Gravita India Ltd
NSE:GRAVITA
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
740.9
2 664.65
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Gravita India Ltd
Earnings Call Analysis
Summary
Q2-2024
Gravita indicated that its EBITDA is significantly supported by turnkey submissions, accounting for 81% of the total. Despite facing challenges with aluminum prices impacting margins, they've maintained an EBITDA margin of INR 16-17 per kg for lead, benefiting from market arbitrage opportunities. Large part of their business follows an OEM partnership model, akin to their Indian operations, with most revenue generated from OEM relationships. Furthermore, they're optimistic about exploiting new sectors like energy storage, which could increase demand significantly as economies develop. They're investing in rubber recycling, with potential margin improvements and environmental benefits. Expansion plans for paper recycling and lithium require 1-1.5 years from initiation to operation. They're set to achieve ambitious targets with a 25% revenue CAGR, 35% profitability growth, and 35% return on capital.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Results Conference Call of Gravita India Limited hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sabri from Emkay Global Financial Services. Thank you, and over to you, sir.
Yes. Good morning, everyone. On behalf of Emkay Global, I welcome you to the Q2 FY '24 post Earnings Conference Call of Gravita India. We have with us the senior management of Gravita led by Mr. Yogesh Malhotra, Whole-Time Director and CEO; Mr. Vijay Kumar Pareekh, Executive Director; Mr. Naveen Prakash Sharma, Executive Director; and Mr. Suni Kansal, Chief Financial Officer. Also today, the management will brief on the results and then we'll go over to the questions and answer round. So without any further delay, now I invite Mr. Malhotra for the opening comments. Over to you, sir.
Thank you, Mr. Sabri. Good morning, ladies and gentlemen, and welcome to our Q2 and H1 FY '24 Earnings Call. I believe you have had an opportunity to review the earnings presentation and financial results that were uploaded on the stock exchanges. Before opening the floor for questions, I will provide a brief overview on the major highlights of the quarter.
I'm very happy to share that Gravita has delivered stellar performance on both financial and operational fronts for Q2 and H1 FY '24. Before we delve into the results, I would like to share some strategic highlights and project updates. I'm pleased to announce that ICRA has upgraded the credit rating for both fund-based and nonfund-based facilities. The long-term rating has been upgraded to A plus stable from A positive.
For short-term rating has been upgraded from A2+ to A1. Gravita step-down subsidiary situated in Togo, West Africa has started commercial production of battery recycling from its existing recycling plant, having an annual capacity of 6,000 metric tonne per annum. I would want to highlight that the company has been sourcing scrap from Togo yard for the last 3 years and has set up a strong scrap collection network before establishing the plant there.
Further, the company is already having aluminum recycling plant having an annual capacity of 4,000 metric tonne per annum in Togo, West Africa and this new facility will enjoy the benefits of economy of scale and will be cost effective due to savings in logistics costs.
Now let's discuss the operational performance. Turning to the capacity expansion as of 31st October 2023, Gravita has expanded its total capacity to 2.84 lakh metric tonne per annum compared to 2.33 lakh metric tonne per annum on 31st March 2023. We are strongly progressing toward a target of reaching the existing vertical capacity of 4.25 lakh metric tonne per annum by 2026. Gravita is committed to expanding its capacity and hence, is expecting to incur a CapEx of more than INR 600 crores by FY '26 for its existing as well as new verticals.
CapEx expected for existing and new verticals is approximately INR 350 crores and INR 250 crores, respectively. The company has witnessed a volume growth of 14% in Q1 FY '24 on a year-on-year basis. We are seeing major volatility in the commodity space and some demand slowdown is also decile globally, especially in China in lead because of our strong relationship and OEMs across globe, the back -- and back to back hedging mechanism, we are able to generate volume growth along with sustainable margins.
In case of plastic and aluminum, we are still in the process of developing OEMs approval and working on hedging options, which will stabilize the margins with sustainable volume growth in these verticals also.
Moving to financial results. Let's discuss the half yearly financial results. Consolidated revenue for H1 FY '24 increased by 22% to INR 1,540 crores and 48% of revenue in H1 FY '24 came from value-added products, aligning with our vision of achieving 50% revenue from this category.
Consolidated adjusted EBITDA for the half year stood at INR 160 crores, that is up 23% and consolidated PAT showed an increase of 26% to INR 110 crores in H1 FY '24 from H1 FY '23. PAT margin increased to 7.1%. ROC for H1 FY '24 stood strong at 26%. Cash and cash equivalents of the company have increased to INR 118 crores of liquidity for future CapEx and working capital.
