Good afternoon, everyone, and welcome to our Q2 and H1 FY 2027 earnings call. Thank you for joining us today. I hope you have had the opportunity to review our financial results and investor presentation, which have been uploaded to the stock exchanges. During today's call, I will take you through the key business development strategic initiatives, operational highlights, and financial performance for the quarter and half year. Following my remarks, we will be happy to take your questions. We are pleased to share that Gravita has delivered resilient performance in Q2 and H1 FY 2027, navigating an evolving global environment and supply chain challenges while continuing to execute its long-term growth strategy. During H1 FY 2027, our revenue, EBITDA, and PAT grew by 40%, 29%, and 10% respectively, supported by an improved product mix, operational efficiencies, and contribution from our diversified recycling businesses.
While geopolitical developments and logistic disruptions have impacted the availability and movement of recyclable materials, we have been actively working to diversify our sourcing geographies and strengthen our procurement network. Alongside sourcing from India and other international markets, we are expanding our presence in developed economies by establishing additional scrap procurement yards. These initiatives are aimed at improving sourcing resilience, reducing dependence on individual geographies, and supporting better utilization of our expanded manufacturing capacities over the longer term.
Our performance reflects the strength of our diversified recycling platform and our ability to adapt to challenging market conditions while remaining focused on profitability, operational excellence, and disciplined capital allocation. Going forward, we will continue to strengthen our core businesses, expand our presence across products and geographies, and increase the contribution of value-added products as we progress towards Vision 2030.
Before discussing our financial performance in detail, let me first walk you through the key strategic developments during the quarter that continue to strengthen our growth trajectory. Our strategic expansion in copper recycling continues to progress well. The initiatives across Mundra and Mandvi designed to strengthen integration across the copper value chain. At Mundra, we have announced plans to add 59,200 metric ton per annum of copper recycling capacity with an estimated investment of approximately INR 64 crores to be funded through internal accruals. The capacity is expected to be commissioned in phases by March 2029. This expansion will support raw material sourcing for our proposed Mandvi plant and further strengthen integration across our copper recycling operations, enabling us to cater to growing demand in domestic and international markets.
At Mandvi, Gujarat, work is progressing on our 29,400 metric ton per annum copper recycling facility with an estimated investment of approximately INR 160 crores. The project remains on track for commissioning within the next 12 months, as previously guided. Funded through internal accruals, the facility will strengthen backward integration, expand our value-added product portfolio, and support long-term profitable growth. We have approved an additional investment of approximately INR 94.42 crores to subscribe to the rights issue of Rashtriya Metal Industries Limited against a total rights issue of approximately INR 94.81 crores. The proceeds will support RMIL's strategic initiatives and general corporate purposes, further strengthening our presence in the copper and copper alloy segment. We remain very optimistic on lithium-ion battery recycling space, a segment poised to grow alongside the rapid rise in electric vehicles.
As battery feedstock availability increases, we will scale toward higher value recovery and processing, positioning this business as a key contributor to Gravita's future growth. In line with our long-term expansion strategy, we have embarked total capital expenditure of INR 1,680 crores through FY 2029. Of this, INR 815 crores will be allocated towards strengthening and expanding our existing businesses, with the balance directed towards entering new recycling verticals, including lithium-ion battery and copper. The 57th GST Council has recommended bringing electrical and electronic waste scrap under the reverse charge mechanism for procurement from unregistered suppliers. This will exponentially enhance our domestic procurements and fast-track the shift from informal to formal. We are also strengthening our international sourcing capabilities. The board has approved the incorporation of a wholly owned subsidiary in the U.S., proposed to be named Gravita Recyclers USA Inc, with an initial capital of $50,000.
The proposed entity will focus on setting up scrap procurement network in the U.S. and other neighboring countries. It is expected to support our international procurement network, broaden sourcing options, and improve supply chain across our recycling businesses. Reinforcing financial stability, RMIL has received an [ICRA]AA (Stable) rating for its long-term facilities and an [ICRA]A1+ rating for its short-term facilities, underscoring its strong credit profile. Coming to operational performance, our overall operating performance during Q2 and H1 FY 2027 reflected the contribution of our expanded manufacturing base, improved operating efficiencies, and continued focus on product mix. Total volumes increased by 3% year-on-year to 52,199 metric ton per annum in Q2 FY 2027. While the availability and movement of scrap continued to influence operating levels in certain businesses, we remain focused on optimizing production, maintaining profitability, and improving the utilization of our manufacturing facilities.
