GRP Limited — Q1 FY27 earnings call

Thank you. A very good afternoon to everyone and thank you for joining GRP Limited's quarter one earnings call for fiscal year 2027. I'm joined today by our CFO Ms. Shilpa Mehta and by our investor relations advisors SGA.

Our investor presentation has been uploaded to the stock exchanges and on our website and hope all of you have had an opportunity to go through the same.

For several quarters now, we have said that FY 2027 would be the year in which the investments that we have made over the last couple of years across our businesses begin to reflect in our operating performance. This quarter is an encouraging step in that direction. And more than the headline numbers, it is early evidence of something we have been working towards for a long time. An integrated circular materials platform we set out to build is starting to come together.

Turning to performance, the consolidated total income for the quarter grew 26% year-on-year to rupees 1573 million rupees on back of volume growth mainly attributable to the Pairova energy capacity utilization and improving realizations with both domestic and export markets contributing meaningfully. Importantly, that growth led to an EBITDA rise of 60% to rupees 174 million and EBITDA.

with a margin expansion by 233 basis points to 11%, even as raw material costs rose sharply during the quarter.

Profit after tax more than doubled to ₹42 million for the quarter. In the quarter of significant input cost, input cost inflation, operating leverage, product mix and cost discipline did the heavy lifting.

You would have also noticed a change in how we present the business. As the integration across our end of life tire value chain has deepened, we have grouped our operations into two segments: rubber recycling, comprising reclaimed rubber, custom die forms, and the newly instituted Pyrova energy, and others comprising engineering plastics, our windmill operations, and the residual polymer composite business. In case of rubber recycling, the clubbing of the BUs,

is a reflection of how these businesses operate together in synergy with one another.

The rubber recycling business led the quarter. On a stand-alone basis, the segment revenue grew 34%, of which reclaim volumes grew 12%, and reclaim export volumes rebounded 20% as customer order patterns normalized following the easing of US tariffs. Domestic demand stayed healthy with our market shares staying intact. Despite elevated raw material costs and extreme volatility with global logistics, better

Realizations and manufacturing efficiencies supported a healthy expansion in the segment margins.

Within this segment, Pyroba Energies is where the platform thesis is becoming most visible, and its performance is improving with each passing month.

During the quarter, the plant achieved its longest continuous reactor run since commissioning, an important milestone because stable continuous operation is the precursor to throughput, reliability, and commercial performance in a continuous pyrolysis process. Both our crumb rubber and continuous pyrolysis facilities have now largely stabilized, and our focus is shifting to raising utilization, expanding customer approvals, improving process efficiency.

efficiency and progressing towards the commencement of recovered carbon black production. The cumulative investment under Pairova now stands at approximately ₹91 crore.

The more important point however is synergy. While the Pyrova business is shy of achieving standalone profitability, as it scales alongside Reclaim Rubber, the two businesses will increasingly reinforce one another through shared feed stock and sourcing capabilities. In the future, the synergies will also be realized across energy needs of Reclaim and more importantly a possible common customer base. This integration is what will structurally lift rubber recycling margins.

As the platform matures, and it is a genuine source of advantage that will be difficult to replicate.

Plastic and others, in the other segment, revenue was broadly stable against a higher comparative base that included the polymer composite business, but the quality of business has improved markedly. Engineering plastics grew volumes 27%, helped by domestic automotive demand and a more favorable virgin nylon pricing environment. And our repurposed polyolefins business, run mostly through our subsidiary, delivered a clear turnaround in profitability.

Together our plastic verticals expanded EBITDA margins by 14 percentage points year on year on a 10 point improvement in gross margin, reflecting a better product and customer mix and continued cost discipline.

Behind this sits a regulatory tailwind that is clearly strengthening. Plastic EPR norms are getting tighter and brand owners are becoming markedly more serious about implementation. At the same time, we want to be realistic. The on-ground challenges of collecting waste effectively and improving yields remain real and persistent challenges. And building a dependable, compliant, recycled content supply chain will take a significant sustained effort.

We would however rather build that capability effectively than chase short-term volume and we believe that discipline will be rewarded as the regulation matures.

