Ladies and gentlemen, good day and welcome to Ganesha Ecosphere Limited Q2 FY25 Conference Call hosted by Antique Stock Broking. 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 now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, sir.
Thank you. On behalf of Antique Stock Broking, warm welcome to all the participants on the Q2 FY25 Earnings Call of Ganesha Ecosphere. Today, we have Mr. Gopal Agarwal, CFO, Mr. Prashant Khandelwal, Senior Vice President, and Mr. Yash Sharma, Director of Ganesha Ecosphere from the management. Now, I would like to hand over the call to Mr. Agarwal for opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, Gopal A.
Yeah, thanks, Manish, and Antique Stock Broking for hosting us for our earnings call. Good afternoon to everyone, and I, along with my colleagues, welcome all the participants to our Quarter Two FY25 Earnings Call. The second quarter of FY25 was good for overall business of our company. We could do well both in our legacy business as well as in the subsidiary business. The company achieved turnover of ₹386.8 crore on a consolidated basis, which is higher by 29% from the corresponding last quarter. We achieved the highest quarterly EBITDA of ₹55 crore, which is 14.3% of the operational revenue. It is a significant improvement over the EBITDA of ₹25.32 crore, or 9.09%, what we had achieved during Q2 FY24. In the approved numbers, EBITDA on a standalone basis was ₹13,900 per ton.
At that level, the number we got during the quarter is ₹27.11 crore, as well as ₹2.80 crore we got in September 2024 quarter. September 2023 quarter, on a half-yearly basis, the operational revenue is at ₹723.35 crore. EBITDA is ₹102.97 crore, and that is at ₹49.65 crore during H1 FY25. These numbers for the corresponding last quarter are ₹532.6 crore, ₹50.83 crore, and ₹6.45 crore, respectively. On a Q-o-Q basis, there is a growth of 15% in operating revenue, 16% in EBITDA, and 20% at that level. We achieved a capacity utilization of 106% in our standalone business and 58% in our subsidiary operation during Q2 FY25. In the B2B segment, we achieved a capacity utilization of over 72%. Now, coming to the business scenario, our rPSF business is continuously facing headwinds due to over- capacity in yarn segment and cheap import of fabric in the country.
With firm raw materials prices and subdued demand from the user industry, as well as the creation of some new capacities in the industry, the industry cycle is in lower orbit. We could, however, did reasonably well during Q2 on the back of higher exports as well as shift in focus from spun yarn segment to other verticals like non-woven and stuffing. However, growing seems somewhat bumpy during the current quarter due to surging raw material prices as well as lower-than-expected factory demand. We are making constant efforts to mitigate the challenges. Our continuous focus on the export market is yielding good results. Further, we are constantly working on changing product mix and on value-added products. Results are evident in Q2. Immediate challenges may affect us for one or two quarters, but we are confident that our strategy will yield positive results eventually.
rPet Granule segment is doing well, and with the operationalization of third production line, our overall capacity utilization level increased to about 72%. Our product is well-established with various brands in terms of quality as well as performance. We have onboarded two more brands during the quarter, and demand from the export market is also growing towards. We have very good demand for the next 12 months and may not be able to accept or fulfill the orders. To address and to encase the rising demand, we are on course with our expansion plan, which is finally being set up in Odisha with an installed capacity of 45,000 tons and an estimated capital outlay of INR 450 crore. The exact location will be finalized very shortly. The demand in the rPET granule segment is still to pick up.
We are optimistic about a good Q3 over Q2 on the back of positive traction in the rPET Granule segment. We have also made some investments and also formed a joint venture for ensuring raw material availability on a sustainable basis, aligning with our increased requirement during the next few years. With our deep-rooted collection network, operational excellence, understanding of products and customers, superior technology, and proactive approach in dealing with challenges, we are at a sweet spot to capitalize the opportunities being unveiled in the recycling space, particularly in PET segment. With this, I open the floor for question-and-answer session.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Akash Jain from MoneyCurve Analytics. Please go ahead.
