Detailed Narrative
Strong FY26 Financial Performance and Margin Expansion
Baheti Recycling delivered robust financial results for FY26, with revenue increasing by approximately 38% year-on-year to ₹725 crores, up from ₹520 crores in the previous year. Profit saw an even stronger growth of 50%, reaching ₹27 crores compared to ₹18 crores in FY25. This performance reflects improved operational efficiency and margin expansion, with current EBITDA margins around 8% and a sustainable range of 7-10% targeted, with a goal to reach 10% by FY28.
Strategic Entry into Aluminum Wire Rod Segment
The company is making a significant strategic move into the higher-margin aluminum wire rod product segment, investing approximately ₹25 crores. This expansion will occur in two phases on existing freehold land in Dahegam. Phase 1 targets 12,500 metric tons per annum with a revenue potential of ₹250 crores, while Phase 2 will increase total capacity to 25,000 tons, aiming for a total revenue of ₹500 crores from this plant. Commissioning for Phase 1 is expected by end of October/early November 2026, with initial utilization at 20-30% and a target of 70% by FY28, contributing to an overall EBITDA margin of 10% by FY28.
Capacity Expansion and Utilization Targets
Baheti Recycling is enhancing its manufacturing capabilities with the commencement of 5 new electrical furnaces in FY27, which are expected to be more efficient and greener. Coupled with a solar plant operational by May 2026, the total installed capacity will reach 38,000 tons annually. The company aims to ramp up its current 60% utilization to 75-80% by FY27 and achieve full capacity utilization by FY28, supporting its ambitious growth targets and ensuring efficient use of new infrastructure.
Working Capital and Cash Flow Management
Despite strong revenue and profit growth, the company has experienced negative cash flows for the past four years, leading to increased debt. This is primarily attributed to maintaining 30-40 days of excess inventory to cater to OEMs. Management plans to optimize inventory levels by FY28-29, expecting to achieve positive operating cash flow. Additionally, they are implementing a 'build to ship' concept with financing services to secure 90-day credit, which is anticipated to improve cash flow without increasing debt.
OEM Penetration and Market Positioning
The company has successfully penetrated the OEM segment, securing direct orders from major automotive clients like Bajaj Auto, TVS Motor, and Royal Enfield in March 2026, with repeat orders in May. This was facilitated by a temporary reduction in OEM approval times from six months to one month due to geopolitical tensions. Baheti Recycling, currently a top 10 aluminum alloy manufacturer, aims to become a top 3-4 player by FY28, leveraging its direct OEM relationships and the cost advantage of secondary aluminum (7-10% cheaper than primary).
Raw Material Sourcing and Cost Management
Approximately 80% of the company's raw material is imported, primarily from the UK, Europe, and the US. While fuel prices have led to a 15% increase in production costs due to geopolitical tensions, management confirmed these costs are immediately passed on to customers, who have been supportive. The company's sales pricing mechanism, based on LME and dollar factors with a fixed INR delta, naturally hedges against LME volatility, ensuring margin stability with a one-month lag.