Ladies and gentlemen, good day and welcome to Gravita India Limited Q2 and H1 FY '26 earnings conference call hosted by Antique Stock Broking Limited. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stock Broking Limited. Thank you, and over to you, sir.
Thank you, Moderator. On behalf of Antique Stock Broking, I would like to welcome all the participants of the 2Q FY '26 call of Gravita India. We have with us the leadership team represented by Mr. Yogesh Malhotra, Whole Time Director and CEO, Mr. Sunil Kansal, Whole Time Director and CFO. On the call without any delay, I would like to hand over the call to Mr. Malhotra for opening remarks, post which we will open the floor for Q & A. Thank you. Over to Yogesh.
Thank you Mr. Manish. Good morning everyone and welcome to our Q2 and H1 FY '26 earnings call. I hope you've had an opportunity to review the earnings presentation and financial results uploaded on the stock exchanges. I'm pleased to share that Gravita delivered a steady performance in H1 FY '26 reflecting consistent strength across operational and financial parameters in all major business verticals. Supported by our net debt free balance sheet, the company remains well positioned for continued growth and long term value creation. Prior to discussing the results, I will provide a brief overview of the strategic highlights and project updates.
The company's expansion program is progressing as planned with current installed capacity rising to 3.40 lakhs metric tons per annum. Gravita aims to more than double this to over 7 lakh metric ton per annum by FY '28. Reflecting its commitment to scalable sustainable growth. The CapEx budget has been realigned to approximately INR 1,225 crore by FY '28. Considering current business opportunities, strategic initiatives in existing verticals and expansion into new recycling domains such as lithium-ion paper and steel. Of this, around INR 850 crore will be deployed towards strengthening existing verticals while the remaining capital will support diversification initiatives. During H1 FY '26, CapEx of about INR 105 crore has been incurred and an additional investment of around INR 100 crore is expected in H2 towards capacity expansion. As part of our commitment to diversification, the pilot lithium-ion battery recycling unit at Mundra is scheduled to become operational in Q3 FY '26.
Phase I of Mundra lead capacity expansion of 30,000 metric ton per annum is expected to be commissioned by November 2025 while phase II adding another 50,000 metric ton per annum is targeted for completion by January 2026. Phagi lead recycling capacity enhancement of 45,000 metric ton per annum is underway and is expected to be completed by December 2026. Mundra project for rubber is expected to be commissioned by Q4 FY '26 with revenue contribution anticipated from FY '27 supported by stabilization of the Romania facility. To give an update on aluminum hedging mechanism. Aluminum trading on MCX is yet to commence but it is likely to begin anytime soon. The proposal has been approved by the MCX Board and all necessary documentation has been completed.
Gravita continues to make steady progress towards achieving its FY '27 ESG milestones aligned with its broader sustainability roadmap extending to FY '34 and FY '50. The company's approach places ESG at the center of its operations. Promoting responsible practices, innovation-led efficiency and transparent engagement to generate enduring value for stakeholders and communities. Coming to the operational performance with the government tightening BWMR and EPR framework, greater accountability has been introduced across producers, recyclers and collection agencies. This has streamlined waste collection channels, reduced leakages to the unorganized sector and improved traceability collectively driving an increase in domestic scrap availability.
On the volumes front, total volumes witnessed a growth of 4% year-on-year in Q2 FY '26 on a year-on-year basis. Quarterly EBITDA per ton stood at INR 23,196 in lead, 14,786 in aluminum and 10,122 in plastics. Coming to consolidated financial results for the half year, Gravita reported revenue of INR 2,075.44 crore in H1 FY '26 marking a growth of 13% year-on-year. 47% of this was driven by value added products reaffirming progress toward our Vision 2029 target of 50% contribution. Adjusted EBITDA increased to INR 223.51 crore reflecting a growth of 16% year-on-year. The EBITDA margin remains strong at 10.77%. Profit after tax rose to INR 189.25 crore, marking a significant increase of 36% year-on-year. PAT margin stood firm at 9.12%.
Throwing some light on the consolidated financial results for the quarter. Gravita reported consolidated revenue of INR 1035.50 crore in Q2 FY '26, registering growth of 12% year-on-year. Adjusted EBITDA rose to INR 111.81 crore up 10% year-on-year with margins stable at 10.80% on the back of operational efficiencies and a favorable product mix. Profit after tax stood at 95.9 crores, increasing by 33% year-on-year with PAT margin maintained at 9.27%. Underscoring strong profitability.
