Tinna Rubber and Infrastructure Limited (530475) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Tinna Rubber and Infrastructure Limited Q1 FY '26 Earnings Conference Call, hosted by Go India Advisors LLP. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sana Kapoor from Go India Advisors LLP. Thank you, and over to you, ma'am.

Thank you, Arshi. Good afternoon, everybody, and welcome to Tinna Rubber and Infrastructure Limited Earnings Call to discuss the Q1 FY '26 results. We have on the call Mr. Gaurav Sekhri, Joint Managing Director; Mr. Subodh Kumar Sharma, Director and Chief Operating Officer; and Mr. Ravindra Chhabra, Chief Financial Officer. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company faces. May I now request Mr. Gaurav Sekhri to take us through the company's business outlook and financial highlights, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

Good afternoon, Sana, and thank you. Thank you for joining us today for the Q1 FY '26 earnings call of Tinna Rubber and Infrastructure Limited. Our financial results and earnings presentation are available on our website and on the stock exchanges. I believe you have had a chance to review the same. I will briefly take you through the strategic updates, post which my colleague, Subodh, our COO, will take over and give details about the operational and financial performance highlights for the quarter. I am pleased to report that Tinna Rubber has demonstrated improved performance in Q1 FY '26 on a quarter-on-quarter basis despite facing challenges arising from the early onset of monsoon and prevailing global headwinds. On a quarter-on-quarter basis, our EBITDA increased by 19% with a 344-basis point improvement, while revenue and PAT remained stable. Coming to some strategic updates. We successfully completed our maiden QIP in July 2025, raising approximately INR 79 crores from marquee institutional investors, including ICICI Prudential Mutual Fund, JM Financial Mutual Fund and Bank of India Mutual Fund. Deployment of QIP funds has commenced from Q2 FY '26 and will be allocated approximately as follows: INR 23 crores towards debt reduction, INR 12 crores, I'm sorry, for solar power expansion and INR 22 crores for a new plant of recovered carbon black and INR 19 crores for general corporate purposes. Tinna marked a key milestone with its successful NSE listing in April 2025, complementing its BSE presence and reinforcing our commitment to greater visibility in Indian capital markets. Coming to our cost reduction initiatives, the reduction in debt will lead to annual interest savings of about INR 1.5 crores. We are expanding the existing renewable energy to more than 3x from the current capacity of 1.26 megawatt to 4.52 megawatt. This will lead to total savings of INR 3 crores annually and approximately 50% of our power needs will be met through renewable sources, including captive solar and some third-party purchases, aligning with the company's ESG goals. Also, with increased optionality on using different types of tires as feedstock, we expect cost savings of 10% to 15%. In Q1 FY '26, we have incurred capital expenditure of approximately INR 13 crores, and we are committed to our plan of approximately INR 100 crores of CapEx over 2 years. I am pleased to inform that we have monetized approximately INR 5.6 crores from noncore assets, which were at INR 28 crores at the beginning of the year, and that company will continue to actively pursue monetization of the remaining noncore assets. Providing a brief overview of projects. The Polymer Composites business during the quarter and in the Masterbatch business, we have reached sales of 100 tons per month, reflecting steady volume growth. The product portfolio was expanded to include color, additives, silicon and biodegradable masterbatches, further strengthening our presence. We are actively working on specialty masterbatches designed to improve technical performance and yield better margins, aligning with our goal of sustained profitability. The Varale plant capacity utilization increased from 30% in Q1 FY '25 to 57% in Q1 of FY '26, driving a significant year-on-year sales growth from approximately INR 6 crores to INR 27 crores. Turning to our international projects. In Oman, the plant operated at 85% capacity utilization, generating around $1 million in revenue and 35% of our output is now sold within the GCC region. In Saudi Arabia, we have received allotment of 20,000 square meters of land, and we hope to commence building the facility soon, and we are hoping for commissioning to happen from Q4 of 2026. Tinna has successfully infused capital into its joint venture, Mbodla Investments in South Africa, where we have received consent to receive and export 24,000 tons of end-of-life tires, which will be used as feedstock for our plants in India as well as Oman. The Phase 1 of operations have already commenced in Q1 of '26. In conclusion, I would like to emphasize that we are firmly on track to achieving our Vision '28, expanding our presence from 6 to 10 locations, targeting revenue CAGR of 25% to reach INR 1,000 crores of revenue by FY '28 with a targeted EBITDA of 18% plus and ROCE exceeding 30%. With that, I would like to hand over to Subodh for his insights and comments on operational and financial performance. Over to you, Subodh.

