They recycle discarded PET bottles into user friendly polyester staple fibre and polyester spun yarn having versatile applications.
Industry vs Ganesha
- Right now domestic industry has 6,50,000 ton capacity for recycling and 2 years ago capacity was around 4,50,000 tons
- No new capacity is coming up in recycling as of now.
- Apart from ganesha, there are 35 more recyclers in India.
- Ganesha is the largest having 1,18,800 TPA capacity.
- And second largest company is reliance industries with 50,000-60,000 ton capacity.
- Polyester Staple Fibre: 80%
- Spurn yarn: 16%
- Direct textile products: 4%
- This quarter revenue growth was higher due to higher realization of 14%.
- However on YoY basis revenue fell because Q1 & Q2 were impacted by COVID.
- Improvement in sale prices & gross margins
- EBITDA per ton is Rs.10600 (2.73% up from Q3)
- Virgin fibre is priced at ~88-87/- whereas company’s recycled fibre is priced at ~73-74/-
- Overall difference is 10-15% and difference will remain the same however demand and supply will also matter along.
- Regarding removal of PPA import duty, it is raw material for virgin fibre not recycled pet fibre, so company will have no pricing impact because of it.
- Volumes dropped because of lockdown issues during March end, volumes were not impacted by the higher sales realizations.
- Some costs are related to COVID, which might go up
- Power costs will have big savings of around 5cr due to new solar plant
- They get power at 2rs per unit
- 75% interest rate subsidy, Capital subsidy and some GST benefits
- They will get 20-25 cr incentive benefits on yearly basis for 8 years
Raw Material sourcing
- They source bottles from pan India.
- Earlier they used to source from rag pickers but due to issues involved they now have started sourcing from scrap dealers and traders who have tie ups with rag pickers.
- They even had their own collection centers dealing with rag pickers but now no rag pickers are in picture.
- They are collecting 350 ton per day of pet bottles and present cost is ~39/- per kg.
- They are currently working with 75% of their capacities but they expect normalization from June onwards.
- Telangana Project:
- Earlier they planned for this project to get operational by Q4’22
- But it is facing delays due to lockdown
- Total capacity is 53000 ton
- There are 3 production lines which will be installed one by one
- Installation will start from Q3 and in 6 months all the lines will be started
- 1st capacity – 14000 ton by December
- Then filament plant and fiber yarn will start
- This facility will not take more than 6 months after operations to reach optimum utilization levels as demand is very high.
- Total capex for south plant is 400 cr
- Establishing a filament yarn and bottle to bottle facility in India using best technology
- Already got USFDA approval for selling chips and quality would be same as virgin one with recycling tag (they will get 35% higher margin)
- New facilities will be ZLD (Zero Liquid Discharge) by nature and they will be utilizing less water to process the same waste.
- Equipment for washing and chips are ready and dispatches will start from June-July
- Started additional rooftop solar power plant of 2.2 MW capacity during the quarter
- Nepal plant:
- Nepal is not a big market
- Company had put a washing line there but now government banned its import which is why they converted Japan plant from washing line to chips
- They did 60 cr of export during FY21 (7% of total revenue) and 17 cr in Q4
- They have increased their exports sales
- With south facility coming in, they are going with 100% export in chips and some fibre and filament will also be exported
- They are expecting 50% of sales from exports from south plant
- Export team is working since 2 years to establish and successfully design the end to end products for the same.
- Demand for recycled fibre is increasing in India as well as in exports
- There is annual 10-12% incremental demand coming in pet bottles so that much newer waste will also be coming in recycling industry.
- PSF is experiencing incremental demand of 40,000-50,000 ton every year
- Earlier textile was dominated by cotton but now cotton has much shifted to polyester
- Company sees high demand from India in this segment and in chips export segment, there is high demand from US & EU
- In value added products EBITDA margins are ~30-45% on an average
- They are expanding in South where they are expecting 25% Ebitda margins and 18% blended consolidated margins from current 10-13%.
- They are also focusing on value added products like filament yarn and chips which will also improve margins.
- Existing tax rate is 25% and for south plant it is 17%.
- They are expecting 70-75cr per annum from south plant
- Bigger chunk of this will be shown in FY23 because of delays in plant
- After the new plant reaches optimum utilization, company is expecting 1500-1600 crores of revenue.
- Filatex has announced a 250 cr capex for polyester recycling (not pet bottle recycling) with chemical process not mechanical process as chemical process is new technology and technology for future.
- For Telangana project they have taken 250 cr of debt
- Government has come up with EPR certificate for all the owners or brands who are in plastics product packaging.
- They will have to collect all the plastics and recycle it.
- This certificate was introduced 3 years ago but timeline has been extended.
- Basically this will improve plastic recycling industry.
- This certificate is tradable. Some brands are doing it from recyclers.
- It is still imported
- Company has already got orders from India as well as exports and their orders also have been executed but all customers are asking for certification.
- They have applied for certification and it will get completed by September, post that specialty fibre can do good
- Company has a ready customer base in south
- They already supply to south but due to higher freight and other such costs they did not focus much, but now they will be penetrating
- And they sell directly sell to customers, no distributors involved
- Normally contracts are short term which are ongoing or roll over every month
- They have a big product basket, whatever customers need, company is ready with everything and they prefer to buy from ganesha
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