Gravita is advancing confidently towards its Vision 2029 guided by a structured roadmap focused on scaling core businesses and expanding into emerging sectors such as lithium ion, rubber, steel and paper recycling. The company is targeting a volume CAGR of over 25% profitability growth above 35% and maintaining a ROIC of over 25% alongside ambitious targets to increase the non-lead segment share to 30% of total revenue, meet 30% of the energy needs through renewables and reduce energy intensity by more than 10%.
With a legacy of over three decades, 13 environmentally responsible state-of-the-art facilities and a commercial presence across 70-plus countries, Gravita is well positioned for sustainable and long-term value creation. Its growth momentum is supported by a focused CapEx program, capacity expansion and strong compliance with global standards. This trajectory is further reinforced by the company's emphasis on operational efficiency, value-added product expansion, disciplined risk management and strong leadership, fostering continued stakeholder trust and confidence. That's all from my end. I would now request to open the floor for questions and answers. Thank you and over to you, moderator.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have first question from Mr. Amit Lahoti from Emkay. Please go ahead.
Thanks for the opportunity. Two questions from my side. First on margins we have consistently delivered higher lead margin compared to our INR 19-INR 20 guidance per kg. So at what point do we actually upgrade the sustainable guidance range? And is this increase in margin coming from India business or Africa?
So I mean yes, over the past few quarters if you see the margins have increased and part of this that is because of improvement in efficiency, increase in value-added content which we are currently having around 46% and we wish to take it to around 50% in future and we are at around INR 19-20. Now earlier it was around INR 18-19. We now foresee that on a sustainable basis we would be able to achieve around INR 19-20 in lead.
But this INR 23 when it comes. It definitely comes with the compromise on the volume. Which slightly when the Indian markets are better. We sell overseas material to Indian markets which pays us better prices sometimes and this is the arbitrage we got in this quarter compromising something on the volumes and better on the margins.
Okay, got it. Second question on capacity commissioning timeline. How close are we in commissioning lead capacity in Mundra and Phagi facilities? As from our last interaction, it was supposed to come sometime in the month of November, so are we there yet or is it going to take some more time?
The Mundra capacity of 30,000 metric ton would be done within November itself and another 50,000 ton would be done by January 26th. Whereas a Phagi lead capacity also would probably be completed by mid-December.
So, and then, how long it will take to Rampur?
So immediately, I mean, because these are brownfield projects, so we can start taking advantage of these capacities from. So, we have already started building up the inventories in anticipation of this upcoming capacities, and as soon as we have the capacities live, we can start the production and ramp up the capacities immediately.
Okay, thank you so much.
Thank you.
Thank you. We have next question from Shivam Dave from MIV Investments, please go ahead.
Yes, hello, am I audible?
Yes, please go ahead.
Yeah, I just wanted some clarification on the CapEx that was guided for FY '26. So I think we were supposed to do around INR 370 crores but I think the PPT suggests that we should move to around INR 200 crores, and the next two years remain really unchanged. But is there any reason rationale as to why your 1,500 crore CapEx come down to 1,200?
What earlier we planned is that we will be expanding the capacities in the form of greenfield expansions. But later on we realize that we should have it at the same location. Like we are expanding the capacity at our existing facilities in Mundra and another facility in Phagi. So the CapEx is significantly lower as compared to what we do in greenfield projects. So that is the reason with the same capacity we are coming up; the same capacity is coming up with the lower CapEx. So that is the reason overall also we have saved significantly on the CapEx with the overall capacity of around 700,000 tons in next three years with the reduced CapEx of around INR 300 crore.
Okay, so that answers that you're 4.6 lakh tons of capacity for FY '26 and that's largely unchanged for the next two years or so, like in terms of. So should mobile be the only greenfield that's coming up as of now that is scheduled? Most of it then could be brownfield.
We are awaiting some approvals in Dominican Republic, which probably we are expecting to come in this quarter itself. Sorry, Q4 of this year and then we will start building up the capacities there in Dominican Republic. Apart from that, we are also exploring a project in east for lead, aluminum and plastic recycling in India and next year onwards we will look into steel and paper recycling that are going to be greenfield projects again.
Okay, okay. And the second thing was hedging mechanism for aluminum. I understand it is something that it's taking some time practically. When do you expect this should actually come into? When we see that mechanism coming into place?