Thank you, Gaurav ji. Am I audible? Moderator?

Yes, sir. Please go ahead.

Thank you. So coming to operational performance. In Q1 FY '26, tire crushing volumes declined due to slowdown in infrastructure and consumer segment. Regarding FY '26 quarter 1 segmental performance, the Industrial and Steel segments delivered revenue growth, while the Infrastructure and Consumer segment faced a temporary slowdown. Revenues from the Industrial segment have grown by 15% on Y-o-Y basis. Despite global economic headwinds, export performance in the Industrial segment remained positive, supported by stability in the rubber conveyor and molded goods industry. The Steel segment recorded an 8% Y-o-Y revenue growth, though overall growth was a bit curved by declining steel prices driven by low-cost steel scrap import from Russia and other countries. The slowdown in infrastructure sector was driven by delayed fund releases from Ministry of Roads and early monsoon and supply disruption caused by the Israel-Iran conflict, which impacted bitumen exports from Iran, a key supplier to India. On a positive note, the bitumen emulsion business recorded approx. 40% year-on-year volume growth. We are confident of a strong rebound post-monsoon driven by a solid and growing business pipeline. Consumer segment demand is expected to revive in the upcoming quarters following a seasonal shift influenced by early monsoon and short-term market liquidity adjustments. Coming to consolidated financial performance for Q1, revenue stood flat at Q-o-Q basis, whereas it declined by 4% on Y-o-Y basis, primarily due to lower EPR contribution of INR 4 crores in Q1 compared to INR 10.5 crores in the corresponding quarter of FY '25. Our gross margins improved by approximately 344 basis points on quarter-on-quarter basis, driven by lower raw material costs, operational efficiency and stronger sales realization. Our EBITDA increased by 19% Q-o-Q basis to INR 21 crores and margin stood strong at 16% and improved by 237 basis points on a quarter-on-quarter basis. Our PAT remained flat on quarter-on-quarter basis to INR 12 crores and PAT margin remained robust at 9%. At the consol level, Global Recycle LLC, our associates company, operating from Oman and TB Buildtech contributed INR 0.4 crores and INR 0.7 crores, respectively, to PAT level. I'm happy to share that our working capital cycle has improved from 42 days in FY '25 to 38 days in Q1 FY '26, reflecting our unwavering focus on operational efficiency and financial discipline. Tinna Rubber is making strong progress towards its Vision 2028, driven by strategic capacity expansion, capital investment, global sourcing and business integration. Its diverse product portfolio and international focus and experienced leadership, supported by committed stakeholders, position the company for sustained long-term growth. I would now like to open the floor for questions and answers. Thank you, and over to you, moderator.

Thank you, sir. [Operator Instructions] The first question is from the line of [ Mr. Akshay Shah from Toro Wealth Managers LLP ].

I have three questions, sir. Is the issue of Red Sea disruption sorted in Q1 FY '26? Or did you still have to face impact of the same?

Can you repeat? What disruption?

Red Sea disruption.

I didn't get the word. What kind of disruption, sorry?

Red Sea. Red Sea disruption?

Red Sea?

Yes, yes.

Red Sea. Okay. Yes, thanks for the question. There is no -- see, there is a certain amount of settlement that has happened in the way the trade is being conducted. There is some normalization, I would say. And the whole logistics industry has kind of gotten used to it and settled around it. The freight rates are also stable. So that's what I can tell you. They haven't gone up.

Okay. Sir, my second question is, is there any impact of Trump tariff policies on your company? And if yes, request you to please explain and how do you plan to safeguard yourself?

Sure. We actually have very little business with the U.S. So to that extent, we have -- we don't see any impact on us.

Okay. And sir, are QIP funds sufficient for your capacity expansion plan of solar pyrolysis and recovered carbon black plant?

Absolutely.

Okay. And sir, what are your plans on the debt front? Do you have any threshold in the mind above which you won't go in terms of total borrowing?

Well, we are currently very comfortable with our debt profile. We have scope to take more, but we don't see any immediate need to take any more funds in debt. We don't foresee it.

