AGI Greenpac Limited (500187) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to AGI Greenpac's Q2 FY '26 Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] I now hand the conference over to Arya Patel, Emkay Global Financial Services Limited. Thank you, and over to you.

Thank you, Ikra. Good afternoon, everyone. On behalf of Emkay Global Financial Services, I welcome you all to the Q2 and H1 FY '26 post earnings conference Call for AGI Greenpac. We have with us today, Mr. Rajesh Khosla, President and CEO; Mr. Om Prakash Pandey, CFO; and Mr. Sandeep Sikka, Group CFO. Today's session would be a brief on the results, followed by a Q&A round. So without any further delay, I now hand over the call to Mr. O.P. Pandey for his opening remarks. Thank you, and over to you, sir.

Good evening, everyone, and thank you for joining the AGI Greenpac Q2 FY '26 earnings call. For those following along, our detailed earnings presentation is already available on our website and on the stock exchange portals. Before we begin, please note the standard disclaimer regarding forward-looking statements on Slide #2 of that presentation. We are pleased to report that the first half of FY '26 marked a period of robust growth and strategic execution, providing a strong foundation for remainder of the year. Our financial performance for the first half of FY '26 clearly demonstrates the success of our focus on operational efficiency and product premiumization. Revenue from the operation, excluding other income, grew by a solid 10.6% year-on-year basis, rising to INR 1,289 crores compared to INR 1,166 crores in H1 FY '25. We maintained strong profitability with EBITDA, excluding other income, standing firm at INR 292 crores. Our net profit surged by 21.9% year-on-year to INR 165 crores, up from INR 135 crores in the corresponding period last year. This enhanced profitability is directly attributed to the successful elevation of our product mix. We have continued to expand our footprint in premium higher-margin segment, including cosmetic, perfumery and alco-beverages. Disciplined execution across all our facilities has been key to realizing these results. Moving to our Q2 performance. The quarter saw revenue from operation increased marginally by 0.4% year-on-year to INR 602 crores. As is common with our business cycle, Q2 revenue were sequentially lower than Q1 partially due to our planned seasonal shift, where we focus on building stock for the products like beer for the remaining quarters. This year, we also saw a slight impact on sales volume due to the higher intensity of the monsoon and flooding in various states. Despite these factors, our production capacity utilization remained high at around 95%. On profitability front, our EBITDA for Q2 stood at INR 150 crores. However, I want to draw your attention to our margin. Our Q2 EBITDA margin, excluding other income, was healthy 24.9%. This represents a significant 250 basis point jump compared to the adjusted Q1 margin of 22.4%, demonstrating improved efficiencies and positive impact of our better product mix during the quarter. This translated into a Q2 net profit of INR 76 crores, an increase of 5.6% year-on-year. We have demonstrated our commitment to financial prudence by completing a term loan prepayment of INR 193 crores in July '25. This has substantially reduced our term loan borrowing to just INR 233 crores as of September 2025, significantly strengthening our financial position. There has been a temporary increase in our current assets holding days by around 15 days as on 30th September '25 as compared to corresponding last year figures. This current assets holding level will normalize during the next 1 and 2 quarters, in line with last year numbers. The overall working capital has increased as the company prepaid some of its outstanding operational creditors by availing additional discount over the bank borrowing cost. Now I will hand the call over to Mr. Rajesh Khosla to walk you through the key strategic and business highlights that underpin our continued growth trajectory.

