Ganesha Ecosphere Limited (514167) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Ganesha Ecosphere Limited Q3 and 9 Months FY '26 Post Results Conference Call hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking Limited. Thank you, and over to you, Mr. Manish.

Yes. Thank you, moderator. Good morning, everyone. I'm pleased to host today's earnings call of Ganesha Ecosphere. Today, we have leadership team represented by Mr. Gopal Agarwal, CFO; Mr. Prashant Khandelwal, Senior Vice President; Mr. Yash Sharma, Director, Ganesha Ecopet. Without any delay, I would like to invite Mr. Yash Sharma to start his opening comments, post which we will open the floor for Q&A. Thank you and over to you, Yash.

Thanks a lot, Manish. Good afternoon, everyone, for being here. I welcome you all to our post results earnings con call to discuss the Q3 year 2026 performance. This quarter has been marked by resilience and progress across our legacy operations despite sectoral headwinds such as the higher U.S. tariffs on Indian textiles. I am pleased to share that our stand-alone business has delivered a good set of numbers with production volumes growing 13% quarter-on-quarter and sales volumes up by 7%. Revenue from the operations increasing sequentially and grew by 5.24% as compared to the last quarter, while the EBITDA has stood at INR 18.54 crores and PAT at INR 15.94 crores surpassing the combined earnings of the previous 2 quarters. On a stand-alone basis, the capacity utilization has exceeded 100% with production volume of 29,088 metric tons as against 25,689 tonnes in the previous quarter. The sales volume at 31,107 tonnes made during the quarter was the highest in the last 5 years. The company earned a revenue of INR 272.95 crores compared to INR 259.35 crores in the last quarter, reflecting a growth of 5.24%. EBITDA per tonne came in at INR 5,962 as against INR 2,812 during the last quarter. The EBITDA margins were at 6.79% of the operational revenue as against 3.15% of the last quarter. The raw material prices have been pretty stable during the quarter in contrast to the high volatility we have experienced previously, which further supported the margins. We have continued to diversify our portfolio, reducing dependency on the traditional spinning sector with over 35% of the sales volume being generated from the non-woven and the home furnishing segments. On a consolidated basis, the performance was impacted by the ongoing uncertainty surrounding the draft notification issued by the MoEF, which delayed the integration of recycled PET into supply chains of beverages and weakened the demand for rPET granules. Overall, the subsidiary business saw capacity utilization drop to 50% and revenues declined by 23%. Consolidated production has stood at 38,768 metric tons with revenue of INR 357.22 crores, marginally lower than the last quarter. Of this, INR 272.95 crores came from the standalone and 84.27% from the subsidiaries. Quarterly EBITDA rose by 37.67 to INR 30.73 crores with standalone and subsidiary contributions of INR 18.54 crores and INR 12.19 crores respectively. Consolidated EBITDA margins have improved to 8.6%, and the EBITDA per tonne has climbed to INR 7,638 from INR 5,703 in Q2. Consolidated PAT was INR 4.74 crores. EBITDA of the subsidiary business has stood at 14.5%. Although the much awaited clarity on the draft notification would have benefited both the user industry and the recycling sector, its extraordinary delay has defeated the purpose. Even if the final notification is issued now, providing some relief in the 30% targets of mandatory use of recycled content, the packaging industry will not be able to meet such low targets within the remaining span of the current financial year. FY '26 is a transitional year for implementing the PWM rules on mandatory recycled content and the adoption was somehow challenging for the user industry and the regulator. We believe that the initial hindrances are being addressed and that adequate approved recycling capacities are now in place, which will make adoption much smoother from the next year onwards. Since the regulation mandating recycled content remains unchanged, the user industry cannot continue to be noncompliant anymore. Overall, we are confident of achieving the desired performance from -- for this business from FY '27 onwards, albeit with a delay of 1 year. Our legacy business has regained sustainable momentum and recently announced reduction of U.S. tariff for Indian textiles should provide an additional boost in the coming quarters. The B2B rPET business is also expected to perform comparatively better in Q4. In a recent development, our recycled filament yarn has successfully qualified with the leading global textile brand, improving the margins and volumes for filament yarn business. We are pleased to share that we have now become a regular supplier of our stadium size flags to the International Cricket Council directly and where we are providing the stadium size flags of various countries as unity -- as well as unity flags made with our recycled materials for the World Cup tournaments. This collaboration highlights the global recognition of our sustainable products and prowess. Overall, Q3 FY '26 reflects both the strength of our core operations and the long-term potential of our sustainability-driven initiatives. We remain confident in our ability to navigate the near-term challenges while building a stronger and sustainable business for the future. Thank you, everyone. [indiscernible]

Should I begin with the question-and-answer section?

