Ganesha Ecosphere Limited ($514167)

Ladies and gentlemen, good day, and welcome to the Ganesha Ecosphere Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking Limited. Thank you, and over to you.

Thank you. Good afternoon, everyone. I'm pleased to host today's earnings call of Ganesha Ecosphere. 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 move to Q&A. Thank you, and over to you, Yash.

Thanks a lot, Manish. Good afternoon to everyone, and thank you for joining us. We are here today to walk you through our Q4 FY '26 results and highlighting the key operational and financial achievements, and we'll share the insights on the broader industry and macroeconomic environment, which has shaped our performance currently. So the first 3 quarters were marked by disruptions and uncertainties, particularly around the pending regulation clarity, which created a lot of challenges for us in planning and execution. We are, however, delighted to report that in FY '26, we concluded on a high note, reflecting both the resilience of our business model and the agility of our teams in navigating a challenging environment. Both stand-alone and subsidiary businesses have performed well during the last quarter. In Q4 FY '26, company has made a strong performance with consolidated production numbers 4,268 tonnes, which is an increase of 6.45% over Q3 FY '26. Sales volumes have also increased to 45,162 metric tons, which is an increase of 12.25% over last quarter's sales volume. Company has closed a consolidated top line of INR 423.94 crores, EBITDA of INR 52.35 crores and bottom line of INR 23.2 crores, registering a growth of 18.7%, 70.4% and 88.6%, respectively, over the last quarter. The company has earned an EBITDA margin of 12.3% as against 8.6% during the last quarter. On a stand-alone basis, the company has achieved a production of 28,209 tonnes and sales volume of 29,034 tonnes, which is lower by 3% and 6% than the previous quarter numbers. Revenue numbers at INR 260.33 crores are lower by around 4.8%. However, there's an improvement of 125 basis points in the EBITDA margins in the stand-alone business. Growth in top line as well as in margins were contributed by improved demand, stable prices as well as liquidation of the inventory. On a year-on-year basis, there is an improvement in production and sales numbers at consol level with production up by about 6.4%, revenue up by 23.1% and EBITDA up by 2.5%. Full year performance is almost at par with FY '25 numbers in terms of production, sales volume and revenue. However, EBITDA and profitability were hit adversely due to the weak performance of the first 9 months for the reasons discussed earlier. There is a significant improvement in operating cash flow generation, which is at INR 170 crores, enhancing our ability to fund the future growth internally. Net debt position has been at INR 375 crores is also at a very, very comfortable level for us. From a macroeconomic perspective, FY '27 has started amidst global volatility. The ongoing Middle East conflict has disrupted supply chains and driven up virgin polymer as well as PET scrap prices, creating significant pressure across the textile value chain. This is impacting the demand for man-made fibers and the industry is struggling to absorb rapid increase in feedstock prices. The situation will improve drastically upon resolution of the conflict as the inventory levels across the value chain are at very, very low critical levels and supply pipeline is almost empty. The wait for India industry revival has become really long, first due to U.S. -- higher U.S. tariffs and now because of the global supply chain disruption in crude and its derivatives. We expect significant turnaround for the industry once the crude prices normalize and the global supply chain revives. The MOEF issued awaited notification on the March 31, 2026, clearing the smoke over the adoption of rPET granules and reaffirming the mandatory recycled plastic usage targets. This clarity has removed lingering uncertainty and enhanced industry confidence and has provided us with good visibility of demand. Strategically, we have taken decisive steps to strengthen our capacity and product portfolio. We have commissioned the 22.5 kt brownfield expansion of our PET chips at Warangal with ramp-up expected by Q2 FY '27. We are pleased to share that we are also pursuing another 22.5 kt expansion and debottlenecking projects to push the installed capacity to nearly 1 lakh tonnes by FY '27. We have also decided to drop the Odisha greenfield project for now, which was originally intended to take our aggregate installed capacity to 132,000 metric tons by FY '27, '28. However, our Warangal facility alone is set to reach nearly 100,000 tonnes by the end of the current financial year and with much more lower and efficient CapEx. Alongside building this milestone, we are actively planning for future expansions with a strong focus on enhancing utilization levels and boosting the overall productivity of our operations. On the product side, we are having a strong visibility of demand for the rPET granules during FY '27 with significant improvement in capacity utilization level of existing as well as enhanced capacities. Our R filament yarn has successfully qualified with a leading global textile brand, and we expect to steadily improve utilization rate in this segment as well over the next 3 to 6 months' time. This milestone is particularly significant as it demonstrates the acceptance of our sustainable products by global leaders, paving the way for stronger export potential and long-term relationships. At the same time, we remain cautious on the RPSF and Spaarn, where demand has slowed due to geopolitical disruptions and the substantial increase in pet scrap prices, but we are confident that our diversified portfolio and focus on high-growth segments of subsidiaries will continue to drive the momentum. The combination of regulatory clarity, capacity expansion, product qualification with global brands and rising industry adoption of our PET products has positioned us strongly for FY '27 and beyond in achieving sustainable growth targets. With this, we are ready to take the questions which you may have. Thank you, everyone.