Thank you so much. I have two sets of questions. The first set of questions is regarding GSPL, which is the related party promoter entity. So if I understand correctly, that company is doing recycled yarn, polyester spun yarn, and specialty yarn. You also have some yarn business in the standalone business. There's also a filament yarn in the subsidiary. So I just want to understand broadly what is the process because which product this company will do in the future? What are you looking at from an expansion point of view? Is there conflict between the businesses? I think my understanding is that we will be a raw material supplier to GSPL. So the goals that I just want to understand, how are you going to manage future expansions and potential conflict between the yarn business of Ganesha and the yarn business of the promoter entity?
That is the first set of questions. The second set of questions is basically on the Odisha expansion. Like you mentioned, INR 450 crore. Maybe in two years' time, we will see the capacity coming up. So just a little bit more details in terms of how the capacity will come up in phases. When will the first phase come up, etc.? And are we also going to look at some equity in fundraising because INR 450 crore is going to be required for this expansion? So that's the two sets of questions. Thank you.
Yeah, thank you, Akash. So we take the first part of the question regarding the GSPL. So GSPL is into the yarn spinning business. So they are making the spun yarn. In Warangal, we are not making the spun yarn. There is the filament yarn. Filament yarn is completely different from the spun yarn. So there is no conflict of interest in that sense. But of course, we are having some yarn spindles with us in our Bilas pur plant. So we are selling the recycled fiber to the GSPL, and they are making the yarn. And eventually, we may exit out of our spun yarn business later on. So it is a completely different business, and there is no conflict of interest in between. Except if we are supplying the raw material to them.
We will be expanding filament yarn in the future, for example, in the subsidiary in Ganesha Ecopet, or filament yarn future expansion, if any, will happen in GSPL?
No, so filament yarn, whatever the filament yarn expansion will happen, it will happen only in our Ecopet, our subsidiary. So filament yarn is not the GSPL business. They are into spun yarn only.
Okay. So whatever small spun yarn business is there in Ganesha, no expansion will happen over there. Eventually, we will look at getting out of that spun yarn business in Ganesha standalone entity as well.
Yes, yes, yes.
And sir, on the raw material side, so clearly right now, there is a challenge in terms of the market for rPSF, right? We are having difficulty in offtake. Our subsidy is also low. So does in the future, GSPL become a strong client and customer for Ganesha Ecosphere and also help in that sense that we will have higher subsidy in Ganesha Ecosphere because of the material we'll be supplying to GSPL?
Yes. So our capacity utilization is not low. We are operating at 106% capacity utilization, which is also in the last quarter. So the capacity utilization there, we are able to make the sale of the entire product we are making on PSF. But of course, GSPL would be buying PSF from us, and we would be selling some value-added products to them. So that will be beneficial for Ganesha Ecosphere in terms of pricing and margins.
Will we have to do some CapEx in Ganesha or any forward integration or some value-added substitute expansion in Ganesha for the supply of raw material or the whole as-is various basis rPet fiber will be supplied?
We are making a small sum in the small R&D and investment in making the different quality value-added products. So that is not a big CapEx. Any big CapEx is not happening in Ganesha Ecosphere.
Okay, sir. And can you also tell me about the expansion plan?
Yeah. So the expansion plan, which we are looking for, is INR 450 crore investment, 45,000 capacity. It is in the first phase only, phase one only. So the entire capacity would be 45,000 operational in one go.
We will be again with three lines of 14,000 each, right?
No, no, no. The line capacity is higher. So we are putting up the two lines of 22,500 each.
Okay, and from the funding point of view, is there anything that has already been planned in terms of how we will fund this?
Sorry, Akash, can you please come again?
I'm saying from a funding perspective, are there any thoughts there on?
No, no. So we are having the sufficient liquidity with us, and the crews are also starting to come from the Warangal plant. So we are not looking for any capital expansion or the raising of funds for this expansion.
Okay. Thank you so much, sir. Thank you.
Thank you very much. The next question is from the line of Mann Ashar from Growth Sphere Ventures. Please go ahead.
Hello. Am I audible?
Yes, Mr. Ashar. Please go ahead.