Coming to quarterly financial results. At consolidated level, revenue for the quarter increased by 22% and 19% to INR 836 crores on a year-on-year and a quarter-on-quarter basis, respectively. 44% of the revenue in Q2 FY '24 came from value-added products and 39% revenue came from overseas business.
On a year-on-year basis, adjusted EBITDA increased by 23% to INR 80 crores. EBITDA margin stood at 9.5%. Gravita reported a consolidated PAT of INR 58 crores with a 30% and 11% growth on year-on-year and quarter-on-quarter basis, respectively. PAT margin remained steady at 7%. That's all from my end. I would now request to open the floor for questions and answers. Thank you, and over to you, Sabri.
[Operator Instructions] We take the first question from the line of Mr. Rahul Bhangadia from Lucky Investment Managers.
Congratulations on a good set of numbers. Two questions. One is on the lead side, things seem to be on track and they seem to be trending towards what we had guided for. But aluminum and plastic volumes seem to be struggling while you touched upon it in the initial remarks. But if you could just give us better insight into what do you think is happening? What is happening there? And what do you think you will do to kind of improve the trends that are visible right now?
Yes. Sure, Rahul. So as I mentioned in the comments also that a very huge volatility in the metals or commodity markets. The prices have seen -- I mean it has come down drastically, especially in aluminum in the last year. And because we are not hedging, there is no hedging mechanism currently. So you could see the effect on the bottom line numbers of aluminum.
And also because of this huge volatility and also there is some slowdown in demand as I mentioned in China, especially. So our Indian operation is not running optimally. So that is why you see some issues in aluminum EBITDA margins and aluminum volumes also. We see -- I mean there is a possibility that this will continue for another quarter. But by the next quarter or at the most, by year-end, we'll see some stability in these markets also. And we are also working on some mechanism for hedging for aluminum as well as I mentioned earlier in my earlier calls as well. So hopefully, that will be also in place by the end of this year. So once these 2 things happen, I think, we'll be in line to grow in aluminum also in the same manner as we are doing in lead.
And plastics, sir?
Plastics there is a slow -- I mean, you could see there -- because we closed down our plant in Nicaragua last year, so that is primarily because of that. But we are increasing the capacity in wherever our other plants are there because that was one of the major plants that we sold off. So you could see some negative growth there. But otherwise, if you look at the existing verticals, we are at par with last year.
So yes, so maybe the existing sites are working at par with last year. How much would have Nicaragua -- shutdown plant contribute to the volumes in plastics?
So it's around 1,000 tonnes per annum -- in this quarter, sorry.
So 1,000 tonnes per quarter is what that shutdown site used to contribute?
Yes.
And besides that, you are saying essentially then we are flattish.
Yes, we are flattish.
But then, sir, besides lead, we need the other guys also to start growing, and we've -- so if you also could touch upon what are the developments in the newer verticals on rubber and other places.
So rubber is doing well. We have increased our capacities in Ghana. We have also increased our capacities in Tanzania. Nickel plant is also coming up. So -- but it does not reflect on the bottom line per se because all the consumption from the material is in-house only. So it gets reflected in the profitability of other verticals, wherever we are using rubber as raw material. So apart from that, we have already applied for a consent to establish a plant for lithium-ion battery recycling at Mundra. We're waiting for the approval. So once that comes through, we'll start setting up our plant there.
Paper also, hopefully, in next quarter or quarter next to that you'll hear something where we'll start setting up a plant in Central America for paper also. So these 2 verticals, we are very confident that we start putting a plant, we'll start establishing plants in this year.
Okay. I'll come back for more questions. Sir, just a final one. Given the slight challenges that you're witnessing in aluminum and plastic for varied reasons, do you still think we'll be able to go by your guidance that you have, of course, reiterated in your presentation as well?
Yes. So these are only short-term setbacks. Actually, if you look at the prices of aluminum, once we stabilize it, I think, we are good to go, our capacities have increased. And in the long term, if you look at it, we are very confident because the overall recycling space is growing very fast. And we see a very good ecosystem in both these plastics, especially and in aluminum also. And that is why we are increasing our capacity.
These are only short-term setbacks and -- especially because currently, there is no mechanism for hedging, you would see the effect on a quarter-to-quarter basis. But if you look at the same time last year, you have seen some increase in EBITDA margins in aluminum also because the prices are going up. So once these prices stabilize, we'll come back to the same EBITDA numbers.