Yes, please.

[Operator Instructions] The first question is from the line of Achal Mehta from Bastion Research.

I want to ask that in food grade rPET earlier there were 5 to 6 [indiscernible] manufacturers from FSSAI. However as of September 2025 many new players have entered, [ it mean ] the total 13. So has this increase from [indiscernible] and how does the Ministry of Environment see this? Do you think there is enough manufacturing capacity in the investment out of [ Warangal ] FY '27 and demand?

Yes. Thanks for your question. So yes, definitely, the number of FSSAI-approved players has gone up quite significantly, and there have been much newer capacities. Certainly, because of that, there is obviously increased competition in the industry. So the increased competition is because of the reason that the offtake of the industry has not really taken off as per the volume increase which has happened and the capacity and supply available. [ Then ] -- going forward, now there is enough capacity available to meet the targets for the next year. And I think that definitely the industry is going to mature much more in a better way now.

So my second question is what is the export revenue for the quarter and for the 9 months?

Sorry to interrupt you, sir. Sir, your audio is not clear. Can you speak through the handset?

Am I audible now?

Yes, it's better.

So my next question is what is the export revenue for the quarter and for the 9 months?

So on consol level, we made the export about INR 30 crores. And for 9 months, we made the export more than INR 100 crores.

Okay. So why we have not been able to sell to Europe and U.S., sir, where we have approval of -- there and there is no tariff on our products? Considering on the ongoing days, they should have been able to offset the decline in domestic demand -- sales demand?

So actually, the tariff is also applicable on our products as well. So when the U.S. tariff was implemented earlier in May, at that time, PET polymer or PET granules were in the exemption list. But on 2nd September, when the new modification of the tariffs and the exemption list came out, the PET was excluded out of the exemption list. So since 2nd September, we have been in the -- we are also -- the tariffs are also applicable on our product. So because of that, we have not been able to work out any supplies to the U.S. market because of the tariff conditions of 50% reciprocal tariffs.

Okay. And what is the broad range on volume and margins on the -- our filament order?

So it is very low at present, but we have been qualified with a global textile brand. And from the next quarter onwards, the volume would increase significantly.

Okay. And do you expect realization to uptick towards 1 lakh per tonne level for the legacy business now that there are reduced tariffs on our and customer industry?

Yes. Certainly, the volumes are very good in this quarter also. We have sold 31,000 tonne volume from our legacy business in this quarter. And definitely, it will be well above 1 lakh tonne for the entire year.

The next question is from the line of Dheeraj Ram from B&K Securities.

Two, 3 questions. So first one is on stand-alone business margins have been improved sequentially. So is it due to raw material prices? If it is yes, then could you let me know the average raw material price of consumption during the quarter? And how do you see that in 4Q?

Yes. The raw material price was quite stable during the quarter. The uncertainty which prevailed over the last 2 quarters is not there. So it helped us in margins improvement in this legacy business.

Okay. Any price that you want to quote, sir? Right now, how is the price trend?

So right now, the prices are in the range of -- the bottle prices are in the range of INR 46, INR 47 a kg.

Okay. Got it. And the subsidiary business, I feel it was being impacted just because of the utilization. But how do you -- how can we go about for 4Q and for FY '27? How do you see the utilization levels for rPET especially in subsidiary?

So for -- we are quite hopeful that the volumes will be better in Q4 than Q3. We are expecting the overall capacity utilization in between 70% to 80% in Q4.

Understood. And can we take the same for FY '27, sir? Or do we take between 60% to 70%?

No. So FY '27 must be a good one and on the expected lines, which we have thought of for FY '26. But because of the chaos on the regulation side, it could not happen in this year. So definitely, it would happen in FY '27, then the regulation would be for 40%. And there is much clarity now over the offtake, basis the regulation is live and intact.

Okay. Great. Got it. And last question, sir. We had some outstanding to be received from the government authorities. Any progress on that? Or is it still to be received?