Thank you, Mr. Pandey. Good evening, everyone. As Mr. Pandey highlight the financial success, my focus will be on 3-pronged growth strategy we are executing to ensure the long-term sustainable value creation through operational excellence and portfolio diversification. Since March '25, we have initiated several capacity expansion projects that are interconnected and designed to strengthen our market presence, enhance our high-margin product capabilities and diversify our packaging portfolio. First, our North India greenfield glass plant in Madhya Pradesh marks the pivotal milestone in this journey. The project is on track to be operational by March '27 and will add 500 tonnes per day of the new capacity that is 25% increase in our overall glass production, taking our total volume to 2,600 tonnes per day. We have already secured land from MPIDC, commenced civil work and are in finalizing major equipment contracts. This plant is crucial for serving the growing North Indian market efficiently. Second, we are making a bold and strategic entry into aluminum beverage can segment with our new facility in Uttar Pradesh. This is our major diversification step that complements our core glass packaging business and positions us in a rapidly growing sustainable packaging category. The facility will be developed in 2 phases, starting with an annual capacity of 950 million cans and scaling up to 1.6 billion cans by FY '30, 3-0. We are in the final stages of land acquisition and machinery finalization for this exciting new vertical. Third, while we built up for the future, we are also driving near-term growth through the debottlenecking and expansion of our existing facility. Both upgrades are expected to be operational by March '26. Our container glass capacity will increase from 1,850 tonnes per day to 1,900 tonnes per day, while our specialty glass capacity will see a significant expansion from 154 tonnes per day to 200 tonnes per day, further strengthening our ability to serve both mask (sic) [ mass ] and premium segment effectively. Collectively, these investments provide a clear road map for capitalizing on market opportunities, especially in high-value industries like cosmetic, pharmaceutical and premium beverages. Our focus remains on optimizing capacity, improving efficiency and delivering long-term value. Thank you. We are now ready to open the call for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Rehan Saiyyed from Trinetra Asset Management.

Hello?

Yes, please.

You're audible.

Yes, please.

Yes. Happy Diwali to everyone. So my first question is around the aluminum business side. So like I want to understand from the ROCE net. So if we can probably start with 950 million pieces, the [ quarterly ] FY '28 scaling to 1.6 billion by FY '30. So at what utilization level do you expect the business to break even at an EBITDA level and cross double digit ROCE? So for example if you take around 60%, 65% utilization or higher, can we generate ROCE in a double digit going forward?

Mr. Sikka? I think there is -- sorry, please carry on.

Yes. So most of these facilities, which we do, they should break even at somewhere around 65% to 70% capacity utilization because what happens is with any -- there are some initial fixed costs which are attached to all these sort of plants, and they should generally get captured ranging between 60% to 70%. The factor was higher for the glass, but for the aluminum segment, I think 60%, 65% is somewhere where the breakeven should happen.

Okay. Fair enough. And my second and last question is about -- regarding post debottlenecking margin guidance [ around ]. So once the container glass moves from 1,850 to 1,900 TPD and specialty glass from 154 to 200 TPD by March 2026. So should we model a stable EBITDA band of 25% to 27% going forward? Or do you still expect volatility in fuel and raw materials?

Your voice was not clear. If you can repeat the question?

Yes, sure, sure. I'll repeat my question again. Can I repeat my question again? Yes, can I repeat?

If you can hold your phone nearer to your mouth or if you're talking on a speakerphone, if you can take it from a speakerphone, that will be helpful.

Yes. Now am I audible clearly?

Yes.

Slightly better. Slightly better.

Okay. I'll just repeat my last question. This is my last question. So this is regarding the post debottlenecking. So once the container glass moves from 1,850 to 1,900 TPD and specialty glass from 154 to 200 TPD by March FY '26, should we model a stable EBITDA guide of 25% to 27% going forward? Or do you still expect a volatility linked to fuel and raw material in the margin side?

Okay. Mr. Sikka, you like to reply or shall I do it?

So if I understand your question, if you're saying is that with all the debottlenecking, which is happening on the container glass and also on the specialty glass, will the EBITDA margin improve or remain in the range-bound. Is that the...

Yes, yes, yes, yes.

So both these projects should be up and running by March '26. We expect -- when you see on both these facilities on the container glass also and now our tonnages and the capacity utilization even on the specialty glass has gone up. It's gone beyond 80%. So we thought of debottlenecking this so that if we can take a higher throughput from these furnaces. There are 2 gains into this. On the container side, we are, I think, the best in terms of the industry and maybe in Asia for the container glass profitability, which we generate. With any incremental tonnage happening, we feel another 0.25 basis point or 0.5 basis point profitability improvement should happen. But this is over a long-term period because you can't measure this on a quarter-to-quarter because every quarter is a different quarter in terms of the mix and the raw material fluctuations and everything. On the specialty glass, there are 2 ways of growth. One, the volume growth will definitely increase. Secondly, there is a journey which we are walking on that path in terms of the specialty glass in terms of acquiring more and more premium and superior international customers, which -- and this path, we have been walking for almost now, almost 2.5 years plus, but we feel still a long way to go wherein we should be able to improve our realizations much better, offer a better high-value value-added products to our international customers. There, the EBITDA margin expansion, you can easily consider maybe 4% to 5% over the next 18 months happening on the specialty glass. Rajesh, do you have any additional point on this?

