizing the quality and supporting domestic manufacturers.”
Yash Sharma
opening
“Another line which will be dispatched by the mid of December and it is expected to be operational during early June ‘24 quarter which will take our total nameplate capacity to 42,000 tons on annual basis.”
Yash Sharma
opening
“We are currently working with around 45 brands where some of them have given us final product approvals and the rest will be completed by the end of this financial year.”
Yash Sharma
opening
“Due to our exceptional quality and performance of the rPET products we are seeing a lot of interest from the brand owners to collaborate and scale the rPET adoption for next year.”
Yash Sharma
opening
“This will reduce the turnaround time in converting the brands to recycled packaging as well as our product development and marketing strengths will be developed.”
Gunjan Kabra
qa
“And in the current scenario also what's the margins are we seeing in that particular business in rPET bottle to bottle chip business in near term in exports and with EPR in place when it comes in FY26?”
Yash Sharma
qa
“So, we think that for next year we should be able to do full almost near to full utilizations on the capacities as and when we increase them.”
Yash Sharma
qa
“As the adoption is growing to scale, we think that by next year we should see an increase in the margins to better than our expectation as well.”
Gunjan Kabra
qa
“So, don't you think it will be difficult to maintain RPSF margins going forward at the historical levels of 11% to 12%?”
Yash Sharma
qa
“As you would have seen, almost all the beverage manufacturing or the beverage brands are coming up with huge expansions in India in the next year itself.”
Risks & concerns — 8 flagged
Indian Textile sector is facing strong headwinds due to decline in exports demand from western world which, in turn, paved the way for cheaper imports of apparels and fabric from China, Vietnam, Bangladesh and other neighboring countries.
— Gopal Agarwal
Average sale prices declined slightly by 1.5% though the decline is steep 21% over Q2FY23.
— Gopal Agarwal
260.59 crore which is down by 21% from corresponding last quarter due to similar decline in prices.
— Gopal Agarwal
Though Raw material prices were adjusted downward vis-à-vis decline in sale prices but pace was not aligned due to higher volatility in sale prices.
— Gopal Agarwal
But unfortunately, the recovery remains short-lived and again there is currently a pressure on demand within textile sector.
— Yash Sharma
So, don't you think it will be difficult to maintain RPSF margins going forward at the historical levels of 11% to 12%?
— Gunjan Kabra
We don't really foresee any pressure in the RPSF margins for now because also there is a lot of consolidation happening on the RPSF side as well as brands are now looking to adopt RPSF with recycling certificate as well which was not happening in India largely now.
— Yash Sharma
Moreover, the RPSF industry may come into the consolidation phase and some weak players may go out.
— Gopal Agarwal
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Q&A — 9 exchanges
Q
I have few questions. First is the Ganesha Ecopet business, so it has chips and yarn business. So, we have received approval from a lot of companies as you just mentioned in your opening commentary. So, what's the timeline of their orders like when will it start at full capacity? And in the current scenario also what's the margins are we seeing in that particular business in rPET bottle to bottle chip business in near term in exports and with EPR in place when it comes in FY26? So, what kind of margins are we seeing in the current scenario?
Yash Sharma
So basically, in terms of the approvals and orders started to come in, so currently we are already running our current production line at full capacity utilization and that is why we are also expanding our capacity aggressively now because we are seeing a lot of demand from these brand owners to start the rPET adoption. So, we think that for next year we should be able to do full almost near to full utilizations on the capacities as and when we increase them. That's for the rPET bottle to bottle side. Now coming to the margin side, though the current margins that we are getting that we have st
Q
You mentioned that your rPET B2B capacity is running at full utilization. So is it for the entire Q3 or is it only part of this Q3?
Gopal Agarwal
Yes, it started from mid of the October. And we expect it to continue to run at full capacity at least for this Q4 and next year for ‘25 also? Yes. And in your presentation, you have mentioned that you are already expecting these three production lines which are going to get installed over the next 4-5 months and you are expecting this capacity to be fully booked. So, can you indicate some of the vendors who are giving you orders and why are you getting so confident on this side? So basically, the customers or the clients over here are largely all FMCG brands. The current brands that we're wor
Q
Firstly, just a clarification. In the south plant we have a total of 50,000 tons of capacity of which only 37,000 has been commercialized, around 12,500 of RPSF will be commercialized in the second half, correct?
Gopal Agarwal
Correct. On the 37,000 tons what would have been the utilization level for the current quarter? I understand the B2B operated at around 70% utilization as per your press release. But on the entire 37,000 tons what would be the capacity utilization? So as explained yes, for the bottle to filament or the filament yarn business it is slowly ramping up. So, the capacity utilization is about 25%-30% there. For RPSF we have yet to start the line which is expected to be started in the next couple of days. So, on a plant level it will have been around 30% utilization? Yes. And secondly, according to o
Q
Out of the total debt, if you can give us the breakup regarding how much of the debt is in the holding company and how much of the debt is in the various subsidiaries?