Yes. So we got INR 70 crores from the government of our outstanding incentives, about INR 110 crores from the Telangana government for Warangal plant. The amount we have received in January only.

Got it. Great. Great. Last question, sir, how do you see this PWMR coming into effect in FY '27? I understand that capacities are up and running now and demand is meeting the capacity, and that's how you are guiding for FY '27 PWMR. But how do you -- is there any chance to roll this forward to FY '28?

So basically, as far as the PMWR is concerned, plastic waste management, we have to understand the chronology of this notification. The notification came into force in 2022, mentioning that every brand owner or packaging -- plastic packaging manufacturer has to use certain percentage of recycled content from '25, '26. So it was 30% and then it has to increase by 10% every year till '29 up to 60%. If any shortfall is there in using this recycled content, there is a penalty provision. For first year, it is INR 2,900 per tonne. The second year, it is INR 5,800 per tonne and the third year, it is INR 8,700 per tonne. So because in very initial stage, there was not much capacity available. There were stakeholders representation for this with the government. And the government has assured everyone that they will look into it and will provide some relief. If any capacity is not available to complete 30% target for first year only, in that case, government may give some relief. And everybody was waiting for that relief the whole year. It is a relaxation because, you see, even we are discussing as on date, the 30% recycled content consumption notification is there. Everybody has to use 30% recycled content. If any notifications for the relaxations comes coming forward in next 2 months because it is now irrelevant because the whole year has passed. In 2 -- In less than 2 months, you cannot do much with your consumption or nonconsumption. But even if any relaxation comes in the remaining period, there will certainly be a big number of brands who are going to pay penalty for the first year itself. So everybody will be in that category of first year penalty of INR 2,900. From April onwards, they have to pay INR 5,800, if any shortfall comes in the next year. So it is intact. The notification is intact and the implementation. As per our discussion with the government officers and the stakeholders from government side, this notification is intact and a lot of investment has came into -- in this particular recycling field, not only in PET, but also in polyolefins and other plastics. So there is not much delays or any major modification is going to be happen in coming days.

Got it. Agreed, sir. Agreed. Just last question, then I will come back in the queue. This new client that you're talking about in filament yarn, when do you see the offtake going for this client? And how do you see margins and realizations for this? And what is expected to be the offtake for this?

So the offtake will be started from February itself. And we are expecting that almost 20% to 30% utilization of our capacity of the filament yarn are going to be increased [indiscernible] working for our partnership that we have done -- started with them. And the margins are quite good as expected on our line for the filament project. Sorry, but we cannot disclose exactly the numbers for the particular product due to competitive reasons, but it will be good.

The next question is from the line of Mehul Panjauni (sic) [ Panjwani ] from 40 Cents.

Sir, now that your legacy business has done well in terms of volumes, can we -- when can we comment on how soon it will take to be out of the woods in the non-legacy business?

So Mehul, we are expecting the offtake will start -- In the current quarter itself, we are expecting a good demand, and we are expecting the good demand from April onwards. So FY '27 would be the year which we are expecting from the FY '26, but definitely, FY '27 would be the good year.

And sir, the government regulation which we are expecting, is it out or it is yet not out?

So regulation is already there. So one notification -- draft notification was there for giving some relief to the user industry, but that draft notification has not been finalized yet. And now the current financial year is going -- is coming to end. So we don't think it will come now.

It won't come. So what -- how...

Basis the capacity available in the rPET in the Indian market, the government may also not provide any further relief [indiscernible] the user industry at the beginning of the financial year.

Sir, government may not -- if government doesn't -- is not expected to provide any relief, can -- then our business will be significantly impacted, right?

No, no, no.

Notification has to come for the relaxation to the brand owner, not to the recycler. For recycler, for brand owner, it is 30% mandate, and it is intact for the year. If any relaxation comes that, okay, instead of 30%, we will allow you 10% of this EPR content responsibility target to be transferred to the next year. So brand owner has to get a relief. If relief doesn't come, then they have to use 30%.

Okay. So that is a benefit to us in -- that means?

Yes.

Yes.

Correct.

But only thing is that it will start flowing into our numbers from next -- from Q1 of FY '27?

Yes.

[Operator Instructions] The next question is from the line of Bharat Gulati from Dalal & Broacha.

