GRAVITA - GRAVITA INDIA LIMITED Share Price

Gravita India Ltd. management provided an optimistic outlook for FY '27, projecting a continued growth trajectory despite macroeconomic uncertainties. Key highlights include a five-year CAGR of 25% in revenue and an expansion plan targeting an increase in recycling capacity to over 800,000 metric tons by FY '29. Notably, the company has made significant strides in capacity expansion, including an 80,300 metric ton addition at its Mundra facility, bringing the total lead recycling capacity to 145,100 metric tons per annum.

Gravita has invested INR 49 crores in this expansion and launched a pilot lithium-ion battery recycling facility with a capacity of 6,000 metric tons per annum, carrying an additional investment of INR 14 crores. The company's recent acquisition of a 99.44% stake in Rashtriya Metal Industries Ltd. (RML) for INR 560 crores indicates a strategic diversification into the copper segment, with plans for a copper recycling facility in Mandvi, Gujarat, estimated to cost around INR 160 crores.

For FY '27, the management anticipates a growth in volumes by 20%-25%, expecting a significant increase in copper volumes due to the new facility. The adjusted EBITDA for FY '26 was INR 452.48 crores, reflecting a margin of 10.6%. The forecast for EBITDA per ton is projected at INR 60,000-65,000 once full capacity is achieved, indicating a strong potential for improved profitability.

The company is earmarking a total CAPEX of INR 1,700 crores through FY '29, with INR 815 crores dedicated to enhancing existing operations. Working capital is expected to stabilize around 90 days, influenced by the introduction of the copper business which adds an import element. The strategic focus remains on operational efficiency, synergies from the copper acquisition, and enhancing value-added products to strengthen margins and drive sustainable growth.

1. Question: "What is our plan now? Are we planning to rationalize some of our net capacity expansion or how it is going to be because of this?"
   Answer: Our previous CAPEX guidance of INR 1,200 crores did not factor in the copper segment. With the recent RML acquisition, we're increasing our CAPEX plan to INR 1,700 crores over the next four years, prioritizing copper expansion, which we are very optimistic about. Our lead capacity remains on track to reach 800,000 tons.

2. Question: "Can we get the commissioning timeline of that 45,000 tons of lead capacity addition?"
   Answer: The commissioning is expected in Q1 2026 in Jaipur. We have installed capacities and are awaiting government approvals, which we anticipate will come in the first half of this quarter.

3. Question: "What is the cause of the decline in absolute EBITDA in Q4 despite the copper segment addition?"
   Answer: The minor EBITDA contribution from copper occurred in March; thus, copper did not significantly impact Q4 results. Additionally, logistic disruptions affected our sales to the Middle East, mainly the value-added products, while rising inward logistic costs also pressured EBITDA margins.

4. Question: "How do we see our Q1 margins to look like?"
   Answer: We foresee a short-term impact on margins due to ongoing disruptions. While we're exploring new markets to mitigate these effects, finding alternative sales for value-added products takes time.

5. Question: "Can you briefly outline your strategy in the copper business?"
   Answer: Our strategy includes consolidating existing markets and backward integrating by establishing a copper recycling plant at Mundra, expected in 12 months. We aim to enhance sales synergy and margin improvement as we expand copper production.

6. Question: "Do we have any plans for rubber and steel recycling yet?"
   Answer: We have already acquired a company for rubber recycling in Romania, with plans for rubber capacity in India expected to come online in H1 2026. Steel is a longer-term goal as we focus first on copper and rubber.

7. Question: "What is the current capacity utilization at RMIL?"
   Answer: RMIL's current capacity utilization is about 50%. We aim to elevate it to 60%-65% next year while planning expansion to nearly double the capacity to 60,000 tons within three years.

8. Question: "What is the outlook for working capital?"
   Answer: Current working capital is around 90 days, slightly elevated due to inventory management for upcoming capacity expansions. We expect it to remain in the 85 to 90 days range going forward, especially with the copper segment's import needs.

9. Question: "How will copper sourcing affect working capital?"
   Answer: The copper segment will require additional working capital due to imports, and while we anticipate maintaining our working capital days, we might see a rise in working capital needs as we scale operations.

10. Question: "What is the current and expected EBITDA for copper?"

Answer: Copper currently stands at about INR 45,000 per ton, and we anticipate this could rise to between INR 60,000 and INR 70,000 per ton once our recycling facility is operational.

These Q&A summaries encapsulate the primary discussions from the earnings call, highlighting strategic insights, operational performance, and future projections for Gravita India Ltd.