Tinna Rubber and Infrastructure Limited (530475) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Rubber Tinna and Infrastructure Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sana Kapoor from Go India Advisors. Thank you, and over to you, ma'am.

Thank you, Shoki. Good afternoon, everybody, and welcome to Tinna Rubber and Infrastructure Limited's earnings call to discuss Q1 FY '27 results. We have on the call Mr. Gaurav Sekhri, Joint Managing Director; Mr. Subodh Kumar Sharma, Director and Chief Operating Officer; and Mr. Abhay Kumar, Chief Financial Officer. We must remind you that the discussion on today's call may include certain forward-looking statements and must therefore be viewed in conjunction with the risks that the company faces. May I now request Mr. Gaurav Sekhri to take us through the company's business outlook and financial highlights, subsequent to we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Sana. Am I audible okay?

Yes, sir.

Good afternoon, everyone, and thank you for joining us today on this call. Our financial results and earnings presentation are available on our website and on stock exchanges. I believe you have had a chance to review the same. I will briefly take you through the strategic updates, post which my colleague, Subodh, our COO, will take over and give details about the operational and financial performance highlights for the quarter. We are delighted to share that we have commenced FY '27 on a very strong note, delivering our best ever quarterly profitability. During the quarter, we achieved record financial performance with EBITDA exceeding INR 30 crores, PAT surpassing INR 20 crores, EBITDA margins of over 21% and PAT margins of more than 13% on both stand-alone and consolidated basis. This performance is the outcome of our sustained focus over the past few years on enhancing profitability through operational efficiencies, cost discipline and increasing share of value-added products. We are pleased to see these strategic initiatives translating into tangible results, reflecting in our margin expansion and continued commitment to creating long-term value for all stakeholders. The following strategic milestones underscore the significant progress we have made towards achieving our Vision '29 objectives. We currently have a tire crushing capacity of 185,000 tonnes per annum in India and continue to strengthen our processing capabilities. As part of our expansion road map, we are on track to increase this capacity by 27% to 235,000 tonnes per annum by FY '27, further enhancing our operational capabilities and supporting our long-term growth strategy. During Q1 of FY '27, we have executed INR 27 crores of CapEx as part of our broader investment plan of around INR 100 crores across FY '27 and '28, strengthening our growth and operational capabilities. We continue to strengthen our focus on responsible growth with our FY '26 EUV verified life cycle assessment validating over 10.37 million kg of CO2 emissions reduction across our integrated -- across our 2 fully integrated manufacturing locations. The integration of renewable energy has enabled emissions reduction of up to 58.7% with further improvements expected through increased adoption of captive renewable energy. Our transition towards cleaner energy continues to gain momentum with renewable energy contributing 51% of the company's total power production in Q1 '27, supported by a more than threefold increase in renewable capacity from 1.23 megawatt to 4.48 megawatt and a strategic third-party green energy sourcing initiatives, which have resulted in savings of INR 1.19 crores during the quarter. We have successfully commissioned rooftop solar plants at our Gummidipoondi, Tamil Nadu facility of 999 kilowatt power in June '26 and at our Varle, Maharashtra facility of 2,218 kilowatt power in July 2026, further strengthening our renewable energy footprint. We had mentioned in the past, and we are renewing our commitment to innovation by allocating INR 5 crores towards research and development in FY '27. During the year, we have established a dedicated R&D team focused on developing technology for high-performance new generation recycled rubber materials and engineered plastics, advancing value-added applications for recovered fiber from passenger tires, further enhancing the TPO quality to drive greater value addition. Turning to