[Operator Instructions] The first question comes from the line of [indiscernible] family office.

First of all, I would like to acknowledge the team for having the prudence to switch from this greenfield to brownfield expansion considering the evolving business dynamics. My first question to you is that what kind of supply additions have you witnessed in the rPET capacities and licenses being provided by FSSI from the start of FY '27? And also, if you could touch upon the demand scenario and the supply-demand gap, how is that seen by the customers?

So see, the current FSSI approved capacity has grown to about 280,000 metric tons as of today. And there are also pending FSSI applications as of today to the tune of about 1.5 lakh metric tons as we speak, which also includes our brownfield expansion as well. Going -- as of today, the demand for rPET looks extremely robust and strong after the mandate has been cleared by the MOF and again has come out with the final notification, all the global brand owners and national brand owners have shown aggressive interest, and we have had good commitments and interest from them to supply rPET to them for the full year of FY '27.

My second question would be that how much further brownfield capacity addition or debottlenecking can be done at your Warangal plant and will it be sufficient to offset 2,500 tonnes drag dealership strategy?

No. So we are putting -- we have already put up the 2,500 tonnes, and we are putting another line of 2,500 tonnes, which will be operational by the Q4, so we 45, 000 tonnes additional capacity, so that would be 10,000 tonnes, so total capacity would be around 97,000 tonnes, 98 000 tonnes.

Got it, sir. Got it. And how has the scrap post this war and what kind of extra cost burden do we expect going forward into FY '27? So how does it revise the prices or the real

really very high at the moment because of the several applications PET. So [indiscernible] two months's time. We are working with our bytes at the cost at the fast through mechanism, in which we are -- are to the increase or decrease in the raw material prices to the wire.

so if you can quantify in terms of what would be the PET scrap now and realization we are deriving.

Currently the rPET prices is now INR 56, INR 55.

The next question comes from the line of Dheeraj Ram with 360 ONE Capital.

Congratulations for great set of numbers. So a few questions from my side. So first one is what would be the guidance on EBITDA per kg for stand-alone business and subsidiary business for FY '27 and '28?

So instead of going for the product-wise EBITDA, we are working on the absolute numbers for the year. So we are looking for EBITDA of about INR 225 crores to INR 250 crores in this year.

Okay. But any EBITDA per kg, sir, or specific EBITDA per kg for stand-alone...

So because of the several reasons, we are not working on the EBITDA.

Sir, any CapEx guidance that you want to say as per my understanding, you are going to reach almost 90,000 tonnes to 1 lakh tonnes in by rPET end of FY '27. So what would be the CapEx for this entire brownfield?

So we have already made the CapEx for this 22,500 tonnes, which is up and operational and we are waiting for some clearances. And for further capacity addition debottlenecking of about 3,000 tonnes, we are looking for -- it will be around INR 150 crores CapEx will be involved.

And this 22,500 tonnes that got operational, is the FSSI approval completed or that is going on and might commence in Q1 or Q2 FY '27?

So we have already applied for the FSSI approval and we are expecting -- we will get by next month -- by end of next month.

FSSI approval will be completed by next month and we can expect this right?

The line is operational. Only thing the approvals we are waiting for. So once the approval comes in, the line will be started full fledged.

Got it. And any CapEx plans for FY '28, sir?

So we are finalizing the CapEx plan for future beyond this 1 lakh tonnes capacity. And we are sensing this geopolitical situations and challenges out of the situation to end. So we'll start to finalize our future expansion plan.