Production and sales also recorded sequential growth during Q2 FY 2027. Value-added products contributed 64% of total sales in H1 FY 2027, reflecting continued progress in improving the product mix. The plastics segment continued its strong growth momentum in Q2 FY 2027, driven by sustained demand and improved operational performance. The copper segment operated at 50% capacity utilization during H1 FY 2027, with sales increasing by 12%, following our strategic entry into copper through RMIL.
We are focused on improving operational integration, leveraging procurement and manufacturing synergies, and progressively scaling the business. As capacity utilization improves and our planned recycling infrastructure comes on stream, we expect copper to become an increasingly important contributor to our consolidated performance. In terms of profitability, EBITDA per ton for the lead, aluminum, plastic, and copper segment stood at INR 22,620, INR 22,664, INR 10,334, and INR 84,671 respectively during Q2 FY 2027.
Moving to the consolidated financial performance for Q2 FY 2027, revenue grew by 38% year-on-year to INR 1,427 crores, supported by the contribution from our diversified businesses, higher capacity utilization across key segments, and continued operational efficiencies. Value-added products contributed 64% of consolidated revenue during the period, marking further progress towards our Vision 2030 target and deriving approximately 60%+ of revenue from value-added offerings. RMIL contributed INR 420 crores to consolidated revenue during Q2 FY 2027 with an EBITDA margin of 8.5%. Its contribution strengthens our presence in the copper and copper alloy segment and further diversifies our revenue base beyond our traditional recycling businesses. Adjusted EBITDA increased 28% year-on-year to INR 143.37 crores, with EBITDA margin remaining healthy at over 10%. Consolidated PAT grew 6% year-on-year to INR 102 crores, while PAT margin remained over 7%.
Looking ahead, we remain confident in our ability to deliver on Vision 2030 and sustain our long-term growth trajectory. Our priorities remain clear: strengthening our leadership in core recycling businesses, expanding into high-growth verticals, increasing the contribution of value-added products, and building a more resilient international sourcing network. With a strong pipeline of capacity additions, deeper integration across the copper value chain, the development of lithium-ion battery recycling capabilities, and continued emphasis on operational excellence and capital discipline, we believe Gravita is well positioned to capitalize on the growing global circular economy opportunity and create sustainable long-term value for our stakeholders. That is all from my end, and I would now request the moderator to open the floor for questions and answers. Thank you, and over to you, Mr. Moderator.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. 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. The first question is from the line of Amit Dixit from Goldman Sachs. Please go ahead.
Yeah, hi. Good afternoon, everyone, and thanks for the opportunity. First of all, sir, congratulations for a good set of numbers in a very testing operating environment. Two questions from my side. The first one is on the West Asia crisis and the impact that we have on sourcing of scrap or maybe the exports. So what kind of impact do you see? Has it reduced compared to the last quarter, since we might have taken some steps to navigate that? And how we are thinking of navigating it or mitigating some of that impact?
Thank you. So basically, of course, what we have done is that we have expanded our procurement network internationally, and we have gone to geographies from where we were not earlier picking up material for various reasons. One of them is because it is a little costlier proposition compared to the territories where we were present. And establishing new areas, new geographies takes some time, but the good news is that now that part is over. So although as far as the Gulf region is concerned, we are still not getting much scrap or raw material from these areas, but we are developing new areas and some of the material will start coming in Q3. There may be some delay in those material reaching to us in our factory, but the bookings have started in last quarter itself.
But another good news is that even in the domestic market, if you see, the reverse charge mechanism, although it's not been notified, but it has come through for battery scrap also. We have seen a good reaction to that in the domestic market, and we hope that in Q3, Q4, and in the next year itself, we will see a huge volume coming from domestic market also. Because now the disparity between the unorganized sector and the organized sector is not there. We are very confident that we'll turn around this issue in the next couple of quarters. But what I can say is that the worst is over. Now, there will be some improvement in the overall volumes from lead also going forward.
Sir, the second question is essentially on lead volumes. If I look at lead volumes, I mean, for Q2, it is lowest in last several quarters, 11% down year-over-year, quarter-over-quarter. Just wanted to understand if this is a one-time blip that we are seeing, or there is some, in short term, we might see lead volumes at these low levels.
No. As I mentioned that basically these volumes, the worst is over. Our working capital cycle in lead is around 80- 90 days. So even if you book something today, it will reach you in 90 days. But you have to develop new territories, new geographies. Generally, that material takes time for you to reach. That is why you cannot just turn it around in a couple of quarters itself. But as I mentioned earlier, that we have booked some quantities for new geographies also, and it is taking some time to reach us in India. But once those volumes will start coming to India, the volumes will start improving. Also the domestic market has also responded well to the reverse charge mechanism. So we will get substantial volumes from the domestic market also in the coming quarters.
