GRP FY26: Tariffs, EPR normalisation, and a new recycling platform taking shape

GRP Limited ended FY26 in a year that tested both volumes and margins. Consolidated total income came in at Rs 5,380 Mn versus Rs 5,518 Mn in FY25, a 3% decline. The pressure was clearer in profitability. FY26 EBITDA fell to Rs 429 Mn from Rs 694 Mn, and PAT excluding the exceptional item was Rs 46 Mn versus Rs 307 Mn in FY25. In Q4FY26, consolidated total income was Rs 1,450 Mn compared with Rs 1,606 Mn in Q4FY25. EBITDA in Q4FY26 was Rs 94 Mn versus Rs 331 Mn a year ago, and PAT excluding exceptional item was Rs -13 Mn versus Rs 194 Mn.

Management framed the year as one where external disruptions met internal transition. The Managing Director highlighted geopolitical uncertainty, elevated trade barriers, and energy price shocks in early 2026. But the sharper hit came from the US trade policy environment. The company cited a 33% drop in reclaimed rubber revenue from key customers and a 44% impact on the corresponding raw material margins from tariffs until January, with marginal relief after revisions in February. At the same time, GRP continued to build out its end-of-life tyre processing platform. Crumb rubber and pyrolysis operations scaled up through FY26, though the commercialization phase carried costs that weighed on reported profit.

What changed in FY26 performance

The company’s consolidated gross margin moderated to 49% in FY26 from 54% in FY25. On a quarterly basis, Q4FY26 gross margin was 46% versus 58% in Q4FY25. The compression reflected a combination of higher raw material costs and a less favorable mix, particularly within the reclaim rubber business.

A second factor was the base effect from EPR income. FY25 EPR income was Rs 434 Mn and included Rs 214 Mn of prior-period accruals recorded in Q4, which lifted the comparison base. FY26 EPR income was Rs 202 Mn at the consolidated level, and the company noted FY26 EPR income of Rs 199 Mn at standalone level. The fall in EPR income did not necessarily indicate weaker compliance demand, but it did reduce a high-margin line item that supported FY25 profitability.

Costs also included a set of one-time items and transition expenses. In Q4FY26, one-time costs included Rs 4.2 Mn toward QIP cost write-off and Rs 7.9 Mn relating to closure of the RC business. There was also an exceptional item of Rs 14 Mn for the impact of the new labour code in FY26. Separately, a forex loss of Rs 41 Mn was recorded in FY26 on working capital loan revaluation.

The third thread was the ramp-up of the Pyrova Energy business. The company stated that the commercialization phase resulted in an EBITDA loss of Rs 23.9 Mn and a PAT loss of Rs 85 Mn during FY26 from Sep 2025 onwards. Management said the project operated at sub-optimal levels before stabilizing in Feb 2026, and expects improvement as utilisation rises and recovered carbon black production begins.

Financial summary

Reclaim rubber held revenue, but margins did the heavy lifting

Standalone segment data shows how GRP managed the trade-offs. Reclaim rubber remains the backbone of the business, contributing 89% of standalone revenue in FY26. Standalone reclaim rubber revenue was Rs 4,692 Mn in FY26 versus Rs 4,771 Mn in FY25, a 2% decline. Non-reclaim revenue was broadly flat at Rs 569 Mn versus Rs 572 Mn.

The more important shift was geographic. Domestic revenue rose to Rs 2,616 Mn in FY26 from Rs 2,366 Mn, up 11%. Exports fell to Rs 2,644 Mn from Rs 2,977 Mn, down 11%. This split explains management’s claim that domestic reclaim rubber outperformed broader industry trends and helped offset export softness. It also reflects a year where demand visibility in export markets was disrupted, and GRP leaned more on the domestic market.

Quarterly reclaim rubber revenue improved sequentially after a weak Q1FY26. Reclaim rubber revenue moved from Rs 1,058 Mn in Q1FY26 to Rs 1,252 Mn in Q4FY26, with both domestic and exports contributing. But the company’s bridge for Q4FY25 versus Q4FY26 indicates profitability did not follow revenue. Reclaim rubber EBITDA fell from Rs 332 Mn in Q4FY25 to Rs 60 Mn in Q4FY26, with negative impacts from income and raw material, partially offset by other expenses.

Standalone commentary added more color on the drivers. The company stated that standalone revenue excluding EPR grew 3% in FY26, driven by 1% volume growth and 4% improvement in realizations. But FY26 EBITDA was impacted by 12% higher raw material cost per ton in reclaim and a 41% decline in margins from key US reclaim customers due to tariffs. It also highlighted that standalone raw material cost increased 567 bps YoY, driven by an around 43% rise in select reclaim rubber grades.

Non-reclaim: mixed demand, but Custom Die Forms held up

Non-reclaim revenue trends were steadier through the year, ending Q4FY26 at Rs 177 Mn compared with Rs 157 Mn in Q4FY25. The Q4 EBITDA bridge indicates non-reclaim EBITDA improved from Rs 11 Mn in Q4FY25 to Rs 44 Mn in Q4FY26, supported by income and aided by raw material and other expense movements.

Management described FY26 as a transition year for the non-reclaim portfolio. Plastics demand softened as virgin prices corrected and low-cost imports rose. Despite tariff-related challenges in the US market, the Custom Die Forms business delivered resilient growth during the year. GRP also discontinued contract manufacturing operations in the Polymer Composite business owing to weak economic viability, creating one-time closure-related costs in Q4FY26.

The key point for investors is that non-reclaim results in FY26 were influenced by portfolio decisions rather than only market cycles. Shutting down uneconomic contract manufacturing is a signal of discipline, but it also means near-term reported numbers include clean-up costs.

