Ganesha Ecosphere Limited (NSE: GANECOS) Q2 2025 Earnings Call dated Nov. 14, 2024
Corporate Participants:
Gopal Agarwal — Chief Financial Officer
Prashant Khandelwal — Senior Vice President
Yash Sharma — Director
Analysts:
Manish Mahawar — Analyst
Akash Jain — Analyst
Mann Ashar — Analyst
Nitesh Dutt — Analyst
Deep Mehta — Analyst
Bhavya Gandhi — Analyst
Amit Kumar — Individual Investor
Jenish Karia — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Ganesha Ecosphere Limited Q2 FY25 conference call hosted by Antique Stock Broking. [Operator Instructions]
I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking. Thank you, and over to you, sir.
Manish Mahawar — Analyst
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, Ganesha Ecopet 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 ji.
Gopal Agarwal — Chief Financial Officer
Yeah, thanks, Manish and Antique Stock Broking for hosting us for our earnings call. Good afternoon to everyone and I, along with my colleagues, I welcome all the participants towards quarter two FY25 earnings call.
The second quarter FY25 was good for overall business of our Company. We could do well both in our legacy business as well in subsidiary business. Company achieved turnover of INR386.8 crore on consolidated basis, which is higher by 39% from corresponding last quarter. We achieved highest quarterly EBITDA of INR55 crore, which is 14.3% of the operational revenue. It is a significant improvement over the EBITDA of INR25.32 crore or 9.09% what we had expected during Q2 FY24. In absolute numbers, EBITDA on per ton basis was INR13,900 per ton.
At PAT level, the numbers we got in the quarter is INR27.11 crore as against INR2.80 crore we got in September ’24 per ton — September ’23 quarter. On half yearly basis, the operational revenue is at INR723.35 crores. EBITDA, INR102.97 crore and PAT is at INR49.65 [Phonetic] crore during H1 FY25. These numbers for corresponding last quarter are INR532.6 crore, INR50.83 crore and INR6.45 crore respectively.
On Q-on-Q basis, there is a growth of 15% in operating revenue, 16% in EBITDA and 20% at PAT level. We achieved a capacity utilization of 106% in our standalone business and 58% in our Warangal operations during Q2 FY25. In B2B segment, we achieved a capacity utilization of over 72%.
Now coming to the business scenario. Our RPSF business continuously facing headwinds due to overcapacity in yarn segment and cheap import of fabric in the country. With some raw material prices and subdued demand from newer industry as well as creation of some new capacities in the industry, industry cycle is in lower orbit. We could, however, did reasonably well during Q2 on the back of higher exports as well as shifting focus from spun yarn segment to other verticals like non-woven and stuffing.
However, going seems somewhat bumpy during current quarter due to surging raw material prices as well as lower-than-expected festive demand. We are making constant efforts to mitigate the challenges. Our continuous focus on export market is yielding good results. Further, we are constantly working on change in product mix and on value-added products. Results are evident in Q2. Immediate challenges may affect us for one quarter or two quarters but we are confident that our strategy will yield positive results eventually. RPET Granules segment is doing well and the operationalization of third line production — 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 with two more brands during the quarter and demand from export market is also floating to us. We have very good demand for next 12 months and may not be able to accept or fulfill the orders. To address and to encash 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 INR450 crore. Exact location will be finalized very shortly.
Though demand in RPOY segment is still to pick up, we are optimistic about a good Q3 over Q2 on the back of positive traction in rPET Granules segment. We have also made some strategic investment and also formed a joint venture for ensuring raw material availability on sustainable basis aligning with our increased requirement during next few years.
With our deep rooted collection network, operational excellency, understanding of product and customers, superior technology and proactive approach in dealing with challenges, we are at sweet spot to capitalize the opportunities being unveiled in the recycling space, particularly in PET segment.
With this, I open the house for question-and-answer session.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Akash Jain from MoneyCurves [Phonetic] Analytics. Please go ahead.
