Gujarat Reclaim Rubber (now GRP Ltd)

I am analyzing Tinna Rubber vs GRP to understand the differences, competitive positioning & the reason for a vastly different P&L & balance sheet. Some initial insights I have been able to gather:

1. Tinna Rubber & Infrastructure Ltd. - Valorem CXO Meet - YouTube Please see from 56:10 He tells diff between grp & tinna
   Grp is only into non road segment, tinna gets 40% or so from road segment Also, grp only makes rubber reclaim products, does not make micronised rubber powder. Tinna does Not sure what implications this has on Gross Margin & opex but will try to dig deeper.
2. 1 more key difference which came out in grp concall : grp receives shredded tires so no steel is present in them they don’t process the steel Tinna receives ready made tyres which have steel in it & tinna produces steel abrasives out of the steel wire present in the tyre & sells it as well.
3. One more critical difference: 90% of sourcing for grp is biax tyres only 10% is radial tyres. Tinna 100% is radial tyres. According to both concalls, Radial tyres are growing much more rapidly than biax types. Tinna also says in their concalls that radial tyres are higher quality & enable them to make higher quality products.
4. Tinna employee costs are around 9-10% compared to 15-17% for GRP. Even tinna used to be around 15-17% mark until fy21, only fy22 onwards, employee cost fell sharply to 9%. We find the reasons in FY22 & Fy21 annual reports: excerpts below:
   
   
5. On EBITDA margins, GRP freight costs is massive at 50cr, so we have to validate whether export is really high margin for them (ex of the freight costs), Tinna in comparison being largely domestic focussed has negligible freight costs (Tinna gets 5% from exports, GRP gets 40% from exports)
6. Material cost: wise both are neck & neck, around 45% material costs in FY22 for both of them.
7. Power costs: Even on power costs Tinna has some details in Concall though not very satisfactory. Let us examine.
   
   
   
   This is a little bit vague & i would love to ask Tinna management what these exact upgrades are which enable higher power efficiencies. One thing to note here is that Tinna has a more diverse manufacturing footprint with plants in Himachal, harayana, Maharashtra, Tamil Nadu & West Bengal
   
   
   
   As opposed to GRP which has its manufacturing footprint concentrated in West India (Gujarat, Maharashtra, MP).
   
   
   
   The power costs in Gujarat are 6.6 Rs / Unit.
   Power costs in Maharashtra are around 8-10 Rupees for commercial users.
   
   
   
   Power costs in madhya pradesh are around 7 Rupees per unit. The blending % would depend on the % mix between the manufacturing footprint. A simple average of the 4 plants gives us a blended cost of Rs 7.5 / unit.

As compared to this, for Tinna, the cost of power in Himachal is around 4.2 Rs / unit post subsidies.
Harayana is around Rs 4.3 / unit

Maharashtra has 1 plant which from previous work is around Average of 9 Rs / unit
Tamil nadu is around Rs 6.35 / unit

Effectively what this means is that there is a possibility that Tinna might be sourcing its electricity at 30% cheaper rates (we should confirm these assumptions via concalls of both GRP & Tinna). This can partly explain some of the differences in power costs for tinna & GRP. For GRP power costs / revenue is around 12% versus 8% for tinna. Normalizing for the rates of power, The difference is not much. of course these calculations are not exact because Tinna & GRP both could be sourcing some of power in-house as well (solar, wind).

Summary of Findings in tabular format:

this analysis is by no means exhaustive, will continue to add whatever i learn on GRP & Tinna.

Disclaimer: have a position in Tinna, studying both tinna & GRP more deeply.