Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gravita India Ltd (BOM:533282, Financial) achieved record high revenue, EBITDA, and PAT for Q4 and FY24 despite logistics disruptions.
- The company’s pure lead produced at Gravita Mundra, Gujarat has been empaneled as an approved lead brand deliverable against MCX lead futures contract.
- Gravita Tanzania Limited increased its battery recycling capacity by 5,000 metric tonnes per annum, bringing the total capacity to 12,000 metric tonnes per annum.
- The Board of Directors approved an interim dividend of INR5.2 per equity share, continuing a 13-year track record of sustainable dividend payouts.
- Gravita India Ltd (BOM:533282) expanded its total capacity to over 3 lakh metric tonnes per annum in FY24, a 29% increase from FY23, with plans to reach 5 lakh metric tonnes per annum by FY27.
Negative Points
- Aluminum volume dropped to approximately 3,200 tonnes due to high risk of metal price fluctuations during the transit period for imports in India.
- The company faced logistics issues related to the Suez Canal, impacting volume growth in Q3 FY24.
- Working capital increased due to higher inventories and receivables, partly due to logistics disruptions and arbitrage opportunities.
- The qualification of recent financial statements regarding the accounting treatment of the sale of shares held by the trust for the benefit of employees led to differences in interpretation of accounting standards.
- The company’s Vision 2028 indicates a delay from the original Vision 2027, incorporating additional landmarks and targets, which may suggest potential delays in certain CapEx elements.
Q & A Highlights
Q: The first question is on the vision. So earlier, it was the Vision 2027. But now in this presentation, we see Vision 2028. What has changed in the vision? Are we delaying certain CapEx elements or expecting the CapEx to go up further?
A: We are doing a rolling four-year vision. Last year, it was '27, and now it is Vision 2028. We have incorporated additional landmarks, especially on the ESG front, and increased certain other targets. For example, the non-lead business target has been increased from 25% to 30%-plus.
Q: Since we are working with MCX and there has been some circular on the inclusion of ADC12 for hedging, does this mean our aluminum capacity utilization at India operations will improve? If so, can you share some numbers?
A: Correct. Last year, we had only 11% capacity utilization for ADC12. This year, we plan to increase it once the derivative is implemented. We expect the derivative to list next quarter, and brand empanelment will start. By Q4, we should see growing volume, and next year, we foresee higher capacity utilization.
Q: The ongoing Red Sea issue has impacted logistics. What alternate arrangements are we making, and can we return to our normal growth of around 20% plus from FY25 onwards?
A: We addressed the issue by diverting volumes to other geographies. Although there was some impact in Q3, we started shifting volumes from Q3 onwards. We think the volume level from Q4 is the base for another 25% growth next year.
Q: The working capital has increased, whereas our guidance has been to gradually move towards 60-65 days. Can you share more details on why this increase occurred and when it will normalize?
A: Part of the sales that were to happen in Q3 happened in Q4, increasing receivables. Currently, receivables have reduced by around INR100-125 crores. The overall inventory levels are in line, and once things normalize, we will be back to our target of reducing inventory levels.
Q: We have provided a revenue growth of 25% and a PAT growth of 35% under Vision 2028. However, FY24 numbers don't reflect this growth. Any specific reason?
A: The 25% CAGR is a long-term guidance. There will be years with faster growth and years with slower growth. Over the past five years, revenue growth is 21% and PAT growth is 74% CAGR. This year was affected by logistic issues in Q3, impacting growth. We are confident in achieving our long-term Vision 2028 targets.
Q: Can you explain the drop in employee costs on a quarter-on-quarter and year-on-year basis?
A: The employee cost includes incentives. Provisions for incentives were higher in Q3, expecting better numbers in Q4. Since the growth was not as expected, the incentive part reduced in Q4, leading to lower employee costs.
Q: The tax rate seems low despite higher contributions from Indian operations. Can you explain this?
A: In India, we have tax advantages in Chittoor, enjoying 100% tax exemption. Profits from Chittoor are tax-free. This has kept the overall tax rate low despite higher contributions from Indian operations.
Q: Regarding BWMR regulations, how has the experience been, and what is the expectation for the next year?
A: After implementation, the central portal started working, and producers and recyclers are getting registered. EPR penalties are expected next quarter, which will create a financial model. We expect more materials to be diverted to the formal sector, increasing organized volumes.
Q: What is the sustainable EBITDA per kg for aluminum, lead, and plastic after aluminum hedging is in place?
A: For aluminum, we expect INR15 to INR16 per kg. For lead, INR18 to INR19 per kg, and for plastic, INR10 to INR11 per kg.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