Akash Jain
Thank you so much. I have two set of questions. The first set of question is regarding GSPL, which is the related party promoter entity. So if I understand correctly, that business — that company is doing recycled yarn, polyester spun yarn and specialty yarn. You also have some yarn business in the standalone business is also a filament yarn in the subsidiary. So I just want to understand broadly what is our thought process because which product this Company will do in future, what are you looking at from an expansion point of view, is there conflict between the businesses? Our — I think my understanding is that we will be a raw material supplier to GSPL. So the whole set, 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, sir, is basically on the Odisha expansion. Like you mentioned INR450 crores. Maybe in two years’ time, we will see capacity coming up. So just a little bit more details in terms of how is the capacity going to go up — come up in phases, when do the first phase come up, etc.? And are they — are we also going to look at some equity in a fundraise because INR450 crores is going to be required for this expansion? So that’s the two set of questions, sir. Thanks.
Gopal Agarwal
Yeah, thank you, Akash. So we take the first part of your question regarding the GSPL. So GSPL is the yarn spinning business. So we 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 Bilaspur plant. So we are selling the recycling fiber to the GSPL and we are making the yarn. And eventually, we may exit out of the spun yarn business later on. So it is completely different business and there is no conflict of interest in between except we are supplying the raw material to them.
Akash Jain
We will be expanding filament yarn in future, for example, in the subsidiary in Ganesha Ecopet or filament yarn future expansion, if any will happen in GSPL?
Gopal Agarwal
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.
Akash Jain
Okay. So whatever small spun yarn business is there in Ganesha, nothing will — no expansion will happen over there. Eventually, we will look at getting out of that spun yarn business in Ganesha standalone entity as well?
Gopal Agarwal
Yes, yes, yes.
Akash Jain
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 capacity utilization is also low. So does it — 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 capacity utilization in Ganesha Ecosphere because of the material that we are supplying to GSPL?
Gopal Agarwal
Yeah, so our capacity utilization as of now is not low. We are operating at 106% capacity utilization, which was also in the last quarter. So the capacity utilization is there. We are making the — we are able to make the entire — the sale of entire production we are making on PSF. But of course, the 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.
Akash Jain
Are we going to do — will we have to do some capex in Ganesha or any forward integration or some value-add substitute expansion in Ganesha for the supply of raw material or the whole — the — as is, where is basis RPSF Fiber will be supplied?
Gopal Agarwal
So we are making a small R&D investment in making the quality, the different quality value-added products. So that is not a big capex. Any big capex is not happening in Ganesha Ecosphere.
Akash Jain
Okay, sir. And can you also tell me about the expansion plan, sir?
Gopal Agarwal
Yeah. So expansion plan, which we are looking for the INR450 crore investment, 45,000 tons capacity is in first phase only — Phase 1 only. So the entire capacity would be — 45,000 tons will be operational in one go.
Akash Jain
We will be again with three lines of 14,000 metric tons, right?
Gopal Agarwal
No, no, no. The line capacity is higher, so we are putting up the two lines of 42,500 tons each.
Akash Jain
Okay. And from the funding point of view, is there anything that has already been planned in terms of how will we fund it?
Gopal Agarwal
Sorry, Akash, can you please come again?
Akash Jain
I’m saying from a funding perspective, are — any thoughts there on…
Gopal Agarwal
No, no. So we are having the sufficient liquidity with us and accruals are also started to come from the Warangal plant. So we are not looking for any capital expansion or the raising of funds for this expansion.
Akash Jain
Okay. Thank you so much, sir. Thank you very mush, sir.
Operator
Thank you very much. The next question is from the line of Mann Ashar from GrowthSphere Ventures. Please go ahead.
Mann Ashar
Hello. Am I audible?
Operator
Yes, Mr. Ashar. Please go ahead.
Mann Ashar
Thank you for the opportunity and congratulations for a good set of numbers. I had two questions on the expansion front. Could you clarify about the total capacity post expansion of INR450 crores in Odisha?