Thank you for the opportunity, and congratulations for a good set of numbers. I had two questions on the expansion side. Could you clarify about the total capacity post-expansion of INR 450 crore in Odisha?
Thank you for your compliments. This expansion is for 45,000 capacity. With this operationalization of this 45,000, our total capacity of the rPET granules could be 97,000 tons.
Okay. So I think you said 42,000, two lines of 42,500 each will be added on the rPet. So what is the line's capacity?
In Warangal, we are having the three production lines of 42,000 tons. Each line is of 40,000 tons. But in Odisha, we are putting the bigger lines of 22,500 tons each.
Any specific concerns as to why we are in South India and now we are venturing into the North-Eastern part of India, directly going to Odisha? Any particular reason as to why you have chosen this strategic location?
You see, our raw material is sourced from which is available in the entire country. With the logistics of raw material and as well as from our buyers, we have to put the plants on different locations. One plant cannot be sufficient and cannot be very economical if we put the entire capacity at one place due to logistics point of view.
Okay. Got it. Got it. So the logistics cost will be much lesser, and a bit upper than might be higher here. That's what my understanding is, right?
So basically, when we are putting the plant in Odisha, our idea is to capture the raw material on the Odisha and surrounding area. So we will certainly have some savings in terms of cost of logistics.
Okay. And you have set up the zonal collection centers. Are we in a conversation with any centers as such in Odisha before we start the capex asset?
So we are already having the network in Odisha as well as in surrounding areas. So we will further extend and further widen that network, expand the network going forward.
Okay, sir. Got it. Thank you.
Thank you very much. The next question is from the line of Nitesh Dutt from Burman Capital. Please go ahead.
Hi sir. Thanks for the opportunity, and again, congrats for a great set of numbers. I have a couple of questions on Warangal first. Can you give a breakup of volume sales across different products, rPET and others? And second, what are your expectations for rPSF, PPSF, and filament yarn ramp-up over the next couple of quarters and for FY26 as well?
So in Warangal, our total sales volume is 70% about our rPET chips, rPET granules. And the rest 30% is the fiber and the yarn. And as about the ramp-up, we are already working at about 72% capacity in rPET granules. And we expect it to by March would be ramp-up to 90%, if possible. And we are also expecting that our rPSF, we are already 80%-85%, and that will also ramp up to 90% by March. So by March, in rPSF and rPET granules, we would be above 90% capacity utilization. And for the filament yarn, we are expecting it would be around 70%-75% by March and rest 80%-85% after that.
So sir, in quarter four, how much revenue would Warangal be generating quarterly run rate?
On quarterly basis, we are expecting a run rate of about INR 160-175 crore.
Understood. So second question pertaining to Warangal itself. I think there was an entry in the annual report of INR 41 crore of government incentive receivables. So just wanted to understand if this is entirely pertaining to the Warangal subsidiary. And have you started receiving the government incentives and subsidies?
No, incentives are just to start to receive.
So did you say you are expecting in Q3?
Yeah, Q3 or Q4. By Q4, we will be getting some incentives.
Got it. One more question on rPET. What was your realization during Q2? And as you mentioned that you are facing pricing pressures in raw materials. So are you planning to pass on the entire cost increase to your customers? Or has it already?
So in rPSF, we are facing some issues in passing on the increase in raw material prices, as I have informed in the opening remarks. So we are trying to further improve our export business as well as our value-added products, particularly from yarn segment to other non-technical textile segments, where the pricing is much better than our yarn spinning business.
Got it. One more question, sorry if I can squeeze in. In this quarter's half-year balance sheet, there's an entry. Capital work in progress is INR 120 crore. So is it entirely because of Warangal subsidiary? I just wanted to understand the breakup of this 120 because I think major expansion in Warangal was over.
Basically, it is having three components. One component is the solar power which we are putting up in our Warangal plant, number one. Number second is some maintenance effects going on in our parent unit. And number third is some advances which we have made for the machinery, etc., for ouE Odisha plant, Odisha project.
Got it. Yeah. I'll come back . Thanks .
Thank you very much. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Deep Mehta from Bank of India Mutual Fund. Please go ahead.