So we were expecting it to come probably last quarter itself but it did not happen that way. And whenever we talk to the MCX, so they say that they would do it anytime, but unfortunately it is taking longer than expected, so we can't comment right now. We are expecting it anytime because all the approvals are in place now. The only thing they have to do is to just start the contract, so we are expecting every quarter we expect that this will be the quarter that it will come so, we are also waiting.
Fair enough. Make sense. And as of FY '27 end, just one follow up if you don't mind. I would just one follow up. Okay.
Yeah, please.
Yeah. As of FY '27 end, what should be your lead capacity that we expect?
So, for 27 should be close to around, for the lead it should be around 400,000 tonnes.
Okay.
Thank you, participants. In order to ensure the management can address all your questions, I would request you to limit your questions to two per participant. We have next question from Mr. Amit Dixit from Goldman Sachs. Please go ahead.
Yeah, hi, good morning, sir, and thanks for the opportunity. Congratulations for a good performance. Couple of questions from my side. The first one is essentially the 700,000 capacity. What would be the breakup of this capacity between lead, aluminium, rubber and plastics, and if you will have lithium ion also at that point in time, so just wanted to get an idea on the breakup.
Okay, so lead should be close to 50,000 tons. Aluminum should be close to 70,000 tons. Plastic should be close to 50,000 tons again and rubber should be close to 100,000 tons. And approximately 30,000 tons should be lithium-ion, other verticals.
Okay, great. The second one is bookkeeping question. Essentially if you could highlight the revenue and PAT contribution of overseas operations in this quarter?
Okay, so because it was, as I mentioned, that there was some overseas volumes were also sold in India. So the contribution from the overseas business in the bottom line INR 10 crores. And the remaining was from India.
Top line?
Top line was around 30% from overseas.
Okay sir. Thank you. I will get back in the queue. Thank you so much.
Thank you. Next question is from Dheeraj Ram from B&K Securities. You may go ahead.
Thank you for taking the question.
Sorry for interrupting. Mr. Dhiraj, your voice is sounding very distant. Can you please be more loud?
Can you hear me now?
Much better.
Yes. So the CapEx has been reduced from INR 375 crore -INR 206 crore. So out of this, in last quarter you have said that 50,000-60,000 tons will be added from lead, which approximately can be around INR 100-110 crore. So that leaves out in the new vertical, which is INR 40 crore, mostly will be going for lithium-ion expected. So that leaves out INR 60-70 crore for non-lead verticals. So out of this INR 60-70 crore, where you're focusing on for FY '26's expansion?
We'll be focusing majorly on tire business. And if we will increase the aluminum business in India if the MCX approval comes. Otherwise we will increase some capacity overseas in aluminum and plastics.
Okay, got it. And in last quarter you have pointed out on major acquisition opportunity by mid FY '27. So if MCX get included ADC12 includes in MCX. So can we expect this acquisition opportunity to come in aluminum where you might increase your capacity by 2x or something or 3x in FY '27N?
It's very hard to say when those acquisitions will take place. But yes, aluminum we are looking for acquisition. But again as you mentioned rightly that it depends on approval of MCX or the hedging mechanism to be in place before we do anything like that. But we are also exploring other options. Like we are exploring options of rubber and plastic in other geographies. Acquisition of some companies in other geographies also. So we are exploring a lot of opportunities for merger and acquisition in all segments which will happen when it's very difficult to say right now.
Got it. And last question. Is your revenue contribution from rubber that you're expecting in FY '27?
In FY '27?
Yes.
So we have just started building up the rubber business. So definitely we are expecting the rubber business non-lead business should grow up to around 30% which includes the rubber also by FY '27. So hopefully we should have a rubber business of around INR 70-80 crores by FY '27 and probably low value, and probably you will be able to, we'll be able to give you a better answer in H1 next year when we've already started those plants in India, and then we will be able to give you a better answer as to what will be the total revenue coming from.
Got it. Thank you, sir.
Thank you. Next question is from Mr. Vikas Singh from ICICI Securities. You may go ahead.
Good morning, sir, and thank you for the opportunity. Sir, I just wanted to understand this value addition sales which you said that have inflated the margins. Have we reached, have we attained the full utilization or the full extent of this, or there is a further scope for increasing our value addition, and it's just up to what percentage?
Currently around 46% of our total volume comes from value added product, quarter- on- quarter it varies between, sometimes it is 44%-45%, sometimes like this quarter it has gone up to 45% also. But our ideal, I mean target is to reach to around 50% value added content in future.
Noted, sir, and how does this impact our overall margins, if we manage to achieve our target at a current scale?