Sir, last question...

So one thing we would like to add this Orissa plant is -- only the dropping of the location, the plant has not been together. So the plants are intact. We are adding up the capacity in future also. But as of now, we are not going...

Last question, sir. This POY, DTY segment, you have said that last quarter, you have onboarded a customer, large one. And when can we see offtake starting for them? And what is the expected uptake for them?

So see, basically, we had -- yes, we had onboarded the brand owner last quarter -- by the end of last quarter itself, beginning of this year itself. But due to this whole geopolitical situation, a lot of challenges came in implementing and commercializing. But we have already started the commercialization to a certain extent as of today, and we are in the ramp-up stage already, so which will take our total utilizations to a good level going forward in the next 3 months -- 3 to 6 months.

Sir, last question is your stand-alone segment guidance, do you still maintain at 9% to 10% EBITDA margin? Or is there any changes to that guidance?

The guidance some challenges as of now because of the geopolitical tensions, global war like situation where all the supply chain has disrupted badly and this polyster sector been completely with the crude oil and derivative prices, so challenges are there as of now because of the demand. The downstream products are not well posed to take on the price increase. There buying materials. There are just liquidating the investory. So the pipeline is completely empty. So whenever this situation improves and all normalizes, this demand is certain to come. But as of now, the situation is something not very, very optimistic.

The next question comes from the line of Saransh.

Congratulations on a very good set of results, sir. Sir, to the earlier participant, you said that the pipeline is empty and there is liquidation of inventory going on. So I just wanted to understand with the intimation coming in by MOF regarding the percentage of recyclable, it still sustained, right? So how...

There are 2 things. The question was about our legacy business. It is for the fiber business. It is not for the rPET business.

I'm trying to understand for the rPET business, like the intimation still sustains that the companies have to be 40% recyclable. So with 280 tonnes of demand coming in -- 280 tonnes of capacity coming in, so how do we see the demand going ahead? And like how are the things panning up from the customer end? Like are they -- have we seen incremental orders or inquiries for the same?

So yes, you're absolutely right because of the mandate now again, reinstated by the MOEF, there is a very high demand in the rPET segment as of today. We are -- as of today, we are running at full utilization of our plant possible -- full productivity of the plant possible. And we have increasing interest from the number of players as well as the volumes are growing in the rPET segment for sure. So the rPET currently as of today is we are basing a very, very good demand across the industry.

And sir, how is the demand supply situation across the industry? Like are we at undersupply?

Yes, if you talk about the current situation, definitely, we are at an undersupply because the industry -- if you see -- if you look at the mandate of 40%, which has been stated for this year, the demand for rPET will be somewhere close to about 4.5, 5 lakh tonnes against the current supply of about 2.5 lakh to 2.8 lakh tonnes. So definitely, there is currently a supply-demand gap and the supplies are lower. But the whole industry is ramping up the supply slowly to cater to the demand.

Is any ballpark idea like where will we be at post 2 years from now in the supply position? Like how many capacities are coming...

So as I earlier told also, currently, the approved capacity is about 2.8 lakh metric tons from and already 1.6 lakh metric tons of applications are already pending with FSSI. And in 2 years time, I think we will be able to reach a capacity of about 7 lakh to 7.5 lakh tonnes overall as an industry.

And so will the demand for rPET increase going ahead with the mandate.

Yes. So yes, target is improving manner. So currently, it is 40% will reach up to 60%. So the demand is also expected to be around 9 lakh to 10 lakh tonnes.

So last thing, like it will be fair to assume that the current rPET prices that are prevailing in the industry, that is the peak?

So see, it is difficult to say basically how asset prices work is based on the price of the raw material. So whatever prices come to, there is -- accordingly, the asset prices work out. So it works in tandem with the prices.

[Operator Instructions] The next question comes from the line of from JM Financial.

Congratulations for a great set of numbers. I understand the uncertainly under the supply and demand gap right now. But can you give a specific guidance if you can for the FY '27 or FY '28, how will the EBITDA margins or how will the bottom line and the top line grow?

Giving any specific number is not possible at this time where the prices are fluctuating like anything. So for the long term, we are set to top line growth of 20% plus CAGR basis.