The next question is from the line of Mr. [Sood] from [JMSL].
Sir, my question is related to the long-term debt part. The long-term debt has increased from approximately INR 90 crores to almost INR 325 crores. Sir, what is the reason for this increase in debt?
Sure. So basically, we have taken some long-term loan in the overseas subsidiary in Netherlands, which is we have taken it from some ESG European funds where the working capital and the CapEx needs of the overseas business is planned to be met by these ESG funds. So that is the reason where we have increased the long-term debt and reduced the short-term debt. So earlier, overseas business was being funded from the working capital -- for the working capital from the Indian facilities. But since we have taken this facility for the overseas business in overseas itself, now Indian working capital debt is slightly reduced. So that is basically -- and some part of this long-term loan is already kept as a cash and cash equivalent in the overseas where it will be utilized for the future CapEx and the working capital needs.
Sir, from which entity, have you taken this loan?
So we have taken it in the Netherlands subsidiary and the overseas lender is Proparco and [OEV]. These are overseas lenders, ESG funds, their mandate is to fund the overseas African business in the recycling space.
Okay. And what is the rate of interest on these loans?
So rate of interest is slightly lower than the current working capital loan facility we have currently in India. So for Indian facility, we are taken -- we are taking at around 8%. And this facility comes at around 7% currently.
Okay. Overseas are at 7%.
Yes.
[Operator Instructions] We take the next question from the line of [Satadru Chakraborty] from [Chakraborty] Family Office.
Congratulations on a good quarter. My first question revolves around the net working capital cycle. So I think the inventories payables look good. My question really is on the receivables. So there is a sharp jump. I see the cash flow from operations is significantly down because of that. Can you give me a bit more insight on what exactly is happening? Is this 1 or 2 large customers who are not paying? Or is it going on credit? So what exactly is causing this jump?
So yes, on the 30th September 2023, this number was exceptionally higher because -- just because of the some additional volume dispatches in the last few days of the quarter before the -- just before the quarter end. And this money is already lying in the current month. So it was exceptionally high at the -- just at the quarter end, but it is already at the normal level at this moment -- at this point of time. So normal level is close to INR 150 crores. But yes, it was higher on the 30 September.
Okay. Any notional idea on how many days this is in terms of receivables on this quarter versus the last?
Yes. So normally, it is in the range of -- in the range of around 20 days, 18 to 20 days, but exceptionally higher because of -- as I explained, so it was around 25 days -- slightly more than 25 days.
Okay. Understood. My second question is a bit more nuanced one. So in the results that you have presented, there is a point #6, which says there is an appeal received by the Commissioner of Customs, Jodhpur of around INR 70 crore. You are saying for the time being, you have a good case, there is no provisioning. And there is just one line which mentions that in case any liability comes from the company, the company is entitled to take credit of the tax amount. So I'm not very sure I understand this last line correctly. So what you're trying to say is if the liability comes, then our revenues will go down. And then the tax that we have paid is more, so we can get a credit of that tax amount. Is this what the strategy is so far?
So as mentioned, this is a pre-import condition where we need to deposit certain -- the demand, which is in the form of GST. So whenever we deposit this amount in the form of GST, it is available as a credit also for us to be taken for the future GST payments. It can be adjusted for the future GST payments. So still, we are under appeal. We are not -- we are saying that we are not this -- this case is not applicable on us. But if, as mentioned, if we are not -- if the case is not in our favor, we have to deposit this amount, and we can take a credit off -- in the future GST payment for this amount.
So in other words, it will affect the cash flows for the time being, but it will not have any financial impacts in the normal terms. So that is the reason where we have not taken any provision on the company's financial...
To further add to this, the judgment was given before the guidelines came from CBIC. The CBIC guideline says that only the cases where this pre-import condition was violated, that only will be the GST has to be deposited. While the Honorable Commissioner considers the entire period as a violation. One part is this. So this number will reduce to less than 10%.
And second thing is that when we have gone to the appeal for the tribunal. So there, we are telling this is a bona fide case, not a mala fide one, wherein this cannot be raised on us over -- after the period of 2 years. So these are 2 other scenarios, which are already there.
I hope we have answered your question? Do you need some further clarification on this?
No, I think this is quite good. The last question I have really is on the upcoming diversifications. So any sense on what exactly is the company and the management trying to do for the lithium-ion recycling because I know there is a lot of scope for this in the market, but not really big players coming on this.