I just had a question regarding the stand-alone business. In terms of EBITDA per tonne, that has seen a significant degrowth year-on-year. So -- and that's been on a downward trend year-on-year, but has picked up Y -- Q-o-Q. So are we seeing this going forward to improve further on? And what will be the kind -- will we be able to reach back to our FY '25 levels? Or are we going to create a base which is lower than that and then sustain that? If you can help me understand what kind of EBITDA per tonne will we have going forward?

Yes. So Bharat-ji, actually, this business was under distress since last 2, 3 quarters, 3, 4 quarters. because of the reasons already explained in various con calls by us. So now this business has come to back on the track. And so the margins have started to improve. And we are expecting in FY '27, we would be able to meet the margins which we are earning earlier on our legacy business. It is in the range of around 9,000 tonne to 10,000 per -- EBITDA per tonne.

So it would be back to, let's say, our FY '24 levels, which is INR 10 per tonne of EBITDA?

Yes, yes. We are expecting because of the demand, because of the recent U.S. tariff relaxation, we are expecting it would come back on the track.

Got it. Okay. And just sir, to understand our business, our rPET granules business in Warangal, if you can help me understand what kind of peak revenues can we get from that in terms of once utilizations will pick up next year?

Yes. So next year, we would be operating at about 70,000 tonne capacity of rPET in Warangal. So the peak revenue potential is about INR 800 crores to -- INR 700 crores to INR [ 850 ] crores.

Okay, sir. And just to understand the EBITDA per tonne there also has gotten hit. So do we see that also coming back to normalized levels? Or will that be on -- in permanent pressures creating a new base because of the higher raw material costs that we are facing now?

You see, the EBITDA margins have been impacted because of the lower capacity utilization. And also as the listing is not there in the market and the -- so many units have been got the FSSAI licenses and so the supply side is more in comparison to demand. And so the pressure was there in the prices also -- margins also. But going forward, we see when the demand will pick up from the sector in next year, so -- and this is the supply. So it will be matching. And so the pressure which we are facing now must be relaxed to some level in next year.

Sir, could you just help me with the number of what kind of EBITDA per tonne would we be expecting to do next year?

So for the EBITDA, we cannot comment as of now currently because the -- so many developments are there in the market in the current year. So the market is evolving. And so EBITDA margins -- exactly forecasting the EBITDA margins is not possible as of now. We will be able to comment in -- on next quarter itself.

Got it. And just one last question, sir, in terms of Q4 for our -- the business that focuses on the F&B segment, is that seen any pickup in terms of customers trying to fulfill whatever they can and reduce their penalties? Or is it still in the same trajectory as it's been?

Yash?

Sorry, can you repeat the question again?

Just trying to understand, has there been some uptick in demand in -- from the F&B players? Or is it been constant with how the previous 2 quarters have played out?

No. So definitely, compared to the last quarter, there has been an uptick in the demand and consumption from the F&B players, but it is still not to the level that we expected that it should be. So yes, it has improved definitely, yes, but still not where it -- I mean, way lower than where it should be actually.

Yes. So basically, this is the current situation. We are expecting the capacity utilization of Warangal plant by about -- in between 70% to 80% as against the 50% which we have got in these 2, 3 quarters.

The next question is from the line of Darshika Khemka from AV Fincorp.

I had a couple of questions. Firstly, on the lines of the fact that 2 quarters of our FY '26 year have been impacted by the MoEF notification. Do you think that this is now behind us or there could be a probability of this -- the government giving this sort of relaxation once again in FY '27, considering the fact that the 30% implementation would be difficult in Q4 and this would sort of be carried forward in the next year?

So unless the relaxation notification doesn't come, there is no carry forward. So this year, 30% consumption was mandatory and whatever the shortfall is there, the penalty would be levied. Penalty is leviable. It depends -- so -- and for next year, it is 40% and the relaxation notification was support basis the capacity of -- recycling capacity was not there in the beginning of the financial year '26. But now the approved capacity is almost 250,000 tonnes to 300,000 tonnes in between. And so it meets the requirement of the industry -- user industry for the next year. So we don't expect there would be any relaxation notification come -- will come further for next year.

Got it. So considering this background, would be right to change our guidance for FY '27 that we had given the last year, both for the legacy business and for the consolidated business and the legacy business, particularly around the fact that the raw material prices have now normalized and you had expected 10% margins for FY -- Q4 FY '26 and a slight improvement further towards 11% for FY '27? Is that guidance intact? Or are we improving it further? And also for the rPET business, what is the guidance that we are now giving? Is there any change?