Hi sir. Thank you for the opportunity and congratulations for a very robust set of numbers. I had a couple of questions regarding our new CapEx in Odisha. Because the capacity per line is increasing, is there any change in technology and subsequently, will we need any additional approvals from our client or we can directly?
Sorry to interrupt. Mr. Deep, may I request you to please speak up? Your voice is coming out a little muffled.
Am I audible?
Yes.
Yeah. Hi. I had a couple of questions regarding our Odisha capacity. Because there is a change in capacity per line, is there any change in technology and subsequently, will we need any further approvals from our clients or we can directly ramp it up?
Yeah, so Prashant will answer this.
So basically, good afternoon. Good afternoon. So basically, it is the technology is from the different suppliers who are already having approvals from USFDA and EFSA. So there is not much difference, but yes, there are different R&Ds and they have done some new modifications in the line to achieve higher production at a lower Opex. So this is what we are now getting, achieving the same or rather higher production as compared to Warangal, where we are putting up only two lines in Odisha as compared to three lines in Warangal.
As far as the approval of the buyers or the brand owners are concerned, yes, they are going to audit each and every setup. But as we are already aware and we already have their approval for the existing plant, it will be a matter of time. Their scheduled audit has to be done for that facility also before sending the material to them.
So it is not taking much time in approvals because we are already getting the approvals.
Very few brands, so very top two, three brands are having their audit procedures. Rest, in case of other brands, it is not that time-taking.
Understood, sir. Very clear. And are we also getting some additional benefits from state government like electricity rebates and all those things? And including those, what kind of margins are we aspiring for our Odisha plant?
Yes, D eep. T here is some incentives in the state which is the power subsidy as well as capital subsidy is there. And so the line is of higher capacity. And so we are expecting some scalings in Opex. So the Opex will be the exact scalings depending upon when the line will be operational. So certainly, the margins are intact which we are getting into this Warangal project, Warangal lines.
Understood, sir. Very clear. And my second question is regarding our JV which we have done with Race Eco. Has that JV already started and are we getting any raw material from them already or is there any target for that?
Yeah. So there is two parts. One is the investment in the Race Eco Chain. The investment is for getting the raw material where we are having certain offer on certain percentage of their collection. And so that is already on. And as it is in JV, we are putting up some washing lines, smaller washing lines. So the work has been started. And first of the plant, we are planning in Chennai.
When will this plant start?
Prashant, can you give some idea?
Yeah. Basically, it will take one year or a year maximum for the start-up of these wash lines. So these wash lines are being arranged in different parts of the country to cover up the material locally in a region of, let's say, 200-kilometer radius. So that is how we have planned with them to install smaller wash lines across India at a few places. Hello?
Thank you very much. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead.
Yeah. Hi. Thanks for the opportunity. A couple of questions from my end. Sir, did you mention that our Warangal revenue will peak out on a quarterly run rate of INR 165 crores? Was the number right or did I? Yeah.
At actual capacity revision, we are expecting a run rate of around INR 200 crores from the Warangal project.
Okay, and that can be a revenue potential.
The total revenue potential we are targeting is in between INR 750-INR 800 crores for the full year. That we are expecting next year.
That we are expecting next year. For this year, what would be the revenue run rate by Q4?
So this year, in FY 25, we are expecting around INR 500-550 crores from Warangal project.
INR 500-550 crores. Next year, we are expecting closer to INR 750, right? That's the right understanding?
Yes.
We are expecting EBITDA margins. At what EBITDA margins quarterly run rate will we peak out when it comes to this year as well as next year? Right now, we are doing closer to.
Currently, we are operating at about 22% EBITDA margins at our Warangal project. So we are expecting it will improve further on year. But how much it will improve, it will depend upon the regulations and they will keep in. As of now, it is too early to comment on anything. But yes, only we are getting the 22% and we are expecting to maintain it.
Okay. And in terms of the agreements, have we signed any long-term agreements?
Long-term agreement, we will sign next year onwards.
Next year onwards.
Next year, we are not making any long-term.