project development. Following are some key updates. The ongoing 3,500 metric ton per annum MRP capacity expansion is progressing as planned and remains on track for commissioning by Q3 of FY '27, increasing the company's total MRP capacity to 20,000 tonnes per annum, which it is our belief is the largest capacity of MRP in the world. The pyrolysis facility at Baral commenced trial in Q1 of FY '27, and it is expected to commence commercial sales in Q2 of FY '27 with operations stabilizing by Q3 of FY '27. The rCB production is scheduled to commence in Q3 of FY '27, followed by operational stabilization and commercial sales by Q4 of FY '27. Our PCMB division continued to witness strong momentum in Q1 of FY '27 with revenue increasing threefold to INR 12 crores compared to only INR 4 crores in Q1 of previous year. The PCMB business is contributing 8% to the company's top line, in line with the indications given in the earlier calls. The division's initial 6,000 tonne per annum capacity operates is operating at 82% utilization, while the commissioning of the expanded facility in Haryana has increased our total capacity to 18,000 tonnes per annum. With enhanced manufacturing capabilities and strong business momentum, this division is expected to contribute 10% of FY '27 revenue. We have also successfully registered on the government portal as an authorized recycler, allowing the company to generate EPR credit from the plastics recycling business from 1st of April 2026. I am pleased to also share that the [indiscernible] but business continues to scale up with the Kolkata plant commissioned in Q4 of previous year progressing well and utilization expected to improve over the coming quarters. The business is in advanced stages of acquiring land in Western Maharashtra for a new manufacturing facility to expand construction chemicals capacity and introduce new products across construction system applications. We are targeting growth of over 30% in this business and cross the milestone of INR 100 crores in revenue in FY '27. Turning to our international projects. Tinna continues to strengthen its global presence with the establishment of its wholly owned subsidiary, Tinna Rubber Chile SPA in Santiago, Republic of Chile. The initiative is aimed at enhancing the company's global ELP sourcing network and expand its international recycling footprint. Global Recycle LLC Oman has delivered a good improvement in Q1 FY '27, generating revenue of approximately INR 9 crores and achieving EBITDA margin of 8.53%. We expect this to improve in the coming quarters. While profitability had been impacted in the recent quarters by elevated raw material costs and the ongoing Middle East crisis, the implementation of corrective measures, including raw material import into Oman has led to a meaningful recovery in margins and overall profitability during the quarter. Mbodla Investment Pty Limited South Africa continues to progress as planned. Phase 1 CapEx has been completed. Operations have commenced and exports of semi-process material has already begun. We expect to breakeven by Q2 of FY '27. Phase 2 in South Africa is focused on full-scale tire recycling, and this has also been initiated where equipment to manufacture and process 9,000 tonnes of tires to produce crumb rubber is on the way to South Africa, and we expect to start production in Q2 or Q3 of the current financial year. In Saudi Arabia, land has been allocated to the company for a proposed facility of 24,000 tonnes per annum by recycling facility. We hope that we will commence the construction of this facility towards the end of this calendar year. Of course, this is subject to normalization of the geopolitical situation in the Middle East. Looking ahead, we remain focused on delivering our Vision '29 objectives through capacity expansions, new product development, sustainability-led investments and on expanding our global footprint, we are targeting presence across 10 locations and revenue of INR 1,000 crores by FY '29, while maintaining 25% plus revenue CAGR, 33% plus profitability CAGR and EBITDA margins over 18% and ROCE exceeding 30%. We believe these strategic initiatives position us well to deliver sustainable growth and create long-term value for our stakeholders. With that, I would like to hand over to Subodh for his insights on operational and financial performance. Over to you, Subodh.

