Ganesha Ecosphere Limited

Instrument
Long Term: Fund Based Limits^

Amount (Rs. crore)

196.70^

Rating Action
[ICRA]BBB+ (Stable)/ [ICRA]A2
/assigned
Long Term: Non-Fund Based Limits
1.30
[ICRA]BBB+ (Stable)/ assigned
Short Term: Fund Based Limits
5.00
[ICRA]A2/ assigned
Short Term: Non-Fund Based Limits
10.00
[ICRA]A2/ assigned
^Long Term Fund Based limits are interchangeable with Short Term Fund Based limits to the extent of
Rs. 23.00 crore and in case the limits are availed as short term facilities, the short term rating will be
applicable. The overall utilisation by way of long term and short term fund based limits cannot exceed
Rs. 196.70 crore.
ICRA has assigned the long term rating of [ICRA]BBB+ (pronounced ICRA triple B plus) to Rs. 196.70
crore* fund based and Rs. 1.30 crore non-fund based bank limits of Ganesha Ecosphere Limited
(GEL). The outlook on the long term rating is Stable. ICRA has also assigned the short term rating of
[ICRA]A2 (pronounced ICRA A two) to Rs. 5.00 crore fund based and Rs. 10.00 crore non-fund based
bank limits of GEL. The long term fund based limits can also be availed as short term fund based limits
to the extent of Rs. 23.00 crore for which the short term rating will be applicable.
The assigned rating takes into account GELs leading position in the domestic Recycled Polyester
Staple Fiber (RPSF) industry and its comfortable financial profile. GEL is the largest domestic
manufacturer of RPSF with an installed capacity of 87,600 MTPA which results in operational
efficiencies on account of economies of scale. Moreover, GELs wide product range and forward
integration into yarn spinning increases the value addition, which has resulted in steady profitability
over the years. Despite the regular expansion of RPSF capacity, GEL has been able to maintain
satisfactory capacity utilization on account of an established clientele and sourcing network for PET
waste which has been developed over the last two decades and has been able to support the
companys increasing scale of operations. While GEL has incurred a large debt funded capital
expenditure of ~Rs. 175 crore over the last two years towards capacity expansion and forward
integration into spinning, the financial profile has remained comfortable on account of regular equity
infusion, satisfactory capacity utilization and steady profitability which has kept the profits and accruals
adequate in relation to the debt servicing obligations. Moreover, with completion of the capital
expenditure program, no major capital expenditure proposed over the medium term and ongoing debt
repayments, the term loans are expected to decline.
The rating is however constrained by the susceptibility of GELs profitability to the volatility in the virgin
PSF prices, particularly in a declining price scenario, as while the RPSF realizations are at a discount
to the virgin PSF prices, which are in-turn driven by crude oil and cotton prices, whereas GELs raw
material (PET waste) cost is driven by its own demand supply dynamics. With the recent decline in
crude oil prices and hence virgin PSF prices, the prices of RPSF have also seen significant decline;
ability of GEL to secure reduction in raw material procurement costs will remain critical for its
profitability margins. Moreover, the demand and profitability of the RPSF manufacturers is also
vulnerable to change in the excise duty structure on RPSF as increase in the concessional rate of
excise duty currently levied on RPSF (2% without CENVAT) to the levels similar to that on virgin PSF
(12%) will adversely impact the price competitiveness of RPSF.

100 lakh = 1 crore = 10 million

For complete rating scale and definitions, please refer to ICRAs website www.icra.in or other ICRA Rating
Publications.

Given the recent increase in GELs RPSF capacity by 21,000 MT in December 2014 and large
scheduled debt repayments on account of the large debt funded capital expenditure incurred over the
last two years, ability to sustain the utilization levels by ensuring regular availability of PET waste bottle
at competitive prices in the backdrop of increasing domestic recycling capacity and maintain the
contribution margin will be critical to generate adequate accruals to maintain the financial profile. In
addition, timing, scale and funding mix of any new capital expenditure program or deterioration in the
working capital cycle will be drivers of the debt levels and thereby GELs financial profile; and thus will
be key rating sensitivities.
Recent Results
In 9M FY 2015, GEL reported an operating income of Rs. 458.59 crore and operating profit margin of
10.1% as against an operating income of Rs. 340.79 crore and operating profit margin of 10.6% in 9M
FY 2014. The operating income has increased on account of increase in the capacity of recycled PSF
by 9,000 MT and commissioning of the in-house spinning unit with an installed capacity of 25,920
spindles in November 2013.
Company Profile
GEL was incorporated in October 1987 as Ganesh Polytex Limited and the name of the company was
changed to GEL w.e.f. October 2011. GEL commenced production in FY 1988 with texturizing and
dyeing of polyester filament yarn at its manufacturing unit in Kanpur (Uttar Pradesh) with an installed
capacity of 391 MT per annum (MTPA). In FY 1995, GEL diversified into manufacturing of recycled
polyester staple fibre (RPSF) from PET waste bottle with an initial capacity of 6,000 MTPA in Kanpur.
Over the years, the company has expanded its texturizing and RPSF manufacturing capacities and
has also forward integrated into manufacturing of spun yarn from RPSF. As on December 31, 2014,
GEL had a total installed capacity of 2,400 MTPA of texturizing in Kanpur, 87,600 MTPA of RPSF in
Kanpur, Bilaspur (Uttar Pradesh) and Rudrapur (Uttrakhand) and 7,200 MTPA of spun yarn (25,920
spindles) in Bilaspur.
March 2015
For further details please contact:
Analyst Contacts:
Mr. Rohit Inamdar (Tel. No. +91-124-4545847)
rohit.inamdar@icraindia.com
Relationship Contacts:
Mr. Vivek Mathur (Tel. No. +91-124-4545310)
vivek@icraindia.com

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