Detailed Rationale

Crisil Ratings has reaffirmed its ratings on the bank facilities of GRP Ltd (GRP) at ‘Crisil A-/Stable/Crisil A2+’.

 

The ratings continue to factor the company’s healthy operating performance while sustaining a comfortable financial risk profile through fiscal 2025. Revenue increased by 19% (on-year) to ~Rs 552 crore in fiscal 2025, driven by a maturing extended producer responsibility (EPR) regime, realisation from sale of EPR credits to tire companies and supported by ~8% growth in volumes despite the slowdown in demand across key markets. EPR norms set by the Central Pollution Control Board, part of the Ministry of Environment Forest and Climate Change, requires tire companies to offset their producer obligation through purchase of EPR credits from recyclers who use domestic end-of-life waste tires. Revenue may rise by low double digits in fiscal 2026, largely driven by volume growth owing to gradual recovery expected in the demand scenario which will be supported by enhanced capacities through debottlenecking activities in the reclaim rubber segment, additional volumes from the ongoing capex on green energy and higher sales of EPR credits to tire companies.

 

Operating efficiency has also improved, with earnings before interest, taxes, depreciation, and amortisation margin of 12.6% in fiscal 2025, as compared to 11.2% in fiscal 2024, supported by cost efficiency programs undertaken by the company and higher sales of EPR credits, which directly flows to profits. However, the margin improvement was restricted owing to hike in raw material prices, one-time costs relating to inventory write-offs and a less than expected savings from the Bio-fuel project. The operating margin may further improve to 13-15% in fiscal 2026, driven by better fixed costs absorption, savings in energy and fuel costs as well as healthy income from sale of EPR credits.

 

The financial risk profile of the company remains adequate yet improving with net worth at 191 crores in FY25 as compared to Rs. 167 crores in FY24. Debt as on FY25 stood at Rs. 146 crores as compared to Rs. 113 crores in FY24 increasing on account of increased long-term debt raised for the ~Rs. 250 crores capex towards the crumb rubber and pyrolysis facility in Solapur and increase in short-term debt to fund capex related needs as well as the working capital of the company. The company has taken an External Commercial Borrowing (ECB) loan which has a sanctioned limit of EUR 12 million (~Rs. 126 crores) out of which ~Rs. 19 crores have been drawn down in FY25. GRP also has an approval from its shareholders and stock exchanges for a Rs. 150 crores Qualified Institutional Placement (QIP) to fund the capex. Net cash accruals of Rs. 50-70 crores over the medium term will be sufficient to cover the yearly debt obligations of Rs. 5-10 crores till FY27 and Rs. 25-30 crores in FY28. The crumb rubber facility has been commissioned but the pyrolysis plant has been delayed by 2-3 months. This has also led to a delay in the expected completion Phase 1B by 2-3 months from December 2025 to March 2026. These delays will have some cost overruns. Liquidity remained modest with cash balance at Rs. 1 crore as of March 25. Utilization was high at 89% during past 12 months ended May 2025.The financial risk profile is likely to remain adequate, with gearing below 0.9 time over the medium term with interest coverage to remain above 6.3 times.

 

The ratings continue to reflect the established market position of GRP in the reclaimed rubber industry, beneficiary of the EPR norms for tire manufactures and importers and adequate financial risk profile. These strengths are partially offset by susceptibility to fluctuations in raw material prices and exposure to tire industry concentration in revenue.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of GRP and its subsidiaries, Gripsurya Recycling LLP and GRP Circular Solutions Ltd. This is because all the entities, together referred to as the GRP group, are in the same business and have operational synergies.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Established market position in the reclaimed rubber industry: GRP is one of the top three manufacturers of reclaimed rubber globally and the largest in India. The company has built healthy relationships with domestic and international tire manufacturers and distributors. Exports to the US and Europe contributed 60% of total revenue in fiscal 2025. Domestic customers include several large and prominent original equipment manufacturers. Increase in composition of reclaimed rubber in tires manufactured by global players should augur well for GRP. Allied businesses such as engineering plastics (EP), polymer composites (PC) and custom die forms (CDF) have contributed to 12% of total revenue in fiscal 2025. Ramp-up in PC and EP capacities on the back of healthy demand and the recent capex should support further diversification in the revenue profile.

