GRP Ltd (GRPLTD) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the GRP Limited Q2 and H1 FY '27 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I would now hand the conference over to Mr. Harsh Gandhi, Managing Director, for his opening remarks. Thank you, and over to you, sir.
Harsh Gandhi (GRP Ltd): Thank you so much. A very good afternoon to everyone, and thank you for joining GRP Limited's Quarter 2 and
Harsh Gandhi (GRP Ltd): half year first half FY '27 earnings call. I'm joined today by our CFO, Ms. Shilpa Mehta, and our Investor Relations advisors, SGA. Our investor presentation has been uploaded to the stock exchanges and on our website, and hope you have all had a chance to go through the same. When I spoke to you all in May, I described fiscal year 2026 as a transition year. Export volumes had been disrupted by U.S. tariffs, raw material costs had risen sharply, and we were absorbing the start-up costs of new platforms that before their revenues arrived. Margins came under pressure, and we said so openly. Two quarters later, the picture has changed. For quarter two FY 2027, the consolidated total income grew by 30% year-on-year to Rs. 1,727 million, and EBITDA grew 60% to Rs. 182 million, and PAT more than tripled to Rs. 64 million. For H1 FY 2027, total income rose 28%, and EBITDA grew 60%, while the EBITDA margin for the first half was 10.8% compared with 8.6% a year ago. I would ask you to focus less on the growth rates and more on what lies underneath the numbers. For two consecutive quarters, we have help held EBITDA margins at around 11%, and we have done this while gross margins fell by 5 percentage points because of raw material inflation. In other words, the business has absorbed one of the sharpest input cost cycles we have seen in multiple years and still delivers stable operating profitability. This came from higher volumes, better manpower productivity, energy optimization, and the growing contribution from our newer businesses. This is what we meant when we said that we are moving from a phase of margin pressure to one of stability. The external environment over the last 6 months has been anything but stable. The conflict in West Asia and the repeated disruptions to shipping through the Strait of Hormuz have pushed crude oil prices from the mid-$60s per barrel at the start of the calendar year to around $100 by the end of September. Energy and freight costs have stayed elevated, and at the same time, natural rubber prices have reached levels last seen more than a decade ago, and competition for key raw materials in India has intensified. Global tire demand remains mixed, with subdued OE demand in some major economies and more resilient replacement demand. The reset of U.S. tariffs on Indian goods earlier this calendar year has allowed export order patterns to normalize, and our export volumes have recovered from last year's disruption. India has been the more encouraging market. Automobile production grew strongly in the September quarter, tire manufacturers continue to see growth across OE and the replacement channels as well, and reclaim rubber consumption in India rose 5% year-on-year in the June quarter. In this environment, our core rubber recycling business continued to perform. Standalone segment revenue grew 30% in H1, and reclaim rubber volumes grew 8%, and sales from our new reclaim technology platform continues to rise quarter-on-quarter. Higher raw material costs weighed on gross margins, and our response remains disciplined pricing, procurement optimization, and flexibility in sourcing. For many years, we've had a simple belief that an end-of-life tire is not one, and a company that recover can recover value from every stream and can connect those streams across one platform will earn better and more resilient returns than a single product recycler. This half of the year has given us the clearest evidence that this belief seems to be right. Pyrova Energy, which recovers crumb rubber, tire pyrolysis oil, recovered steel, and very soon, recover carbon black, is now contributing meaningfully to the rubber recycling segment. Operations have improved month-on-month, and that consistency is giving the confidence to move ahead with the next phases of growth. Pyrova's EPR registration has been completed, and its first EPR income was recognized in quarter two. Cumulative investments so far has stood at 1,140 million as of end of September, including a 110 million in capital work-in-progress. Commissioning of the RCB facility at Solapur is progressing, and expansion of pyrolysis capacity is underway through March 2027. Our plastics business has achieved a complete turnaround. On a consolidated basis, plastics revenue grew 38% year-on-year in
Harsh Gandhi (GRP Ltd): for H1, and EBITDA margins improved by 11 percentage points, with growth across automotive and non-automotive applications. We are progressing customer qualifications in compounding and specialty applications, and then our conversations with customers are increasingly about application performance and higher-value use of recycled materials. Taken together, these businesses are doing what we build them to, which is shared feedstock, sourcing networks, energy, and customers with reclaim rubber, widen our revenue base, and reduce our dependence on any single product market or input cost. One consequence of this is a visible shift in the shape of our business. For the last decade or more, GRP has been an export-led company, and while exports will continue to remain central to who we are, but the standalone domestic revenue has grown far more than the export growth. In H1 FY '27, the standalone domestic revenue grew by 40% to rupees 1,678 million, while export revenue grew 19% to 1,548 million. Domestic sales now accounts for about 52% of the standalone revenue compared with about 48% a year ago. This shift is being led by Pyrova Energy whose sales are largely domestic, alongside a he healthy and do healthy domestic demand for reclaim rubber. We see this as a positive. It lowers our exposure to tariffs, currency movements, and international freight, and it positions us