GRP Limited Navigates Headwinds, Commissions Pyrolysis Plant, and Eyes Strong H2 FY26

GRP Limited, a prominent player in the polymer recycling sector, recently released its financial results for the second quarter and first half of fiscal year 2026, demonstrating resilience amidst a challenging global economic landscape. The company's total income for Q2 FY26 stood at INR 133.1 crore, reflecting a nominal 1% year-on-year growth. For the first half of the fiscal year, H1 FY26, the total income was INR 257.8 crore, remaining largely flat compared to H1 FY25. Despite persistent macroeconomic headwinds, global volatility, and pricing pressures, GRP Limited managed to maintain its topline performance, a testament to its strategic agility and operational focus. The company reported a gross profit of INR 68 crore in Q2 FY26, up 1% YoY, with gross margins at 51%. EBITDA for the quarter increased by 13% YoY to INR 11.4 crore, with EBITDA margins improving to 9%. However, profit after tax (PAT) for Q2 FY26 saw a decline of 22% YoY to INR 2 crore, primarily impacted by notional forex losses, higher finance costs, and challenges in certain non-reclaim segments.

The company's performance was significantly influenced by a mixed global tyre demand scenario. While passenger and light truck markets in China, India, and other emerging regions showed growth, Europe and North America experienced softening demand. Domestically, reclaim rubber demand rose 8% year-on-year, supported by increased consumption in the tyre sector. GRP Limited's focus on alternate markets drove a robust 20% YoY growth in domestic revenue during the quarter. However, US tariffs proved to be a significant headwind, leading to a 36% drop in margins from US-linked customers and a 15% YoY decline in overall export raw material margins. This downturn also contributed to a 5% impact on reclaim rubber volumes from US-linked customers, resulting in a INR 6.2 crore quarterly reduction in revenue and a INR 3.8 crore gross margin reduction from these markets. The non-reclaim rubber business underperformed due to soft uptake in plastics verticals, a sharp 45% decline in virgin polymer prices, and intense competition from low-cost Chinese imports. Consequently, GRP Limited made a strategic decision to discontinue contractual manufacturing for its Polymer Composite segment, which was commercially unviable due to tariffs and strong local competition in the US market.

Despite the challenges, GRP Limited's proactive measures, including diversification of sources, selective price increases, and continued operational excellence, helped contain the impact on margins. The company's EBITDA for the reclaim business improved due to efforts in new technology and reduced manpower and energy costs. A significant strategic highlight was the commissioning of the continuous pyrolysis facility in Solapur in Q2 FY26. This facility, integrated with their existing reclaim rubber unit, is one of India's largest single-line continuous reactors, utilizing a closed-loop energy system with syngas for clean and efficient heating. It enables the recovery of three key material streams: Tyre Pyrolysis Oil, char (to be upgraded to recovered carbon black), and steel wire. The recovered carbon black unit is expected to be operational by March or April 2026, further unlocking growth opportunities. The company has deployed INR 72 crore towards this project, part of a larger INR 250 crore CAPEX plan over three years, focusing on new technology, crumb rubber expansion, and plastic recycling. The funding for this CAPEX is a mix of internal accruals and debt, including a EUR 12 million External Commercial Borrowing from PROPARCO, of which EUR 7.5 million has already been drawn.

GRP Limited remains confident about its long-term growth story, driven by its focus on operational excellence and strategic execution. The company anticipates a much stronger H2 FY26 compared to H1, with the reclaim rubber business expected to perform robustly. The newly operational pyrolysis, crumb, and steel businesses are projected to turn profitable and contribute significantly to both the top and bottom lines in the coming months. While the Engineering Plastics business is expected to maintain its status quo, demand is anticipated to return to previous levels. Management expects EBITDA margins for H2 FY26 to improve by 200 to 250 basis points. Looking ahead, FY27 is projected as a turnaround year, with a significant breakout in revenue and profitability, largely driven by the full impact of recovered carbon black. The increasing global focus on sustainability and the introduction of EPR guidelines in India for both tyre and plastic recycling present substantial growth opportunities for GRP Limited, positioning it as a key player in the circular economy.