No, I think it's okay. One thing is there. When we have already put up the facility in the case of specialty glass, so there is a long gestation period to put up the new facility. It is always -- yes, it is always advisable or it is a business sense that we should try to extract maximum potential of the assets we have already put up there. So with this debottlenecking, we have been able to -- or we will be able to add up almost 40, 50 tonnes of glass every day. And for that, already the action has been taken. The new machines are already on the way, and it will be operational by the end of this year. So certainly, one is because of the volume growth. So the EBITDA margin is certainly going to grow because of the volume. On the percentage-wise, I think Sandeep Sikka has already informed you that, yes, there will be an impact of small percentages impact on margin percentages. That all depends upon so many more factors. But certainly, on the absolute term-wise, the EBITDA margin is certainly going to grow with the volumes.

The next question is from the line of Harshit Toshniwal from Premji Invest.

Yes. Am I audible?

Yes, you are audible. Harshit, there is a background disturbance from your side -- background noise. Can you please look into this?

My question was regarding capital utilization.

Harshit, sorry, we are unable to hear you. Can you please join the queue again?

Okay. Okay.

Yes. The next question is from the line of Parikshit Gupta from Fair Value Capital.

Thank you very much for the opportunity and sharing my best wishes for the festive season. I have a couple of questions. Firstly, on the aluminum can business. We recently read a news about pushing authorities to remove import curbs on beer cans. This was due to the high supply-demand gap. And do you anticipate this to go through? And if yes, how might it impact our plans?

Okay. There is a big demand of the aluminum can market on the beer side and beverages side, and there is a gap between demand and supply. And the beverage companies or the beer companies, they are requesting the authorities, the government to remove some of the non-tariff barriers, for example, like BIS standards and other standards so that they can import the can. So there may be possibility that this can be done. There may be possibility, but it has no impact on our operations, our profitability or our future or our demand side because whatever these imports somebody likely to bring, if at all, they are bringing, I am taking the extreme negative part of the discussion. So it will be very, very expensive because of the freight element and taxation elements and other local freight elements. And they are not at all viable, but they are only to fill up the gap. So it is a very good thing that the market is going to grow. And for us, then we will enter into this market by '27. So there will be a ready-made platter for us, and we don't have to do anything. We just have to replace the imports whatever is coming. I have taken extremely negative view or extremely negative view of the remarks in this situation.

Understood, sir. This is helpful. And there was a decision by the Board to raise equity. Has there been any finalization of the terms? Or when might that be expected?

So the Board has passed a resolution to raise equity through various instruments, and we are in process of seeking shareholder approval also and for which the -- I think it's already up with the shareholders. The plan is that we may raise this in the next 12 months. We're just trying to see how market stabilizes and how we plan it out. So right now, difficult for us to give a guidance on this, but I think maybe in the next 3 to 6 months, we should be giving.

Understood. Next question on the debottlenecking. Can you tell us the tentative time lines for the debottlenecking process? Because during that process, you will -- there will be a loss of revenue. So if you can also please quantify what kind of revenues can we anticipate being lost due to this debottlenecking process?

Okay. When we are talking of 2 debottlenecking, one is in commercial glass and one is in container -- sorry, specialty glass. In the case of specialty glass, so whenever you are adding the equipment, so for a week's time or maximum 10 days' time, there is a bit of disturbance. For 10 days' time, there can be a little 5%, 7% less of the production. That's all. But immediately, once you put up the facility, those productions are being covered up with the higher volumes and within a span of 2 days, 3 days, they are being covered up. So for all practical purposes, it is not to be taken in account and everything remains standstill. So these are up and downs only because of the small adjustment or synchronization of the new machinery to the old machinery. And same thing is applicable in the, what you call commercial glass. But in the commercial glass, whatever is 1,850 tonne facility is there, that is distributed among 4 furnaces and the debottlenecking has to be done in one of the furnaces. So I do not see any remarkable -- any change or dip on any of the revenues because of this debottlenecking.