Gopal Agarwal
So, Ashar, thank you for your compliments. And this expansion is for 45,000 tons capacity. So with this operationalization of this 45,000 ton of total capacity of the rPET Granules could be 87,000 tons — 97,000 tons.
Mann Ashar
Okay. So I think you will get 42,000 tons — two lines of 42,500 tons will be added on this capex. So what is the line capacity?
Gopal Agarwal
So in Warangal, we are having the three production line of 42,000 ton. So each line is a 14,000 ton, but in Odisha, we are putting the bigger lines for 22,500 [Phonetic] tons each.
Mann Ashar
Okay, okay. And any specific comments as to why we are in South — we are in South India and now we are venturing into northeastern part of India directly going to Odisha. So any particular reason as to why we have chosen this strategic location?
Gopal Agarwal
So you see we — our raw material, PET bottle scrap, which is available in the entire country. So with the logistics of raw material and as well as from our buyers, we have to put the plants on different locations. So 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.
Mann Ashar
Okay, got it, got it. But your logistics cost will be much lesser and the EBITDA per ton might be higher here. That is what — am I understanding right?
Gopal Agarwal
So basically, when we are putting the plant in Odisha, so our idea is to capture the raw material of the Odisha and surrounding area. So which will certainly have some savings in terms of cost of logistics.
Mann Ashar
Okay. And you have set up the zonal collection centers have — are we in a conversation with any centers as such in Odisha before we start the previous [Phonetic] asset?
Gopal Agarwal
So we are already having the network in Odisha as well as in surrounding areas. So we will further strengthen and further widen that network, expand the network going forward.
Mann Ashar
Okay, sir. Got it. Thank you.
Operator
Thank you very much. The next question is from the line of Nitesh Dutt from Burman Capital. Please go ahead.
Nitesh Dutt
Hi, sir. Thanks for the opportunity and again, congrats for a great set of numbers. I have couple of questions on Warangal first. Can you give 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?
Gopal Agarwal
Yeah. So in the Warangal, our — our total sales value, 70% is about rPET Granules and the rest 30% is the fiber and the yarn. And as about the ramp-ups, we are already working at about 72% capacity in rPET Granules and we expect it to, by March, it will ramp up to 90% plus level. 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 will be around 90% capacity utilization and for the filament yarn, we are expecting it will be around 70%, 75% by March and rest, 80%, 85% after that.
Nitesh Dutt
So sir, in quarter four, how much revenue would Warangal be generating, quarterly run rate?
Gopal Agarwal
So on quarterly basis, we are expecting run rate of about INR160 [Phonetic] crores to INR175 [Phonetic] crores.
Nitesh Dutt
Understood. Sir, second question pertaining to Warangal itself. I think there was an entry in the annual report of INR41 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 subsidiaries?
Gopal Agarwal
No, incentives, we’re yet to start — to receive.
Nitesh Dutt
Sir, did you say, you are expecting in Q3?
Gopal Agarwal
Yeah, Q3 or Q4. By Q4, we will be getting some incentives.
Nitesh Dutt
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 been passed…
Gopal Agarwal
Yeah. So in RPSF, we are facing some issues in passing on the increase in raw material prices as I had informed in the opening remarks. So we are trying to further improve the — our export business as well as our value-added products, particularly to — from yarn segment to other non-woven technical textile segments, where the pricing is much better than the — our yarn spinning business.
Nitesh Dutt
Got it. One more question, sir, if I can squeeze in. In this quarter, half year balance sheet, there is an entry, capital work in progress is INR120 crores. So is it entirely because of Warangal subsidiary? I just wanted to understand the breakup of this INR120 crores, because I think major expansion in Warangal was over.
Gopal Agarwal
Yeah. So basically, it is having three, four components. One component is the solar power which we are putting up in our Warangal plant, number one. Number second is some maintenance capex going on your parent unit. And number third is some advances which we have made for the machinery, etc., for our Odisha plant — Odisha project.
Nitesh Dutt
Got it. Yeah, I’ll come back in the queue. Thanks for your help.