Yes. So as I mentioned earlier, answering some questions that we are already putting up -- we have plans to put up a lithium-ion recycling plant, pilot project in Mundra, and we have already applied for consent to establish a plant in Mundra, we are waiting for the concerned authorities to approve that plant for us to start putting that plant there. So hopefully, we'll get that consent in the next quarter, and then we'll start putting up a plant in -- lithium-ion recycling plant in Mundra in this year itself.
Okay. And one additional follow-up. Just taking this further, I don't think there is any hedging mechanism in place that you can afford to do with the lithium metal, the way it stands now, right?
No, for all metals, there is a hedging mechanism. It can be traded on exchanges. There is LME, London Metal Exchange, also and then there is [indiscernible].
Lithium ion is getting in formation because SHFE China is a major lithium supplier of these batteries. So there is some accrual which is in dollar. But since these batteries availability is very low, and we expect that more volumes to come by FY '26, '27, then this particular hedging will also be evolved over a period of time.
[Operator Instructions] The next question is from the line of Mr. [Parikshit Kabra] from [PK Ray Advisors].
Congratulations on your results. Great set of numbers. I wanted to touch upon that other people have already touched upon is basically the lithium opportunity. But not from the angle of recycling lithium, but this is obviously going to impact the lead market as well. Maybe not in the next couple of years, but maybe in 5 years, 6 years. So I just wanted to get a sense of the management. Over the next 5 to 6 years, how do you see the lead market, addressable market evolving and Gravita's market share within that?
So I think although it may affect the lead market, it will not affect in a big way because the lead acid battery is used for lighting, ignition and starting of -- I mean, so it's SLA battery that you use. Whereas the lithium-ion battery is a traction battery which is used to drive the car. So even in an electric vehicle, you would require a lead acid battery, although the size of the battery is smaller. The lithium-ion battery replaces the IC engine part.
So it's not there. If I know this has been the line for a while. But we know that the consumption will significantly drop, right, not only because the...
Yes. So it will be -- I mean, the size of the battery would be, say, around 70% of the size of the battery that is getting used currently in IC engines. So the -- but at the same time, because I mean it will take some time. I think what you were mentioning about in the next 3, 4 years, it will replace lead acid battery or the EVs will replace the IC engines that would happen probably in the developed countries. But in countries where we are present, I think most of the applications would still run on IC engine, is our take. But we have mentioned earlier also that it doesn't matter whether lithium-ion battery comes in place or maybe some other technology comes in place. Our business is recycling business, where the ecosystem is more important. Procurement is more important than the technology. Technology can be bought. But the whole ecosystem of procuring material, processing it and then supplying to the OEMs, that ecosystem is much more important. So although the lead acid battery may come down in future, we believe that recycling of lithium-ion battery will present a much larger opportunity for us to go into.
No, absolutely. And that makes sense, right? When you diversify, you can go into other segments and I completely appreciate that. I'm -- and so this is not a take on Gravita as a whole. I'm just trying to understand the lead market as a vertical, how we see the lead vertical evolving over the next 5 to 6 years? Gravita may obviously create multiple new businesses and that's great. But how will the lead business evolve over the next 5, 6 years, in your opinion?
Yes, as Yogesh rightly said that lithium-ion batteries are upcoming market. And undoubtedly, it is going to take some space out of the Gravita recycling -- recycling background. But if you see lead space also, we have hardly 2% of the global market share. And if we slightly increase our global market share...
Entire market.
Okay. Okay. I'm sorry. Because in the case of Gravita's perspective, we see that we will position ourselves more in global market to sustain the volumes of lead. But yes, in times to come as soon as lithium-ion increases, it will take the space from the lead pace.
Yes. So to answer your question, definitely, there will be a hit on battery manufacturing. It's all the -- I mean all the IC engines will get converted to EVs. But then there are other opportunities also coming, stationary batteries, I think other -- I mean like this battery for power generation is also another -- power storage is also another application that is there. So overall, probably in the mobility business or in the cars of -- or I mean automobile battery section, lead-acid battery may go down, but there are other applications for lead that are still going.
I mean we're talking about cable industry, which is using lead as a sheathing mechanism, which is also growing, the radiation industry, x-ray machines and nuclear power plant. There are various other applications for lead, which are also growing at the same time. So overall, we are very confident that lead as a commodity, there is very little chance of it going down because of the other opportunities that are available for this.
The next question is from the line of Mr. Rahul Soni from ICICI Bank Limited.