Thank you, Gaurav ji, and good afternoon, everyone. Am I loud and clear? So I would like to reiterate that our record quarterly profitability in quarter 1 FY '27 marks a significant milestone in our growth journey. It reflects the successful execution of our strategy, continued operational excellence and our unwavering focus on creating long-term value for all stakeholders. Let me briefly walk you through our operational performance during the year. Tire fishing operations remained resilient in Q1 FY '27 with capacity utilization at a healthy 88% in India and 78% in Oman. India recorded a strong 35% Y-o-Y growth in tire fishing volumes, while operations in Oman were temporarily impacted by the West Asia conflict, resulting in relatively subdued volumes. Sequential volumes for India moderated by 10% due to lower requirement following softer consumer segment demand. Rubber production remains stable with an increased share allocated towards higher-value products such as micronized rubber bottle and Reclaim Rubber. In quarter 1 FY '27, MRP and Reclaim Rubber volumes grew strongly by 28% and 37% on Y-o-Y basis, supporting to robust performance of the Industrial segment. In Q1 FY '27, the Infrastructure and Industrial segments recorded volume growth of 33% and 27%, respectively, while the Steel and Consumer segment witnessed a decline in volumes. The Industrial segment achieved a strong 58% Y-o-Y growth in revenue. Exports volume delivered robust 46% Y-o-Y growth despite global economic headwinds, supported by a healthy order pipeline. Rising raw material costs and increasing focus on ESG goals within the tire manufacturing industry continued to drive demand in the industrial segment. The Infrastructure segment delivered 7% revenue growth in Q1 FY '27, supported by increased bituminous road surfacing activity. The West Asia conflict led to temporary bitumen supply shortages and elevated prices, creating a stronger demand for our bitumen as a cost-effective alternative for road infrastructure projects. While our Bitumen Emulsion business was impacted by supply constraints and subdued market demand, the long-term outlook for rubberized bitumen remains robust, supported by government continued focus on reducing import dependence. The company also secured a 15,000 tonnes of rubberized bitumen processing order for execution in FY '27. The Consumer segment was impacted in quarter 1 due to a sharp increase in raw material prices following the West Asia conflict, along with import/export disruption affecting the availability of key imported raw material to the turfing industry. The significant rise in binder and synthetic grass prices nearly threefold in some of the cases led to delay in tracks and turfing project execution. This segment will bounce back once these scenarios stabilizes. Our Steel segment delivered a stable performance during quarter 1 FY '27 with revenue remaining steady despite a marginal decline in volumes, supported by improved realization following price corrections. We further strengthened our market presence by securing the exclusive distributorship for Zibo TAA Metal Technology China for Steel Abrasives across India. With customer transition underway from Q4 FY '27, we remain confident of achieving approximately 50% volume growth in our Steel Abrasive business during FY '27. Coming to financial performance, achieved record quarterly profitability with EBITDA exceeding INR 50 crores, PAT surpassing INR 20 crores, EBITDA margin above 21% and PAT margin above 13% on both at stand-alone and consol level. On a stand-alone basis, quarter revenue increased by 18% and EBITDA and PAT margin expanded by 638 bps and 471 bps on Y-o-Y basis, which is a further validation of our robust performance. At the consol level, revenue increased by 20% and EBITDA PAT margin improved significantly by 575 bps and 416 bps on Y-o-Y basis. Global Recycled Oman reported a PAT of INR 0.34 crores in Q1, marking a 31% increase over FY '26. While profitability had been impacted in recent quarters by elevated raw material costs, the implementation of corrective measures, including raw material import into Oman led to a meaningful improvement in profitability during the quarter. Mbodla and Saudi Arabia reported have combined loss of around INR 53 lakhs owing to initial start-up costs. [ PP Bildtech ] delivered revenue of INR 19 crores and EBITDA of INR 3 crores in Q1, while continue to scale its construction chemical business through capacity expansion, execution of key projects and improved plant utilization. The inventory of accrued EPR credits up to 31st March 2026 was fully monetized within Q1 FY '27. Looking ahead, we remain confident in our growth trajectory with investment in capacity expansion, product diversification and international markets beginning to deliver results. Backed by a strong operational foundation, robust project pipeline and clear strategic direction, we are well positioned to sustain momentum and deliver on our Vision 2029. I would now like to open the floor for question and answer. Thank you, and over to you.