Operator
Thank you very much. [Operator Instructions] The next question is from the line of Deep Mehta from Bank of India Mutual Fund. Please go ahead.
Deep Mehta
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…
Operator
Sorry to interrupt. Mr. Deep, may I request you to please speak up? Your voice is coming out a little muffled.
Deep Mehta
Am I audible?
Operator
Yes, sir.
Deep Mehta
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?
Gopal Agarwal
Yeah, so, Prashant will answer this.
Prashant Khandelwal
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 how — this is what we are now getting this — 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 your each and every setup. But as we are already aware and we already have their approval for the existing plant, it will not be — it will be a matter of time. Their schedule audit has to be done for that facility also before sending the material to them.
Gopal Agarwal
So it is not taking much time in approvals because we are already having the approvals.
Prashant Khandelwal
Very few brands. So very — top two brands, three brands are having their audit procedures. Rest, in case of other brands, it is not that time-taking.
Deep Mehta
Understood, sir. Very clear. And are we any — 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?
Gopal Agarwal
Yeah. So, Deep, there is some incentives in the state. It is a power subsidy as well as capital subsidy is there. And so that the line is of higher capacity. And so we are expecting some scaling in opex. So — but the opex will — the exact scaling will be depending upon when the line will be operational. So certainly, then the margins are intact which we are getting into this Warangal project — Warangal lines.
Deep Mehta
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?
Gopal Agarwal
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 far as the JV, so in JV, we are putting up some wash lines, smaller wash lines. So the work has been started. And first of, the plant we are planning in Chennai.
Deep Mehta
And when will this plant start?
Gopal Agarwal
Prashant, can you give some idea?
Prashant Khandelwal
Yeah, basically, it will take one year from here maximum for the startup of these wash lines. So these wash lines are being arranged in different part of countries 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 line across India at few places.
Gopal Agarwal
Hello?
Operator
Thank you very much. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead.
Bhavya Gandhi
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 INR165 crores? Was the number right or did I — yeah.
Gopal Agarwal
So at maximum capacity utilization, we are expecting a run rate of about INR200 crores from the Warangal project.
Bhavya Gandhi
Okay. And that can…
Gopal Agarwal
So the total revenue potential we are targeting is between INR750 crores to INR800 crores for the full year. That we are expecting next year.
Bhavya Gandhi
That we are expecting next year. For this year, what would be the — by Q4, what would be the revenue run rate?
Gopal Agarwal
So this year in FY25, we are expecting around INR500 crores to INR550 crores from Warangal project.
Bhavya Gandhi
INR500 crores to INR550 crores. Next year, we’re expecting closer to INR750 crores, right, that’s the right understanding?
Gopal Agarwal
Yes.
Bhavya Gandhi
And we are expecting EBITDA margins. What — 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…
Gopal Agarwal
Currently, we are operating at about 22% EBITDA margins at our Warangal project. And so we are expecting it will improve further from here. But how much it will improve will depend upon the regulations and the regulations will kick in. So 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.
Bhavya Gandhi
Okay. And in terms of the agreements, have we signed any long-term agreements?
Gopal Agarwal
So long-term agreements, we will sign next year onwards.
Bhavya Gandhi
Next year onwards.
Gopal Agarwal
[Indecipherable] long-term.
Bhavya Gandhi
Okay. And that would be an early contract or three year or how will the price revision or at least if you can give…
Gopal Agarwal
So I think, Yash will throw some light on it.
Bhavya Gandhi
Okay.
Yash Sharma
Yeah, sure. So yes, so for you, basically, currently, we are doing year-long contracts. For example, for this year, we’ve done — we’re doing for next year similarly. And next year, obviously, we will start the long-term discussions as per — that is currently the strategy that we are running that since once the regulation is online and we have much more clarity on the actual demand that is going to be — 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, enter into any multi-year contracts. And obviously, the multi-year contracts are supposed to have by default inflationary measures as well. So, yeah.
Bhavya Gandhi
Right, great, great. And also, just wanted to understand what is the consolidated average realization? Or if you can give a split between the Warangal average realization and the standalone realization, that will also help?