[Operator Instructions] The next question is from the line of Mr. Deep Mehta from Bank of India Mutual Fund.

A couple of questions. First, in Q1, if I adjust your margins with EPR credits, we have seen sharp improvement in overall margins. So what led to improvement in margins? And is this higher margin sustainable going ahead?

Deep, Gaurav here. Thank you for the question. Yes, your analysis is correct. The improvement in our overall margins has happened right from the gross margin level, where we have seen a 300 bps plus improvement. And we believe at this stage, it seems sustainable. I don't see any reason for that to change.

And what led to this improvement in margins, if you can share?

Well, we -- it was a combination of things. Primarily, we brought down our cost of raw materials by increasing the optionality of the kind of tires we run into our facilities. That helped us. Also, higher sales of crumb rubber modifiers benefited us as well in margin improvement.

Very clear, sir. And my second question is regarding our PCMB business. As you have said in your presentation that capacity utilization has improved to 24%. If you can give us some qualitative color about this business, how do you see the capacity utilization going ahead? How many clients have we onboarded? Is the product profile at par with clients' expectation, both in terms of quality as well as pricing? If you can talk about that, that can be very helpful.

Sure. No, excellent question again. On the PCMB business, while we have now reached a steady state of about 100 tons of sale, but our ambition is far larger than that. We are at early stages of trials, bulk trials, initial supplies with various customers across different sectors. And we are confident that in this financial year, we are expecting approximately INR 30 crores to INR 35 crores of contribution in our overall top line from the PCMB business. And once that is achieved, that will lay the foundation to further expand that vertical. So that is where we are at. So we are keeping ourselves very focused at this point of time to get as many approvals in marquee clients and industries to enable us to get to our target for this financial year.

Great, sir. And my last question is just a bookkeeping question. If you can help us with the number of EPR credits, which we are holding as on Q1 ending, if that can be very helpful.

We will get back to you on that. We'll get the data out and we'll get back to you.

[Operator Instructions] The next question is from the line of Mr. Mihir Vora from Equirus Capital.

Gaurav, sir. So basically, sir, just one clarification. In your opening remarks, you mentioned that there was a 10% to 15% cost reduction by using these different kind of tires. So maybe you can just extrapolate it a bit that is the understanding correct that previously it used to be TBR now you're getting into PCR also? Or you have changed something into your machinery in that sense?

Thank you for asking this clarification. We were largely a TBR recycling business. And of course, after that, PCRs were added as well. We have now enabled ourselves to also recycle off-road tires like agriculture tires and mining tires. So combination of all of these three is what is helping us to get a reduction in our raw material cost.

And sir, the off-road tires basically, is it into the existing machinery only or we have added some machineries to that?

We've added some equipment. We've added some equipment because these off-road tires can be very large. An individual tire can be half a ton. So it needs a different treatment.

Okay. And sir, my second question was on this PCMB business. So just wanted some highlight on the nature of the business, whether this will be a order book-driven business? Or is it some kind of spontaneous orders? How does it work?

No, this is very much a order book kind of business. The large -- just like any other business, this has elements also of some sales into the more spontaneous sector, as you called it. But to a large extent, it is -- it follows a very similar process of getting approvals of your product from large auto component companies, other organized players, which is a process. But once that is done and achieved, then one develops a fairly high visibility of sales.

Okay. And so in terms of this year, maybe the approval process for the OEMs also would be sort of elongated. So this year, would it be correct to assume that this would be more of a spontaneous business than to an order book or then it starts building up, say, going towards the next year, start getting a few orders into this? How will that trajectory go for the PCMB business?

You're right. While we are at different stages of approval with OEMs, et cetera, it is the more sort of the resale market, replenishable market which we are trying to cater at this point of time, while we get approvals from other clients. So you're right, your assumption is correct.

All right. And sir, finally, on this margin target, which we have set for ourselves that is 18% by FY '28. So first thing here is that because you're getting into the newer segments like PCMB and pyrolysis also, which will still be at a nascent stage. So what are we seeing there that we are thinking about achieving that 18%? So how this margin trajectory will play because in the newer segment, we faced some competition also. So how are you planning to manage that?