So this is probably one of quarters where the lead volumes have gone down. In future, we expect the growth to come in lead also.
Understood, sir. Thank you so much, and all the best.
Thank you. The next question is from the line of Shreya Masalia from Ashika. Please go ahead.
Hello.
Yes.
I think we are on. Yeah.
Miss Shreya?
Hello?
Yes. Please go ahead.
Yeah. Thanks for letting me ask the question. My first question has already been answered, like on the scrap sourcing. My second question was on EBITDA per ton. This quarter, the EBITDA per ton of quarter for the copper has gone substantially high, like around 80,000 above. Just wanted to ask, what is the sustainable amount of EBITDA per ton on copper terms?
Yeah, definitely the copper EBITDA has gone up.
Yeah.
Partially because of we have changed the raw material mix, changed the sales mix also, and to some extent, the economies of scale have also helped us because the capacity utilization have improved in copper.
Okay.
It has partially come from that. We also got some order of high-value products in this quarter, so that also contributed to some extent to the higher EBITDA. In copper, we expect that for the next few quarters, you will have a sustainable number of around INR 65-INR 70 per kg. Going forward in the next two to three years, once our recycling facility is there as backward integration to the RMIL business, the EBITDA will grow to around INR 80-INR 90.
Okay. I saw that your standalone profit has fallen sharply, like around by 50%. At the same time, the consolidated has gone up by 6%. From where is usually the revenue coming in?
It is partially from RMIL, the copper business, and also from our-
Okay.
Overseas subsidiaries.
Okay. Understood. Got it. Thank you.
Thank you. The next question is from the line of Vikash Singh from ICICI Securities. Please go ahead.
Good afternoon, sir, and thank you for the opportunity. Sir, just wanted to understand why FY 2027 seems to be a little bit low on the volume due to geopolitical issues. Our CapEx plan has been intact, so how should we look at the volume growth going forward? Also, U.S. subsidiary which we have created, I believe it was scrap sourcing. If you could give us some more highlight that whether we would act as an aggregator there, or we would buy some dump yards to become the source material for ourselves. What are our thought process on those lines?
Whatever we are going to source in U.S. is going to be raw material for us for our India operations, both for copper and to some extent for lead also. Because generally, most of our yards so far that deals in lead are from the developing economies. But in copper, the generation of copper scrap happens mostly in the developed nations. Therefore, we've always believed that to be successful in the recycling business, you have to have consolidated over the sourcing. That is why we believe in not buying from aggregators. We want to put up our own scrapyards wherever we are so that it gives us a delta while buying from the aggregators.
We are going to put up yards in U.S. so that we can consolidated sourcing and go to the last mile for sourcing, and that product we will import into India and then do the recycling in India.
Currently, what percentage of our overall material source from U.S. and how it would shape up as per you?
In lead we are hardly getting anything from U.S. so far, although we have started doing some bookings in this last quarter. But in copper, even now most of the scrap that comes to India comes from U.S. for us also. But the biggest difference is that it comes through aggregators. There is a huge difference in pricing once you source from small scrapyard owners and then consolidate it and bring it to India compared to what you do it with the aggregators. The idea is to not depend on the aggregators and then start doing sourcing on your own, which we have been doing successfully in other geographies.
Okay. Sir, just one more question.
Yes.
I see that our sequential utilizations in RMIL have been segment that probably. Where was the problem in terms of ramping it up?
First of all, there are two issues in RMIL. One is that you need to de-bottleneck the manufacturing process because the overall capacity is based on the overall capacities of all the finished goods. But there are certain bottlenecks within the systems for which you need to have additional CapEx done. You need to install new plants and machinery so as to increase the utility. That will take some time. We have already ordered some machines to improve increasing the operational utilization. It will take maybe two to three quarters to improve it to around 65%-70%. But beyond that, if we want to go, then we have to do CapEx to increase the overall capacity of the system, which will take probably around three years.
Sir, as of now for-
I am sorry to interrupt you, sir.
there could be 75%.
Vikash, sir.
Yeah, 65%-70%.
Noted, sir. That's all from my side, and thank all the best.
Thank you.
Thank you. The next question is from the line of Netra Deshpande from Mirae Asset. Please go ahead.
Yeah, thanks for the opportunity. Good afternoon, sir, and congratulations for the great set of numbers, especially for copper EBITDA per ton that has extremely jumped after RMIL. My first question pertaining with the lead volume. With the lead volume fell around 11,000 tons is due to the scrap availability or any weaker demand or any other deliberately shift which is towards the value-added products like not only specific with any other core business and what would be the volume group which is expecting for the H2 FY 2027 or FY 2028 like what would be?