Gopal Agarwal
So standalone — so on the consolidated basis, the average realization is about INR95.
Bhavya Gandhi
This you’re talking about the consolidated, right?
Gopal Agarwal
Consolidated, yes.
Bhavya Gandhi
Consolidated average realization. And if we talk about the Warangal plant, what would be the average realization right now?
Gopal Agarwal
So it is more than INR100.
Bhavya Gandhi
More than INR100. 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, ROCE, ROIC metrics, that will be really helpful?
Gopal Agarwal
So if your talk about the new projects, especially for the rPET Granules, so we are looking out a working capital cycle of 45 days to 50 days. Currently, it is slightly — it is higher because there are some other products also, like the filament yarn and the PSF. And also we have — we are into the launching stage. So the working capital volume is higher. But going forward, we are looking at working capital of 45 days to 50 days in our rPET Granules business. And as regards total capital employment — total capital employed, we are looking for about INR550 crores for all these projects, including the working capital.
Bhavya Gandhi
So including working capital, INR550 crores, that’s the right understanding?
Gopal Agarwal
Yeah.
Bhavya Gandhi
And an asset turn of closer to 1.25 [Phonetic, if I’m not wrong?
Gopal Agarwal
Yeah. Yeah.
Bhavya Gandhi
That would be — that would be in year one or that would be in year two?
Gopal Agarwal
So in year one, the — because ramp-up happens, ramp-up of capacity takes some time. So you can expect in year two.
Bhavya Gandhi
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 prepone it? Because the regulation is kicking in by April, right? So is it possible because demand — supply should — demand will outpace supply? So is there any way to streamline, cut down the timeline?
Gopal Agarwal
Bhavya, we are working on various alternatives, but yes, we have already placed the order for the machinery because the lead time of the machinery is 12 months to 15 months. So we have already placed the order for machinery, and we are trying to commence the production by March ’26.
Bhavya Gandhi
March ’26. Okay, great. That’s really helpful.
Gopal Agarwal
Yeah, we are trying to accelerate the project, though the extended time is two years, but we are trying to accelerate it and to complete it by March ’26.
Bhavya Gandhi
By March ’26. Great. Great. Okay, sir. That’s it from my end. I’ll get back in the queue. Yeah, thank you so much.
Operator
Thank you very much. The next question is from the line of Amit Kumar, who is an Individual Investor. Please go ahead.
Amit Kumar
Congratulations for great set of numbers and thank you for the opportunity. Just wanted to know what is the guidance for H2 and for — maybe first you can provide some top line and EBITDA guidance for FY26 to FY27, for next two years?
Gopal Agarwal
Thank you, Amit. So for the current financial year, we are expecting a top line of about INR1,500 crore to INR1,600 crore with EBITDA of 14.5% to 15%. On long-term basis, we are looking at EBITDA of about 16% to 17%. And — sorry?
Amit Kumar
Revenue guidance for next financial year, two years, three years, FY26, FY27, FY28, maybe if you can provide?
Gopal Agarwal
So we are expecting revenue growth of about 25% to 30% every year for next couple of years.
Amit Kumar
Okay, thank you, sir. That’s all my questions. Thank you, sir.
Operator
Thank you very much. The next question is from the line of Mann Ashar from GrowthSphere Ventures. Please go ahead.
Mann Ashar
Hello. Thank you for taking the follow-up. So sir, just had a question around the technological difference between the Warangal line and Odisha fleet that you are doing. Could you share some light on the sales? What is the technological difference and will the lines and machinery will be of Starlinger only or will it be from some other brands? Yeah.
Prashant Khandelwal
So basically, about the technological development, yes, the OEMs had 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 than — lower by 15% as compared to our Warangal lines. And there are some other changes has also been done in the line itself to achieve a better quality of the materials also in the line. As far as the opex is concerned, it will be having a 15% lower power consumption.