No. So basically, our legacy business, we are expecting 9% to 10% -- we'll come back to 9% to 10% EBITDA margins next year. And for the rPET business, yes, we are expecting with the 40% mandatory use is intact, we would be doing much better.

Okay. And we had expected 65% of our revenue coming from rPET chips by FY '28. That is also still intact, right?

Yes. Once the offtake will start, definitely, we will go -- we will move on our capacity expansion.

The next question is from the line of Bhavik Shah from Invexa Capital.

So my first question is, our realizations have actually not improved despite you mentioning the notification is still in place. So what is actually leading that the companies are not buying in the volumes they require to fulfill for the year, one? Second is then, have you seen any traction in the last quarter currently, like in terms of, say, improvement in realizations?

So you see why the -- basically, if you look at, same as Prashant sir had put in detail chronological order, what happened is that the regulation for 30% offtake is live. But in June, the government came out with a draft giving some relaxation that, okay, you can carry -- because there is capacity shortfall to meet the target, you can carry forward to the next 3 years. Since then, there has been a lot of to and fro happening between the industry bodies and the government, and they are finally working with the final notification. Everyone is awaiting and postponing their purchases for the final notification to come out, which is with the relaxation basically. And because of that, everyone has been holding off to do their purchases since December. So if you look at the current situation, it is because the government has told that -- everyone that we will be coming out with it very soon. So everyone has definitely started again the offtakes. Yes, obviously, it has not reached to the level that it is expected. But since the notification is still not out, a lot of brands -- I mean, I would say 90% of the people are still not -- have not really started the offtake in the right volume way -- manner. And the realizations have also been very consistent. They have not improved because still the capacity or the supply of the material is way, way more than the demand. So the realizations have not really improved any better.

Understood. So basically, they are ready to pay the penalty of INR 2,900 per tonne, but they're not willing to purchase the additional volumes, right?

So you see, it's much more complex than that. You can say when it comes to bigger brands, paying penalties for them is a very, very big issue from their brand equity point of view. Second is that paying the penalty also does not absolve you of the requirement. It just carries forward the volume requirement to the forward years. And like also there is another EC clause, which is the Environmental Compensation Act, where they can levy a much more stringent penalty to -- on you if you are not fulfilling the mandate. So paying penalty is -- it's not as simple as it seems like, but the problem is that they are awaiting the final notification, the relaxation notification from the government because of which they have been postponing the usage.

Understood. And sir, when we say 9% to 10% margins we are guiding for, so can you just help us understand like do we expect our cost to be lower? Do we expect our realizations to improve to come to this margin? Or what are we factoring in to come to this margin?

So 9% to 10% guidance is regarding our legacy business, the stand-alone business of Ganesha Ecosphere. So basically, the raw material prices has been -- the stability in the raw material prices is the key factor. And with the increase in the volume and our -- shifting our production -- our dependence on the spinning sector, it will be driving the margins.

Understood. So, sir, just let us assume that this notification is there without any changes. So how do we see our volumes in FY '27?

So, this [indiscernible] notification is only -- meant only for FY '26. It is nothing to do with the FY '27. So the regulation of 40% for the FY '27 is intact.

So like, then how do we see our volumes improving, sir, in terms of...

So for next year, the regulation is intact for 40%. We are expecting we would be able to utilize 85% to 90% capacity utilization. And currently, we are -- next year, we would be having around 70,000 capacity. And so we would be expecting a volume of around 55,000 to 60,000 tonnes and more than 50,000 tonnes.

The next question is from the line of Avnish from Vaikarya.

In terms of these F&B customers you have, the number of vendors they have approved earlier, has there been any change in that because there is a lot of capacity which has come in, but have they signed up or approved more vendors?

Yes, definitely, they are obviously working with more vendors also. And I mean, the bigger problem here is that it's not that they are approving other vendors, the reason is that the volume offtake is not going up with the capacity increase that is coming in. That has been the biggest issue which has caused this kind of -- I mean, this kind of outlook in the rPET industry currently. And they will have to do that. They will have to work with all the recycling guys because the capacity needed to fulfill the mandate requirement is obviously currently still under -- it's almost matching. They will -- obviously, the industry will have to work with the people who are also putting up capacities.

