Gravita India Ltd — summary of earnings call

by

Gravita India Limited
Q4 FY25
Call date · May 05, 2025

1 · Management Commentary

Key Positives

  • Achieved highest-ever revenue, EBITDA, and PAT in FY25; 5-year CAGR of 23% in revenue and 57% in PAT.
  • Net debt-free status; ICRA rating upgraded to AA-Stable.
  • Strategic acquisition of an 18,000 MTPA waste tire recycling plant in Romania (INR40 crores investment).
  • Capacity expanded to 3.34 lakh MTPA; targeting 700,000+ MTPA by FY28.
  • Cash flow from operations rose from INR42 crores to INR282 crores.
  • Interim dividend of INR6.35/share; 14-year track record of payouts.
  • Domestic scrap sourcing rose to 43% (from 30% YoY), aided by regulatory changes.
  • EBITDA per ton improved YoY across lead (+6%), aluminium (+30%), and plastic.

Key Negatives

  • Overseas profitability contribution dropped to 25% in Q4 from 53% in Q3, partly due to Mozambique operational hiccups and treasury income skew.
  • Plastic segment growth and profitability lagged expectations due to slower market development.
  • Some project delays overseas (e.g., Dominican Republic) due to licensing.

Forward Guidance

  • Capex plans: INR1,500 crores by FY28 (INR1,000 crores for existing, rest for new verticals); INR375 crores planned for FY26.
  • New products/segments: Pilot lithium-ion battery recycling and rubber recycling facility in Mundra to be operational by H1 FY26; expansion in rubber, steel, paper recycling.
  • Expected client wins: Increased tolling volumes with Exide and Amara Raja; capacity expansions in Phagi and Mundra to support new contracts.
  • Revenue/margin outlook: Targeting 25%+ volume CAGR, 35%+ profitability growth, ROIC above 25%; EBITDA per ton guidance—lead: INR18–19/kg, aluminium: INR14–15/kg, plastic: INR10–11/kg.
  • Other initiatives: ESG targets for FY27, FY34, FY50; aim for 50% revenue from value-added products by 2029; non-lead business to exceed 30% of mix; >30% energy from renewables.

2 · Q&A Highlights

Q 1 (Composite): What is the timeline and impact of ADC12 aluminium alloy listing on MCX, and how will it affect hedging?
A (Management):
• ADC12 is already listed on Shanghai Exchange; MCX listing expected in H1 FY26, possibly Q1.
• MCX listing will enable hedging for Indian business, supporting growth.

Q 2 (Composite): What is the specific growth guidance for FY26 and beyond, including volume/revenue and ROIC?
A (Management):
• Capex of INR375 crores planned for FY26; targeting 25–30% capacity growth YoY for next 3 years.
• ROIC benchmark is 25%+ for all businesses; actual may range 25–30%.
• FY26 revenue/volume growth expected in line with 25% projection, but may vary (20–30%) depending on capex execution.

Q 3 (Composite): What is the expected tax rate and MAT credit utilization outlook?
A (Management):
• Blended tax rate to remain at 12–13% globally; India at 30%.
• MAT credit of INR30 crores to be used over next 6–7 years; all credits already accounted for in books.

Q 4 (Composite): What are the plans and scale for rubber recycling, and when will new products (e.g., reclaimed carbon black) be commercialized?
A (Management):
• Rubber capacity to reach 60,000 MTPA in FY26 (part in H1, part in H2); includes pyrolysis, crumb rubber, sheets, and future rCB.
• Romania plant has rCB capability but not yet in production; India plant to start in H1 FY26, with sampling and commercialization to follow.

Q 5 (Composite): What is the mix and outlook for tolling business, especially with Exide and Amara Raja?
A (Management):
• Tolling constitutes ~85% of India recycling volumes.
• Exide trials began Jan 2025; volumes expected to rise substantially.
• Capacity expansions underway to accommodate increased tolling.

Q 6 (Composite): What is the impact of regulatory changes (RCM, EPR, BWMR) on formalization and profitability?
A (Management):
• RCM for battery scrap expected to be notified soon (possibly in next GST Council meeting).
• Formal sector share in lead recycling could rise sharply to 75% if RCM is implemented; otherwise, gradual over 2 years.
• EPR credits from local procurement are profit-neutral; not included in growth plans.

Q 7 (Composite): What is the EBITDA per ton guidance for lead, aluminium, and plastic, and what drives margin changes?
A (Management):
• Lead: INR18–19/kg sustainable, with slight annual improvement.
• Aluminium: INR14–15/kg; Plastic: INR10–11/kg (improvement expected H2 FY26 or FY27).
• Margins influenced by scrap mix, value-added product share, and operational efficiencies.

Q 8 (Composite): What are the asset turns and revenue targets for rubber, and how will captive consumption affect reported numbers?
A (Management):
• Asset turns in rubber expected at 8–10x, similar to other verticals.
• Romania rubber revenue: INR100–125 crores; domestic rubber largely for captive use, so not fully reflected in revenue.

3 · Other Key Numbers

  • 5-year revenue CAGR: 23%; PAT CAGR: 57%.
  • FY25 revenue: INR3,869 crores (up 22% YoY).
  • FY25 adjusted EBITDA: INR404 crores (up 22% YoY); EBITDA margin: 10.43%.
  • FY25 PAT: INR312 crores (up 31% YoY); PAT margin: 8%.
  • FY25 ROIC (pre-tax): 27%.
  • Q4 FY25 revenue: INR1,037 crores (up 20% YoY, 4% QoQ).
  • Q4 FY25 adjusted EBITDA: INR109 crores (up 17% YoY, 6% QoQ); EBITDA margin: 10.5%.
  • Q4 FY25 PAT: INR95 crores (up 38% YoY, 22% QoQ); PAT margin: 9%.
  • Cash flow from operations: INR282 crores (vs. INR42 crores YoY).
  • Capex allocation by FY28: INR1,500 crores (INR1,000 crores for existing, rest for new verticals).
  • Interim dividend: INR6.35/share.
  • Domestic scrap sourcing: 43% (vs. 30% YoY); Q4: 48%.
  • EBITDA per ton (Q4 FY25): Lead INR20,466; Aluminium INR19,836; Plastic INR9,882.
  • Value-added products: 46% of revenue (FY25); target 50% by 2029.
  • Overseas profitability: 25% of Q4 total (vs. 53% in Q3); sustainable range 40–50%.
  • Treasury income in Q4: INR9 crores; interest cost savings: INR7 crores; total pre-tax impact: INR15–16 crores.
  • Rubber revenue (Romania): INR100–125 crores expected in FY26.
  • Rubber capacity: 60,000 MTPA (FY26).
  • Tax rate guidance: 12–13% blended; India 30%.
  • MAT credit to be utilized: INR30 crores over 6–7 years.
  • Asset turns (rubber): 8–10x.
  • Tolling: ~85% of India recycling volumes.
  • Formal sector share in lead recycling: 40% (current), target 75% (post-RCM).
  • ESG: >30% energy from renewables; >10% reduction in energy consumption targeted.

Leave a Comment