The investment story is shifting toward an integrated end-of-life tyre platform

Where FY26 stands out is in how GRP is repositioning from a reclaim rubber leader into a broader integrated recycling platform. The company describes itself as a scalable integrated polymer recycling company with five business verticals and manufacturing across five strategic locations. It has presence in over 55 countries, with about 50% revenue from exports, and serves eight of the top ten global tyre companies.

The most concrete strategic buildout is Pyrova Energy and the adjacent crumb rubber and recovered carbon black roadmap. GRP outlined a phased plan.

Phase 1, commissioned in Oct 2025, included India’s largest single-line continuous reactor of 15 KTPA and an integrated crumb rubber facility for Pyrova and the reclaim rubber unit.

Phase 2, under commissioning through Feb 2027, includes setting up a recovered carbon black facility at the Solapur site and increasing tyre pyrolysis capacity to 45 KTPA.

Phase 3, under planning to be commissioned through Oct 2027, is an integrated facility for crumb rubber, tyre pyrolysis oil, and recovered carbon black in Gujarat.

This matters because pyrolysis enables extraction of three material streams: tyre pyrolysis oil, recovered carbon black, and recovered steel wire. The presentation also lists end-use industries ranging from petrochemicals and tyre manufacturing to paints, coatings, plastics, and virgin carbon black production.

The near-term question is execution and economics. The company disclosed the FY26 profitability impact of commercialization costs, but it also provided a milestone: the pyrolysis project stabilized in Feb 2026, and it expects margin improvement in FY27 with full capacity utilisation and commencement of recovered carbon black production expected from Q3.

In parallel, GRP outlined a longer runway in capacity expansion. It targets reclaim rubber expansion from around 88 KTA to 110 KTA over FY27 to FY30, alongside expansion in the adjacent end-of-life tyre opportunity from around 39 KTA to 130 KTA over FY27 to FY30 across crumb rubber, tyre pyrolysis oil, and recovered carbon black. It also highlighted demand-driven portfolio expansion in repurposed polyolefins and engineering plastics.

Capex context helps frame the ambition. The company reported consolidated capex of Rs 170 cr over FY24 to FY26 and targeted capex of around Rs 90 to 100 cr in FY27 across reclaim rubber and Pyrova Energy. It also reported consolidated EPR income of Rs 79 cr over FY24 to FY26.

Balance sheet and risk markers to watch

The consolidated balance sheet expanded in FY26 as projects moved from work-in-progress into plant and equipment. Total assets increased to Rs 4,618 Mn at Mar 2026 from Rs 4,120 Mn at Mar 2025. Property, plant and equipment rose to Rs 2,109 Mn from Rs 1,671 Mn, while capital work in progress fell to Rs 58 Mn from Rs 273 Mn.

Borrowings increased, consistent with the investment cycle. Non-current borrowings rose to Rs 863 Mn from Rs 376 Mn, and current borrowings increased to Rs 1,201 Mn from Rs 1,086 Mn. Finance costs rose to Rs 148 Mn in FY26 from Rs 105 Mn in FY25. Management also noted the withdrawal of interest subvention and interest costs associated with the Pyrova Energy business commencement.

Ratios reflected the same stress. Interest cover ratio declined to 1.6 in FY26 from 5.1 in FY25. ROCE fell to 6% from 16%, and ROE to 3% from 16%.

These are not subtle moves. They signal that FY26 was a transition year where GRP carried the cost of building new capacity while facing tariff disruption and raw material inflation. Investors will likely focus on whether FY27 converts that higher asset base into throughput and margins.

How EPR frameworks fit into the model

The presentation spends meaningful time on EPR, and for good reason. For tyres, the guidelines require manufacturers and importers to recycle 100% of the quantity of new manufactured or imported tyres after 2025, or acquire EPR certificates. Recyclers generate certificates based on the quantity recycled on the CPCB portal.

It also details weightages and conversion factors used in certificate generation across products such as reclaim rubber, recovered carbon black, crumb rubber, and pyrolysis oil and char. This is relevant for GRP because its shift toward pyrolysis and recovered carbon black is not just a product diversification story. It also intersects with how value is recognised under the EPR regime.

For plastics, the presentation outlines EPR obligations for rigid plastic packaging producers, including minimum recycling obligations and recycled plastic usage requirements that rise over time. GRP’s repurposed polyolefins and engineering plastics verticals sit within that policy tailwind, even though FY26 demand was impacted by price corrections and imports.

The theme for investors: absorb the shock, then scale the platform

GRP’s FY26 can be read as two overlapping stories. The first is a profitability drawdown driven by factors that are visible and largely explainable: tariffs affecting key US customers, a sharp rise in raw material costs for select grades, EPR income normalisation, and the cost of commercialising a new pyrolysis platform.

The second is the strategic build that is now in motion. The company has already commissioned a 15 KTPA continuous reactor and integrated crumb rubber facilities, and it is moving toward recovered carbon black commissioning and higher pyrolysis capacity. Alongside, it is planning reclaim rubber capacity expansion and further scaling in adjacent end-of-life tyre processing.

For investors, the immediate signals to track into FY27 are straightforward. First is whether margins recover in reclaim rubber as tariff effects ease and pricing actions catch up with raw material costs. Second is whether Pyrova Energy moves from stabilisation into utilisation, with recovered carbon black production commencing as indicated. Third is whether the higher leverage and finance costs are matched by operating cash generation as new assets ramp.

The company’s own positioning is clear. It sees itself moving toward an integrated sustainable solutions company across end-of-life tyres and plastics. FY26 did not deliver that payoff in the income statement. But it did set the base for what management is trying to build next, provided execution remains tight and the external environment becomes less hostile.