Generally, value added products give you a 2.5%-3% additional gross margin.
Noted. So my second question pertains to along with you all other recyclers are also adding capacity. So just wanted to understand your sourcing strategy. Considering that there was a new source that some of the people whom you supply right now are thinking of putting their own capacity. So from where would you source that much of lead for recycling?
First of all, you have to understand that there is a lot of recycled battery scrap is going to be available to the organized sector in India itself because of battery waste management rule. The shifting of material from unorganized to organized is already taking place, so there is going to be huge opportunity. Currently around only 35% of the total material comes to the organized sector, and the expectation is that all of that would shift. I mean around 90% would shift to the organized sector in the next two to three years, so there is going to be huge capacity expansion throughout the organized sector in India. I don't think that raw material is going to be an issue, but in addition we also have our own yards.
In overseas locations from where we import a lot of material. Currently around 50% of our total scrap that we operate in India comes from overseas locations. So we are continuously increasing our strength there also. So both Indian scrap as well as overseas scrap is going to contribute to the expansion in the future.
Notice that. Thank you. That answers my question.
Thank you very much. Next question is from Sumangal from Kotak Securities. Please go ahead.
Yeah, good morning and thank you for the opportunity sir. So my first question is on the volume. So if you look at 1h volume growth has been in single digit. So wanted to understand what was the constraint. I understand the delays in expansion but stated capacity is still much higher. So first question is want to understand the reasons. And then if we have this significant capacity across Phagi and Mundra getting added over the next two, three months. From fourth quarter onwards and in FY '27, if we kind of assume even a 60% kind of utilization, it implies a 30%- 40% kind of a growth. So should we expect that and do we have the scrap available with us to deliver that growth over the next few quarters?
Yes. So, to answer your first question, I think, I mean, so we were expecting a 4% sequential growth in last quarter also, but because of this GST reduction that took place. So there was already an anticipation in the market that the GST in batteries would go down from 28% - 18%. So the trade reduced their overall inventories because of which there were some delays from the OEMs in picking up materials which impacted part of the volumes. We expect the impact would be around 5%-8% of the volumes dropped because of this particular reason. But we have, we anticipate to cover this in H2 and we have ample inventories in place at least for Q3 and the procurement is going on for Q4 volumes, also keeping in mind the expansion that is taking place in this quarter. So you can expect, again, as we mentioned that in the long term we are very confident of achieving the 25% growth in volumes going forward.
Sir, in FY '27, whatever we've lost in terms of lower volumes this year. So in the new capacity of around 120-130 kt should we expect 60%-70% utilization in FY '27 for this new capacity?
Not immediately, because you know when we build up capacities we build up with the thought process that in future we will start receiving more and more battery. So we will start some of those efforts to increase that, that battery capacity also. I mean, procurement capacity is also once we have done part of it already and the balance part would be done in Q3 and Q4 and you can expect probably from Q1 next year or maybe Q2 the capacity to go to the optimal level of 60%-70% utilization. And these capacities are enough to give you 25% growth for the next one year itself. By that time we are planning to build up more capacities.
Understood, Understood. So my second question is on your opening remarks when you mentioned that on the ground there is some tightening happening and more compliance on BWMR. So, in over the last three, four months, can you highlight few developments? What is the change and how are you, I mean, some anecdote in terms of what are you seeing on the ground, more compliance with respect to BWMR? That would be helpful.
So, the biggest, I think, evidence is the procurement of battery scrap, domestic battery scrap, and we've increased it by around 35% this year. Q2 versus Q2 and H1, also there is an increase in battery of around 22%. So there is a continuous increase in availability of battery scrap overall to us. And that is itself a clear indication that overall regulation is becoming stricter and more and more battery companies are now focusing on buying from companies who can give them EPR credits also.
Understood. And just one last question on the I mean a lot of our peers are quite positive on the copper business and they are investing and growing that business as well. What is our take, h ave we evaluated in the past and are we kind of studying it and planning anything in that?
Yes, so we keep on evaluating all segments in recycling as we mentioned earlier also. So far we are not focusing that much on copper because as per our studies we see, I mean, valuation in copper is very small. There is no copper scrap generation in India. We are not very confident of bringing copper scrap into India. Definitely we'll keep on reevaluating copper as a segment as we do for other segments also. It's not that we don't want to do copper at all, but we regularly evaluate the market scenario, what is happening in different commodities and based on that we take decision on where to grow and when to grow. Copper is also part of our evaluation. But right now we don't believe that the ROCs is of the same level as which we expect from other businesses. We are focusing on other businesses first and then probably copper also would follow suit.
