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    Gravita India

    GRAVITAGood
    Metals & Mining·23 Jan 2025
    Management Summary

    Gravita India delivered a robust Q3 FY25 performance characterized by significant volume growth across all segments and a strategic shift toward domestic scrap sourcing driven by EPR and BWMR regulations. The successful ₹1,000 crore QIP has fortified the balance sheet, enabling a path to zero gross debt by fiscal year-end while funding aggressive capacity expansion toward 5 lakh MTPA by FY27. Management remains highly confident in achieving its Vision 2028 goals through diversification into lithium-ion and rubber recycling alongside core lead and aluminium growth.

    Highlights

    8

    • Consolidated revenue for Q3 FY25 reached ₹996 crores, up 31% YoY and 7% QoQ

    • Overall volume growth of 33% in Q3, led by a 92% surge in aluminium volumes to 6,264 tons

    • Consolidated PAT grew 29% YoY to ₹78 crores with a strong PAT margin of 7.8%

    • Domestic scrap sourcing experienced 50% YoY growth, now accounting for 44% of total scrap processed in India

    • Successfully raised ₹1,000 crores through QIP, with ₹245 crores already utilized for debt repayment and working capital

    • Management reiterated Vision 2028 targets: 25%+ volume CAGR and 35%+ profitability growth

    • Gross debt is targeted to reach zero by March 2025 following QIP proceeds utilization

    • Total recycling capacity expanded to 308,000 tons per annum, including new rubber recycling capabilities

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹996 Cr+31%YoY
    2. 02EBITDA Margin10.3%
    3. 03PAT₹78 Cr+29.0%YoY
    4. 04EBITDA per kg (Lead)₹18.5
    5. 05Total Volume53,443 tons+33%YoY

    Segment breakdown

    • Lead43,900 tons82.1%
    • Aluminium6,264 tons11.7%
    • Plastic3,279 tons6.1%
    Donut· Share of Volume

    Guidance & targets

    5
    CategoryTargetPriority
    Capacity
    Total Recycling Capacity
    5,00,000
    		High
    Volume
    Volume CAGR
    25%+
    		High
    Debt
    Gross Debt
    0
    		High
    Market Share
    Non-lead business share
    30%+
    		Medium
    Margin
    Sustainable Aluminium EBITDA
    ₹14-15
    		Medium

    Risks & concerns

    4
    RiskSeverity

    Geopolitical Unrest and Shipping Costs

    Management cited unrest in Mozambique and previous Red Sea issues as factors that can disrupt supply chains and inflate freight costs. — Management acknowledged

    medium

    LME Price Volatility in Aluminium

    Lack of a hedging mechanism on MCX for aluminium alloys leads to margin fluctuations; sustainable margins depend on future hedging implementation. — Both acknowledged

    medium

    Technology Disruption (Lead-Acid to Lithium)

    Management is diversifying into lithium-ion and other verticals to mitigate the long-term risk of lead-acid batteries going out of favor. — Analyst downplayed

    low

    Areas of Evasion(1)

    • Specific names of M&A targets were withheld for confidentiality.

    Q&A highlights

    3

    “In certain quarters, you will see higher margins as this quarter... on a sustainable basis, INR14 to INR15 is the margin that you can expect going forward.”

    Clarifies that current high aluminium margins (INR 18-21) are due to LME price movements and lack of hedging, setting realistic long-term expectations.

    asked by Amit Lahoti

    2 min read5 chapters

    Detailed Narrative

    01

    Vision 2028 and Capacity Expansion

    Gravita is aggressively scaling its operations to exceed 5 lakh metric tons per annum capacity by FY27, up from its current 3.08 lakh tons. The company is targeting a volume CAGR of 25%+ and profitability growth of 35%+, supported by a shift toward high-margin value-added products which currently contribute 46% of revenue. Management expects ROIC to remain above 25%, eventually reaching 27-28% as working capital cycles improve.

    02

    Regulatory Tailwinds in Domestic Scrap

    Strict government regulations under BWMR and EPR have catalyzed a 50% YoY growth in domestic scrap availability for Gravita. Domestic sourcing now accounts for 44% of the scrap processed in India, providing a logistical advantage and reducing reliance on imports. The upcoming implementation of the Reverse Charge Mechanism (RCM) for battery scrap is expected to further shift the market from unorganized to organized players, potentially tripling battery scrap availability in the next 2-3 years.

    03

    QIP Utilization and Deleveraging Strategy

    The company successfully raised ₹1,000 crores through a QIP, which is being strategically deployed to eliminate gross debt by March 2025. Of the proceeds, ₹245 crores have already been used for debt repayment and working capital. While the company will be debt-free in the short term, management indicated they may take on new debt in FY26 to fund strategic M&A opportunities and greenfield expansions in regions like Oman and the Dominican Republic.

    04

    Diversification into New Verticals

    To mitigate the risk of technology disruption in lead-acid batteries, Gravita is diversifying into lithium-ion, rubber, and plastic recycling. A pilot project for lithium-ion recycling and a new rubber recycling plant in Mundra are expected to be operational in H1 FY26. The company aims to reduce lead's share of total revenue to approximately 70% within the next three years by scaling these new verticals.

    05

    Aluminium Segment Dynamics

    Aluminium volumes surged 92% YoY in Q3 FY25 to 6,264 tons, though management cautioned that current margins of INR 18-21 per kg are inflated by LME price movements. A sustainable margin of INR 14-15 per kg is expected once a hedging mechanism is established on the MCX. The company expects the aluminium segment to grow at a 40% rate over the next 3-4 years as capacity utilization increases from the current 48%.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.