Detailed Narrative
H1 FY26 Performance Overview
Baheti Recycling Industries Limited reported robust performance for H1 FY26, achieving its highest-ever profit. The company's sales surpassed INR 315 crores, representing a significant 22% growth compared to the previous half-yearly reported sales. This growth was underpinned by sustained demand for recycled aluminum in India. Management noted improvements in EBITDA and net profit margins, although the PAT margin for H1 FY26 stood at 3%, which was attributed to seasonal factors.
Aluminum Wire Rod Facility Expansion
The company is establishing a new aluminum wire rod facility with an initial capacity of 12,500 metric tons per annum on its freehold land. This facility is designed to be equipped for 25,000 metric tons per annum, providing headroom for future scaling by FY28. The total capex for the 25,000-ton infrastructure and 12,500-ton production is estimated at INR 30 crores, with INR 18 crores already spent through internal accruals. This expansion is expected to contribute INR 200-250 crores in revenue from the initial 12,500 tons and up to INR 500 crores from the full 25,000 tons capacity, with commissioning targeted for H2 FY27.
Capacity Expansion and Utilization Targets
Beyond the wire rod facility, Baheti Recycling is expanding its existing capacity from 29,000 tons to 38,000 tons by shifting from traditional pit furnaces to electric furnaces. For its existing business, the company targets 65% capacity utilization by FY26 year-end, increasing to 75% in FY27 and 80-85% in FY28. Overall, the company aims to achieve a revenue of INR 1,200 crores in the next couple of years, representing a significant step change for the business.
Strategic Focus: EPR and IATF Certification
The market for aluminum wire rod is transitioning from primary metal to secondary recycled supply, driven by the implementation of EPR (Extended Producer Responsibility) regulations. Baheti is strategically positioned to benefit from this shift. The company obtained IATF certification in June, which is a critical enabler for directly targeting major OEMs like Ola, TVS, Yamaha, Hero, and Bajaj. This certification removes a previous barrier, allowing the company to expand its client base beyond Tier 1 die casters.
Working Capital and Margins
The company acknowledged an increase in inventory and debtors' days, attributing it to strategic procurement of higher inventory to cater to new customer additions and accelerated sales, which aligns with industry norms of 90-100 days. While H1 margins were affected by seasonal productivity dips, management anticipates improvement in H2 FY26, targeting a PAT margin of 3.5-4% and an EBITDA margin of 8-10%. For the new aluminum wire rod business, the working capital requirement is expected to be lower due to a 30-day credit period norm, and sustainable margins of 8-10% are targeted.
Deleveraging Plan
Addressing analyst concerns about the balance sheet, management stated that deleveraging would occur in the coming years. As a growing company aiming for INR 1,200 crores in revenue, Baheti plans to deleverage its balance sheet immediately after that period, primarily through internal accruals. This indicates a focus on maintaining financial health while pursuing aggressive growth.