Understood, sir. Now about the operating expenses. You mentioned in the presentation that you're targeting a cullet share of about 40%. Can you please tell me what are the current levels being used? And this question is more from the perspective of reducing -- optimizing the energy expenses. It has also been articulated that, that will be reduced by 10%. So currently, as a share of top line, they stand around 19% to 20%. How much can we anticipate them to be going forward?

So I think the presentation covered that we are already using 40% cullet, and that helps us save the energy. So it's not a directionality which we are saying that we will start using 40%. So we are already doing that. Rajesh, if you can add to that?

Yes, we are using more than 40% of the cullet. And we will be using more also in the times to come. And since cullet or the scrap -- glass scrap, you can say, it is being handled by unstructured market. So sometimes you face a difficulty in raising the things. But as the country progressing, as the municipal corporations are getting more and more structured, so this cullet is available and cullet has no other usage except the melting or glass making. So we expect that in the times to come, the cullet percentage will increase further, which will further give us better energy and which is certainly going to give us better tonnages also. So that is exactly what we mean to say in our presentation.

Understood, sir. So for the near term -- for the near to medium term, can we expect the power and energy expenses to be range-bound as a percentage of the top line?

See, we are doing day and night efforts how to reduce the energy and how to optimize the same. Cullet is one part of the whole efforts which we are being done. But all these efforts in a small percentage will give very small incremental benefits, but they are the benefits. So I cannot say immediately, but certainly, with our aims on sustainability, with our commitment on the environment and our targets on how to reduce the further energy, I think we are going to get the results in the next few months, I can say, or within the next year or 2 years like that. And let me clarify you, we are already at one of the most optimum energy usage company in the glass industry in the world, not in India, in the world.

Understood, sir. Sir, you mentioned 3 levers of growth.

Sorry to interrupt, Parikshit. If you have a follow-up question.

This is my last question, please.

Yes, please go ahead.

Yes. So the question was more on the export side. In the 3 levers of growth, there were -- there was no mention of exports here. So can you please tell us what was the share of exports as a percentage of top line? I know that the target is around 15% and there have been more visits to international expos and the markets and those. So...

Okay. As on today, our export percentage falls anywhere between 5% to 7%. We have an aspiration of increasing our export to 10% to 15% total, total, I'm not talking. In a specialty glass, this percentage is quite high, and we have an aspiration of taking this percentage to 40% in the specialty glass. But this aspiration will not overcome our commercial targets. We are more interested to have very good bottom line and top line. For that purpose, export is not the criteria on which we are working, looking to the unstability in the global market as on today. For example, like U.S.A. has a tariff. Europe, we have yet to settle with the FDA agreement and other areas, there are some disturbances because of either war or because of geopolitics. So we are not very, I can say, desperate. But yes, we are keen and we are developing slowly, slowly the pockets in which our material can go. We are already having a very strong footprint in Europe as on today, and we are supplying a lot of quantity in Europe today. And I think there is a good amount of supplies to U.S.A. as on today. And probably once the tariff thing is settled down, we are going to go in a big way in this thing. But again, it all depends upon the economics of our business. We have no desperation in chasing in numbers just like that. Aspiration is everything goes well, economics goes well, we may like to go up to 40% in specialty glass. And in commercial glass, it all depends upon demand and supply globally. So -- but in commercial glass, all the plants are being added up with local demand in consideration, not the export demand in consideration.

[Operator Instructions] The next question is from the line of [ Nishita ] from Sapphire Capital.

Yes. Hello? Am I audible?

Yes, please.

Yes. Happy Diwali to everyone. So I just had a question on the CapEx that you are doing. So what will be the CapEx amount required for all the projects?

So we would be spending around INR 50 crores on the debottlenecking exercise. Apart from this, we are also undertaking some expansion of our closures, specialty glass closure, specialty closures basically, which is caps and closures. The overall spend in the next 1 year, I think on a rolling basis should be in a range of -- I'm not including Gwalior plant or aluminum beverage can, so -- but should be in the range of odd INR 120 crores to INR 150 crores.