to benefit from India's growth in automobiles, tires, and EPR-driven demand for recycled content. At the same time, it changes how we manage the business in terms of pricing, credit, and working capital, and we are adjusting our internal processes accordingly. I'd also like to add a word of caution. Tire pyrolysis oil is used mainly as an industrial fuel and its price tracks crude oil, and more directly furnace oil prices. Part of Pyrova's current performance reflects today's elevated crude and furnace oil prices, which are themselves a result of the geopolitical situation in the West Asia. These prices may, may not last, and if energy markets do normalize, the realizations will soften, and investors therefore should not take the current level as a necessary run rate for Pyrova as a business. But our investment case for Pyrova was never built on high oil prices. It rests on the value chain of recovered carbon black, recovered steel, income from EPR, and integration with our core reclaim rubber operations. As rCB comes on stream, we expect the business to become less sensitive to fuel prices over time. Sustainability is not something we do because the regulation requires it. Policy on climate and circularity continues to shift with governments in different parts of the world, but our commitment to this flame does not. During this half of the year, we received the EcoVadis gold rating, placing GRP among the top 5% of the companies assessed worldwide for this, an important independent validation for our global tire company customers. We continue to invest in clean energy for our own plants, and while renewables met about 48% of standalone power needs in FY '26, in the current year, post the commissioning of the Gujarat solar project, we will cross the stated target of 50%, and these investments cutting are are cutting our carbon footprint and reducing costs, both at the same time. For the second half of the year, our priority continues to be completion of the rCB commissioning and approvals in in a few key markets, growing the reclaim market share with new technology sales, and converting plastics development programs into commercial volumes, while staying disciplined on pricing, efficiency, and capital. The first half has shown that our integrated model can deliver stable margins in a difficult environment, and our task is now to turn that stability into sustained growth and stronger profitability in the time to come. With that, I'd like to hand over the call to our CFO, Ms. Shilpa Mehta, who will take you through the financial performance for Q2 and H1 fiscal year 2027. Thank you.
Shilpa Mehta (GRP Ltd): Good afternoon, everyone. I'll take you through our consolidated performance for Q2 and H1 of FY '27 and our capital expenditure and balance sheet main features. First if we take performance as of for Q2 FY '27, total income for Q2 FY '27 stood at rupees 1,727 million compared with rupees 1,331 million in Q2 of FY '26, reflecting
Shilpa Mehta (GRP Ltd): which is a growth of 30% year-on-year basis. Sequentially, this compares with ₹1,573 million in Q1 of FY '27. Growth was driven by 24% higher volumes and 8% improvement in realizations year-on-year. EPR income for the quarter was ₹67 million compared with about ₹43 million in Q2 of FY '26. Gross profit stood at ₹791 million with gross margin declining to 46% from 51% in Q2 of FY '26, primarily due to raw material cost escalation. However, improved operational efficiencies supported 60% year-on-year increase in EBITDA to ₹182 million, with EBITDA margin improving to 10.5% from 8.6%, an expansion of 199 basis points. Profit before tax stood at ₹89 million and PAT was ₹64 million compared with ₹20 million in Q2 of FY '26, an increase of 226% on year-on-year basis. Now we look at consolidated performance H1 FY '27. For the first half, total income stood at ₹3,300 million compared with ₹2,578 million in H1 of FY '26, a growth of 28%. EBITDA for H1 was ₹356 million against ₹222 million in H1 of FY '26. EBITDA margin was 10.8% compared with 8.6% in H1 of FY '26. Profit before tax for H1 was ₹173 million and profit after tax ₹106 million compared with ₹37 million of H1 of FY '26. EPR income for the first half of FY '27 is ₹115 million, including ₹14.9 million from Pyro Energy, which began availing EPR benefits in Q2 of FY '27 following its registration. Now we look at capital expenditure. We continue to allocate capital to projects that expand our recycling capabilities and create new avenues for growth. Total capital expenditure in H1 of FY '27 was ₹246 million and cumulative CapEx under Pyro Energy stood at approximately ₹114 crore as of September 30, 2026, including ₹11 crore under capital work in progress. These investments are funded through internal accruals and long-term debt, including the ECB of up to €12 million from Proparco. Of this, €7.5 million had been drawn as of 30th September 2026, which is unchanged from which we drew as of 31st March 2026. As of 30th September 2026, gross debt stood at ₹2,191 million and net debt at ₹2,140 million. The consolidated debt to equity ratio was 1.13x as compared to 1.08x as of 31st March 2026. On working capital front, proactive cash flow planning, disciplined working capital management, and close monitoring of fund flows reduced our working capital cycle by 11 days from 95 days as of 31st March to 84 days as of 30th September 2026. With that, we can now open the floor for questions. Thank you.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask question may press star and one on their touchtone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line
Moderator: Narendra from Equinova. Please go ahead.
Narendra (Equinova): Hi, am I audible?
Harsh Gandhi (GRP Ltd): Yes sir.
Narendra (Equinova): Yeah, thanks for the opportunity and congratulations on the good set of results. So sir, my questions are on your pyrolysis business, right? So how, what is the procurement strategy for this segment? Cuz I believe use of imported feedstock in pyrolysis is prohibited. So, how are we procuring our raw materials for this segment?
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