Ma'am, it's primarily because of the raw material availability. If you look at the EBITDA numbers, if you look at the value-added products. With whatever raw material was available to us, we tried to maximize the value. It's very clear that the demand is not an issue. The major issue for the last quarter was raw material availability, and that also because the disruption took place so suddenly and it takes time for you to develop new geographies. I think from next quarter onwards you will start seeing that improvement in lead business for us.
Okay, sir. What about this CapEx for the INR 585 crores that has already spent in H1? The target for that would be for the next on track, which is the remaining about any other for the-
Yeah
all that.
Overall CapEx, we are pretty much in line with the Vision 2030 plan. It is around INR 1,680 crores till FY 2029. We are right on track in this. We already spent approximately INR 600 odd crores till now out of this INR 1,680 crores of plan and we are on track of increasing the capacity also. Currently we are at approximately 480,000 tons, which we are taking it to 800,000 tons by spending this amount. We are on track on both the sides.
Okay. Got it. Sir, what about the copper operations for the Gujarat? Copper scrap has been secured for the Mandvi startup or any other plants, how many tons of copper scrap that have contracted already?
Ma'am, copper scrap, as I mentioned earlier also, is not an issue. We can always source the scrap from the developed nations through aggregators, so that is not an issue. The moment the Mandvi plant gets the license to start operations, we will start procuring that material. But the value would not come by just procuring that material. The actual value will only come when we set up our own yards in these developed nations. We are expecting to start the company in U.S. in this quarter itself. But it will take us time to set up our own yards, and gradually, probably in the next one to two years, we will be fully operational on our business there.
Okay. What is the scalability of this recently incorporated newly wholly subsidiary of Gravita Recyclers USA that recently you have
Ma'am, we have just incorporated the subsidiary right now. There are no operations right now there in the U.S. We have just set up the.
Actually, U.S. company is just a sourcing arm for us. Basically, it will be sourcing scrap from U.S., and it will be shipping the scrap to Indian plant to feed for copper as well as battery scrap also. So it is not going to generate the revenue directly, but yes, it will help us to reduce the scrap collection cost.
Okay. So there must be scrapyards. What would be the CapEx? Any other investments inside the-
CapEx is not substantial. CapEx is not substantial because mostly these facilities will be on lease model. All the scrapyards will be on the lease model. Only the working capital will be needed, and whenever we start this operations, we will take the working capital and start sourcing the scrap and shipping it to India.
Okay. Got it, sir. Thank you, sir, and all the best for your future. Thanks.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Should you have follow-up questions, please rejoin the queue. The next question is from the line of Sagar Shah from Spark PWM. Please go ahead.
Yes, thank you for the opportunity. First of all, big congratulations to the management for posting at least a sustainable set of numbers in this kind of uncertain environment. My first question has already been answered, about the lead volumes, the de-acceleration that we saw, that was the predominant problem that happened in Q1 and has also continued in Q2. Now, effectively, you are diversifying your sourcing, and that is why you have set up a subsidiary in U.S.A. Also the RCM mechanism that came in India. I wanted to understand some quantitative numbers that what is your, sir, import versus domestic scrap ratio in this quarter, and going forward, what you envisage. How much percentage of scrap are you envisaging from abroad and how much from India? That is my first question, sir.
For last quarter, it was around 26% of the scrap was Indian battery scrap and 74% was imported scrapyards. Going forward, I think even though we have set up our new geographies overseas internationally, we believe that the domestic procurement is going to give us much more volume compared to international volume. Around 40%-50% would come from the domestic sourcing only, and balance 50%-60% would come from overseas sourcing for India.
Okay. So within the lead segment, do you expect at least our sales mix also to improve actually, I mean, within the domestic and exports?
Sir, actually, we don't discriminate between domestic and export. It's basically wherever we are getting better realization, we sell in that market. If the margins
are better in Indian market, then we'll sell in Indian market, otherwise we'll export it.
Okay. Fine.
It will always be a dynamic decision. In some cases you will see that exports is better, in other quarters you will see domestic sales is better.
Okay, got your point. That's a tactical decision that the management takes based on the operating environment actually it is prevailing in.
Yes.
My second question was related to copper. Copper again in this quarter, first of all, congratulations for very healthy performance actually in this segment for even growth in volumes and also in terms of your segment margins also. So within copper, I wanted to understand the product mix you highlighted one of the earlier participant's question actually. That you have changed the customer mix and you have changed the product mix as well. So I wanted to understand that the product mix, has it been shifted to the phase 2 of copper integration already in the RMIL? I mean, have you moved on from traditional copper rods, have you moved on to copper busbars or copper wires, or have you done that? Can you elaborate on that segment so that we can have an idea at what actually trajectory the company is looking as far as copper is concerned?