Am I audible?
Yes, yes, please.
Sir, my question is on the procurement side. Sir, I want to know what percentage of your raw material requirement like scraps for lead and aluminum you procure from group globally. And at what discount to the prevailing LME prices? And thirdly, I want to know what is the power cost for smelting of lead and aluminum compared to the recycling of the same?
As compared to the?
As compared to recycling, what is the power consumption in the...
If you mine as compared to recycling, right?
Yes, yes.
So to answer your first question, you were asking about the price of batteries that we buy?
Yes. Percentage of your total raw material procurement globally.
Figure that whatever batteries we are importing in India is somewhere in the vicinity of 50% to 55% of the LME prices, right? So -- I mean -- but the lead content in that battery is around 60% to 65%. So you will probably get the picture. It's around 80% of the total lead available.
The price of the batteries is around 80% of the total lead metal available in that battery when you import that battery. Whereas in India, it's somewhere around 58% to 60%. So it's around 90% of the total lead available in that battery if you buy it in India. But there are certain places where we are procuring it from -- we have our own yards in Africa where we get this lead acid battery around 40% of the LME prices also.
So it varies a lot depending on which geography you are in, where you're buying it from? Either you're buying it from your own yard or you're going to aggregators and buying it from there. So the prices would change drastically depending on the geographies and the mechanism. Coming to the energy cost of recycling vis-a-vis mining, it's approximately 1/4 of the total energy cost is used if you are smelting it by recycling as compared to mining. And in case of aluminum, it's only 5% of the energy that you consume when you recycle aluminum as compared to when you do mining of aluminum. So it's very energy efficient.
So in terms of units, sir, what is the power consumption for lead acid battery?
So in recycling, generally, it's not the power. It's the fuel that is important because for smelting, you use fuel and not -- power is very miniscule. The major part of energy that is consumed is through -- in way of furnace oil or gas or coal or any other such things. To give you a picture, I think, for every tonne of lead that we produce, we use around 50 liters of furnace oil.
Okay. So that is the main component?
Yes. That is a major component. And for that also, we are using rubber and tire recycling too and we are kind of replacing the fossil fuel and using tire instead of fossil fuel. So we're using pyrolysis oil to replace fossil fuel for our smelting processes.
The next question from the line of Mr. Khush Nahar from Electrum PMS.
Am I audible?
Yes, please.
I have 2 questions. One, what would be the percentage of domestic sourcing this quarter?
Yes. So domestic sourcing percentage is close to 20% in this quarter. But on H1 basis, it is approximately 27%.
Okay. And sir, just want to know that are we maintaining on the volume guidance, as I said earlier, around 20% to 25% for FY '24 and going ahead for the next 2, 3 years? Seeing the demand slowdown.
Yes, correct. So that guidance is given till FY '27. So that guidance is continued of 25%. So as I mentioned earlier also, we are not affected by slowdown that much in lead business because we already have [relationships with] OEMs and also, as Vijay mentioned earlier, that the total capacity that we have is hardly 2% of the total global requirement. So the slowdown will not affect us. That is one part. The second part is that this is only -- as Sunil also mentioned, this is only a temporary setback. In the longer term, I think in aluminum and plastic, we'll come back to the same position that was there last year. So in the longer run in the next 3 years, 25% growth rate is not at all a problem.
We take the next question from the line of Ketan Athavale from RoboCapital.
I wanted to know what revenue growth can we get in this year, FY '24? Will it be slightly lower than 25%? And also what is your EBITDA margin guidance for FY '24, '25, and '26.
So revenue growth in H1 is approximately 22%. So we are giving a volume guidance of 25% growth on a longer-term basis, so which is a target for us. So there may be some fluctuation in the prices. So that may be -- vary from year-to-year or quarter-to-quarter. But yes, we are confident for taking a volume growth of 25% on a longer-term basis.
Margin guidance?
I'll just elaborate it a little bit more in the sense that our focus is more on the bottom line rather than the volume growth in revenue numbers because there are various factors that are important in the volumes. As I mentioned that sometimes we also have arbitrage opportunities where we bring in some of the material that we source outside into India. And therefore, it does not get reflected when you consolidate the numbers. So the volume growth shows a little lesser than the total production that we've done. So that way, the volume growth may not be the right reflection on how much production we have done on how much volumes we have done overall. Because it gets eliminated when you bring it to India and then sell it from India. So that is only because we want to increase the bottom line. So those numbers can change, but our guidance on the bottom line of 30% to 35% growth on the PAT numbers are intact, and we are very confident of achieving that in the longer run also.