 

• Beneficiary of inclusion of tire manufacturers and importers under the EPR norms: The company is set to benefit from the regulations that include tire manufacturers in the EPR framework of the government. Since the mechanism for sale of credit has been put in place in fiscal 2024, GRP has sold the remaining credits generated for fiscal 2023 and fiscal 2024, in fiscal 2025. The mechanism for awarding and consequential selling of the same is more established now but the formulae may still undergo a change as deemed necessary by the regulatory authorities.

 

• Adequate financial risk profile: The financial risk profile has been adequate and will continue to improve. Networth stood at Rs 191 crore in fiscal 2025, increasing from Rs 167 crore in fiscal 2024, with steady accretion to reserve. Debt for fiscal 2024 stood at Rs 146 crore, of which a majority is short-term working capital debt. Yet, debt protection metrics remain comfortable, with interest coverage ratio of over 6.6 times for fiscal 2024 and gearing of 0.76 time as on March 31, 2025. The company has taken an External Commercial Borrowing (ECB) loan which has a sanctioned limit of EUR 12 million (~Rs. 126 crores) out of which ~Rs. 19 crores have been drawn down in FY25. The loan will be fully drawn down by FY27. GRP also has an approval for a Rs. 150 crores QIP to fund its capex towards setting up a facility to manufacture rubber crumbs and downstream products.

 

Weaknesses:

• Susceptibility to fluctuations in raw material prices: Raw material cost accounts for around half of the operating income. End-of-life rubber tire, the input, is procured from an extensive chain of suppliers. Changes in raw material prices could impact operating margin, which has fluctuated between 6% and 13% over the five fiscals through March 2025. Prices of butyl rubber which is a key raw material for the company saw an sharp increase in fiscal 2025 which led to an impact in the gross margins.

 

• High concentration of revenue from the tire industry: GRP is highly dependent on the performance of the tire industry, which accounts for 65-70% of its revenue. While the company has diversified into multiple segments such as EP, PC and CDF, the extent of revenue contribution from these remains critical.

Liquidity: Adequate

Net cash accrual stood at Rs 47 crore in fiscal 2025, against debt obligation of Rs 10-12 crore. Net cash accrual is projected at Rs 50-70 crore per fiscal, sufficient to meet yearly debt obligations of Rs. 5-10 crores till FY27 and Rs. 25-30 crores in FY28. Capex requirement of ~Rs.200-220 crores over the next 3 years will be funded by debt, internal accruals and the proceeds from the QIP. Bank limit utilisation was around 89% during past 12 months ended May 2025. Liquidity stood at Rs 1 crore as on March 31, 2025.

Outlook: Stable

GRP will sustain its operating performance with steady revenue growth, further supported by income from sale of EPR credits over the medium term. Financial risk profile will continue to improve, driven by strong gearing and debt protection metrics.

Rating sensitivity factors

Upward factors:

• Sustained double-digit revenue growth backed by increase in volume while maintaining operating profitability, leading to net cash accrual more than Rs 75 crore
• Improvement in the financial risk profile

 

Downward factors:

• Sustained decline in revenue and operating profitability dropping below 8%
• Increase in working capital debt or large, debt-funded capex

About the Company

Established by Mr Rajendra V Gandhi in 1974, GRP manufactures reclaimed rubber (recycled rubber) from end-of-life tires and tubes. Having commenced operations as a tire recycling company, GRP has transformed into a sustainable materials company over the years. It also separates nylon from tires to produce raw material for sale to engineering plastic component manufacturers for automotive and electrical applications. The residue rubber from the above businesses is used by yet another business to blend with recycled plastic waste and produce composite material, which replaces wood and concrete.
 

The company is a leader in the domestic tire recycling industry, and among the top five manufacturers globally. GRP has total installed capacity of 84,200 tonne per annum across all business segments.

Any other information: Not applicable