Stepping back for a moment, our sector is drawing growing interest and rightly so. What distinguishes GRP is not a single product or a single plant. It is a five decade integrated platform spanning reclaim rubber, crumb rubber, and now tire ferrolysis oil and RCB along with engineering plastics, serving eight of the top 10 global tire manufacturers and with more than half of our revenues coming from exports. We are also the first reclaim rubber manufacturer in the world to earn ₹1 lakh.

the ISCC plus certification and affirmation to our capability and possible synergy with certain set of customers. As this platform matures, that breadth and integration is what converts into durable structural margin growth. And that is precisely the trajectory our targets are reflecting.

While the external environment remains dynamic, we're confident in the medium-term direction of each of our businesses and I'd like to share what we are aspiring for with you. In our tire recycling businesses for reclaim rubber, for example, we expect volumes in FY2027 to grow by close to 20% over the prior years. And over the next three years, we expect reclaim rubber to continue a sustained mid-term, a mid-team volume growth on the back of new product introductions.

Grading into a healthy double-digit revenue growth and with EBITDA margins improving from the roughly 9 to 10% average over the last couple of years towards 10 to 14% as the synergies with Pyrova progressively come through.

For Padova Energy, we expect to steadily scale capacity to 45,000 tons as we stabilize the technology, followed by a further 30,000 ton capacity addition in FY 2028. On profitability, we expect margins to build from a single digit during the ramp up stage that we are currently in to move towards 18 to 20% once the RCB facility is commissioned, operational, and mature with customer approval.

That step change that will turn Pyrova into not just a growth engine, but an important profitability pillar for the company.

In our plastic recycling business, our nylon and polyolefin recycling verticals, we expect our over a 20% growth this fiscal, followed by a mid-team growth through FY2030, while maintaining a stable EBITDA margin of between 10 to 15%. Supported by tightening EPR regulation and our continued focus on value-added products.

Taken together, these targets describe a business whose margin margins will expand structurally as the platform matures and which is the essence of what we are building.

A brief word on our sustainability actions. Renewable energy accounted for approximately 48% of GRP standalone power consumption in FY 2026, up from 37% a year ago. This is well ahead of our stated target of 50% by FY 2028, which we should breach in the current fiscal. We published our first sustainability report during the quarter for FY 2026 in line with globally recognized reporting standards.

standards and we continue to focus on measuring and reducing emissions, increasing renewable energy use and improving resource efficiency across our operations. To close, a strong start to fiscal year 2027, a platform that is visibly coming together and a clear disciplined target to build on it. With that I would like to hand over to our CFO Ms. Shilpa Mehta who will take you through the financials in detail. Thank you.

Hello, am I audible?

Yeah. Yeah, so thanks for the opportunity and my first question is that following the tariff related disruptions last year. So have you observed any permanent changes in the competitive landscape? So specifically has GRP been able to win customers from global competitors or has the market large deal largely reverted to pre-

Sure, Raj, I suggest if you can ask all the questions and I'll be happy to address all of them rather than doing it one at a time.

is that this quarter benefited from export recovery, volume growth, and improving contribution from newer businesses. So looking ahead, which of these do you expect to be largest contributor to earnings growth for the remainder of FY27? And lastly, after delivering a strong start to FY27, how confident are you about sustaining this trajectory while appreciating that you may not provide formal guidance? Could you indicate whether management expects FY27 to deliver double digit?

Revenue growth along with further EBITDA margin expansion versus FY26.

Okay, thank you, Raj. I'll try and take the questions in the order as received. So the tariff related comparative landscape, I think we've indicated this in the past on account of the tariff, one particular business line which was polymer composite, we have permanently shut down. So that is a permanent impact to the revenue as well as the margins coming or accruing from that particular business. As far as the other businesses are concerned, which is reclaim rubber,

and the custom die forms, we've seen that the volumes have restored to the past levels as was the case prior to the tariff implementation. As a matter of fact, on account of the currency, there is an overall positive impact in terms of margins compared to pre-February 2026. So yes, net net there has been a change which is for the positive. Not all of it is attributable.

just to these two businesses, but the loss on count of composites is a real one-time loss. there is also some amount of tariffs that the customers are starting to receive credits for, and there's a possibility that this margin therefore for GRP may increase in the future, but at the moment that visibility is not not known.

This is all to do with the direct business. Uh, I have indicated in the past that GRP has lost some volume of business on account of indirect impact of tariff, which is our exports to some of the other countries, which was a base for manufacturing uh goods that were being supplied to North American markets. Some of that volume has honestly not come back yet, uh, because those volumes by those large or global tire companies was diverted to other markets and we are yet to see uh those impact come through.