Okay. And that will be a yearly contract or three-year or how will the price revision or at least if you can give us a year-round?
I think, Yash, we'll throw some light on it.
Okay. Yeah, sure. So yes, so see, basically, currently, we are doing year-round contracts. For example, for this year, we have done; we are doing for next year similarly. And next year, obviously, we will start the long-term discussions . That is currently the strategy that we are running since once the regulation is online. And we have much more clarity on the actual demand that is going to come out and the demand-supply gap which is going to generate, which will be very positive for us. So we are waiting that whole thing to unfold before we enter into long-term, any multi-year contracts. And obviously, the multi-year contracts are supposed to have by default inflationary measures as well. So yeah.
Right. Great, great. And also, I just wanted to understand what is the consolidated average realization? Or if you can give us split between the Warangal average realization and the standalone realization, that will also help.
So on standalone basis, so on the consolidated basis, the average realization is about INR 95.
This is, you're talking about the consolidated, right?
Consolidated, yes.
Consolidated average realization. And if you talk about the Warangal plant, it's similar to the average realizations right now?
It is more than INR 100.
More than INR 100. Okay. And also, if you can throw some light on the total working capital requirement for the future CapEx that will be required. And if you can throw some light on the asset turnover, ROC, ROIC metrics, that will be really helpful.
If you talk about the new project, especially for the rPET plant, we are looking at a working capital cycle of 45-50 days. Currently, it is higher because there are some other products also, like filament, yarn, and the PSF. And also, we are into the launching stage. So the working capital involvement is higher. But going forward, we are looking at a working capital of 45-50 days in our rPET business. And as regards to total capital employment, we are looking for about INR 550 crores for all these projects, including the working capital.
Including working capital, INR 550 crores, right? That's the right understanding?
Yeah.
Asset turnover closer to 1.25, if I'm not mistaken.
Yeah, yeah.
That would be in year one or that would be in year two?
So in year one, because ramp-up happens, ramp-up of capacity takes some time. So you can expect in year two .
Year two. Okay. And we've said around two years it will take to commission, right? Have we started ordering the machinery and all that? If you can throw some light, how long is it possible to keep on it? Because the regulation is kicking in by April, right? So is it possible because demand will outpace supply? So is there any way to streamline, cut down the timeline?
We are working on various alternatives. But yes, we have already placed our order for the machinery because the lead time of the machinery is 12-15 months. We have already placed the order for machinery. And we are trying to commence the production by March 26.
March 26. Okay. Great. That's really helpful.
Yeah. We are trying to accelerate the project. Though the estimated time is two years, but we are trying to accelerate it and to complete it by March 26.
By March 26. Great. Great. Okay, sir. That's it from my end. I'll be tracking the queue. Yeah. Thank you so much.
Thank you very much. The next question is from the line of Amit Kumar, who is an individual investor. Please go ahead.
Congratulations for giving us the numbers and thank you for the opportunity. Just wanted to know what is the guidance for H2 and maybe if you can provide some top-line EBITDA guidance for FY 2026 to 2027 for next two years?
Thank you, Amit. For the current function, we are expecting a top-line of INR 1,500-1,600 crores with EBITDA of 14.5%-15%. On long-term basis, we are looking at EBITDA of about 16%-17%. And for.
Revenue guidance.
Sorry?
Revenue guidance for next financial year, two, three years for 2026, 2027, 2028, if you can provide?
We are expecting a revenue growth of about 25%-30% every year for the next couple of years.
Okay. Thank you, sir. That's the only question. Thank you, sir.
Thank you very much. The next question is from the line of Mann Asher from Growth Sphere Ventures. Please go ahead.
Hello. Thank you for taking the follow-up. So I just had a question around the technological difference between the Warangal line and the Odisha fleet expansion . Could you shed some light on the field? What is the technological difference? And will the lines and machinery be of Starlinger only or will it be support from some other brands? Yeah.
So basically, about the technological development, yes. The OEMs have also done a very good R&D, and they are able to give us a lower power consumption. So as discussed and finalized for the Odisha lines, the power consumption would be somewhere lower by 15% as compared to our Warangal lines. And there are some other changes that have also been done in the line itself to achieve better quality, better quality of the material also in the line. So as far as the Opex is concerned, it will be having a 15% lower power consumption.