Gopal Agarwal
So, we are having the net debt level of around Rs. 550 crores on consol level and out of that around Rs. 200 crores is with the standalone Ganesha Ecosphere, Parent Company and the rest is with the Rs. 350 crores with the subsidiaries. And majority of these 350 crores will be for our southern plant? Yes. And what will be the payment schedule for this debt? Repayment is to be made up to FY32. So, it is equally divided or some part of it is front ended? No, it is not front ended, it is back ended. Okay fair enough. And regarding this B2B chips, you have said that you can add three more facilitie
Q
I have a couple of questions. So, the first is regarding our margins, we make about 10% operating margins, and we have done so for a few years. So, going forward, as our product mix improves, can we achieve a consolidated mid to high teens margins of say 16% or 18% over the next 2 to 3 years? So that by FY27 can we achieve a consolidated 18% margin?
Gopal Agarwal
Yes. For the Warangal project of course we are looking for the 18%-20% margins on consolidated for all the products. But for the RPSF business of northern India we are looking for a margin of 12% to 13% which is a standard margin for the last couple of years barring these two quarters only. What I meant was on a total company, on a total consolidated firm basis, can we look at a total number of 18% consolidated margin in the next 3-4 years? Yes of course. Going forward we are looking for the increasing the proportion of B2B chips business higher than the overall business and because the margin
Q
Can you please share since what date you have started utilizing your B2B bottle chips plant at full utilization? Because in the last quarter I don't think there was much contribution from that.
Gopal Agarwal
As we replied in earlier question we had started in mid of the October. What is the maximum revenue or what is the realization per kg in that segment? We are having only one line and from that line we are looking for a revenue realization of about 125 to 150 crores in a year. And the margin would be between 20% to 25%. Yes.
Q
So, we received the order from Moon Beverages sometime in August and to be delivered over the next 3 months by November. Also, we have been speaking of improving textile demand outlook on a sequential basis and the export demand also improving. Despite all this, why has the production volumes been declining on a sequential basis for the south India plant?
Gopal Agarwal
No, as we said, we have started this B2B chips plant in full in mid of October. So, though we had got the orders in late August, the supply started by end of this September. So whatever volumes were done in 2nd Quarter was only for the textiles in the south plant? Yes. Can you provide a segment wise revenue breakup? For example, for yarn business, RPSF business B2B and trading business? For Ganesha Ecosphere, the mix is 85% from the RPSF business and 15% from yarn business and for our Warangal plant, as of now the major revenue would be from the B2B business and RPSF business and filament yarn
Q
I would like to thank you everyone for joining us on this call. I hope we have been able to address all the questions. We also thank you Mr. Yousuf for hosting this call. Have a good day. Thank you.
Management
Q
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
36
Jenish Karia
14
Yash Sharma
11
Moderator
10
Gaurav Agrawal
9
Gunjan Kabra
6
Deep Mehta
6
Divyam Gupta
6
Prashant Khandelwal
3
Suraj Nawandhar
3
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Opening remarks
Manish Mahawar
Thank you Yousuf. On behalf of Antique Stock Broking, I would like to welcome all the participants on the 2Q FY24 Earnings Call of Ganesha Ecosphere. Today we have Mr. Yash Sharma – Director; Ganesha Ecopet, Mr. Gopal Agarwal – CFO and Mr. Prashant Khandelwal – Senior Vice President from the management. Now I would like to handover the call to Mr. Agarwal for opening remarks, post which we will open the floor for Q&A. Thank you and over to you Mr. Agarwal.
Gopal Agarwal
Thanks Manish and Antique stock broking for hosting us. Good afternoon to all the participants for taking the time to join us today and on behalf of Ganesha Ecosphere I extend a warm welcome to all of you at the Company’s second earnings conference call of FY24. I hope all of you might have had a chance to look into our quarterly numbers and investors’ presentation already available on the exchanges. Indian Textile sector is facing strong headwinds due to decline in exports demand from western world which, in turn, paved the way for cheaper imports of apparels and fabric from China, Vietnam, Bangladesh and other neighboring countries. Exports to European region including UK, has declined over 20% during last 6 months. Cheaper imports coupled with over capacity in yarn segment has resulted into steep fall in prices of yarn and fabric. Amidst the above low-spirited scenario, we could perform better than last quarter due to our rich product basket and wide customer base. On standalone bas
Yash Sharma
Thanks, Gopal, for laying out the Financial Performance of the Company and I extend my warm welcome to all the participants here. As explained by Gopal, the textile intermediate products, particularly yarns and fabrics is currently at a disadvantageous stage due to slower export demands, cheap imports and overcapacity in Southeast Asian countries. The June ‘23 quarter was much slower, but August was better off with some improvements in pricing and demand, and we were expecting it even better due to the start of the festive season. But unfortunately, the recovery remains short-lived and again there is currently a pressure on demand within textile sector. We could outperform this quarter as against the last quarter due to our deep penetrated market network and diversified product portfolio. Our Warangal operations also could not kick off during this quarter and earnings fell short of recovering finance and depreciation costs. To become more resilient to the market headwinds, we are curre
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