So if I was to again sum up, loss of volume on account of polymer composite is permanent, return in the business of direct exports to US is back and at a healthier margin than before. Indirect business impact on account of the tariff to non US countries is not fully recovered and hopefully will be recovered through the rest of the year. Your second question was regarding the different business models.

units and the you know, margins prospects from that. And your third question was regarding the expectation as far as growth and EBITDA for FY27 is concerned. I think I already indicated, I mean this is one first thing that I mean first time that we kind of provided an outlook. But again, I'll recap, it was already covered in the opening remarks, which is that we are expecting a close to overall 20 plus percent revenue growth in the current fiscal on the back of the new business, which is the Pairova Energy.

growth in the reclaim rubber capacity and resultant order book there. as well as the plastic division scaling to a newer high. So all of this should help us deliver a significantly higher revenue growth. And you know, all things stand pending as we said, since this platform is kind of getting built and the structure structural changes coming to light, I do believe that this margin that we have generated in Q.

21 is not a one-time margin generation. I do believe this will only continue to improve from here on forward. So that's broadly how where I would leave as far as the business and the EBITDA margin guidance is concerned for the year. I hope that answers all your questions and happy to move to the next.

Hmm

So I'll I'll I'll I mean as far as the RCB is concerned, I think we've already indicated in our investor presentation as well. I mean our first phase was commissioned in October 2025 and that's stabilized by March of 2026. As I said, month after month there is a improvement in performance when it comes to pyrolysis. Our RCB plant is under commissioning, well, will be under commissioning starting next month and hopefully will be commissioned by October.

of 2026. I assume it will take at least a month or two before it stabilizes and starts you know, becoming productive in terms of sale. I mean, there will be a couple of months where there will be commissioning trials as well as product trials that will be ongoing. So I expect that by Q4 of this fiscal, RCB will start meaningfully contributing towards the overall performance. As I indicated,

Once RCB is completely set up, then the entire Pairova business has the potential to generate between 18 to 20% EBITDA. But that will depend on age gates in terms of customer approvals as well as optimal utilization of both the reactor as well as the RCB capacity utilization. We are hoping that that can happen at the earliest, but this is all subject to and dependent on customer approvals for the product and the stabilization of the technology.

So one can expect that FY28 is when this business will kind of attain maturity to be able to deliver that kind of margin percentages. Your second question as far as the drivers of growth on the plastic business is concerned, I think bulk of our plastics which is nylon continues to be sold mostly to the automotive industry but also some part to the furniture and the appliance industry. We have been able to get

some approvals in the appliance sector during Q4 of FY 2026 and some of that is translated into commercial volumes in this quarter. But bulk of the growth was on account of the OE demand in the automotive industry. Whether this will replicate or not remains to be seen as far as nylon is concerned. But we remain fairly bullish because there are regulations now in place that govern use or that mandate the use of nylon.

of circular plastic materials in automotive and we we continue to hope that that will create the demand maturity for our nylon business. Our poly all of in business has also grown in terms of overall revenue but there has been pretty flat but it has been pretty flat when it comes to volumes and this is more mainly as I mentioned on account of us being selective with the choice of customers.

product categories and also end applications. We are looking to move into certain specialty sectors within the polyolefin space as well and that is why the margin expansion has happened which was the next part of your question. We will continue to maintain a healthy balance between the packaging appliances and automotive sector when it comes to the polyolefin business while our nylon business will continue to focus mostly on automotive followed by furniture and appliance as business.

So this is broadly the canvas of the plastic business where we are focusing on where the growth will come from and how the margins are accruing. I hope that answers all your questions. We can move possibly then to the next slide.

Tanmay, if you have a couple of other questions or one or two more, happy to address all of them unless this is the only question in which case I'm happy to answer this.

so the answer on how long will the rubber inflation last, I don't think I'm qualified enough to answer that question. yes I mean our revenue growth partly as I mentioned out of the entire growth I mean you know about 12% has been volume growth. however the overall revenue growth has been about 30 odd percent. So the balance is on account of price movements and large part of those prices are

transferred to the customers, but against this backdrop, I mean our raw material prices have also moved up as as as is evidence in the gross margins. and as you know that most of our pricing contracts run on either quarterly, six monthly or annual basis. So there's generally some amount of lag before the pass through entirely happens. but we would say we've been able to achieve large part of the pass through on raw material costs into the customers right.

