GRAVITA - GRAVITA INDIA LIMITED Share Price

Gravita India Management provided an optimistic outlook for the company during the earnings call for Q3 FY 2026, highlighting steady operational and financial progress. The company reported a year-on-year growth of 9% in revenue, 15% in EBITDA, and 32% in PAT for the nine-month period ended December 31, 2025.

Key forward-looking points include:

1. Capacity Expansion: Total installed capacity currently stands at 340,000 metric tonnes per annum, aiming to increase to over 700,000 metric tonnes by FY 2028. The capacity expansion targets for the Mundra and Jaipur plants are set at 80,000 and 45,000 metric tonnes per annum, respectively, both targeted for completion by Q4 FY 2026.

2. Capital Expenditure (CAPEX): Gravita is earmarking a total CAPEX of Rs. 1,225 crores through FY 2028, with Rs. 850 crores focused on strengthening existing businesses and the remainder earmarked for new recycling verticals such as lithium-ion batteries, paper, and steel. So far, Rs. 1,255 crores has been incurred in the first nine months.

3. Regulatory Environment: Favorable regulations like the BWMR and EPR are enhancing accountability among recyclers and improving domestic scrap availability, which is anticipated to positively impact procurement and operations.

4. Volume Expectations: Following a modest sequential improvement, the lead and plastic segments are expected to show continuous growth, while aluminum volumes faced a temporary decline mainly due to higher market prices. Lead, aluminum, and plastic EBITDA per metric tonne stood at Rs. 23,000, Rs. 14,215, and Rs. 10,462, respectively.

5. Long-term Vision: Gravita aims for a volume CAGR of over 25%, profitability growth above 35%, and a return on invested capital (ROIC) exceeding 25% by FY 2029. The company also targets to increase non-lead segment revenue contribution to 30% and enhance renewable energy usage to 30%.

Overall, the management expressed confidence in achieving their long-term goals supported by disciplined CAPEX, operational efficiency improvements, and a focus on expanding into high-potential recycling sectors.

Q&A Section from Gravita India Ltd. Earnings Transcript

Question 1: "What were the bottlenecks in the last two months to three months which led to this delay in capacity expansion projects?"

Answer: There have been delays from government authorities in granting licenses to operate due to various reasons in Gujarat, particularly related to the 'Vibrant Gujarat' initiative. We're expecting these licenses by the end of January or max by February, allowing us to proceed with the Phagi and Mundra plants.

Question 2: "Is there a change in government's stance on recycling that affects the urgency around approvals?"

Answer: It's a one-off delay attributed to state government inspections and not a broader policy change. We have already received the Consent to Establish. Once inspections confirm compliance, the Consent to Operate will be granted, which we're confident will occur this quarter.

Question 3: "At what point will you reconsider your guidance of Rs. 19 to Rs. 20 per kg margins since you're reporting Rs. 23?"

Answer: We expect to maintain the Rs. 19 to Rs. 20 margin as we sometimes sacrifice revenue to preserve these margins due to arbitrage opportunities. We will reevaluate after six months to assess if we can sustain margins above that range.

Question 4: "What was our domestic versus overseas mix in Q3?"

Answer: In Q3, our mix was 25% domestic and 75% imported. Once capacity is live, we expect the mix to return to around 45% domestic and 55% imported.

Question 5: "Is top-line growth not expected to pick up before FY 2028?"

Answer: While we expect capacity expansion soon, insufficient procurement due to vendors holding back scrap impacts growth. However, once prices normalize, scrap should flow better, helping us get back to normal production levels.

Question 6: "What is the progress on the trading of aluminum alloy on MCX?"

Answer: MCX is expected to finalize trading rules by Q1 FY 2026-2027. This delay was due to compliance under the Security Contract Regulation Act and internal discussions within MCX.

Question 7: "What percentage of revenues came from Exide Industries in the last quarter?"

Answer: Exide represents a small portion of our sales currently. We are focusing on developing our engagement with them, and though sales are low now, we anticipate growth as volumes increase.

Question 8: "What impact will the new labor law have on your financials?"

Answer: We expect an overall impact of around Rs. 4.2 crores for FY 2027, primarily due to recalculation of gratuity and leave encashment, with a portion affecting this financial year as well.

Question 9: "What is your outlook on margins and any growth expectations for FY 2027?"

Answer: Although we expect some volatility in volumes, our long-term EBITDA growth target remains around 30-35% even if top-line growth lags.

Question 10: "How do you manage pricing volatility and which new recycling verticals are you considering?"

Answer: We are 100% hedged in lead while exploring aluminum hedging options. We're considering new verticals like copper and solar panels, complementing our current initiatives in rubber, steel, and lithium recycling.