Right.

The...

Go on.

I mean the bigger problem is that the number of players who are using the rPET currently has not gone up. We were expecting that as the mandate comes to final this thing, the number of players should now start to increase. They have -- it's increasing, but not at the rate that it should actually.

Yes. And as far as the approval is concerned, yes, we have -- our product is approved from almost all the big plants.

No, I mean to say your customers, say, earlier working with the 2 recyclers. Now they now have approved 3, 4 or 5 recyclers because more capacities have come in.

They have. Correct. Absolutely, they have, yes.

Got it. And let's say, as you mentioned, some of these global brands, if they have to be really, really careful about breaching the norms, will they have -- like even the notification comes in February end or March, they don't have much time. If they have to fulfill this 30% irrespective to whether relaxation comes or not, they need to decide whether to pay a penalty or offtake, right? Or they can offtake, let's say, just in the month of March, can they offtake enough quantity to meet this guideline?

No, definitely, you see it's -- Please go on, sir.

So I think you see the 30% mandate is there. If any relaxation, let's say, let's presume whatever was in the year, a 10% relaxation comes for the current year. Even if 10% relaxation comes, you are very correct that most of the brands are going to pay penalty for the first year. And the first year penalty of INR 2,900 is only for the first default. Once a first default has been done, the next default has -- on case of next default, you have to pay a penalty of INR 5,800. And in case of third default, there will be a penalty of INR 8,700. Over and above this, there will be environment compensation. So, if any relaxation comes for the first year, because government has been represented by all the brand owners, many of the brand owners that not enough capacity is available for the first year. So they were seeking some relaxation in the percentage for the first year. So for next year, there is a mandate of 40%, which has to be fulfilled by the brand owners, and there will be -- looking to this 40% number, there will be good demand. And Ganesha as the largest capacity holder is well placed for taking that demand in the business.

No, I was trying to understand the reduction of 10%, and they have to fulfill this 20%, somebody who does not want to be in this spot of not being compliant. Will they have this one month so much material that they can meet this 20%, not just with Ganesha, but across the industry? That availability is so high that they can fulfill this in 1 month or -- Otherwise, they will be -- they can pay penalty and all, but it still be having the challenge of not meeting the norm...

Yes. So in any case, any relaxation comes altogether, so it is true that you will not be able to fulfill it, even the lower targets.

They will not be able to fulfill it. Okay. The second question I had was on the export side. Now as the tariffs are reduced to this 18%, so your product will be covered with the 18%. Would you be looking at exporting opportunity? Or you think that 18% is also too high to make export viable for you?

So you see the market is currently very evolving across. And definitely, we are currently in discussions with the consumers there, and we will get to know about this only with time of what kind of volume and business is possible.

The next question is from the line of Dhirendra Kumar Patro from Spark PMS.

My first question is on CapEx. Can you provide any color on our CapEx plans, brownfield and greenfield in FY '26, '27 and '28 in terms of investments and metric tons?

So we are already implementing a brownfield project. So the brownfield project could be operational by March and April. And -- so it [ involves ] core CapEx around INR 130 crores which has been largely incurred so far. As for the next leg of expansion, greenfield expansion or the brownfield expansion, we -- our -- as per our plans, around INR 450 crores is to be invested in next 2 years.

Okay. So INR 130 crores of brownfield, that was around 22,500 tonnes of rPET in Warangal, right?

Correct.

And -- so if I heard it right, you said 4Q, you would be able to do 70% utilization in the subsidiary business. That 70% is including the brownfield expansion?

Correct.

The next question is from the line of from Atharva SmartSyncServices.

This is my first time ever I'm attending your con call. Sorry if I have some basic questions. But I wanted to understand do we have any seasonality in our business? So can you please explain the seasonality in our business?

So seasonality -- in case of our legacy business, the seasonality is largely from the raw material side. So in case of Northern India in winter season, the raw material availability reduces somewhat. And in the summer season, the availability is superior. But from the -- our finished goods level, there is no such seasonality in our legacy business. And for our B2B granule business, yes, there is a seasonality though -- and this is very new business, so it will be much -- much [ competent ] in next financial year. But certainly, the user industry is having that seasonality when there is a winter season and -- from August to September onwards, the production -- they reduce their production and the production is again geared up from January itself.