I think as as we speak. I think how long I mean I think the at least the projections the way things stand it will take some time before prices will reverse especially on account of this being an El Nino year there are expectations of natural rubber to behave in a certain way. Synthetic rubber prices as you were aware is very very closely linked to the oil prices. And has anything any guess in that is not going to be worth any of it.

of our time if I may. So as of as we speak, I mean, this revenue, I mean, volume growth of 12% we are hoping to maintain a double digit volume growth for this year and that should therefore translate into as I indicated closer to a 20% overall revenue growth for the company.

Yeah. So as far as FY27 is concerned, we have a targeted CAPEX of between 90 to 100 crores and bulk of this will be going in what do you call it, expansion of the pyrolysis lines, adding two more pyrolysis lines to taking us to the 45 KTA that I alluded to in the opening comments, as well as the RCB plant which will be commissioned by October of 2026.

in addition to that we are adding some sort of debottlenecking and I mean we are adding capacity to debottleneck the overall reclaim rubber plants as well. So combination of all of this would be between 90 to 100 crore of investment of capex in FY 2027. As far as FY 2028 is concerned depending on the success of the entire Sholapur facility coming through we will take a call on capex for FY 2028 only in the second half.

in half of this year. So at this stage it may be a little premature to put out an announcement of the likely numbers, but we remain committed towards the overall investment of the 250 crores which we set out about 18 months ago. and with some of these investments being completed, we will still have room for about another 100 crores of expansion towards that target of 250 crores, whether all of it will happen in FY28 or will spill over to FY22.

2029, maybe a little early to comment, but directionally, we are committed to creating another 30,000 ton capacity for pyrolysis along with a 12,000 ton capacity for recovered carbon black in our facility in Gujarat as well, and doing some more debottlenecking in the reclaimed rubber business with the new technologies to add some more capacity there as well. So we continue remain firm on our plans and we have an eye on that number and we will invest.

as as the opportunity presents itself.

I think the deleveraging is I mean timing of that is is is not entirely in our hands. So we will take appropriate calls on deleveraging as the opportunity again presents itself. at least as things stand now, we do expect these businesses to start generating cash flow. Yes, if we want to accelerate the next phase of expansion in Gujarat plants, we will need to deleverage, but there are no firm plans at the moment on the table.

Sorry, could you repeat that question again? I didn't hear you clearly, Shiva.

I think it's a combination. I wouldn't say it's either or. I mean, the circular materials that we offer, our positioning is always on the basis of value, not just price. We do offer or our products do offer a certain, you know, set of advantages when it comes to mechanical and chemical properties, in addition to being sustainable and helping them fulfill their end-of-life obligation, and in addition also offer them commercial value for the product.

switch over to a I would say a value material at available at a much lower cost than the virgin materials. You know, the context of the discussion changes depending on what are the prices of virgin rubbers. As we speak now with the volatility in oil prices as well as the demand supply mismatches in the synthetic rubber, carbon black and other materials. ZPM rubber is being looked at as a fairly strong alternative and

And also a lot of carbon black manufacturers and others are looking at TPO and other materials also fairly seriously to replace virgin materials. In plastics, it's a combination of regulation that is driving the conversion as well as cost that is driving the adoption. So I think it's a combination in each material category by each industry.

Thank you, Mohit. These were fairly loaded questions but equally very insightful. So thank you for the same. I'll take them one after the other. Obviously, as far as the export volume itself is concerned, there's a, sorry, go ahead, Shraddha. There's a 20% growth in the export volumes. Bulk of it is the exports of the North America which have kind of come back. But

we've also started to see some growth from Europe and some of the other markets. This is purely on account of a sustained effort. I mean again earlier this year I had indicated that we've kind of investing in and setting up a base in Europe for serving the Western hemisphere. So some of that is starting to pay off and as a result we're seeing a likelihood of increasing growth in the coming years in the export geographies. To your

question whether this was a one time or whether there is still room for growth. I do believe there is more room for growth in certain geographies where hither to while we did have a presence in the value was not compelling enough for the customer to look at us. However with the introduction of several new categories of products as I've indicated you know these are deploying newer technologies as well as a higher performance set of material. We are finding the

adoption of these products in North American as well as European and Latin American markets are fairly encouraging. So we do believe that we will grow back to exports becoming a dominant share of the total sales as far as reclaimed rubber is concerned. we are also infused by the possibilities that thiopirolases oil as well as recovered carbon black will have markets outside of India. So while our team focuses on reclaimed rubber, we are also equally

focused on starting to build a presence in those businesses in the international markets. And as and when they come to fruition, I do believe that the overall margin profile will reflect the gains from the export customers. Our share, I mean you mentioned what what are the market shares. I think in domestic industry our market share remains marginally increased. I think it has grown by about 1% compared to the last year's this thing, while exports are