Is this LSP by any chance that what we are trying to do is it liquid state polycondensation type of a system?
So LSP, you see, LSP is a very recent technology approved by EFSA just two years back. But there are certain constraints for this. There are some good views also on the LSP, but as far as the color and B-values, some technical things which are not as good as the mechanical recycling is. So we are evaluating the technology and getting the feedback from the brand owners as well. And we will certainly work on this technology also in the future.
The machinery will be of which brand? Will it be of Starlinger only? And if it is of other brands, will we get any issues in the audits done by the brands? And is there any advantage if it is of Starlinger only? Share some background on it.
So the selection of machinery is always done in consultation with the big brands. It may not be correct to disclose the names, but yes, we already take all our buyers in confidence before finalizing the technologies.
Okay. That's it from my end. Thank you.
Thank you very much. The next question is from the line of Jenish Karia from Antique Stock Broking. Please go ahead.
Yes, sir. So if you could just help us with the consolidated sales volume in the last year, second quarter?
Sorry, Jinesh, can you please come again? I didn't get it.
Consolidated sales volume for second quarter FY25.
So you want to know the consolidated numbers for the Q2? June quarter.
Last year, second quarter.
Q2, Q1 or Q2?
Q2, sir. Q2.
Q223. Q224. Q224 consolidated numbers. Yeah. So last year, in Q2, it was consolidated numbers were INR 278 crores revenue.
So the sales volume number is what I'm asking for? Sales volume.
The sales volume was about 30,000 tons.
30,000 tons. Okay. Thank you. So next is on the EPR certificates. So what would be the revenue from EPR sale of EPR certificates for the second quarter and first half of FY25?
The total EPR revenue is about INR 3.5 crores.
Can you clarify?
The total EPR revenue is about INR 3.5 crores.
Okay. And what is the base price of the certificate which has been set?
So it is varying. It is varying.
Okay. Okay.
There is no base price. It is completely demand and supply.
Okay. Understood. So next is on the JV that we are setting up with Race Eco Chain. While prima facie it looks good that we will have washed flakes available for pushing it into production, and the turnover time will be better. But does it come with some cost savings? Because at the end of the day, the material will have to be transported from the smaller hubs to the plant. So technically, your logistics cost remains more or less the same. So how does it impact in terms of financials?
So in this case, in this joint venture, we are looking for more of the raw material security than any saving in the cost.
Okay. Okay. And so lastly, on the subsidiaries' gross margin, so while we get it that there are some cost pressures with rPSF and everything, but 70% of our subsidiary capacity is in rPET granules where we have an edge in terms of supply shortage. And we can pass on the RM inflation for 70% of the capacity. Then too, our gross margin on the subsidiary level has dropped significantly by 900 basis points on a Q-on-Q basis. So any specific reason why the gross margin has declined in the subsidiaries?
Gross margin in the subsidiaries are also having the PSF and the filament yarn. Gross margins, the export is also using those verticals also.
Yes, but it is still 25%-30% of the total capacity. But the dip is very significant. The 70% of the capacity will still have the pricing power to pass on.
So it takes almost one to two months' time to pass on any hike in the prices of raw material to the brands. Because it is on monthly because the prices are revised every month. So if there is any.
The rPET is normalizing.
Yeah, yeah, yeah.
Okay. Sure. Sure. So that's all from my end. Okay. Just one last thing. What would be the debt level that we'll see, maybe net debt level FY25 and FY26?
Currently, we are having the total debt of about INR 500 crores in our books, including the working capital. We are looking that the debt level would be around that only.
Okay. There should be the peak debt level with the expansion that we are planning.
Yes, yes.
Sure. Thank you so much, all the best.
Thank you very much. The next question is from the line of Nitesh Dutt from Burman Capital. Please go ahead.