So basically, the main seasonality which we have in our legacy business because of raw material, right, raw material prices?

Correct.

So what are the measures we are taking to mitigate this risk, mainly raw material prices risk?

So basically, we try to make some inventory. Basically, you see the raw material -- our raw material is scrap. So it is not an organized business. It is not a standard material. So if the collection is going on and you have to buy it. So you cannot stock it in too big quantity. But certainly, we try to maintain a inventory of around 30, 35 days. And in summer season, we will try to increase the inventory by every 4, 5 days, additional inventory stocking.

And sir, you are talking about this draft notification. So can you please explain more on this? Like you are expecting, like the players expecting 10% relaxation also. So can you please throw some light on the draft notification?

Sorry, can you please come again? Your voice was not audible.

Hello? Now am I audible?

Better.

Yes. So just wanted to know more about the draft notification, which you are talking? Sir, I joined late.

Yes. So basically the regulation was implemented for 30% mandatory content of recycled granules in the packaging industry, plastic packaging industry and the regulation was implemented from April '26 -- '25, April '25. But at the -- when the regulation was implemented, the domestic capacity, recycling capacity was not [ agreeable ] and only around 70,000, 75,000 approved capacity was there, while the consumption was expected to be much more than that. And so the user industry contacted to the ministry MoEFCC for some relaxation. In June, the government has come out with a draft notification in which they proposed to allow the -- to make the [ next term ] relaxation of 30% target and allowing the shortfall for over next 3 years. That was the draft notification, which is not finalized yet.

Atharva, may I request you to join the queue for a follow-up question. The next question is from the line of Mehul Panjwani from 40 Cents.

So sir, regarding the preceding question, you said that the notification was -- the draft notification was for 3 years. So it has not come yet, right?

It is not for the 3 years. It is only for the FY '26, but any shortfall to be carried forward for over next year. Suppose the 30% target is there and someone uses the 20%, so 10% is the shortfall. So 10% shortfall could be recouped in over the next 3 years.

Okay. Got it. And sir, my next question is, sir, can we expect that Q4 results will be better than Q2 and Q3?

Yes, yes. We are expecting the better Q4 than the Q3.

And it will be mainly aided by the legacy business or overall?

Overall. Both legacy business as well as for new business, our subsidiary business.

The next question is from the line of Siddhartha Barman from Sagun Capital.

I was just trying to understand what would be the kind of margin we would be looking next year and forward? Any kind of ballpark figure if you can tell us?

So we are not providing any guidance as of now because of the uncertainty prevailed in this financial year over the notification and the regulation. But we are expecting that this uncertainty would not be there for FY '27. Certainly the margins would improve with the increased OpEx and volumes. But any margin guidance overall, we would be able to provide only in the next quarter.

Okay. So it will be same as the TTM or we can expect at least a slight improvement?

We are expecting much better than that.

The next question is from the line of Reuben Mathews from Equity Intelligence.

I just wanted to know with your discussions with these large branded players, on how much are they right now? What is their percentage of recycled material that we are using for the B2B?

So see, it's very difficult to give the exact numbers because even we don't have the exact numbers, but it's fairly low. I would say that it's lower than 10% to 15%, maybe somewhere in the ballpark. I'm just talking about the global big brands, but very difficult to come with the exact number.

Okay. So you're saying that they are right now at around 10% to 15%. And with your recent discussions, do you see them ramping up to at least 20%, 25% with the purchases that they are making or...

So see, currently, they are not ramping up. But definitely, they would be post the government notification, once notification will be there.

Okay. And this expansion plans, you don't need to -- you already have funds for the expansion, right? There's no more additional funds required?

Yes. We are having the funds and our leverage position is also very, very comfortable. So we will manage on that.

Okay. And just to help me out with the average realization of your product now, is it around INR 100 for the recycled plastic for the bottles?

Yes. So it is different for the different products. So for fiber, it is lower than the -- it is around INR 85, INR 84, INR 85. And for the granules, yes, of course, it is more than INR 95.

More than INR 95. Okay. And just one last question. Now I'm just starting to follow this company. So now you're looking at collection of raw materials, right, for the plastic bottles. Now with all these additional companies setting up their capacities, do you see there being a shortfall in collection of these raw materials? Or would you look at importing plastics maybe? How would you go about it?

