Ganesha Ecosphere Navigates Q2 FY26 Headwinds, Eyes Stronger H2

Ganesha Ecosphere Limited, a prominent player in India's PET plastic recycling sector, faced a challenging second quarter of fiscal year 2026. While the company reported a consolidated revenue from operations of INR 363.38 crores, marking a 7.8% increase quarter-on-quarter, its profitability was significantly impacted. The quarter concluded with EBITDA margins compressed to 6.1% and net profits turning slightly negative, a notable shift from earlier expectations.

The primary drivers behind this subdued performance were a combination of inventory losses and regulatory uncertainties. The company incurred INR 10-11 crores in inventory losses due to sharp fluctuations in raw material prices. Bottle scrap prices surged from INR 43-45 per kg to INR 55-56, only to retreat sharply, leaving the company with higher average carrying costs. Compounding this, a draft notification from the Ministry of Environment, Forest and Climate Change (MOEF) proposing a relaxation in mandatory recycled plastic usage created market apprehension. This led to reduced or postponed purchases of rPET granules by the F&B industry, causing under-deliveries and impacting profitability in the B2B segment.

Financial Performance Snapshot (Consolidated)

Strategic Initiatives and Future Outlook

Despite the short-term challenges, Ganesha Ecosphere's management remains confident in a demand recovery, particularly from January 2026. This optimism is underpinned by the long-term regulatory mandate to increase recycled content usage, which is set to rise to 40% from the next fiscal year, driving compliance requirements across industries. The company has already secured customer commitments for rPET deliveries starting January 2026, which is expected to stabilize demand and optimize capacity utilization.

The company's legacy business, encompassing rPSF and yarn segments, is showing strong signs of revival with robust order flows and rising demand. Management anticipates an improvement in EBITDA margins for this segment to the 7-9% range during the December and March quarters. This turnaround in the legacy business is a key factor in the company's projected stronger performance in the second half of FY26.

Expansion and Product Diversification

Ganesha Ecosphere is actively pursuing strategic expansions and product diversification to capitalize on the growing rPET market. The brownfield expansion at its Warangal facility is on track to be operational by end-March 2026. This project, with an investment of approximately INR 130 crores, will add an additional 22,500 metric tons per annum (MTPA) of rPET capacity and is expected to generate INR 225-250 crores in annual revenue upon full utilization. Furthermore, a greenfield expansion project, with an estimated capital expenditure of INR 500 crores, is planned to be operational by the end of the next financial year, significantly boosting overall production capacity.

Under its 'GoRewise' brand, the company is expanding its portfolio to include premium quality rPET products such as bottle-grade chips, textile-grade chips, and rPET fibers and yarns. This initiative aims to establish sustainability supremacy and cater to diverse end-user industries. The company also plans to increase its rPET granules capacities by 90,000 MTPA to meet the rapidly growing demand, especially fueled by government recycling mandates.

Commitment to Sustainability

Ganesha Ecosphere demonstrates a strong commitment to sustainability, which is integral to its business model. The company is transitioning towards clean renewable energy, with 16.53 MWp of rooftop solar installations across its production facilities. Its Warangal facility is equipped to recycle approximately 90% of the water required for operations, with only about 10% fresh water needed, and operates as a zero-discharge facility. These efforts underscore the company's dedication to environmental stewardship and circular economy principles.

Looking Ahead

While Q2 FY26 presented significant headwinds, Ganesha Ecosphere's management is transparent about the challenges and has outlined a clear strategic path forward. The anticipated recovery in demand, coupled with ongoing expansions and a strong focus on high-margin products, positions the company for a stronger performance in the latter half of FY26 and beyond. The long-term regulatory support for recycled plastics in India provides a robust foundation for sustained growth, reinforcing investor confidence in the company's strategic direction and commitment to delivering long-term value.