Gravita India Q1 FY27 earnings call

Gravita India reported robust financial performance in Q1 FY27, with revenue growing 42% YoY to ₹1,475 crores and EBITDA increasing 29% YoY to ₹145 crores, maintaining margins above 9.80%. PAT also saw a 14% YoY rise to ₹106.39 crores. This growth was supported by strategic capacity additions and a focus on value-added products, which constituted 63% of consolidated revenue. The company's diversified recycling platform and disciplined execution underpinned this strong performance.

A significant global milestone was achieved with the London Metal Exchange (LME) Brand Listing for lead metal produced at the Mundra, Gujarat division under the brand name GRAVITA M. This accreditation reinforces the company's commitment to world-class quality and is expected to enhance credibility with global OEM customers, strengthen international presence, and create new export opportunities. The company's existing facilities at Chittoor, Mundra, and Phagi continue to adhere to stringent quality standards, reflected in their MCX paneling.

The company's total installed capacity now stands at 4.97 lakh metric tons per annum, with a target to reach over 8 lakh metric tons by FY29. A key expansion was the Phagi, Jaipur lead facility, adding 40,500 metric tons per annum of lead recycling capacity, bringing the plant's total to 75,819 metric tons per annum, funded by ₹30 crores from internal accruals. However, overall capacity utilization was around 52% in Q1 FY27, with the new Phagi capacity at 45%, primarily due to supply chain disruption^🌐s affecting scrap availability.

To counter geopolitical supply chain disruption^🌐s, particularly from the Middle East, Gravita is expanding its procurement network into developed economies like the U.S. This initiative aims to secure scrap availability for both lead and copper, reducing reliance on specific geographies and potentially lowering overall procurement costs. Management expects these new yards to be set up and operational by the end of the year, mitigating future disruptions and ensuring consistent supply.

The copper division contributed ₹376 crores in revenue in Q1 FY27, operating at 50% capacity utilization. The company is progressing with the development of a 29,400 metric ton per annum copper recycling facility in Gujarat, with an estimated investment of ₹160 crores, expected to be commissioned within the next 12 months. Management targets doubling copper capacity to 60,000 MTPA in the next 3 years and improving copper EBITDA per ton from ₹55,151 to ₹65,000-₹70,000 in 2-2.5 years, with an interim target of ₹60,000 by year-end.

Gravita has earmarked a total capex of ₹1,680 crores through FY29, with ₹850 crores allocated to strengthening existing businesses and the remainder supporting entry into new recycling verticals such as lithium-ion batteries, copper, and steel. The company's capital allocation strategy emphasizes funding through internal accruals, as demonstrated by the ₹30 crore Phagi expansion and the ₹160 crore Gujarat copper facility, both funded internally. This approach reflects a disciplined capital allocation strategy.

Despite volume challenges in lead due to supply disruptions, the company focused on improving profit margins and operational efficiencies. The management decided to consolidate the Kathua manufacturing unit with the Jaipur facility to enhance operational effectiveness, improve cost efficiencies, and better utilize group resources. The company's long-term credit rating was upgraded by ICRA from AA- to AA, reflecting its consistently improving financial profile, prudent capital allocation, and robust cash flow generation.

Net debt stood at ₹150 crores as of Q1 FY27. The working capital cycle was 95 days in Q1 FY27, primarily due to increased inventory for copper and in-transit materials. Management expects the working capital cycle to normalize as operations stabilize and scrap availability improves. The company continues to fund its expansions through internal accruals, maintaining a prudent financial approach and aiming for sustainable long-term value creation.