Understood. And if I can ask one more question.
Sorry for interrupting.
Okay, no problem. Thanks. Thank you. And all the best to the management.
Thank you very much. Next question is from Jayesh Shah from OHM Portfolio. Please go ahead.
Hi. Hi. Thanks for the opportunity, am I audible? Yeah, my first question is, you know, in your opening line comment that your loss of volumes is basically an arbitrage on the margins, which is why you have higher margins. Can you explain this better? Because what we have seen is first quarter also you lacked on volumes, and so in second quarter, probably the GST explanation is there. But what is the real constraint? Is it the inventory or is it lifting of the OEMs? Does this mean that overall you h ave lost market share in the first half vis-a- vis other players?
No market share, a ctually, if you look at the overall market share globally, probably the market share is minuscule. So saying that we've lost market share generally, whatever customers we are servicing, there's no market share erosion has taken place. We are still increasing market share on a regular basis. Capacity is definitely a constraint. The other constraint, as we mentioned in the opening remarks also that when there is an option to increase volume vis-a-vis, we increase the overall profitability, we go for the second and improve our profits. So for example, we have our own operations in overseas locations. So rather than selling directly to the third party, we bring that material into India, do some processing in India and then sell it to the customers in India. So that way we increase profitability.
Of course, in the consolidation, the value, sorry, the volume from our other subsidiaries get cancelled out. So you don't see the total volume. Although if you look at the production levels, there would be an increase in production. Now with this capacity increase that we're talking about, in addition to processing the scrap from our overseas operations, we can also take on more scrap in India itself. Earlier there was a constraint because if we bring in the scrap from our overseas locations, we were not able to process the Indian scrap to some extent.
So what you are trying to say is that if I add up the volume from your international business, that your volume growth is even line, is it?
Yes.
I see. It would be interesting if you can reveal these figures in the quarterly presentation, then we have a better idea because this is a bit confusing.
So we will try to somehow find a solution to this and on how to make it more clear.
Right. As a corollary to what you you're saying is that when you expand capacities now and when the volumes go up, the margins will trend down again to INR 19-20 per kg, is it?
No, no, not exactly INR 19-INR 20 because we will still, so INR 19-INR 20 rupees will only happen if we stop bringing that material to India at all. Till the time there is some arbitrage opportunities, you can see some, expect some increase over INR 19-INR 20. But once that arbitrage is off, then definitely it would be around INR 19-INR 20 only.
Okay. In this case, how do we look here, look at your overall guidance, which is, you know, revenue you've given in terms of absolute growth number? And you mentioned INR 19-INR 20, because first half, the numbers are not really on track. We are happy to see that you have done better on margins, but you are lacking on revenue and volumes so.
So, sir, we generally say that, because -- I mean, so you can look at the overall total EBITDA or PAT numbers rather than looking only at volume and the ROC from the businesses that we are doing. So these are the two major areas where you can track our performances.
Okay. And sometime back you have talked about some acquisition in Europe or you know, some kind of discussion going on. Any update on that?
So, we've already acquired a company, tire recycling company in Romania and we're looking at options in Eastern Europe. We are exploring options in Eastern Europe to either set up more such units or maybe look for opportunities where we can buy out some die recycling or maybe even lead or aluminum recycling companies there.
So that's still on the lookout, is it? That -- that's the update I was looking.
One company has already been taken over and we are increasing capacity in that company itself. Then we are also looking out for other opportunities in Eastern Europe.
Okay, thank you very much. Best of luck.
Thank you. Next question is from Parikshit Kabra from Pke day. Please go ahead.
Hi. Thank you for the opportunity. I just wanted to do a follow u p on the previous gentleman's question about t he volumes and your explanation. If I understood correctly, you implied that w hen you source scrap abroad and you find that you're getting a better price i n India, you bring the scrap to India and you process it in India and then you sell it. And because of this, are you saying that your capacity abroad, where you would have ideally liked to use that scrap, is lying idle and hence your volumes are not rising?
No, no, it's not. So we do part of the process in those countries and the second part, w hat we call refining or alloying, et cetera, those capacities definitely are running idle to some extent. And we are utilizing Indian capacities for that. So we are increasing those capacities in India so that even when we bring those material into India, we still have the capacities to p rocess the domestic scrap that we buy on our own in India.