Hi sir, I just have a follow-up on the Odisha facility. You mentioned, I think you were trying to commission it in March of 2026. Does this include the time taken for approvals also, or will approvals take another three-to-six months? So basically, will FY27 see the entire benefit, or the entire benefit will come from FY28?
Yeah. So certainly, it will take some time in approvals. We are expecting it will take two to three months' time in getting the approvals from the brands. And some brands, we have already approved, so they may not go for the first approvals. So the full potential of the brand will be in FY28 only.
Understood. Thank you.
Thank you very much. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead.
Yeah. Thanks for this second opportunity. So can you just help us with the CFO expectation cash flow from operations for next two, three years? Because right now, in the first half, hardly any cash flow from operations we've made. So for the future CapEx also and for the working capital also, if you can throw some light, what is the expectation for cash flow? Because I believe there are two, three elements which will aid your cash flow. One is from your warrant conversion. You'll have some fundraise from promoters, plus the subsidy amount that you are about to receive. If you can throw some light, how the timeline and cash flow will be moving. Yeah.
Yeah. So the warrant conversion is due in May 2025, six months from now. So around INR 110 crores will come from the warrants. And the subsidy, we are expecting to get about INR 30-40 crores in March quarter. So it may be in April.
Subsidy, you are saying? INR 30-40 crores?
Yes, subsidy. Subsidy. Yes, yes, yes. And we are already having INR 150 crores cash in our books.
Okay. And I mean, what is the normalized cash flow conversion at the EBITDA level? I mean, steady state, what would be the percentage that we are looking at, conversion of EBITDA to CFO?
So if you leave it on the opex to be done in our new project, in Odisha projects, so we are looking for about 60%-70% will flow to the cash flow, EBITDA margin.
Okay. 60%-70%. Okay. Got it. And with respect to the Warangal capacity utilization, because you mentioned that rPET capacity utilization was closer to 72%. But what was the total Warangal capacity utilization put together, everything?
Total average capacity utilization is about 55-56%.
55%-56%. And in that, we have generated closer to INR 130 crores of revenue. So can we expect, I mean?
At the peak, I have given an idea about INR 20 crores. That's why I've given the.
Okay. Got it.
The peak revenue generation is INR 200 crores for the quarter.
And also on the taxation part with respect to the Odisha CapEx, is there any tax benefit? Because in the Warangal plant, we are having closer to 17% tax rate. So over there, do we have any tax benefits?
As of now, there is no any exception or the tax that we will get the tax benefit only in our Warangal plant. The exception is you will get the benefit of lower taxation on your profits. Irrespective of it, the only condition is that the unit must have been started by 31st March 2024. Unit must have started well before the 31st March 2024. All the expenses going forward will also be eligible for this lower tax rate. This is the position as of now. It might change later on, so we don't know it. As of now, we are quite hopeful to get the benefit of lower tax rate on the entire profits of the subsidiary.
Okay. So you are saying that if this tax regime continues, so you are saying that Odisha plant will also have 17% tax rate unless there's any change, right? That is the right understanding?
That's correct. Correct.
Okay. Also, on the depreciation, can you just mention about the useful life of the assets for the incremental CapEx?
We are taking the useful life of the assets about 18-20 years.
Okay. Okay. What is the current average cost of borrowings?
Currently, it is about 8.3%-8.5%.
8.3%-8.5%. Okay. And do we intend to take any debt? Because I believe around INR 250-300 crores cash flow we have, another INR 100-200 crores incremental you'll have to borrow. Is it the right understanding?
So we are not looking for any debt raising at this point of time because we are already having the INR 150 crore cash with the INR 100 crores to come from the warrant from the project to be released. And we are already having the room in our working capital limits, sufficient room. So as of now, we are not looking for any cash borrowing. But yes, certainly, it will be decided when the project we will ground the project.
Okay. Got it. And just last thing on the Odisha.
Sorry to interrupt you, but we will have to take that as the last question from you.
Sure. No worries.
Thank you very much. I would now like to hand the conference over to the management for closing comments.
Yeah. Thank you, Manish and Antique, for hosting us. And we hope to see you soon for our next quarter earnings call. Have a good day. Thank you.
Thank you so much, sir. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.