So you see the collection is very, very good in the country as far as the PET bottles are concerned. And the user industry is from the fiber, from B2B business. And -- so certainly, the demand is much better than -- much, much more than the supply side. So the fiber industry is trying to use some textile waste and other waste as against the PET bottle scrap, and so the industry is now moving from the PET bottle scrap to some other alternatives. And so it will release the pressure on the supply side for the PET bottle.

The next question is from the line of [ Subhasish Padhi ] from Manish Mundala (sic) [ Mundada ] & Associates.

Is my voice clearly audible?

Yes, sir.

So my first question is regarding the competitive landscape. As I have heard from a media release that Reliance Industries is also collaborating with Srichakra Ecotex to enter into the recycling rPET business. So they are targeting to recycle around 5 billion plus PET bottles and in an industry where Reliance is going to enter, we can expect a steep competition there. So what is your opinion and perspective on it? I want to know that. And add on to it that Reliance is also having chemical recycling technology. As per my knowledge, we, Ganesha Ecosphere is currently using the mechanical recycling technology. So I also wanted to take some -- what is your take on it? Actually, I want to...

So yes, you're right. So I think this news is not new. I think it's a pretty old news. So basically, yes, Reliance and Srichakra are collaborating, but their collaboration is regarding the RPSF, the traditional legacy business that we have, recycled polyester staple fiber business. That's the collaboration to do recycling of the PET bottle waste basically. Reliance also has a capacity of its own to do RPSF and they partner with Srichakra for building some more capacity of the RPSF product, which is our legacy product. And talking about competition, I mean, I think it's pretty clear that the recycled PET industry has always been very, very competitive, I would say, very highly competitive from the last 25 years, and it remains to be so. And Ganesha has still been able to navigate and has maintained its position as the leader of the industry in spite of the industry condition.

And what about, sir, are we planning to set up any chemical recycling plant or you are just planning to continue our existing [indiscernible]...

So we are basically into the mechanical recycling and we are -- and as far as only the mechanical recycling [indiscernible] over. Chemical recycling is a very nascent stage and its cost is too high, operational cost is too high as well as the CapEx is also too high. So it will take time to be commercially viable.

Okay. And sir, are we having any plans to recycle HDPE and flexible plastic and other hard plastics in the future? Or are we just going to focus on PET recycling?

Yes, we are also starting the recycling of the polyolefins apart from the PET. We are exploring that. Any concrete plan is not yet as of now finalized, but definitely, we are looking for it.

Okay. And [indiscernible] to do some exports?

So we are already making some export, around 9% to 10% of our fiber volume has been exported. And because of the tariff in the U.S. so we have started the export of some -- rPET. Because of the tariff it was stopped. Now we are expecting it will again get some...

Sorry to interrupt you, sir. You may join the queue for the next follow-up question. The next question is from the line of Dheeraj Ram from B&K Securities.

Sir, for this rPET realizations, historically, I mean, in FY '24 and '25 around, used to be higher and now it slightly came down in FY '27. Do you expect it to go back to previous levels? Or is it too much to go back to previous levels?

So basically, the realization of rPET depends on the prices of the bottles, scrap bottles also. So it moves with the prices of rPET -- scrap bottles.

Okay. Got it. And based on landscape of competition, what previous participant was asking, could you throw some light on this Indorama JV with Varun Beverages? If we consider that maybe coming in FY '27 or '28, do we still have a shortfall of demand versus capacity of recycles?

Yes, definitely. So see, it's not about shortfall of demand or the capacity. It's about managing the demand and supply. So what is happening now in the industry is that we are working together to establish a very coherent demand-supply situation for the industry to work in a better way, in a more efficient way. So what is happening -- what is not going to happen is that the -- like in the last couple of quarters, any new capacity -- no new capacities have -- are coming up or are coming up to be announced in the future because the industry is waiting for the demand to firm up and the numbers to stabilize. So even with the -- this JV volumes which are coming in, we have already considered it in the current set of numbers. It will be still -- we will be almost at par with the demand and supply equation.

Ladies and gentlemen, we take that as the last question of the day. And now I would like to hand the conference over to management for the closing comments.

Thank you. Thank you, all, for joining today and for your continued interest in our journey. We appreciate your continued engagement and look forward to updating you on our progress in the next call. Until then, stay safe and stay connected. Thank you.

On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.