See, we've done our forecast, and that is why we feel confident to give that as a guidance. At this point, we've achieved 15.5% EBITDA margin in Q1. And at this point of time, whether it is the PCMB business or the setting up of the regenerated carbon black business, these are new initiatives where a lot of costs are incurred front end and the result comes a few months or quarters down the road. Similarly, in our international operations, we are in investment stage in stabilizing South Africa, Saudi Arabia, et cetera. So these -- the benefits of this work will be seen over the next few quarters, but the expenses are being incurred today. So as they stabilize, that will enable our EBITDA to go up. And of course, operational efficiencies will kick in as well.

[Operator Instructions] The next question is from the line of Mr. Kushal Kasliwal from InVed Research.

So just wanted to understand your realizations in pyrolysis and recovered black carbon. We are doing this CapEx and entering into this new business. So can you indicate possible top line, bottom line estimate, margin estimates and realization there?

So the regenerated carbon black business is, at the moment, we are in the process of placing orders for the plant and the equipment, et cetera. A lot of the civil work and the building work is more or less complete. So that is the stage we are at. In terms of the margin profile of this business, we expect it to operate at very similar margins as our existing tire recycling business. Similar kind of margin profile is there. But we will be able to tell you more surely when we begin and start, which is expected to happen.

Q4.

End of Q4, maybe early Q1 is when we will start seeing this facility becoming operational.

Okay. Sir, just for my information, what kind of asset turns can be expected here?

It's approximately 3x again. Very similar to our Industrial business.

Understood. Got it. Fair enough. Sir, on the Industrial business side, we obviously saw a significant decline -- sorry, Infrastructure segment. Any particular -- I mean, obviously, you have highlighted some reasons, but are these issues out now? Were they temporary? How are you experiencing 2Q? I mean what has been your experience in July maybe? If you can just spell that out?

Yes. This is Subodh here. So on this side, like Q1, it's very unlikely like the monsoon started quite early this time. And we are also keeping an eye because the business pipeline is strong and we are anticipating the business will come back on that track. So Q2, at this point of time, it's very difficult. We expect it to be finished off by early September. So the things should come back on the track. That's what we feel on the Infrastructure segment side.

Okay. So you're saying September is when you think things will become normal, till September. So Q2 will also be weak?

Yes.

Understood. And I mean, same question on the Consumer side. I think we have -- again there is a temporary decline of 10%. Can you also tell about Q2 there, Consumer segment?

Q2, and I think this already started picking up because certain application where we were struggling to get approval in the Q1 and that finally are in place. So that already started picking up from Q2 onwards. So you will see some growth in the Consumer segment from the Q2 itself. But the road business is, again, it's just a break of this monsoon period. This will further kick in back, and we expect it to come back on the track from -- by end of Q2, we believe.

Understood. Sir, my last question on the Valare (sic) [ Varale ] -- capacity utilization of our Varale plant. So this is now around 57%. So what kind of top line can we expect overall in FY '26 from this plant and overall capacity utilization for FY '26?

See, Varale, when we set up, if you see it is growing and consistently since last 2 quarters, it is operating at around 55%, 60% in-between capacity utilization. We have always maintained once it reaches its zero optimum, so it can generate close to INR 100 crores to INR 120 crores kind of top line. Without adding the new initiatives what we have taken in the current financial year, that will further be added once that come into the operation.

So on an annualized basis, what can be ideal capacity utilization number?

See, this year, we expect it to be around INR 80 crores to INR 90 crores kind of top line from Varale alone with the existing kind of product portfolio. But going forward, once we see stabilizing our rCB and pyro, which we are not taking into the account, that will start contributing from the next financial year. That's -- and it is completely -- as of now, we cannot predict anything that we are targeting by Q1, we wanted to start. But if everything fall in line, so that will further add something to the Varale overall revenue.

Okay. So I'm assuming INR 85 crores, INR 90 crores at the same 60% kind of capacity utilization, right?

Yes, sir. Yes, sir.

[Operator Instructions] The next question is from the line of Mr. Kedar from NAN Partners.

I've just started -- recently started tracking your company. So forgive me if my questions are very basic. So firstly, on your sourcing part, so it's mentioned that you -- in the previous con call that you import 70% and 30% is domestic. So on the import side, is it mainly from the tire manufacturers? Or is it from the dealers?

This is Gaurav Sekhri. See, each country is a little bit different. Some countries have -- the collection of end-of-life tires is done through scrap traders, et cetera. So we work with such entities. In some countries, there are producer responsible organizations, which are organizations formed by tire manufacturing companies, which ensure efficient collection, and it is their mandate to ensure environment-friendly recycling. So we work with those as well in countries where they are set up. So these are sort of the ways we operate.