Sir, in copper, RMIL has always been selling value-added products like copper strips, sheets, cups for ammunition and coin blanks. These have always been more profitable businesses. The only thing that we've done is that we've tried to rejig the entire sales process so that we sell the product that gives us the maximum margins. Because you know the capacity is constrained to some extent. That is what we've done.
But more than that, the major amount has come because we have increased the capacity utilization also, and also because we have done some rejig in the sourcing also. Wherever possible, wherever we can use scrap material, we are using scrap material also. That is why if you see the overall profitability has gone up, although it has also impacted, to some extent, our working capital cycle in copper. Because we have now started importing a lot of scrap from U.S. But overall EBITDA margins have improved because of that.
Okay, fine. Just lastly, on the copper front only, are we hedging our copper positions, sir?
Sir
This is the last one.
Including copper and lead. In case of aluminum, as we mentioned numerous times, there is no possibility for us to hedge it because it's not being traded.
No, sir, I'm just asking for copper, sir. I'm just asking for copper.
Copper and lead we are hedging, sir.
Copper fully hedged.
Okay, okay. Fine, sir. Thank you so much.
Thank you. The next question is from the line of Prolin Nandu from Edelweiss Public Alternatives. Please go ahead.
Yeah, my question is on the sourcing. You mentioned sourcing as a moat. Just wanted to understand both for the copper and if you can separately answer for lead as well as copper as to what is the advantage that one has having a local sourcing yard or some kind of an ecosystem in the country from which we are sourcing. On the lead side, we already have some infrastructure in some of the countries, but despite that, in such uncertain time, we have faced challenge. Just wanted to understand what is the kind of moat that we want to develop over the period of time on sourcing for lead as well as copper, and what kind of a mix one should think about domestic as well as international scrap sourcing.
From the countries that you are importing having a yard there or collection center there, how does it help? Are there any regulatory headwinds which might prevent importing from some of the countries where we are operating, maybe Europe or some other countries that we are importing from? So slightly more qualitative texture from you as to how do you see sourcing as a key moat for our business.
Sir, basically in a recycling business where scrap is concerned, I think the biggest contributor to profitability is your strength in sourcing itself. When we say that we set up our own yards, it is simply because it gives you better margins as compared to people who buy it from aggregators. You can consider this like a reverse FMCG kind of a process. In an FMCG, generally, what happens is that the company that can sell its goods to the last retail shop, the distribution network is best. They are the people who succeed in FMCG. Similarly, in scrap business, if you can collect at the source itself, it will give you advantage over people who are buying it from aggregators who collect from these sources and then keep it consolidated and then give it to the highest bidder.
We bypass that, and that has always been our strength, and that is why if you see the EBITDA numbers that we give vis-à-vis the competition has always been very high. That would continue to happen. To answer your question about because of the problem why has it affected us, the answer to that is that there is only a limited supply of material in a particular territory. If in some of the territories there is a restriction you cannot now sell it from those territories, then definitely in the short term it will impact you. But slowly you will develop new geographies, and also because the logistic cost will go up from those territories to bring it to India, and it will not be that profitable. We will then decide not to compromise the profits and just bring in the volumes.
At the same time, what we have done is that we have started developing new territories. This was always the plan. We were always planning to go into the U.S. to set up our own yards. But only for lead and aluminum it was not making sense. Now with copper coming to the picture, now it makes sense for us to set up our own yards in the U.S. also. Because the volumes will be there to justify the additional fixed cost for those scrapyards. So definitely it is going to give us better margins and also consolidated over the raw material in future for both lead as well as copper.
Sure. Just slightly more double-clicking on this. Are there any regulatory risks that you see which will restrict the exports from these countries where you are setting up a yard? Secondly, when you say you want to go directly to the source, how deep you want to go? Because ultimately we are setting up a yard, we are not setting up a collection, kind of an infrastructure in these countries, in a way.
Yeah.
How deep we want to go when you are saying that we want to set up a local collection infrastructure in these countries? There are multiple ways in which one can source even in these countries. Aggregator is one, to go directly to the source like some of these metal traders is another source. Can you just tell us across these different sources, why is it that I understand the cost and the quality part, but there are some competitors of ours who do not have a setup and they are still operating while at a lower margin, but they are still operating. Amongst the multiple routes how deep we want to go in setting up our own infrastructure in these countries?