Out of India, our share continues to be more or less the same, but in the geographies where we choose to export, and I think there are certain geographies where we have deliberately stayed out of, for the geographies that we focus on, our market share has actually grown from India as well. So, in a nutshell, to answer your question, exports continue to be more promising from a margin perspective. We have restored all of the lost volumes and are eyeing for more.

Our domestic share has marginally improved, while our export share in the geographies we concentrate on and focus on has increased as well. So that's to answer the first part of your question. Your second question was on the gross margin to EBITDA and whether it is structural versus one time. I think one has to look at each of these businesses stand alone. I mean, we are now starting to see the full impact of the pyrolysis. So let me actually take the third question.

Question first and then I'll come back to the margins later. Uh, as far as the operational milestones are concerned on pyrova, I think the first stage was on ensuring that the pyrolysis reactor starts functioning, uh, you know, producing at the throughput that it was desired for and running on a continual basis for a certain number of days. The threshold in the industry from a performance perspective is for a run of minimum of 25 days in a month, uh, and a four day shutdown on the pyrolysis.

Pleased to share that in the month of July we've been able to achieve that level of performance which gives us the confidence that the technology that we have chosen and the throughput that we are now generating is here to stay. So there's no more ambiguities or questions around replicating the same in terms of technology. That to us was the first milestone Mohit to be able to generate a 25 day run at a certain throughput which we have.

already crossed. The second threshold would be the commissioning of the RCB plant and then also generating the quality of recovered carbon black that would be usable by the tire industry. So while we will commission the plant in October of 2026, I do believe it will take us several quarters before we can get a product which can be approved and used by the tire industry. However, we've done some work on our pilot plant. Some of it is material that is

is likely to be used in the carbon black manufacturing process and used by the carbon black manufacturers and that has been encouraging and that gives us the confidence that as the pyrolysis, sorry, as the recovered carbon black facility is commissioned, we will start having a market for this outside the tire industry in the carbon black industry as well as possibly in the non-tire sector. So that would be the second milestone which is the stabilizing of the RCB product. The third milestone would be the approval.

from the tire industry and that will provide us a significant value add for the recovered carbon black. Thereafter it is about replicating that model and you know, figuring out what is the right size of crumb, pyrolysis and RCB operating in a single unit. Once we get that template right, which is likely to be you know, at least six to eight months post commissioning of the RCB plant is when we can look to replicate that whole template into another.

another location and that would then be the next milestone in this journey. So we we several milestones away from that but this is to describe the milestones as you kind of talked about. With all of this through I mean the the investment that we are making would generate in excess of 250 to 300 crores of revenue and possibly generate an EBITDA margin of between 15 to 20% on a standalone PIO.

Pyrova basis. So that I believe answers your questions as far as the whole Pyrova is concerned. The last part therefore coming back to what are the structural expectations as far as the gross margins and EBITDA margins are concerned. I'd say the gross margins is there's always a lead and a lag when it comes to our industry given that our contracts with a lot of the tire companies as well as a lot of other customers is either quarterly or six monthly. So I wouldn't want to comment on the gross margin.

number, but when it comes to EBITDA margin, I've indicated for each of the businesses. I do believe reclaim rubber business post synergy with Pyrova will get to a EBITDA margin of between 10 to 14%. The Pyrova business post the commissioning of and stabilization of RCB would get to between 15 to 20% EBITDA margin. And the plastic business which is now kind of stable, but we need to start continue to build scale should generate an EBITDA margin.

margin of between 12 to 15% as well. So this is broadly the EBITDA margin targets on a individual BU basis overall as a company. Hope that answers all your questions.

thank you all for the set of questions and again as I said I mean FY27 continues to be in our view the pivot towards you know the the panning out of the story around the circular materials platform and I appreciate the patience that each of you has shown over the last several years and stood by the management through the investments that we've made and hopefully we will continue to better this performance that has been made.

has been delivered in this quarter over the course of the next quarters and appreciate your time, questions, and your interest in the company. Thank you all for joining the call.