So this INR 120 crores to INR 150 crores does not include the greenfield project and the aluminum beverage plant CapEx?

Yes, for which we have already separate numbers because it's very difficult to time out on the rolling basis. Like the Madhya Pradesh, Gwalior plant should be up and running by March '27. So the overall capital expenditure in terms of land and building and other expenses is about INR 700 crores. So a majority of that will be spent there. And then the aluminum can, we have disclosed the commercial production should start by Q3 of FY '27-'28. The total outlay in the first phase is around INR 850 crores. So major chunk will be spent by that time, let me just say December 2027 for that.

Okay. Understood. And how are we like raising the funds for this line?

So right now, if you see our existing businesses throw out almost INR 400 crores plus cash flow from operations, given the fact that the debt is very low right now. So we'll use a mix of internal accruals and also raise long-term debt for this. And maybe going forward, if we raise equity, we can then prepay the debt or use the debt as maybe mandated as part of the document. But right now, it's a mix of internal accruals and the long-term debt.

Okay. Understood. And any growth projections you can give for FY '27 on EBITDA level and top line level?

So we have already gone on record through various media by saying in the next -- if everything gets implemented, we should be able to further enhance our EBITDA margins ranging around 1% to 2% in next 24 months before the other project starts coming in. So that's the guidance which we have already given to the market.

Okay. And on top line level and growth guidance?

We should continue for the next 2 years to grow in a range of around 8% to 10% every year. And after that, the Gwalior project will come and after that, a can project will come. So we have a series of growth benchmark for each of the year. So for financial year, let's say, FY '25-'26, 8% to 10%, FY '26-'27, another 8% to 10%. And then followed by, we'll have a 25% more volume. So maybe you have to assume a capacity utilization for next 2 years, 3 years, after that, there will be a consistent growth coming through.

The next question is from the line of Harshit Toshniwal from Premji Invest.

Hello? Am I audible now?

Yes, please.

Yes. Sir, just wanted to check on the reasons which you gave for the very flat growth. Is it because of some kind of temporary shutdown issues of [indiscernible].

Sorry to interrupt, Harshit. Again, we can notice some disturbance while you are talking.

We can't hear you. Your voice is breaking. In fact, I couldn't understand anything. There's [ sparking ] or something fluctuation happening in your line. We can take the next question maybe once he gets back, so we can answer his question.

The next question is from the line of Anil Shah from Insightful Invest Managers.

Yes. Sir, I had just 2 questions. One, can you give us a little bit more granularity on your CapEx for each year wise? Because you talked about a QIP over the next -- I mean, equity issuance over the next 12 months subject to markets in case market conditions are not great. I just want to get a sense of will we continue with the proposed CapEx plans as is basis? What's the highest EBIT -- what's the highest level of debt that we will be sitting at in case we don't have an equity issuance, so on and so forth? So assuming that most of the projects get scheduled on time as you've talked about, by March '27, the Madhya Pradesh plant and in FY '28, the first phase of the aluminum cans. Assuming that, then for -- now for the next 6 months in FY '26 and in FY '27 and in FY '28, what would be our CapEx?

So if I add up, let's say, we benchmarked INR 700 crores for the glass expansion of container glass, another INR 850 crores on the aluminum cans, INR 150 crores on the other debottlenecking and the expansion, which we already spoken of and take another INR 100 crores each for the remaining 2 years. So this total works INR 900 crores, INR 900 crores plus that is somewhere around INR 1,900 crores to INR 2,000 crores of CapEx happening in March 2028. Even without an equity, let's say, even if the current state of operations going through the way we have been generating EBITDA, and I'll benchmark last year numbers, let's say, we generate around INR 425 crores, INR 450 crores of cash flow from operations before the CapEx and before any working capital adjustments. So in a span of 3 years, we should have odd, let's say, INR 1,000 crores to INR 1,200 crores bare minimum coming from this. And we'll have -- we can easily take a debt because assuming even the current run rate of EBITDA of somewhere around INR 650 crores to INR 700 crores, 2x debt is around INR 1,300 crores. So we have a fair headroom to punch in the growth, which is targeted by the management.