Mann Ashar
Okay. Okay. Is this LSP by any chance that what we are trying to do? Is it liquid state polycondensation type of a situation?
Prashant Khandelwal
So, LSP, you see, LSP is a very recent technology approved by EFSA just two years back. And – 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 future.
Mann Ashar
Okay. And the machinery will be of which brand? Will it be of Starlinger only and if it is of other brands, so, will we get any issues in the audits done by the brands, ad is there any advantage if it’s of Starlinger? Can you shed some light on it?
Prashant Khandelwal
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 — before finalizing the technologies.
Mann Ashar
Okay, sir. That’s it from my end. Thank you.
Operator
Thank you very much. The next question is from the line of Jenish Karia from Antique Stock Broking. Please go ahead.
Jenish Karia
Yes, sir. Sir, if you could just help us with the consolidated sales volume in the last year second quarter?
Gopal Agarwal
Sorry, Jenish, can you please come again? I didn’t get you.
Jenish Karia
Consolidated sales volume for second quarter FY24.
Gopal Agarwal
So you want to know the consolidated number for the Q2, June quarter.
Jenish Karia
Last year second quarter.
Gopal Agarwal
Q2 — Q1 of Q2?
Jenish Karia
Q2, sir. Q2.
Gopal Agarwal
Q2 ’23 FY — Q2 FY24, Q2 FY24 consolidated numbers. Yeah. So last year, in Q2, it was — consolidated numbers was INR278 crores.
Jenish Karia
Volume number is what I’m asking, sir, sales volume.
Gopal Agarwal
So the sales volume was about 30,000 tons — 40,000 tons.
Jenish Karia
40,000 [Phonetic] tons. Okay. Thank you. Sir, next is on the EPR certificate. So what would be the revenue from EPR — sale of EPR certificates for the second quarter and first half of FY25?
Gopal Agarwal
So the total EPR revenue is about INR3.5 crores in the first half.
Jenish Karia
Sir, can you please repeat?
Gopal Agarwal
So the total EPR revenue is about INR3.5 crores from the first half.
Jenish Karia
Okay. The base price of the certificate which has been set?
Gopal Agarwal
So it is varying.
Jenish Karia
Okay, okay.
Gopal Agarwal
There is no — as such, no base prices. It is completely demand and supply.
Jenish Karia
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?
Gopal Agarwal
So in this case, it is joint venture, we are looking for more of the raw materials than any saving in the cost.
Jenish Karia
Okay. Okay. And sir, 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 is — subsidiary capacity is in rPET Granules, where we have a edge in terms of supply shortage. So — 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?
Gopal Agarwal
So gross margin — in the subsidiaries, we’re also having the PSF and the filament yarn. So gross margins — so the [Indecipherable] is also increasing in those verticals also.
Jenish Karia
Yeah, sir, but it is still 25% to 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.
Gopal Agarwal
So it takes almost one month to two months time to pass on the — any hike in prices of raw material to the branch because it is — because the price are revised every month. So if there is any…
Jenish Karia
Next quarter we’ll see it normalizing?
Gopal Agarwal
Yeah, yeah, yeah.
Jenish Karia
Okay, sure. Sure, sir. That’s all from my — okay, just one last thing. What would be the debt levels that we’ll see, maybe net debt levels, FY25 and FY26?
Gopal Agarwal
So currently, we are having the total debt of about INR500 crores in our books, including the working capital. So we are looking that the debt level would be around that.
Jenish Karia
Okay. This should be the peak debt level with the expansions that we are planning?
Gopal Agarwal
Yes, yes.
Jenish Karia
Sure, sir. Thank you so much. All the best.
Operator
Thank you very much. The next question is from the line of Nitesh Dutt from Burman Capital. Please go ahead.
Nitesh Dutt
Hi, sir. I just have a follow-up on the Odisha facility. You mentioned, I think, you are trying to commission it in March of ’26. Does this include the time taken for approvals also or will approvals take another three months to six months? So basically, will FY27 see the entire benefits or the entire benefits will come from FY28?