And in addition to that, we are also focused on taking the minimum ROC of 25%. So that's also one of the -- because there are different kind of businesses and different kind of businesses involve different kind of working capital also. So to be on -- more precise on the bottom line, that ROC, return on capital is more precise number we follow, and the target is minimum achieved 25%.
The next question is from the line of Jenish Karia from Antique Stock Broking.
The first question is with regards to the CapEx, for first half we have been around INR 54 crores of CapEx. As per the cash flow statement, we are guiding for around INR 205 crores of CapEx in FY '24. So will the second half be CapEx heavy? Or do we see some slippages in the next year?
Yes. So approximately INR 54 crores we have done in the H1. But H2 may have another INR 100 crore. And part of plan of H2 may carry forward to the next year, maybe first half of next year. So that will be incurred in that period. So maybe 50-odd crores which will carry forward to the next year.
And the INR 100 crores that we plan to spend in the second half will it be majorly for the lead overseas business or which verticals will it be allotted to?
So basically, it's for the existing vertical capital that we are talking about, and it's not INR 205 crores per annum because it's around INR 150 crores per annum for the existing vertical we were talking about. So we would be completing that INR 150 crores for current verticals in this year. Apart from that, in other verticals we are expecting to incur around INR 45 crores this year and then INR 100 crores next year and INR 100 crores next year.
So in the existing verticals, we are in line. It's the new verticals as we're talking about, we are talking about lithium and we are in discussion with -- so we are doing a feasibility. We're completing our feasibility for paper and steel plant in Africa and Central America. That may get postponed to the next year. I mean some of the CapEx in those 2 lines may get postponed next year, spillover to next year. But the existing working will be in line with the total INR 150 crores that we are talking about.
Okay. That's helpful. The second question is why is the domestic sourcing for India plants declining over last 4 to 5 quarters?
So it's basically -- I mean, we have -- I mean I talked about this earlier also. Sometimes, there is an arbitrage opportunity where the overseas market is more price -- I mean, effective as compared to the Indian market. There is a difference between the prevailing prices overseas compared to the Indian markets. During those times, we import a lot of batteries into India. And on other occasions, we export a lot of materials from India also whenever the prices are the other way around. In last quarter in Q1, we -- because the prices were -- there was a huge arbitrage opportunity. So we imported a lot of battery into India. Because of that, there was surplus of batteries availability to us. So because of that, we hold securing any batteries both from overseas also and in India also.
So that is one of the reasons. Otherwise there is availability, but when there is availability, we choose the scrap that is cheaper to us. So it happened in last quarter. But from next quarter onwards, you will see improvements in the domestic battery scrap also. It's not because of nonavailability of battery much more. It's the availability -- because of the capacities are limited. So it is dependent on the price of battery that is available to us.
Okay. So just a follow up on that. So prior to FY'23 and FY '22, the proportion of domestic sourcing for India plants was upward of 50% with battery waste management rules getting implemented from FY '23 onwards, the proportion of sourcing from India has gone down. So is it because of the rules being implemented, the domestic sourcing has become costlier and we are finding it economical to import it? Is that understanding right? Or am I missing something?
No, no. Batteries have always been cheaper overseas. We are increasing our capacities because there is huge opportunities in the local space also. But at the same time, we are increasing our procurement yard capacity too. So it's -- the overall capacities are increasing and the overall battery availability is also increasing for us, both from Indian market as well as from overseas market. And -- but we pick and choose which is more price efficient for us, and that is what we do.
So both prices as well as the ROC is important to us. But when you see there is a huge arbitrage between overseas batteries and domestic batteries. Within those times only, we buy more overseas scrap as compared to the Indian scrap. Having said that, we are already increasing our capacities in India. We have increased the capacity in Mundra, and we are continuing to increase our capacity. So that whatever scrap is available, we can use that scrap also.
Just to summarize that the spreads between the overseas and India battery right now have widened. Once it narrows out we will increase our domestic sourcing, right?
So if you look at the overall numbers compared to last year, we have procured 40% more batteries as compared to last year in India.
Okay. Just one last thing. On the reporting part, we used to earlier report our profits from the overseas business as a percentage of total profit. We have stopped it from the last 2 quarters. So if you can just give me those numbers?
Come again? Sorry.
Earlier we used to report our overseas profit as a percentage in our presentation. So that has been stopped in the last 2 quarters. Can you just...