So then are you essentially saying that look, there is no demand problem abroad, but you are purposely bringing the scrap to India because your overall margins improve in India? But surely even if your margins don't increase by utilizing your full capacity there and selling it here there and using your sourcing lead in India and utilizing your capacity in India and selling it in India, your absolute profit would rise because of overall volume increase and revenue increase even if the margins come down.
No, we always take that into consideration and only bring when we see that the overall margins also increased over overall EBITDA also increased by bringing those material into India. If that is not the case, then we don't do it. So we are also aware of this thing, but whenever there is an option of bringing it into India and getting overall increase in overall EBITDA, only then we go and do it. Margins offset the overall EBITDA that you make by selling those products.
The reason why I think you're pushing on this is because your competitor has grown at 40% top line and you have grown at 10% top line and you're playing in a similar market, right? You both are supplying mostly to your customers in India and at the same time but you're saying that this plays out fine and they are obviously growing at 40%. So wouldn't it be fair to say that you're losing market share?
As I mentioned that it depends. The global market is too huge for anybody to lose market share. Some of the companies, I mean, are not supplying to the customers to whom we are supplying. They have a different customers globally. So I don't think there is. And as it is, the overall market is increasing to such an extent that everybody can grow keeping the same market share. But as we also mentioned that there was some restriction because the capacities that we were trying to put up in probably H1 this year got delayed and are coming up in H2 this year. So once those capacities are in place, we will be able to increase our production and then we will be able to sell those material into the market again.
Got it, sir. And so my second question was on the aluminium side, I understand you're waiting for the MCX to approve the hedging mechanism, but of course the other bottleneck would be getting approval from OEMs or whoever your customers are for the quality of aluminum that you're providing after recycling. So, once the MCX hedging mechanism comes online, is the other bottleneck already solved for? Do you already have approval from a bunch of OEMs who you see start immediately supplying once the hedging mechanism comes online?
So there are two aspects definitely if you have, we have some OEM approvals but not some of the major OEMs are approved, have approved us. So that is one part. But the second part is that once MCX comes into place, you can openly sell the material to the exchange itself if you make ADC12 if there is a demand rather than looking for OEM approval. So to answer your question, there are two parts. Definitely we will be also looking at some opportunities where we can probably take a stake in a company that already has OEM approval. And we are currently also considering some of these companies. But we are waiting for the MCX approval to start happening first, the second part is that even if that does not happen, there will be a market where we will be able to sell at a market price the moment we will buy material overseas. So selling itself is not a problem though the margins would be higher if you are able to sell it to the OEMs directly in India.
But other than that, I mean we can still sell, we were still selling that material in India without OEM approval also.
Got it sir. And so your manpower cost seems to fluctuate up and down.
Mr. Parikshit, I would request you to rejoin.
All right, thank you.
You're welcome. Next question is from Mr. Parikh Gandhi from Verushka Capital Research. Please go ahead.
Yeah, hello, sir, and thank you for taking this question. I just wanted to know that with respect to the 7 lakh capacity that we are eyeing for the FY '28, how much of these with respect to paper and steel are we in? Because from this call as well, from a previous call as well, what I could understood is that a major focus is on the existing verticals along with expanding the lithium ion one and the rubber ones. So how does paper and steel come into this picture and do we foresee this as well as the next, you know, which can really help our top line as well.
So, in paper and steel we are not expecting any capacity out of the 700,000 tons capacity. Whatever paper and steel are going to happen is beyond this 700,000 metric ton.
And so we like, are we sure to incur this next year as well like for the paper and steel, because in the previous con call we did mention that the earlier CapEx was supposed to get incurred for paper and steel, b ut then we moved the CapEx to the existing verticals. So how do we see going forward like?
Yes, absolutely. Our current focus is on existing verticals and the new verticals that we've already started of rubber and lithium-ion battery. And we are probably, once we are done with those, and we are very confident of getting the 30%-35% increase in revenue numbers from the existing and the new verticals in the next three to four years. And once we are, I mean after that we will be exploring paper and steel. It's only one by one that we are exploring all these facilities rather than going at all the segments at once.
Okay, so no CapEx for paper and steel for now.
Not in this year and probably not in the first half of next year also. Beyond that, if there are certain -- I mean we see some changes in the environment, we will probably do it, but at least for the next H1 of next year, there is no commitment to put any money in paper or steel.
Okay, thank you so much and all the best.
Thank you very much. Next question is from Siddharth from Kotak Securities. Please go ahead.