Capacity and the margins are also going to expand? And talking about sir, the Warangal capacity, as you guided that the Q4 should be 70% to 80% utilization. Was it 70% to 80%? Or what was the number of utilization of the Warangal.

So overall, it was 67% at Warangal facilities. But in case of it was about 85%...

The next question comes from the line of Darshika Khemka with AV fincop.

I had a major question around the yarn segment. Firstly, what is the price of the raw material currently? As far as I remember earlier, you were mentioning that scrap bottle prices used to be in the range of INR 45 per kg. As mentioned in the presentation, you have said that it has increased. What is the quantum of this increase? And what is the trend going ahead? And secondly, what would be the impact on the financials of the company going ahead, both in terms of the revenue and the margins and the overall industry situation on the demand shortage?

So you are right, currently, the scrap bottle prices have increased. It is in the range of -- as I told earlier also, it is in the range of INR 55 to INR 56 a kg as of now. The trend has now stabilized, so the prices are rolling around that, so in our carpet business, we are able to pass increase to buyer. So it will not impact the margin. But certainly it will have some impact on our business. But going forward, we are able to manage the things and we are expecting -- we will be delivering a good set of numbers despite this increase in the prices.

Okay. And do we expect any impact on the revenue considering the demand situation?

Yes, so impact will be revenue because the prices were very volatile and very fluctuating, the revenue numbers are also fluctuating accordingly.

Would you be able to give us probably quantify a number around this? Like an indicative range would also be helpful.

So yes, it is different for different products like fiber, it is in the range of INR 90 to INR 200 to INR 100. In the case of rPET is around INR 150 to INR 120 as of now. And in case of the yarn, it is around INR 150 to INR 160, but it is fluctuating.

So can we expect like a 10% negative impact on the yarn segment revenues?

It depends how long this global disruptions last. So it depends on all because the textile sector is hit by this disruption very badly, particularly in case of India.

The next question comes from the line of Dolly Choudhary with Niveshaay.

I just had one question, just a follow-up on the previous participant's question. So it is regarding CapEx only. So we just mentioned that we are planning for the future CapEx plans. But I want to know like directionally, so you also mentioned that maybe 2 years down the line, the demand supply may match in the industry as new capacities will come. So if we are planning for CapEx for after maybe financial year '28, '29, so will it be in the same sector or maybe we are planning for a new ancillary products going down the line because maybe the margins will also not stay competitive when the competition will come. I wanted to get your view on that.

Sorry, could you repeat the question, sorry?

So I was just taking a follow-up on a previous participant CapEx plans of our company. So maybe this year, they are coming with brownfield expansion that you just mentioned, but maybe 2 years down the line, when demand supply may match and the industry mandate is already out and maybe will directionally move in the same product segments only going forward or we are planning for some new product segment also as new capacities will come in this space?

Sure. So see, I think as of today, at least for the next 4 to 5 years, it will take for the rPET industry to grow and settle down at its pace because you see in India, the consumption of beverages and the consumption of PET is also growing at a very, very good rate. And as the consumption and as the usage of PET grows, the demand for rPET is also going to grow also along with the increasing percentage of compliance levels. So I think that going forward -- I mean, at least for the next 3 to 5 years, I think the rPET is going to take to reach the level that it stabilizes, the industry really stabilizes that. Also, what is happening is that in rPET, currently, the good quality or the high-quality suppliers who are able to sustain the operations at a good level are also very, very few. Not everyone is able to do that, which really differentiates us from the other suppliers in terms of consistency, quality and everything. So I think that we're in a very good position given current scenario in the overall rPET industry development. As of looking at the other products, definitely, I think we are also currently trying to work out on other different products as well, which will become the growth engine for the company in the future.

So -- but the new segments will get clarity more maybe going forward?

Yes.

Yes. The next question comes from the line of Rahim Patel with B Research.

I had regarding CapEx itself. So the first was around considering we have a drop project, we considered setting up plants in states where there are GST incentive, any such thought process in the pipeline?

See, the Orissa greenfield project, it would take 1.5 years to 2 years time in starting and getting up business. So it would be going for this extension. We are able to rental the capacity first year with much lower CapEx. So we will certainly go for the other locations in plant. We are discussing internally, we are also watching the geopolitical situation as we are working with our supplier for the location. So we will finalize the same.

