Ganesha Ecosphere: Conference Call Updates

Ganesha Ecosphere

 

Business

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.

 

 

Performance

Revenue

Segment contribution

  • 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)

 

 

Pricing

  • 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.

 

Volume

  • Volumes dropped because of lockdown issues during March end, volumes were not impacted by the higher sales realizations.

 

Costs

  • Some costs are related to COVID, which might go up
  • Power costs will have big savings of around 5cr due to new solar plant

 

 

Government benefits

  • 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.

 

 

Capacities

  • 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

 

 

Exports

  • 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/supply

  • 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

 

 

Margins Guidance

  • 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%.

 

 

Revenue guidance

  • 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.

 

Peers

  • 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.

 

Debt

  • For Telangana project they have taken 250 cr of debt

 

 

EPR division

  • 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.

 

 

Specialty Fibre

  • 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

 

Customer acquisition

  • 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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