Hi sir. Congratulations on a good set of results. Just one question on the other side of things. From what I understand, this space is fairly saturated. There are a few large existing players operating -- Am I audible now? Am I audible now, sir? Okay, so sir, I was asking at least in the rubber space, it seems that there are a few large players already operating in India. So I just wanted to check, given our sort of focus on rubber as the newest vertical, what exactly gives us the confidence or a right to win in this space. Just would like to hear your thoughts on that.
Yeah, so again, if you look at rubber also, it's a very fragmented industry, right now, rubber recycling. And there has been an introduction of EPR and earlier it was around 90% of the total capacity in rubber recycling was in the unorganized sector. Because of this EPR and also some regulations by CPCB of continuous pyrolysis plants, the older plants for the unorganized sector will probably go away. And again, the rubber recycling would also start happening in the formal sector. That is one part. The second part is we already have our own scrap yards overseas where we can source cheaper tire and rubber scrap which will help us in getting better margins out of rubber recycling. And the third part is we are also looking at various other options rather than merely pyrolysis oils like RCV rubber sheets.
So all these carbon black also. So we are looking at various other options in rubber recycling and not only pyrolysis oil. So where currently also there are very few players. So we believe that there is enough space in this segment also where we can recycle it in a profitable manner.
Sir, if I were to sort of ask you what sort of economics you do see from the business. I understand that last time we highlighted that we will have further clarity as our plants progress. So would you be in a position to give me the unit economics of say the rubber division, say three years down the line?
See, currently we are taking the lowest of. In our projections we take the lowest EBITDA margins of around INR 7-8 per kg. As and when we go in for some value addition definitely the margins would improve. But in our projections we've only taken if we don't do any value addition and only going for the pyrolysis oil and rubber sheets etc. Which are run-of-the-mill products. Even then the EBITDA margin is around INR 7-8 per kg.
And on a percentage basis that number would be? Percentage EBITDA?
It should be close to 30%. 30%.
Okay. Okay, so just a second question, sir. Just wanted to check that we are saying that the ADC Alloy 12 all approvals are in place. Just wanted to confirm one small point, sir. Any incremental change which has happened in t he last, say, three months?
So what we can tell you is that all required permissions are in place in MCX.
So there is nothing left, s o all --
But from what I understand this was the case last quarter as well. Or has anything changed in the past three months?
No, internally also they have -- I mean, the goal had to go for all these commodities that are there for which the permission has been granted. But beyond that, I mean we don't know what exactly is happening and where it is stuck.
Okay, so last time there was no internal approval from the MCX side for these contracts. Is that understanding correct, sir?
Yes, yes, that is our understanding that now even the internal permissions are in place for them to launch these products.
But even if you get these like MCX alloys, if you don't have OEM approvals, my understanding is almost 65%-70% of the total ADC demand is tied to the auto industry. If you don't have the auto OEM approvals in place, I was just thinking how do you plan to expand this particular segment? Any thoughts on that sir?
There are two, three things. First of all, of course we have OEM approval but not of the major OEMs like Maruti. That approval is not there. So that is one. Second part is even if you do not have approval from Maruti you can just sell it to tier one or tier two vendor. And there the margins would be lower. But you can still sell it to those customers in India.
But the reason why we were not doing it is because the margins are thin and because the overall time period for realizing the profit was too high. And because of no hedging mechanism, sometimes you would run into profits higher than expected and sometimes you will run into losses also, so we were avoiding that. Otherwise if you look at what I buy today and sell it to even a trader or a tier two company there are margins to be made in aluminium also. We mentioned that on a sustainable basis around INR 12-INR 14 margin can be made in aluminium, not as high as lead. But even if you sell it to tier two companies you can make around INR 12-INR 14 EBITDA margins on aluminium.
These are tier one tier two suppliers of two of these auto OEMs. Is that correct?
Yes.
Yes. Got it. Right, so just as one last question, if I can.
I would request you to rejoin the queue for a follow up.
Sure thing. Thanks for your time. Thank you.
Thank you.
Thank you very much. Next question is from Archit Agarwal from Steptrade Capital. Please go ahead.
Hello.
Hello.
Yes, sir. Please go ahead.
Yes, sir. Can you throw some slides on the revenue mix as of now?
Yes. One thing. Okay, so revenue. 87% of the revenue has come from lead. 9% from aluminum and 4% from plastic.
Okay. Volume wise?
So this was volume, as I was mentioning, was volume only.
Okay.
Thank you very much. Next question is from Romil from Electrum PMS. Please go ahead.