[Operator Instructions] The first question is from the line of [indiscernible].

Congratulations for great set of numbers. So first one is, you've spoken on increasing realizations due to the bitumen prices. So how much of this increase in EBITDA margins has been factored in because of inventory gains? Do we see any inventory gains this quarter?

Gaurav here. Are you inquiring about if there was any contribution to margin because of gain in inventory relating to bitumen prices?

Yes. Not only in bitumen, but overall, is there any contribution of inventory gain across all segments?

Very marginal. Nothing meaningful to report back to you.

Okay. So last year, you've been guiding for around 18% EBITDA margin for the whole year, and that's your long-term target. So do we see any normalization of this margin as we go ahead in 2Q and 3Q?

See, we have been achieving around 17% and guiding that our aim has been to achieve 18%. Of course, that has been surpassed and delivered in a -- we have delivered more than 20% EBITDA margin. A lot of that has to do with some optimization we have done in our raw material costs. We have spoken in the past about how we have increased optionality of feedstock to control our raw material prices better. That strategy has played out well. Also going more towards value-added product sales has been our focus. We have always mentioned that. That has played out quite well. So a lot of these changes are systemic in nature. They are not one-off. And I hope these margins are sustainable. There will be some increased costs down the road in a growing business like ours because there -- anything new you start, there are always -- the costs are front-ended, like the project in Oman and -- sorry, not Oman, but in Saudi and also in South Africa, where we are right now incurring some cost for revenues and all have not yet started. So that is the nature of the business. Because of that, there will be some added cost booked. So when you blend that with the efficiencies, overall margins of 18% to 20% is what we believe can be delivered in a business like ours, and that is what has played out well in Q1.

Got it. Sure. And last question is, sir, is it possible to share segmental working capital days?

Segmental working capital days, we won't have ready to give you. We have -- our blended working capital days is 50, and that is fairly consistent actually for our business over the last 2 to 3 years. I think hardly 5% movement in this number, plus or minus.

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

So just wanted to check, I mean, you had accrued EPR credits that you monetized this quarter. So what's the quantum? Can you throw some light on that?

We have monetized around 100,000 units and converted into cash in this quarter.

And what -- I mean, 1 lakh units, I mean, at what price per unit?

We are -- it is all trading at the floor price, which is around INR 2,500 a unit.

INR 2,500 per...

Per unit.

So we sold about what 1 lakh unit you mentioned, right?

Yes.

So around total INR 25 crores is what we got, right?

Yes, that's right.

So this INR 25 crores goes straight to your EBITDA, right?

No. We had accrued these already in previous years. As and when our EPR credits start reflecting on the portal of the government, we accrue them and they sit as inventory. These have been monetized. That is what has happened.

But in terms of P&L, the accounting has been done as per particular [indiscernible]?

Yes. So the impact on P&L has already been taken in previous year. This is just an exercise of monetizing it this quarter. Converting it to cash.

Understood. And going forward, I mean, how many units per annum, I mean, we expect to generate for this EPR thing?

Our revenue-wise, I can tell you and the contribution of EPR basically comes at the PBT level for us. That number for us is approximately INR 25 crores to INR 30 crores annually, and this is a fairly stable number now for the last couple of years.

So INR 25 crores to INR 30 crores per annum, right? That's the contribution of EPR that we get at the PBT level on [indiscernible]?

That's correct.

[Operator Instructions] The next question is from the line of Mihir from Equirus.

So my question was basically around the global expansion piece also what we are doing. Like recently, we announced an investment in Pune as well. So just getting some sense here, like Saudi project is something where we have been investing it is yet to start. And so just something like how is the thought process here and why Chile now? Like first, why not increase our capacities in South Africa and Saudi and then move to some other geography?

See, there are many reasons which are understood, deliberated because of which we take a decision to enter a new geography, especially a new country. And those details are confidential, and we will not share that on open platform. However, what I can share with you is that we have reached a certain operational capability in the Middle East. And Oman being a small country, there was less scope of expansion and Saudi became a compelling proposition for us. It just makes a lot of sense. because we already have a base there and the operational parameters are very similar to Oman. And South Africa and Chile are both very interesting geographies from securing end-of-life tire supply and making our sourcing more robust and protecting our business from any incidences or global events and things like that. It's a way of hedging our business. So this is why we are looking at these geographies.

So sir, going ahead, say, next -- so a bit of a longer-term question, but say, in 2, 3 years, will we see a massive scale up in terms of investments there? Or our target continues to be that INR 100 crores kind of CapEx?

Our CapEx target, we have mentioned earlier as well, we are looking to spend around INR 100 crores in FY '27 and '28 together. In my opening remarks, I mentioned we've already spent INR 27 crores in Q1. In regards to how much and to what extent we will be active in each geography, that's part of the core strategy of the company. What I can share with you is that these are all businesses outside India, they add a certain hedge, a certain robustness to our core business, which is India. Our focus -- our core investment will remain India for the foreseeable future.