The idea in this is that you very rightly said that we cannot go to each and every household to collect the scrap. Generally there are scrapyards in countries like, let's take an example of U.S. only because Africa is totally different. In U.S. generally there are various tiers of yards. You can say that tier 1, tier 2, tier 3, and tier 4. The idea that we have is that we will put up a consolidating yard in major cities, and then we will start collecting from these tier 3, tier 4 yards, have tie-ups with them so that all their material we can pick up. We will have long-term contracts with them. We will give them financial support also.
That is how we will ensure that most of the material comes to us at the right price rather than people who buy from them and then they kind of. If you look at it, if you buy from aggregators compared to if you use your own scrapyard, generally it will give you around 2%-3% additional margins after taking care of all the expenses that you incur in operating those scrapyards. That is a major contributor to margin in our case. Whether it is lead or copper, it doesn't matter. The margins remain there. That is what we are planning to do in the developed nations. As far as regulatory headwinds are concerned, I think it's basically the tailwinds that are there. As it is, if you talk about Europe, all the scrap is banned.
They don't export it from Europe. On the other hand, most of the countries have stopped importing scrap. China has stopped importing scrap. More and more countries are now stopping importing scrap rather than countries not selling them. Therefore, availability has gone up and it will continue to go up is what we believe. That will basically be a tailwind for us. If suppose, as you say that India stops importing material or they put a ban on import of these products, which is very unlikely to happen because the government policy is to promote Make in India, so they are encouraging people to import scrap into India and then do it. But in case that does not happen, then we have overseas operations also where we can. If it is a permanent solution, this was only a temporary problem.
But if it was a permanent problem and India stops imports of those scrapyards, then we have overseas operations where we can increase our capacities, put up plants in other countries also and mitigate that risk also in future. But we don't believe that that is going to happen anytime soon.
Because copper scrap earlier there was a duty on the copper scrap and then government stopped charging that import duty on copper scrap rather. So they want to promote the copper scrap to be imported in India. So rather than stopping the, because it-
Because we are-
demand is more
Because we have deficit in most of these metals. India encourages that you import those metals in scrap form and then process it here so that India can be self-dependent on these metals.
Regulatory is all positive for this business.
Thank you so much for answering the question in detail. Thank you so much.
All the best.
Thank you. The next question is from the line of Khush Nahar from Electrum PMS. Please go ahead.
Yeah. Thank you for the opportunity. What will be the hedging income for the second quarter? Just want to know that.
Okay. The total reported income in Q2 and other income was INR 18 crores. Out of that INR 9.39 crores was our operational income and INR 8.61 crores was the other non-operational income.
Right, sir. Lastly on the lead volume, always been just a month for Q3, but we are seeing some green shoot signs in terms of RM sourcing.
Yes. As I mentioned, yes. We are seeing some encouraging signs in India operations, also India procurement operations also.
Okay.
Although the notification is yet to come, we have seen that on the ground, people have started offering scrap to us, which earlier they were not offering us. There has been some positive change there. Also internationally, because we have shifted some of the material, we have developed some of the geographies from where we have now started procuring material for India. That will also start coming partially from this quarter itself. We see some upside in lead businesses from this quarter itself.
Right, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment Management. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Couple of questions. One is regarding the RM sourcing from U.S. Obviously, the cost of raw material in U.S. would be at a higher cost, that is the reason that we were not going to U.S. and we were taking RM from countries like Africa and Middle East and stuff like that. Just wanted to understand, because of the supply crunch, by changing the sourcing to countries like U.S., will the overall EBITDA per ton take a hit on a longer term basis with respect to lead? That is one. Would you delay the CapEx for lead because the overall utilization is still at a lower level? Do you plan to postpone the CapEx by any chance? Will that be a possibility? Just wanted to understand that. Yeah.
To answer your first question, I think we have our internal ROCE targets for all these businesses. So long as we meet those targets, we will keep procuring from all the geographies possible. Even though maybe compared to Africa, battery sourcing may be a little costlier in U.S., we don't deny that, but it will still meet our ROCE requirements. Also because we will be consolidating copper, aluminum, and battery scrap in Africa, so overall profitability would increase rather than. So earlier, why we were not buying it was simply because we had to buy it from aggregators if we wanted to buy it. Therefore it was not making sense. But once you start putting up your own scrapyards and start collecting from small time scrap dealers, then the prices will come down, and it will meet your ROCE requirements.
Of course, wherever we are getting batteries, it's not that we will stop buying from Africa. We'll keep buying from Africa, and we will keep on increasing capacities if it is required to increase the capacity, so long as battery scrap is available. The only constraint in future is going to be the scrap availability. So long as scrap is available and it is profitable and it meets the ROCE requirements, then we'll keep on buying more and more scrap and keep on increasing our capacities. We will not delay the capacity increase till the time we have a sight on the import of scrap. Only when we see that there is no scrap availability in future would we delay or stop CapEx in future.