And just to clarify, I'm talking about in the longer term, as you have said in the previous participant's question as well that our PET industry will take a couple of 5 to 6 years to normalize. So do you see that in longer term, recycling plants have to set up their facility next to packaging companies or brands, have we ourselves considered doing some form of JV with the bottle plants? Is there anything...

So we are working on several combination, including the JV, the putting of the plant to market. We are working on various alternatives.

The next question comes from the line of Ankur Gulati with Genuity Capital.

Sir, in Q4, for rPET, your average realization as per disclosed number is INR 103 per kg. Is that correct?

Yes, it's correct.

And your EBITDA per kg is roughly INR 19.80. Just want to confirm the numbers.

Sir, your voice is very low. Can you please come...

Your EBITDA per kg is INR 19.80 for Q4 recycled PET, is that correct?

Yes. For our subsidiary business -- it is correct for subsidiary business, yes.

Yes. Perfect. Can you give me the exact capacity for recycled, which was active in Q4 for rPET business? The capacity which we can sell to external parties, not the backward integration tonnage, but product capacity?

Yes, so Ankur, in which segment, you are asking. We have yarn and fibre and the rPET.

RPET, sir.

RPET, currently we are having capacity of 64,500 out of [indiscernible] operational, 2,500 is waiting for the approval from FSSI, and we are adding further capacity and capacity of around 36,000 with debottlenecking as well as the new lines. So it would be around 100,000 tonnes by the end of this year, and this is entirely for the outside thing.

One clarification, maybe I don't know the details, but if your rPET is 45,000, then the subsidiary sale was 15,900. So what else gets classified and subsidiary tonnage.

Start, the actual capacity was much lower because of the substance over the -- and the opaqueness of the regulations and all those things so. We could not see much quantum in the first 3 quarters.

48,000 is annual capacity. In one quarter -- this quarter we did 16,000, roughly....

There are other quarters. There is fibre, there is yarns. Other also. We roughly sold the -- about 11,000 tonnes of the rPET.

Can you give me the other fibre and the other two -- other products also.

16,000 tonnes.

16,000 tonnes is your.

In last quarter, we did a good sale of even it's stock. We released the stock in last quarter, for rPET.

That's correct. But our overall sale was, yes, 45,000 tonne, including 29,000 tonnes from -- 15,000 tonnes for our subsidiary businesses, which include the yarn, fibre and rPET.

[Foreign Language] 15,900 [Foreign Language] rPET, fibre, and yarn [Foreign Language] tonnage [Foreign Language]

To be very precisely, it was about 11,500 fibre and yarn.

[Foreign Language]

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Yes, we produced about 8,500 tonnes.

Extra, right? [Foreign Language] for standing on business and subsidiaries.

Basically, it is not possible for us to give the product wise finish, but overall, it would be 150,000 tonnes.

150,000 tonnes of which, sir.

150,000 tonnes total thing.

[Foreign Language] standalone and subsidiary [Foreign Language]

Yes.

[Foreign Language] quarter [Foreign Language] that means quarterly run rate [Foreign Language], right? This quarter [Foreign Language] total [Foreign Language]

Yes, my bad, my bad. It is around 180,000 tonnes to 200,000 tonnes. It is around 200,000 tonnes. Yes, right.

[Foreign Language]

Subsidiary [Foreign Language] growth, yes.

[Foreign Language] 47,000 tonnes, which means F '27 [Foreign Language] 65,000 tonnes to 70,000 tonnes [Foreign Language] expectation [Foreign Language]

[Foreign Language] almost 100,000 tonnes to 150,000 tonnes. Yes.

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Yes.

[Foreign Language] financial year '27 [Foreign Language], correct?

Correct.

The next question comes from the line of Chirag Jain with Spark Capital.

And congrats on good results. My first question is, so, sir despite reaching around 85%...

Sir, you voice is very low. Your voice is not clear.

Okay. I'll repeat my question. So I was asking our utilization level in subsidiary 67% for 4Q, right?

Right.

Margins are 20%, and if I look back, it was 24% level that we used to clock in FY '25. Any color on that, like is this the new normal, like...

Yes, yes. So it was 25%, 26%, but the volume was very low at that time, and so it has come down.

Okay. Volume has come down, I was asking is the sustain margin, there is no expansion from here...

Yes, we hope so.