Thanks for the opportunity. Sir, just two questions. One is on this one.
Sorry for interrupting. Mr. Romil, your voice is breaking. Mr. Romil. Please go ahead. Your line is unmuted.
You can hear me properly.
Mr. Romil, I would request you to reconnect because we can't hear you. Next question. We will. Next question is from the line of Karan Gupta from ACMIIL. Please go ahead.
My question is regarding the EBITDA person. Am I audible?
Can you speak a little louder? You are audible.
My question is regarding the EBITDA per ton. As you've already alluded on the left side that INR 19 -INR 20 is more sustainable and marginally accretive. What for aluminum and plastic side? You said INR 12 -INR 14.
Yeah. Currently, because we are not doing business in India, our overseas margins are a little higher of around INR 14-INR 15. But if we do it in India, the margins would be around INR 12-INR 14 in aluminium. And for plastic, the sustainable would be around INR 10-INR 11 per ton. Sorry, for kg.
Yeah, yeah. Okay. And just one last one on the copper card is partly answered. But what kind of value addition that you are seeing is limited as of now and is it the sourcing is limited or the process that you need to refine or maybe collect the raw scrap is basically the complex as of now?
Yeah. So generally, when we talk about the scrap that we are doing, like battery scrap, aluminium scrap it is, etc. We are buying it from developing countries, there we have our own yard. So part of the advantage that we hold is access to the scrap availability. Whereas in copper, most of the scrap generation happens in the developed countries like Europe and U.S. And it's a very, I mean organized setup.
And it's accessible to each and everyone. So there is very little play in terms of getting a better procurement price. The second thing again is bringing it to India and then doing the processing. So processing is also very simple because copper is just copper metal. Whereas in lead, you remove impurities, make value-added products out of that, and that's where the margin comes to. Whereas in copper generally it is in terms of cables. You take off the layering and then melt the copper and then you can sell it at a percentage of copper price anywhere you want. So therefore the value addition in.
Whatever we think is not that high when you deal in copper pricing. But overall, definitely it helps you improve revenues also because copper prices are higher. So those advantages are there with copper. But in terms of percentage EBITDA margin that you can get out of it or even absolute EBITDA margin would definitely be higher because the prices are four to five times that of lead or aluminum. But in terms of percentage EBITDA margin, it will never match those numbers.
Okay, it will never match.
That is our take on. But others are doing profitably. Then we'll have to see where probably we'll have to reevaluate it again.
Okay. Yeah, thanks.
Thank you very much. Next question. Question is from Kishore Kumar from Unifi Capital. Please go ahead.
Yes, sir. Thanks for the opportunity. I just wanted to understand the broad procurement split of domestic and imports for the scrap for this quarter vis-a-vis the last year.
Yeah. For Indian yards, we are close to 50% import and 50% domestic. But yes, we have another line where we source overseas and process overseas. So that's another part. But for India we are 50/50.
So just to clarify, for the Indian business, it's 50% sourced domestically and 50% we are getting it from the overseas plants. Overseas yards.
Now domestic has slightly gone up. It is around 52% domestic battery and around 48% overseas battery.
But so is the split similar for the last Q2 as well, sir? Year on year, is there any difference?
Last year around 36% of the battery was Indian battery and around 60-64% was imported.
Got it, sir. Got it. So my second question is on the balance sheet. Booking, bookkeeping machines, other current assets have actually gone up significantly. Is there any prepaid expenses actually accounted there or capital advances?
You are talking about other current assets, right?
Yes. Yeah, yeah.
Okay. Basically this includes whenever we import the scrap, we need to pay the advances to the vendor and so considering the upcoming facilities in Mundra, which is mostly import-intensive, we are coming up with significant capacity expansion in Mundra, so in anticipation of the upcoming capacity, we have slightly increased, started increasing the import bookings and made some import advances also, which is helping us ramp up the capacities as soon as we have the capacity online. So this denotes the, you know, more imports in the upcoming quarters.
Got it, sir. It's clear. Thank you, sir. All the best.
Thank you very much.
Thank you very much.
Ladies and gentlemen, in the interest of time, that was the last quarter. I would now like to hand the conference over to management for closing comments.
Thank you, moderator. Thank you everyone for participating in this call. We trust that we have addressed all your queries during the session. However, if there are any remaining questions, please feel free to reach out to our investor relations team. Once again, we extend our gratitude to all the participants for joining us today. Thank you and have a good day.
On behalf of Antique Stock Broking Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.