Actually, earlier there was a concern about the Indian profit being too low. So we were always mentioning that Indian profits. But if you want, we can start it from next quarter again.
That would be helpful, sir. And if you can just give me the last 2 quarter numbers?
I probably will share it to you offline.
No problem. I'll take it offline.
[Operator Instructions] We take the next question from the line of [Jassal Navneet], an Individual Investor.
Can you tell me the market share that you have in lead recycling right now?
So it's a very fragmented market. It all depends on which geography you are present in because we are not present in terms of toward where most of the battery gets consumed. We're not there in Europe. We are not there in U.S. So overall, global market share would not be available. But when we talk about Indian market of the total organized market, we have around 15% to 17% market share in India. And wherever we are present in Africa, whichever country we are -- we have more than 50% market share in all the countries that we are in. So we are the major player in most of the countries.
And sir, organized market would be what proportion in India?
Around 30% of the total market would be organized, 30% to 35%.
Got it. Do you have similar numbers for your plastic and aluminum business as well?
For plastic, it would be very difficult because most of the plastic business in India is unorganized. There is hardly any -- not more than 10% would be in the organic sector, around 90% -- more than 90% would be in the unorganized sector. For aluminum, I'll just hand over to Mr. Naveen.
In aluminum, mostly India is importing scrap because the local generation of scrap is very less. So that volume is percentagewise is very low. You can say our capacity here, we have around 15,000 tonnes per annum and alloy market should be somewhere around 7 to 8 lakhs. So percentage is maybe 2% -- 2%, 3%.
Right. On the aluminum and plastics business, before you grow it aggressively, would you want to sort of develop that hedging plan or irrespective of whether you can develop the hedging plan or not, you would continue to invest heavily in these businesses as well?
See, there are 2 aspects of this business when we recycle. One is when you have -- when you use these EPR, like we are doing it in lead recycling also, we have tooling business availability. So part of the business would be tooling business as we grow especially in plastic more and more because of the EPR, extended producer responsibility, where you would not require any hedging. But for other businesses also -- so hedging is important, but business proposition is more important. So I'll just give you an example because what happens when you don't hedge is that your quarter-on-quarter variability and profit will be less. But that profit does not go anywhere if you keep the same stock, even better there is a hedging mechanical there or it is not there. It will only affect your quarter-on-quarter profit.
So if you keep the quantities constant, if you keep on buying regularly throughout the year, then whenever there is -- I mean, change in prices, again, we will start getting the benefit of the stock that is already there. So it will not affect the actual profits. It is just a notional profit that gets affected.
I understand. Currently, in terms of profitability, at least in this quarter, these 2 businesses contributed quite insignificantly to your overall firm. So when do we see these businesses contributing, say, upwards of 10%, at least to your overall business?
So definitely we're increasing volume. If you see the last year, we have increased the capacities of aluminum by more than 100%. I'll just give you the -- 200%. I think -- just one second. That is one thing. And if you see last year also, the profit from aluminum was high because the prices were high. This year, you're seeing because the prices have come down, so the sort of price of my inventory has gone down. Once there is a reversal in prices, again, the prices of inventory will go up again and that profit is already intact in the inventory. So it has not gone away. Although notionally, because we presented on -- sorry, -- and despite that, in the current business also 11% of the EBITDA comes from aluminum and plastics.
Okay. Understood. And when do you think...
Another 8% comes from turnkey submissions. So that is contributing 81% of the total EBITDA currently.
True. So when do you think you will be able to get some....
I'm sorry to interrupt you. [Operator Instructions] The next question from the line of Mr. [Rohan Rohra] from [Envision Capital].
Sir, I would like to have your views on how different the sourcing ecosystem will be for lithium, paper, et cetera, the new businesses? How different would be the sourcing ecosystem?
Sourcing equipment, I think it is very similar to the tooling business that we do, where you'll have to have [partnership with] OEMs and collect battery on their behalf from their workshops and also most of the business will be that way, where you have relationship with the OEMs, either battery manufacturing OEMs of car manufacturing OEMs, which is very similar to the Indian business that we are doing. And also some part of it will be retail batteries that -- that are being used by e-rickshaw and all, especially in countries like India and developing countries. That would come probably through the retail network only. But that would be only a small percentage of the total business available. Other business would be very similar to the OEMs relationship that we are having in lead acid battery in India.
Okay. And across the globe, would it be any different?