Sorry to interrupt. Chirag, I would request you to please use your handset.

Okay. So stand-alone utilization level will go down like you just said. And so margins will also be getting down for next 1, 2 quarters?

Utilization level will go up. It is not going down. Standalone, it is almost 100% level.

Okay. But the...

There may be some downturn there because of the current situation. But long term, we are -- we would be doing it...

Okay. And margins will also get impacted for next few quarters because of whatever.

Yes, for stand-alone business, yes.

The next question comes from the line of Parth Agarwal with B Research.

I had just a couple of questions. One was considering that our RPET prices would be much cheaper than virgin PET. Is that understanding correct?

Yes, yes. So currently, the prices are slightly lower than the virgin prices, correct?

Is after accounting for the price increase of scrap, which is at INR 55 kg, right?

Right.

Okay. So considering that we have done like INR 19, INR 20 per kg EBITDA in the subsidiary business and considering we are already running at almost full utilization in the rPET business, is the kind of EBITDA per kg we are looking at right now?

We are looking to maintain the EBITDA. It is a blended EBITDA for our subsidiary business, and we are looking to maintain the same. Yes.

So last year, same quarter last year, we were at like INR 28 per kg. So is that the number which is -- does not look achievable right now?

Yes. That the margins have come down.

Okay. And secondly, just last question. So considering our brownfield expansion that we are doing in FY '27 and existing capacity, what is the peak revenue potential that we can achieve from our current capacity, assuming that we are running at optimal utilization?

So with the total plant capacity at Warangal, we are looking for top line about INR 2,300 crores to INR 2,500 crores.

The next question comes from the line of Bharat Gulati from Dalal & Broacha Stock Broking.

I just had a question understanding. I couldn't understand when you say that capacities after this 22,500 expansion will go to 1 lakh tonnes. The math sits at 87,000. So can the 13,000 tonnes delta be explained? I'm just not able to understand that.

So we are making -- we are making some debottlenecking at the plant we have some additional capacity being so. So that capacity will be released -- about 10,000 tonnes capacity will be released because of that.

So sir, would it be fair to say that 42,000, only 32,000 is currently utilizable? Is that what you're trying to say?

Yes, yes, yes.

Got that. And just trying to understand the gross margins for the subsidiary, that's taken a sharp hit year-on-year. Do we see this a new base for the gross margins? Or can we see that recovery of 45% coming back in terms of subsidiary gross margins?

Yes. So subsidiary gross margins basically depends on the raw material prices and the steel prices. So basically, it is a completely pass-through mechanism as of now. So -- but in the last year, it was disrupted. It was -- most of the time it was spot sales. So that's why it was higher.

So just trying to understand, should we consider this as the new base for FY '27? Or should this revive back to the 45% EBITDA gross margin levels?

I think the right way to look at it is not from the gross margin, but rather the EBITDA levels. So how our business is structured is that across both textiles as well as packaging, our gross EBITDA or the conversions are sort of basically how it operates in. So the gross margins might change depending on the price levels of the feedstock and the finished product, but the conversions or the EBITDAs are what stays more consistent. You should -- it's the right way to look at it from the EBITDA point of view.

Let me put it in that way, then should this be the new base for EBITDA for FY '27 and from here, we should see a sequential uptick? Or should the Y-o-Y numbers start to come -- should the FY '25 kind of EBITDA start to show back in our numbers?

So we are looking for the EBITDA which we have earned in the Q4.

So just to understand, should we see an uptick in it sequentially? Or should that -- should this be the base for FY '27?

So in terms of absolute numbers, obviously, there will be uptick as more capacity comes online and the position improves...

Okay.

That should be very, very similar. That should be very, very similar.

And just in terms of cash flows, we've generated about 120 OCF to EBITDA, 120%. Should this kind of cash flow conversion continue? And what has caused this huge cash flow improvement in terms of conversion?

So. We are trying to manage our working capital operations very efficient. And so our target is to get at least 70%, 80% of the EBITDA to convert into cash flow. This year, we got some release of subsidies this EBITDA margin so this cash flow is better. But going forward also, we are looking for 70%, 80% conversion of the EBITDA into cash flow.

The next question comes from the line of Harsh [indiscernible] Capital.