Okay. Understood. And on the import side, like is it skewed towards imports because of lack of availability in the domestic market? Or is there any other reason? And what is the difference between imported ELT and the domestic ELT?

See, in terms of quality, et cetera, there is very little difference. In terms of landed cost basis because 3 of our plants are located at ports, we find it more economical to work with imported end-of-life tires in most instances. So that is why the 70-30 ratio as well as the collection -- the volume that we need is easier for us to aggregate from imports. Of course, we like to use as many domestic tires as possible. But here, there is no organized collection yet. It is happening. And certainly, implementation of EPR is enabling that. We see that with progress of time, our dependence on imports will reduce.

Okay. Okay. Understood. So like over the next maybe 2, 3 years, you will see domestic's procurement increasing because of this EPR policy? Can you give any guidance, like 70-30, say, how much it will be?

I think -- and I'm just guessing here over next -- maybe after 2, 3 years, it could become 60-40 possibly in favor of domestic. That is possible. So we will see.

Okay. Okay. Understood. And secondly, on the -- like I had a hypothetical question. So if companies like tire companies like, say, MRF, if they decide to build up their own recycling operations since they have the scale and they would have the end-of-life tires. So can they not be a competition for you in the future? Or what is your view on that?

We have not seen any tire manufacturing company globally, and there are many large international companies, which are even larger than MRF, getting into tire recycling. It is not really their core activity. So for that reason, I don't see that happening in India either. And I believe a big challenge for tire companies is that their own use of recycled rubber is very limited. They will use maybe 10% or 15% in their overall compound. So for them, just to recycle tires, so they can use 10%, 15% and the balance steel, they have to sell, fiber they'll have to sell, rubber also they'll have to sell to other industries. It is just not their core area of competence. So I think that is why we've not seen any tire company anywhere in the world getting into recycling.

Thanks for your views. Then secondly, on your margin.

I'm sorry to interrupt. Mr. Kedar could you come back again in the queue, please.

Yes, sure.

Thank you so much, sir. Thank you. The next question is from the line of Mr. Deepesh Sancheti from Maanya Finance.

I've joined the con call a little late. So if there is any repetition of questions, please you can skip that. What is the trend of the scrap price in Q1 FY '26? And how do you see this happening? I mean, how do you see the trend in Q2 till now?

See, end-of-life tire landed cost to us, we have created some efficiency in reducing our cost by increasing optionality of different kind of tires we use. But at the moment, we are seeing a bit of a downward correction. So that is where we are at right now.

Okay. So -- and you have mentioned in your PPT that you are planning to setting up the pyrolysis and recovered carbon black plant. Can you please let me know the location where you are planning to set up this plant and the payback period for this project? And by when can we expect that to commission?

The regenerated carbon black plant is being set up inside our existing facilities at Varale, where we already have a passenger car radial recycling plant in the same complex. We expect to begin sales possibly from end of Q4 of this financial year. And in terms of margins achievable, we expect to operate at around 15% to 16% EBITDA margin, very similar to our existing material recycling facilities.

Okay. And how much top line do you expect from this?

We expect approximately in full capacity utilization, probably around INR 70-odd crores a year.

Okay. And the PCMB business has a capacity utilization of 25% roughly. By how much do you expect the same to increase by FY '26 -- end of FY '26? And on an average, what approx be the utilization in FY '26 and going ahead?

We expect to get to about 60% utilization by Q3 -- from Q3 onwards in the PCMB business. And we expect its top line contribution to be approximately INR 30 crores, which was almost negligible in FY '25.

Okay. And do you expect that this will actually contribute about 5% of your top line going ahead?

Very, very much so, possibly larger because this is a very small pilot plant that we've set up. If our business model is validated, we will plan a ramp-up very quickly in this. So the contribution to our overall top line could be 5%, 8%, 10%. I mean that's very hard to predict today.

Okay. And how fast can you ramp this up? I mean if this thing turns out to be successful? And how much CapEx will you require for that?

Again, it's very early stage. It will be speculation. But in terms of ramp-up, the period is under 6 months. I mean the learning that we are getting now, I believe that from decision-making to getting something started will be about a 6-month process.