We see for the next three to four years, there is enough availability there, both in India domestically as well as overseas, so we would not slow down on our CapEx.
Also on the BWMR part, which will see a major uptick in FY 2029, that is where the seven-year timeline ends. If you can throw some light, will it be like a hockey stick RM sourcing over there and revenue for you as well?
I think, the major problem also it was coupled because of this Gulf War. What happened was that because imports of scrap was restricted, so there was a huge pressure on the domestic scrap in the last two quarters. Because the unorganized sector was getting an 18% additional margin because of GST regulation, so the organized players, including the battery manufacturers, it was very difficult for them to source that material on the ground. Now with this reverse charge mechanism coming into picture, I think the BWMR will be fast-tracked. We've always been saying that it will take around three to five years for this entire recycling sector to convert from unorganized to organized. I think that may be optimistic, but we firmly believe that now it will be fast-tracked because that 18% advantage that the unorganized sector had will now go away.
They will be on an even playing field with us, and therefore because of our better efficiency and our sales mix, et cetera, we'll be able to outprice them for the scrap and there will be a major shift that will take place.
No, my question was regarding FY 2029 particularly, where the BWMR seven-year window ends and for the compliance angle for the battery manufacturers. Just wanted to understand, will there be a hockey stick or a J-shape sort of demand for recycling in the FY 2029?
No, not only FY 2029. What I'm saying is that because of this new reverse charge mechanism, the shift will take place from this year itself, is what we are expecting. Because the only hindrance in that was because a lot of that battery was going to the unorganized sector. Now with the reverse charge mechanism, we will be able to match the prices that the unorganized sector is giving to the scrap dealers. Therefore, most of the organized sector will be able to get that scrap, and therefore the EPR regulations will be fulfilled from this way.
Have you started seeing on the ground?
You are asking that the targets has to be completed within the window, so there will be a surge in demand of EPR credits once this window closes of seven years. Yes, you are right. Certainly, most of the people are buying on regular basis, the producers. But those who are waiting that prices of EPR will go down, they are deferring their purchases. So once this window of seven years closes, then there will be certainly a surge in demand, and no doubt, credit demand will go for EPR and the band is around INR 5.40 per kg to INR 18. So the market will decide how you are able to get the EPR prices. On that side also, there are a lot of development happening.
Central Pollution Control Board is planning to keep these credit on an electronic credit platform, which will be traded under MSTC guidance, and all these credit generations audit will be done, so that is also taking place. The rules are being formed, and soon they will be implemented. The future of EPR portal at Central Pollution Control Board will be monitoring all your purchases, GST, e-way bills, and similarly, your sales. This audit will help in genuine EPR credit creation.
Got it. Fair enough. Thank you so much. That is really helpful. Yeah, that is it from my end. Thank you.
Thank you. The next question is from the line of Patanjali Srinivasan from Sundaram Mutual Fund. Please go ahead.
Hi, sir. Thank you for the opportunity. I have a couple of questions. Firstly, with respect to lead, what do you expect to be your growth rate for you in terms of volumes going forward? I know that you are having a challenge right now with respect to sourcing material, but going forward, what would you expect the growth rate to be?
Irrespective of the past two quarters being not so good, we believe that going forward, the lead would grow at around 18%-20% for the next three years in volume terms. There may be quarters where we would not fully grow by around 18%, but by the end of these three years, the overall growth would be around 18% CAGR.
Okay. With respect to copper, I think margins are a fair bit of increase this quarter versus the previous quarter. What would be a sustainable level of margin for us in this business?
For the short term basis, around INR 65-INR 70 per kg are the sustainable margins. But in long term, once we set up our own recycling subsidiary, and therefore, once we make it fully operational in the next three years, the margins would be around INR 90 per kg.
If I look at last quarter number and this quarter number, I think it's moved from INR 55-INR 85, but you're giving 70 as the number. Was there like an inventory loss or something last quarter, which you have caught up on this quarter? Is that the correct understanding for this quarter's number?
No. Actually, as I mentioned, we have started using some imported scrap. Raw material for the products were imported, and also we have got some good orders for some higher margin sales. This is not something similar to lead because here we are making some specialized products. So in some quarters, you get some good orders for some value-added products. So last quarter was one of those quarters where we could get some good sales mix, better sales mix, and also from 55, we are saying that around a INR 65-INR 75 EBITDA per ton is sustainable. So that was considering the higher efficiencies that we will incorporate and also the capacity utilization increasing and also because of the raw material utilization, which was not there in the Q1. And therefore, the EBITDA margins were a little lower.
