Release Date: October 22, 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) reported a consolidated revenue increase of 19% for H1 FY25, reaching INR 1,835 crores.
- The company achieved a significant growth in consolidated adjusted EBITDA, which rose by 30% year-on-year to INR 192.72 crores.
- Gravita's step-down subsidiary, Gravita Netherlands, signed an MOU to acquire a waste rubber recycling plant in Romania, marking its first recycling facility in Europe.
- The company is making steady progress towards its goal of increasing its capacity to over five lakh metric tons per annum by FY27.
- Gravita India Ltd is strategically advancing its ESG roadmap, aiming to integrate ESG principles into its operations and decision-making processes.
Negative Points
- The volume growth for Q2 FY25 was only 8%, which is lower than expected, partly due to the diversion of materials from overseas to India.
- The company faces challenges in the plastic segment, with quarterly volumes remaining in the range of 3,000 to 4,000 tons due to product development delays.
- There is uncertainty regarding the implementation of the reverse charge mechanism for battery scrap, which could impact future operations.
- The company plans to raise up to INR 1,000 crores, but the timing and necessity of this fundraise are uncertain and dependent on future opportunities.
- Gravita India Ltd's reliance on imported scrap remains high, although domestic scrap availability is increasing.
Q & A Highlights
Q: What is the expected volume growth for Gravita India Ltd for the full year, and what are the key avenues for this growth?
A: The H1 growth rate is 17% year-on-year, and the company expects to maintain a growth rate of around 25% for the full year. The growth projections for lead are around 17-20%, while plastic and aluminum are expected to grow by 35-40%.
Q: Can you provide more information on the aluminum capacity utilization and the listing of aluminum on MCX?
A: The listing of aluminum on MCX is in process, with approvals received from the Finance Ministry. It is expected to be listed in Q4. The current capacity utilization for aluminum is around 45%, and it is expected to increase to over 50% in H2.
Q: How does the hedging mechanism work for Gravita India Ltd, and what is the impact on profitability?
A: Gravita hedges approximately 10-15% of its volume, around 10,000 to 12,000 tons. The hedging gains or losses pertain to the entire volume, not just the hedged portion. The profitability from hedging is higher when there is significant price fluctuation.
Q: What is the rationale behind the INR1,000 crore fundraise, and how does it relate to the reverse charge mechanism?
A: The fundraise is an enabling provision to prepare for potential M&A opportunities and fast-tracking CapEx investments due to policy changes like the reverse charge mechanism. This mechanism is expected to convert the unorganized sector into the organized sector, potentially accelerating CapEx needs.
Q: What is the status of the paper recycling plant setup in Central America?
A: The paper recycling and steel recycling projects are expected to take longer, with movement anticipated in FY '27. There are no immediate developments expected before that timeframe.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