I wanted to ask if you could establish what was the situation without EPR norms and what it will be after EPR has been implemented asking from a long-term perspective of 2 to 3 years at least, because I can understand the short-term volatility in the prices and everything, but what would be the long-term play here?

So see, last year, basically, what had happened, although the regulation was there, but last year in between -- in the mid -- in June, basically, the government had come out with a draft notification that they would be delaying or basically giving carryforward of the current year's mandate to the future years. So because of that, what had happened was that last year, you can say it was as good as new mandate being there and the consumers, the brand owners have started delaying the usage of the rPET content because of which our expired contracts did not renew and the offtake of the rPET took a major hit. But since this year starting itself, again, since the clarity has started coming in, the brand owners had started offtaking the material from the year beginning itself. And since after in March and when the regulatory clarity again came through, we are seeing a very, very good increase in the demand going forward. And I think we'll be able to utilize our full capacities going forward with good set of numbers for our rPET business.

So overall, the sentiment would have changed positively in a much larger way now, right?

Yes, yes, absolutely. Absolutely. That's why we were able to have a very, very good sale numbers in the first quarter as well.

Also, could you quantify the current virgin PET versus rPET spread? And how was it in March? And has it declined after that? Or is it at the same prices or it has gone up, what is it?

So in fact, today, because of the geopolitical conditions, the virgin prices are slightly higher than the rPET prices. So today, the spread which used to be earlier at around plus 10 between 10 to 12, 15 between rPET and PET today, it's about minus 5 between rPET and vPET.

Okay. And can you quantify per kg if it is...

Per kg. So basically, the virgin prices today are in the range of INR 125 to INR 130, whereas the prices are in the range of INR 118 to INR 125.

Got it. And on the demand side, so brand offtake has started. There is no issues in that from that part, right?

Correct.

Okay. So overall, I think the industry is looking up for next 2, 3 years where demand will definitely outpace the supply. That is what I'm trying to judge.

Correct. Absolutely. We think that will happen, yes.

The next question comes from the line of Yash Anand.

Congrats on a good set of numbers, sir. Sir, my question was at peak utilization, what asset turns do you expect in rPET granules? And secondly, ROE and ROC range should investors underwrite for the RPE CapEx once stabilized? What should be the ROE, ROE and ROC range should be -- should investors underwrite for the RPE CapEx once it is stabilized?

So it is the asset turn is about 5 that 1.25x to 1.5x of the CapEx. And overall business, we are looking on a long-term basis, we are looking for the ROE about 17%, 18%...

Okay. And this will be higher when the MOS regulation that is now 30% to 40% will scale up to 50% and 60%, right?

No, it will not depend on the regulation targets, but it will depend on our capacities and the utilization of the capacities.

Okay. So going forward for meeting this demand front, you will be expanding your capacity and the asset turn on that would be, sir, if you can give any idea?

So the asset turn is in the range of 1.25 to 1.35 to 1.40x.

The next question comes from the line of Kunal Bhatia with Dalal & Broacha Stock Broking Limited.

Congrats on good set of numbers. So most of my questions have been answered. Just wanted to know, considering the current demand and supply mismatch especially in case of the rPET business for the next year, considering that capacity ramp-up would come in, what is the maximum kind of volume we could achieve for FY '27?

As mentioned earlier, the total volume in the range of 180,000 tonnes to 200,000 tonnes. The total volume we are looking at for the next -- for the current year will be 180,000 to 200,000 metric tons of total volume. The rPET capacity would be about 100,000 metric tons. And we expect that we'll be able to achieve somewhere between -- somewhere around 85,000 tonnes of volume for this year.

Not for this year because the capacity will -- next year, yes.

I was just trying to understand what would be the best case scenario in terms of the volume that could be -- we could deliver for FY '27, considering the demand-supply mismatch in the industry per se...

Yes, 180,000 tonnes to 200,000 tonnes is the range which deliver the quantity this year.

The next question comes from the line of [indiscernible] Group.

Yes. So my question is that the future capacities that are coming, do you enter into a pre capacity tie-up with the customers? And if yes, then at some pre-agreed prices or some pre-agreed commercials?

Sorry, could you repeat?

The new capacities that are coming up, which will come online this year, do we go for prebooking of capacities with the clients on some commercial arrangements?

