Nikita Greentech Recycling Ltd Q4 FY2025 Concall Summary

Key Takeaways

• A transition quarter, deliberately: Revenue grew 9% YoY but capacity utilization fell as the company swapped biomass boilers for waste-to-energy feedstock, a trade-off that cut production volumes while setting up a structural cost advantage.
• The 9 MW power plant is the thesis: A ~₹50 crore capex project promises 100% energy self-sufficiency, elimination of the ₹18–19 crore annual grid electricity bill, and a more-than-doubling of EPR credit profit to over ₹12.5 crore annually.
• Specialty grades are the margin story: Management is shifting mix toward food-grade, carry-back and other tailored papers that command a premium, even though it means lower volumes than standard corrugation grades.
• IPO proceeds fund the pivot, not deleveraging: The ₹67.5 crore raise is earmarked for the power plant, working capital and corporate purposes; debt repayment stays on its natural schedule with no additional reduction planned.
• What to watch next quarter: Whether the 9 MW plant stays on track for a Q3 FY27 commissioning, any concrete B2C plan emerges from current discussions, and how quickly specialty-grade mix shift improves the working capital cycle.

The Energy Transition: From Cost Centre to Profit Driver

• What changed in FY25: Boilers were converted from biomass to municipal solid waste derived RDF, which cut power plant output efficiency and therefore capacity utilization versus FY24, but delivered significant cost savings on the fuel side.
• The 9 MW waste-to-energy plant: Estimated capex of ~₹50 crore, targeting commissioning by Q3 FY27 (17–18 month installation period). Once live, it substitutes the 5–6 MW currently drawn from the UP state grid, eliminating an ~₹18–19 crore annual electricity bill.
• Surplus power: The process requires ~8 MW, leaving a balance from the 9 MW plant that can be sold or used elsewhere.
• EPR credit multiplier: The plant will incinerate ~2.5 times the current waste volume, and because EPR credits are proportionate to waste processed, annual EPR profit is expected to rise from ₹5.29 crore to more than ₹12.5 crore.
• Grid independence: After commissioning, the company will not depend on the state electricity board for supply.
• 1.5 MW rooftop solar is already commissioned and operational, adding to the green power base.

Ayush Bansal: "It's a freely traded total given by the central pollution control board. So whatever waste whatever amount of waste that you process in your waste to energy plant a proportion of that gets credited to your account directly."

Product Mix & the Specialty Pivot

• Volume vs value trade-off: Specialty grade papers (food grade, carry back, waterproof, high strength) run at lower production volumes than standard corrugation grades, so the shift deliberately sacrifices tonnage for margin.
• Current mix: ~8–10% of volume is value-added; the balance is corrugation segment, of which 88–90% is regular product made to forward orders.
• Specialty production cadence: Orders are accumulated up to a minimum batch size before scheduling with the production team, reflecting the tailored, low-volume nature of the work.
• Market tailwind: The specialty grade segment carries an 18–20% CAGR in market segmentation, and management is consistently focused on increasing production at those levels.
• Competitive moat: Management acknowledges replicas will emerge but argues the USP lies in how well you cater to the customer, not in being the only producer.
• Pricing sensitivity: Management declined to quantify the premium over standard paper, calling pricing "business sensitive," but confirmed it fetches a value addition.

Ayush Bansal: "It is not that you are the only 1 who will be producing the same replicas will definitely come out. But then it is your USP on how you cater to your consumer, how better you feed him that keeps you the leader in the market."

Raw Material & Supply Chain

• Domestic sourcing: 100% of waste paper comes from domestic throwouts, industrial sources and shopping malls within a ~100 km radius (Delhi, UP, NCR), supplied by ~20–25 stockists under long-term monthly or quantity agreements with pricing that stands for ~15–20 days.
• Imports for fiber length: Waste paper imported from the US and Canada provides longer fiber, enabling manufacture of high-end paper grades that domestic short-fiber waste cannot support.
• Abundant feedstock: Management sees plenty of visible waste piling up in tier-1 and tier-2 cities, implying no near-term raw material constraint for the expanded waste-to-energy plant.
• Working capital drag: The corrugation segment carries longer recycling receipt cycles; shifting toward specialty grades is intended to improve this.

Ayush Bansal: "So there is plenty available, Rakeshji, that is physically visible to all of us that we see that is being piling up in the tier 1 and tier 2 cities."

Financials & Capital Allocation

• FY25 headline numbers: Revenue from operations up 9% YoY, EBITDA up 24% YoY with margins at 13%+, PAT up 11% YoY. H2 momentum was stronger at 12% revenue growth and 18% EBITDA growth.
• Paper segment margin: Currently 13–14%, which includes a portion of costing from the waste-to-energy transition in FY25.
• Energy cost structure: Energy is the highest cost after raw material, driven by steam and electricity needs in manufacturing. The 9 MW plant directly attacks this line.
• IPO proceeds: ₹67.5 crore raised in May 2025, allocated to the waste-to-energy plant, working capital and general corporate purposes, not debt reduction.
• Debt posture: No plans to raise additional debt; repayment schedules are already in place and will run their natural course. A term loan of ₹77 crore includes a non-interest-bearing unsecured loan from promoters.
• Unsecured loan conversion: Management will strategically plan conversion of the unsecured promoter loan to equity but cannot act now due to the 75% free float requirement; no timeline was given.
• Subsidy: Papers and compliance formalities for a state government subsidy on the PM 2 paper machine are complete, but the government's processing timeline is uncertain.

Growth Initiatives Beyond Power

• B2C entry: The company is in discussions to enter the B2C segment, leveraging certifications with brands to produce products directly for them. Management declined to give a timeline, saying the concrete plan is not yet finalized.
• International exhibitions: Specialty paper products are being showcased at exhibitions in Dubai, Cairo, Dhaka and Saudi Arabia, though exports were low this year due to global geopolitical conditions.
• Group structure simplification: Planned to enable seamless integration across the value chain and unlock synergies.
• Supply chain optimization: Technology adoption and procurement streamlining are on the agenda.
• Capacity constraint: Current paper capacity stands at 133,000 tons with no plans to increase it; the focus is purely on the 9 MW waste-to-energy plant, after which management targets at least a 10% addition to effective capacity utilization once full power is available.

Ayush Bansal: "We are regular in touch with the brand. Now the brands have, you know, once our paper is certified with them, why not produce products for them?"

Guidance & Commitments

Key Metrics