No. It's going to be very similar because generally, what happens, first of all, the life cycle of a lithium-ion battery is very high. And secondly, because it comes under the warranty for car, it will go to the workshop only to get replaced or maybe get changed or things like that. So it is going to be especially for passenger car, it would be very similar to the lead acid battery system that is in place. Whereas in -- for 3-wheelers or e-rickshaws or maybe 2-wheelers, et cetera, probably it will come through retail networks.
We take the next question from the line of Mr. Shubham Thorat from Perpetual Capital Advisors.
Am I audible?
Yes.
So earlier -- one of the earlier answers, you mentioned that even if the lead acid battery share in the auto space will be declining. There will be other applications that can support our new division. So can you point out what applications are you looking for?
Yes, other applications will certainly grow as countries growing -- per capita income is growing. So the storage energy household battery, their lead demand will certainly grow. And telecom towers, they will keep growing. So cable industry, alloy cable industry -- so smart city storage and solar. As of now, solar is mostly used on grid -- off grid. So later on, they will be using -- societies or housing societies will be storing energy in lead-acid battery only. So those sectors will grow and that demand will be even bigger.
The next question is from the line of Mr. [Harish], an Individual Investor.
Am I audible?
Yes.
I just had 1 question. When you mentioned that the rubber recycling is now being used. The rubber is now being used as a fuel. So will it -- should it not increase your margins going ahead as you keep adding more capacity for rubber recycling?
Yes, definitely, it will increase the overall profitability for us because it will reduce the cost of fuel wherever we are using it. So definitely, it will have some marginal impact on the overall profitability of the EBITDA margins as we increase the capacity. So far, we don't have any rubber recycling unit in India, but now we are in discussion of putting up a continuous process, which is a state-of-the-art process, which is currently not used in India to start using that for our Indian plants also.
But in addition to the margin improvement, it will have better and more impact on the environment side because it will be better for the environment as we are not using the fossil fuels there.
Okay. And the second question is how much time -- so when you talk about the new avenues across paper recycling and lithium, how much time does it take for the plants to come up onstream like if you start by Q4, how much time does it take for the plant to get set up?
So it all depends on the total -- from country to country, how much time would it take for you to take approval for a particular plant. Because these categories are -- especially paper industry is very critical environmentally. So sometimes, it takes a lot of time for clearances also. But generally, once you give a go ahead from that point to installing the project would take around 1 to 1.5 years.
Okay. And sir, do you see your margins have gone down? Now is this because of the notional loss that you would have on your aluminum business, is that partly because of that? And if you have the amount which is there any inventory loss that you have there?
So some of the notional loss that we've got is part of the notional profit that we got last year. So we've always stated that the average EBITDA margin is around INR 17 in aluminum, INR 6 to INR 7 per tonne per KG in aluminum. Last year, that profit was INR 20 because the prices are going up regularly. Once the prices -- the prices came down. So whatever we have gained in inventory last year got reflected in the profitability this year. But some part of the profits are still in the inventories, if the prices go up again, will again start seeing some better EBITDA margins going forward. So this is for aluminum.
But in case of lead, we are very stable on the [quarter] EBITDA margin. The normal EBITDA margin is in the range of INR 16 to INR 17 per kg. Once we get slightly additional margin [on the cost of] arbitrage [fortunately] by selling more into India when the Indian prices are higher and we're selling some more quantities in overseas when the international prices are higher. So that arbitrage because we have presence in both the markets, we take the advantage of that. So sometimes, some quarters, it is higher. But normal margin is INR 16 to INR 17 per kg, which we are maintaining.
Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Yes. Thank you, everyone, for participating in this call. At the end, I would want to mention that Gravita has made a niche for itself over the last 31 years. And our strong performance year-on-year is a testament to our fully integrated business model, which covers all the key aspects of recycling. Our strategic position as 1 of the few recyclers in the formal sector is supported by strong sectoral tailwinds like stricter government norms of BWMR and EPR. Our pan-India and global presence, integrated supply chain, operational excellence and strong risk management framework makes us a preferred partner of choice for OEMs across India and gives us confidence to meet our Vision 2027 of diversifying into new business verticals and achieving revenue CAGR of 25% plus profitability growth of 35% and ROC of 35%.
We trust that we have addressed all our inquiries during this session. However, if there are any remaining questions, please feel free to reach us to our Investor Relations team at Go India Advisors. Once again, we extend our gratitude to all of the participants for joining us and for your attentiveness to our updates. Thank you, and have a great day. Thanks.
Thank you, sir. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.