But going forward, around INR 65-INR 70 per kg without the specific sales orders that we got this quarter is.
Got it, sir. Thank you so much.
Thank you.
Thank you. The next question is from the line of Sahil Bambade from Monarch. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Most of my questions were already answered by you, but I actually wanted to get your perspective on India's aluminum recycling industry, but in the context of this new proposed European regulations on the scrap exports. Basically, with the EU looking to restrict certain waste and scrap exports to non-OECD countries like India, how significant do you think this impact could be on India's aluminum scrap availability and procurement cost? This is my first question. My second question is regarding Gravita itself. Roughly what proportion of Gravita's aluminum scrap is currently sourced from Europe, and how easily could you replace that supply with scrap from, let's say, other regions, U.S. or any other Africa? If this proposed restriction come into effect. That's my two questions.
Your first question, that EU WSR guidelines. India has already written to EU that we will be part of this scrap chain, and there are negotiations going on with the Ministry of Commerce and Ministry of Environment, Forests with them.
Okay.
We will certainly be keep getting material because European scrapyards, they also want, because it will unnecessarily create monopoly in Europe. Their smelters are already having lot of material. The additional material only comes to India.
Okay.
That will be sorted out. When it comes to Gravita, we are not dependent much on the imported scrap, because most of our processes which we are processing aluminum is in Africa, all our four of locations. So we source local scrap there and we make alloy. In India, we shifted our Jaipur unit to Mundra, and that will start soon. There also we will collect more of a African scrap, because as of now, whatever operational plants are mostly from Africa only.
What is happening is that all the African countries are getting second-hand vehicles imported in Africa from European countries, and then they are discarded over there, and the scrap is available in Africa as a local scrap. So that is what-
Okay
African
Okay. I understood. Thank you, sir. That is it from my side.
Thank you. The next question is from the line of Dheeraj Ram from 360 ONE Capital. Please go ahead.
Hi, team. Thank you for taking my question. Sir, could you please let me know if we are setting up our tire recycling facility in our existing plants so that we can use TPO internally, and then maybe chances of selling RCB outside. Could you let me know when this is going to start?
Yeah. So as far as using our TPO in internal usage, for all of our African plants, we are already doing it. In India, actually, in future, we may think of setting up the tire plant, but currently we are more focused on the existing lithium-ion battery and copper business. So we have kind of put it on a back burner right now. But definitely in the scheme of things in the next three years, we are definitely going to set up this tire recycling plant in India also.
Understood.
But initially, I think right now our focus is on copper and setting up our own yards in the U.S. and consolidating the existing verticals of lead, aluminum and plastics.
Understood. During this rise of crude prices and TPO is substantially cheaper to crude, won't it be operationally efficient to have TPO internally like how we have in Africa? Similar can we have it in India any soon?
I think the government has a regulation of, now they are restricting the import of scrap tires in India for TPO. You cannot set up a plant in India to make TPO from imported tires or imported scrap. If you start using Indian scrap again, there is this GST issue that is prevailing. We, in any case, do not buy local scrap in India. For us, setting up this plant was not to set up it for TPO but for other uses of rubber, which we are postponing for right now.
Understood. The last question is-
We are looking at alternative fuels. Always, we are looking at alternative fuels. Currently also, we are using TPO also, as well as we are using other kind of sustainable fuels also. Going forward, we are also planning to set up our own gasification plants, which will run on all kinds of coals and other materials, et cetera. It will both help us in lowering down the cost of fuel also, as well as in our carbon emissions also for future.
Understood. Got it. Last question is, you have seen lithium-ion is somewhere near future. When do you see lithium-ion actually going to come in and contribute to the top line? How do we see the procurement of this?
So lithium-ion, I believe that in the past few quarters, you might have seen that the EV vehicle population have gone up, and more and more people are now buying EVs. We believe that average life would be around six to seven years for these batteries. But of course, some of the material will start coming a little earlier. So I think in the next four to five years, we can see some volumes coming from lithium-ion batteries on a conservative outlook, but it can start coming a little earlier also. But of course, in our Vision 2030, we have not taken any revenue or any inputs from lithium-ion battery revenue for our target for 2030. If it comes, it will be only additional to whatever is the targets right now.
Understood. Thank you, sir.
Thank you. That was the last question for today. I now hand the conference over to the management for closing remarks.
Thank you everyone for participating in this call and for your continued interest in Gravita. We trust that we have addressed your queries during the session. Should you have any further questions, please feel free to reach out to our investor relations team. Once again, thank you for your time and participation. Have a great day.
Thank you. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.