Gopal Agarwal
Yeah. So certainly, it will take some time in approvals. We are expecting it will take two months 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 fresh approvals. So the full potential plan will be in FY28 only.
Nitesh Dutt
Understood. Thank you.
Operator
Thank you very much. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking. Please go ahead.
Bhavya Gandhi
Yeah, thanks for the second opportunity. Sir, can you just help us with the CFO expectation, cash flow from operation for next two years, 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 elements, three elements which will aid your cash flow. One is from your warrant conversion, you will 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.
Gopal Agarwal
Yeah. So the warrant conversion is due in May ’25, six months from now. So that around INR110 crores will come from the warrants. And the subsidy, we are expecting to get about INR30 crores, INR40 crores in March quarter. So it may be in April.
Bhavya Gandhi
Subsidy, you’re saying INR30 crores, INR40 crores?
Gopal Agarwal
Yes, subsidy, subsidy, yes, yes, yes, and we are already having INR150 crores cash in our books.
Bhavya Gandhi
Okay. Okay. So — 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?
Gopal Agarwal
So if you [Indecipherable] the capex to the end of our new project, in Odisha projects, so we are looking for about 60% to 70% will flow to the cash flow EBITDA margin.
Bhavya Gandhi
Okay, 60% to 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?
Gopal Agarwal
So total average capacity utilization was about 55%, 56%.
Bhavya Gandhi
55%, 56%. And in that we have generated closer to INR130 crores of revenue. So can we expect…
Gopal Agarwal
At the peak, I have given the idea of about INR200 crores. That’s why I’ve given the…
Bhavya Gandhi
Okay, got it.
Gopal Agarwal
The peak — yeah, the peak, revenue generation, INR200 crores.
Bhavya Gandhi
And also on the taxation part with respect to the Odisha capex, is there any tax benefits? Because in the Warangal plant, we are having closer to 17% tax rate. So over there, do we have any tax benefits?
Gopal Agarwal
So, as of now, there is no — any exception or the cash that we will get the tax benefit only in our Warangal plant. So the section says you will get the benefit of lower taxation on your profits irrespective of it is — the only condition is that the unit price has been stated by 31st March ’24. So unit price started when we sold in 31st [Phonetic] March ’24. And so all the expansions going forward will also be eligible for this lower taxation. This is the position as of now. It might change later on. So we don’t know it. But as of now, we are quite hopeful to get the benefit of lower taxation on the entire profits of the Company.
Bhavya Gandhi
Okay. So you are saying that the — 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?
Gopal Agarwal
Yeah, yeah, correct, correct. Yeah, yeah, correct.
Bhavya Gandhi
Okay. Also on depreciation, can you just mention about the useful life of the asset for the incremental capex?
Gopal Agarwal
So we are taking the life of the — useful life of the assets about 18 years, 18 years to 20 years.
Bhavya Gandhi
Okay. Okay. And what is the current average cost of borrowings?
Gopal Agarwal
Currently,, it is about 8.3% to 8.5%.
Bhavya Gandhi
8.3% to 8.5%. Okay. And do we intend to take any debt because I believe around INR250 crores, INR300 crores cash flow we have, another INR100 crores, INR200 crores incremental you’ll have to borrow. Is the — is it the right understanding?
Gopal Agarwal
So we are not looking for any debt raising at this point of time because we are already having the INR150 crore cash with us and INR100 crores is to come from the warrants and [Indecipherable] and we are already having the room in our working capital limits, sufficient room. So as of now, we are not looking for any fresh borrowing. But yes, certainly, it will be decided when the project — we will round the project.
Bhavya Gandhi
Okay, got it. And just last thing on the Orissa…
Operator
Mr. Bhavya…
Bhavya Gandhi
Yeah.
Operator
Sorry to interrupt you, but we will have to take that as the last question from you.
Bhavya Gandhi
Sure. No worries.
Operator
Thank you very much. I would now like to hand the conference over to the management for closing comments.
Gopal Agarwal
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.
Operator
[Operator Closing Remarks]