Okay. And sir, broadly, circling back to the domestic piece of business, very strong set of numbers is what we have reported. But going ahead in terms of your growth trajectory in infrastructure and both the industrial and infra, how are we seeing the traction currently given the backdrop of the current West Asia situation? Like you mentioned that we have got some benefits of moving to rubberized bitumen and all. But overall on the infra segment front, do we see some kind of a slowdown yet? Or are we seeing some kind of improvement on track in quarter 2 now? And we are also getting into a low base of last year?

I think your question is specifically about the impact of global events on the infra business. And while there is -- there has been some impact to the road construction activity in India because of the disruption of supply of bitumen, for example, our country is dependent in perpetuity to imported bitumen for our works. We don't produce enough and we simply cannot produce enough. So while that did impact us in some localized way in some projects, but at the same time, we saw increased awareness amongst contractors for use of rubberized asphalt to make higher quality roads and use less bitumen in their projects. So overall, I believe that this disruption has only benefited our business.

Okay. And sir, in terms of industrial, the growth was mainly driven by, say, MRP or we have added some onboarded from new client as well, which has led to this we have reached a run rate of around INR 45 crores, INR 46 crores in the quarter. So is it some customer addition as well or it is the new MRP or something like that?

We are adding customers all the time. We are also increasing our production of MRP, which has also happened in Q1. So it's a combination of factors. We -- our exports have grown 46% in Q1 year-on-year. So these are all contributing factors to the results that we have shown.

Okay. So just finally, last question here. So we have been increasing the MRP capacities and across space, we have been increasing the capacity and seeing our margin profiles have been quite lucrative. So just one thing what I wanted to understand here is that what makes it difficult for the competition to enter the similar segment or a new player to enter the similar segment what we are seeing at the margin profile of the business?

Mihir, see, there is multiple things. Nothing is, to be honest, that difficult if one puts their mind to it. I mean in 2015, '16, when we started MRP from scratch, our sales were not even 100 tonnes a month. And now our capacity is going to be 20,000 tonnes per annum. But there is a lot of learning. There is technology efficiency, which I believe we are excelling in. There is a lot of effort and convincing needed for onboarding customers. It's a fairly long process where I believe we just seem to be more resilient than our competition and more committed. And this is what has brought us results.

The next question is from the line of Khushal from Asian [indiscernible].

Sir, my question is regarding other expenses. It has increased by around INR 5.4 crores from previous quarter, March 2026. Like what component has increased? I just wanted to know that.

I think we will need a little bit of time to give you that detail. If you send us an e-mail, we can reply you better. But our other expenses may have increased because of our expansion of businesses outside India. And I think second, our CFO may have a little more clarity to our other expenses table, as I see it, was INR 29.85 crores in Q4 and now it is INR 30.58 crores. That's comparison to previous quarter. Does that give you clarity or no?

INR 29 crores was in which quarter?

Previous quarter, Q4.

Okay. The order is showing INR 27.19 crores in previous quarter.

The next question is from the line of [indiscernible] from Venture Securities.

Congratulations on a wonderful set of results. There would be 2 questions from my side. So firstly, on the INR 100 crores that were outlined as CapEx over next 2 fiscals, how much that would be capitalized over FY '27? And how much of that will be capitalized over FY '28? Can you give a breakdown of that? And I'll ask my second question later.

Yes. This is okay. [indiscernible] fund, we would be capitalizing around INR 60 crores in FY '27.

Okay. And secondly, sir, what is the targeted blended utilization are we looking at once all the plants are operation across India, Oman and South Africa and these plants are operational and scaled up, what is the blended utilization are we looking at the closing of this fiscal?

Subodh here. So on the capacity utilization you are asking?

Yes, sir.

Yes. So currently, we are utilizing our capacity for tire recycling close to 88% in the India alone. And the value-added products like MRP and reclaim rubber, we are growing. So capacity utilization on PCMB business side [indiscernible] where around 60% this year and will contribute 10% to our revenue of this side. So combining everything together, we feel we should be somewhere around 75% to 80% capacity utilization.

And that could be across all geographies?

Yes.

[Operator Instructions] The next question is from the line of Navani Naredi from Naredi Investment.

I've got a few questions. So my first question is like where is the API monetization is being booked?