Baheti Recycling

Baheti Recycling delivered a robust financial performance for FY25, achieving a 22.1% year-on-year top-line growth. This was accompanied by significant margin expansion, with EBITDA margin increasing by 337 basis points and PAT margin by 221 basis points, leading to a 150.1% growth in PAT and EPS. These improvements are primarily attributed to the modernization of furnaces, which resulted in a 2% higher yield and a 5-7% reduction in processing costs, enhancing overall operational efficiency.

Despite a flat volume growth of 1.5% in FY25, attributed to ongoing plant upgradation and the replacement of old rotary furnaces with new TRF technology, the company expects significant volume growth in FY26. Capacity utilization stood at 64% in FY25, with a target to reach 75-80% by the end of FY26. Management is targeting an ambitious annual growth of 30% for the next two to three years, driven by new capacity and strategic market penetration.

The company faced challenges in working capital management, with trade receivables increasing from ₹48 crores to ₹72 crores, extending receivable days from 41 to 50. Debt has also grown substantially, increasing fivefold over the last five years, contributing to negative cash flows. Management attributes this to longer credit terms with new OEM customers (45-90 days) and increased inventory due to global trade uncertainties, but plans to mitigate this through discounting facilities and by maintaining debt levels relative to top-line growth.

Baheti is actively pursuing diversification into zinc alloy and aluminium billets, with projects expected to be completed by the end of the current financial year. The company is expanding its market reach into South India, a key automobile hub, and exploring international markets like Hungary and Turkey. The upcoming IATF certification by June end is expected to facilitate direct entry into major OEMs like Maruti and Bajaj, further boosting volumes and market share.

Baheti is committed to environmental sustainability, having shifted one shed to electrical operations and begun using biodegradable fuels in some furnaces, with plans for wider adoption. They are also planning to install solar power for captive consumption to reduce CO2 emissions. These initiatives, coupled with the technology shift in manufacturing processes, have significantly reduced labor requirements and improved overall operational efficiency, contributing to bottom-line growth.

The aluminum recycling industry is fragmented with many players, but Baheti focuses on niche alloys, which allows for better PAT margins compared to top-line growth. Management aims for a sustainable PAT margin in the range of 3.5% to 5%. While competition exists, the company's specialized product offerings and continuous modernization efforts are key differentiators, enabling them to maintain a strong market position.