So not like prebooking. So how it happens is that as the new capacities come online, we get the approvals from the brand owners and then the utilization starts right away. So yes, we have some -- we have ongoing discussions with a lot of customers to ramp up our -- the supply of the products to them for the year.

And one last question. The legacy business of ours, do you think it's going to eat up some margins of ours and cash flows from the rPET business as a whole?

Short-term basis, there might be some impact. But on the long term, it will not be up the profit of our overall business. So considering that we have given the guidance of 225,000 tonnes to 250,000 tonnes, INR 50 crores EBITDA for this year.

The next question comes from the line of [indiscernible]

Sir, the rPET business benefit of margins because of this inverted spread would only be visible for 10, 15, 20 days or maximum a month in the March numbers. And this would have only increased. So while we have done INR 50 crores, INR 52 crores EBITDA, the Q1 EBITDA should be significantly more given the spread is now significantly more in favor of RPET. Is that the right way to think of it?

So see, not really. How it works is that our rPET pricing depends on the prices. And how we work with our customers is that we have an understanding of supplying the rPET volume and the price with the prices -- with the price conversion cost. So it is kind of not dependent on the virgin price. Yes, what happens -- what does happen is that when the virgin prices stay at the higher side, the overall demand is slightly higher, but it doesn't impact much on the price of the rPET regime.

Okay. That's clear. And the second question is more on the RPS side, where the pricing is at a discount to the virgin PSS. Even there, again, given that the PSS has increased so much, there should be a volume push for our RPSS side? Or am I missing something because I heard that and not remain the same and there may be margin pressure on that?

Yes. Currently, there is a pressure on the prices because of the increase in the feedstock prices and the textile industry is not in a position to absorb the cost because the demand is lower in downstream products.

Understood, sir. But the increase in price of PSF, because the ICF must be even higher, right?

Yes. The prices have increased. The prices have increased of that also, but the industry in the position to absort the price hik. So the demand has come down.

No demand expectation, I understand, but the margin should not be a pressure in RPS, right? Because our raw material pricing has only increased 20%.

Yes. But if the demand and we have to cut down our production to some extent. So it ultimately bottom line.

The next question comes from the line of Deepak Ajmera with IGE India.

With the increase in the virgin PET price, are we in a position to increase our conversion margin going forward?

So it doesn't really work like that, sir. It works on a very long-term understanding with the customers. So we have been working on a very similar understanding for a long time. So it really works like that. And see, the virgin fluctuation, whether it is up or whether it is down, it keeps on changing throughout the year. We cannot really bet on what the crude oil prices are going to be 1 month or 15 days or 2, 3 months down the line. So what we work on is very ethical and transparent mechanism for the rPET linked to its raw material rather than the crude.

Okay. And because of the policy push now on the demand side, the earlier offtake was not there. And now you have a good visibility of offtake. So why we are like canceling that Odisha project when you see the demand visibility is there?

So sir, basically, see the demand visibility is definitely there. We are basically now wanting to change our expansion plans more strategically to a more strategic location than Orissa. So we will be finalizing our expansion plans going forward as this whole geopolitical tensions come down and we get more better clarity from our customers as to the strategic location of the expansion should be. So -- and we are now going to -- currently going forward because any new greenfield project, the capacity actually comes alive 1.5, 2 years down the line and not immediately. So that was the reason that we shifted it to brownfield expansion so that we could get our capacities live much more faster.

Okay. Apart from brownfield, anything have you planned for the -- as you said, like faster capacity expansion? Brownfield has a limitation only?

Yes, sir, we are already currently right now in the discussions of finalizing our future expansion plans.

I think he is asking for the brownfield. So brownfield, we have already planned. And as we told, we are going to ramp up the capacity -- to increase the capacity by about 97,000 tonnes to 100,000 tonnes by the end of this year.

Yes, yes. My question was on the greenfield beyond brownfield because that has a limitation. You can't expand beyond certain capacity on brownfield.

Yes. So definitely for greenfield project, it takes much longer time for establishing the unit and operationalize the plant.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

Thank you. As we conclude today's discussion, we want to thank each of you for your continued trust. Despite challenges in the macro environment, we have delivered resilient performance and positioned ourselves for sustainable growth. On behalf of the entire leadership, we extend our gratitude for your engagement and support. Together, we look forward to building an even stronger and sustainable future. Thank you. Thank you once again.

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. Thank you.